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Activity-Based Management

traditional forensic evidence, such as paper, necessitates ACFE
the involvement of accounting and auditing professionals SEE Association of Certified Fraud Examiners
in the design of such systems. Periodic involvement of
public auditing firms can be used to make sure the AIS is
in compliance with current internal control requirements,
such as the Section 404 requirements of the Sarbanes- ACQUIRED-NEEDS
Oxley Act and revised financial reporting standards. THEORY
After the implementation, the focus of attestation is SEE Motivation
the review and verification of system operation. This
requires adherence to such standards as ISO 9000 for soft-
ware design and development, as well as standards for
control of information technology. ACQUISITIONS
Periodic functional business reviews should be con- SEE Mergers and Acquisitions
ducted to make sure the AIS remains in compliance with
the intended business functions. Quality standards dictate
this review should be done according to a periodic sched- ACTIVITY-BASED
ule.
MANAGEMENT
Activity-based management (ABM) is an approach to
TRADITIONAL AIS AND MODERN
management in which process managers are given the
ENTERPRISE RESOURCE PLANNING
responsibility and authority to continuously improve the
SYSTEMS planning and control of operations by focusing on key
Enterprise resource planning (ERP) systems are large-scale operational activities. ABM strategically incorporates
information systems that affect an organization’s AIS. activity analysis, activity-based costing (ABC), activity-
These systems permeate all aspects of the organization and based budgeting, life cycle and target costing, process
value analysis, and value-chain analysis. Enhanced effec-
require such technologies as client/server and relational
tiveness and efficiencies are expected for both revenue
databases. Other system types that affect AISs are supply
generation and cost incurrences. Since the focus is on
chain management and customer relationship manage-
activities, improved cost management is achieved through
ment.
better managing those activities that consume resources
Traditional AISs recorded financial information and and drive costs. The focus for control is shifted away from
produced financial statements on a periodic basis accord- the financial measurement of resources to activities that
ing to GAAP pronouncements. Modern ERP systems cause costs to be incurred.
provide a broader view of organizational information, As an overall framework, ABM relies on ABC infor-
enabling the use of advanced accounting techniques such mation. ABC deals with the analysis and assignment of
costs. In order to complete cost analyses, activities need to
as ABC and improved managerial and financial reporting
be identified and classified. An activity dictionary can be
using a variety of analytical techniques.
developed, listing and describing all activities within an
SEE ALSO Accounting; Information Systems; Management organization, including information on each activity’s
Information Systems location, performance measure(s), and key value-added
and non-value-added attributes. ABC information is
extremely helpful in the strategic analysis of areas such as
BIBLIOGRAPHY
process and plant layout redesign, pricing, customer val-
Hall, James A. (2007). Accounting information systems (5th ed.).
ues, sourcing, evaluation of competitive position, and
Cincinnati: Thomson South-Western.
product strategy.
Jones, F., and Rama, D. (2006). Accounting information systems:
A business process. Cincinnati: Thomson South-Western.
ACTIVITY AND ACTIVITY ANALYSIS
O’Brien, J. A., and Marakas, G. (2006). Management informa-
An activity is a business task, or an aggregation of closely
tion systems (7th ed.). New York: McGraw-Hill.
related purposeful actions, with clear beginning and end-
ing points, that consumes resources and produces outputs.
Theodore J. Mock An activity could be a single task or a simple process.

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 13