Information Technology (1)
Content
Information Technology
Mark Benedict M. Guia CPA
MBA
Reviewer
CRC-ACE The CPA Professional Review School
Information System
• Processes data and
transactions
• Provide users with
the information
needed
• Effectively and
efficiently manage
an organization
General Concept
Input
1. Transaction
Processes
2. Collection
of Data
3. Entering
data into the
system
Processing
Manual versus
Computerized
System
Output
Providing
users (external
and internal)
with
information
General Types of Information
Technology Systems
• Office automation systems (e.g.,
word processing, spreadsheets, etc.)
• Transaction processing systems (e.g.
ordering system, payroll recording,
cash receipts, cash disbursements)
• Management reporting systems
(MRS)
Accounting Information
System
• Transaction Processing System
– converts economic events into financial
transactions
• General Ledger/Financial Reporting
Systems
– Reports the status of financial resources
and the changes in those resources,
primarily for external users
• Management Reporting System
Types of Management Reporting
System
• Management
information systems
• Decision support
systems
• Expert systems
• Executive
information systems
General Model of AIS
• Data Sources – External sources of financial
transactions are those involving other legal entities
• Data Collection – ensure that data is valid, correct,
and free from material errors. Two rules govern data
collection: relevance and efficiency.
• Data Processing – can be as simple as sorting
events alphabetically or adding up like events, or as
complex as statistical modeling.
• Database management – involves the tasks of
storing, retrieving and deleting collected and
processed data.
SYSTEM DEVELOPMENT
AND LIFE-CYCLE
Systems Development and LifeCycle
•
•
•
•
•
•
•
Planning
Analysis
Design
Development
Testing
Implementation
Maintenance
SDLC – Planning Phase
1. Identify the problem
2. Define the system to be
developed.
3. Determine the project
scope.
4. Develop a project
(action) plan.
5. Evaluate the initial
feasibility of the project.
SDLC – Analysis Phase
• Development Team
• Needs assessment
• Current System
Analysis
• Gap analysis
Systems Characteristic Requirement
1.
2.
3.
4.
5.
6.
7.
8.
Performance levels
Reliability
Quality
Interfaces
Security and privacy
Constraints and limitations
Functional capabilities
Data structures and elements
SDLC – Design Phase
1. Databases
2. User interface
(boundary) for
input and output
3. Required reports
4. Programs
5. Infrastructure and
controls
SDLC – Development Phase
• Purchase
– Turnkey systems: finished, tested, and
ready for standard use.
– Backbone systems: basic structure
upon which you can build your system
to fit your particular needs.
– Vendor supported systems:
• Built or in-house development
SDLC – Testing Phase
SDLC – Implementation
Phase
• Parallel implementation
• Plunge implementation
• Pilot implementation
• Phased implementation
BASIC CONCEPTS OF
COMPUTERS
Types of computers
• Supercomputers
• Mainframe
computers
• Servers
• Microcomputers
(e.g., desktop
computers, laptop
computers)
• Tablets/Smart
Phones/Personal
Digital Assistants
Parts of a Computer –
Hardware
• Central Processing
Unit (CPU)
– Arithmetic/Logic Unit
– Primary Memory
• RAM (random-access
memory)
• ROM (read-only
memory).
– Control Unit
Parts of a Computer –
Hardware
• Storage Devices
– Magnetic tape
– Magnetic disks
– RAID (Redundant array
of independent
– Compact Discs
– Solid State Drives
(SSDs) also called “flash
drives,” or “USB drives”
– Cloud-Based Storage
Parts of a Computer –
Hardware
• Input Devices
– Key-to-tape and key-to-disk
– Visual display terminal/monitors
– Mouse, joystick, light pens
– Touch-sensitive screen
– Turnaround documents
– Magnetic tape reader
– Magnetic ink character reader (MICR)
– Scanner
– Automatic teller machine (ATM)
– Radio Frequency Identification (RFID)
– Point-of-sale (POS) recorders
– Voice recognition
– Electronic commerce and electronic data interchange
Parts of a Computer –
Hardware
• Output Devices
– Monitors
– Printers
– Plotters
– Computer
output to
microfilm or
microfiche
(COM)
Parts of a Computer –
Software
• General
Software
– Operating
system (e.g.,
Windows, Linux,
Unix)
– Utility
programs
– Communicatio
ns software
Parts of a Computer –
Software
• Application Software
– Word processing, graphics,
spreadsheets, email, and database
systems
– Accounting software
• Low-end (e.g. Peach Tree, Quickbooks)
• High-end(e.g., general ledger, receivables)
• Enterprise Resource Planning (ERP)
Methods of Processing
• Batch Processing
• Online real-time (OLRT) or direct
access processing – Online transaction processing
(OLTP) – (bank automatic teller systems
and Internet website sales)
– Online analytical processing (OLAP)
Data Processing Structure
• Centralized
– processing occurs at one location.
• Decentralized
– Processing and storage on computers at multiple
locations.
– Computers involved are not interconnected by a
network
• Distributed
– Processing at various sites but the overall information
is in one database.
– Processing may be on either a batch or online real-time
basis.
Data Organization
•
•
•
•
•
•
•
•
•
•
Bit
Byte
Field
Record
File
Table
Database
Array
Master file
Detail or
transaction file
DATA FILE STRUCTURE
Traditional file
processing
systems
Advantages
Disadvantages
1. Currently operational for many
existing (legacy) systems
2. Often cost effective for simple
applications
1] Data files are dependent upon a
particular application program.
2] In complex business situation
there is much duplication of data
between data files.
3] Each application must be
developed individually.
4] Program maintenance is
expensive.
5] Data may be isolated and difficult
to share between functional areas.
Database systems
Advantages
1] Data independence—Data can be
used relatively easily by differing
applications.
2] Minimal data redundancy—The
manner in which data is structured
results in information being recorded in
only one place, thus making updating
much easier than is the case with
traditional file systems.
3] Data sharing—The sharing of data
between individuals and applications is
relatively easy.
4] Reduced program maintenance.
5] Commercial applications are
available for modification to a
company’s needs.
Disadvantages
1] Need for specialized personnel with
database expertise
2] Installation of database costly
3] Conversion of traditional file
systems (legacy systems) costly
4] Comprehensive backup and
recovery procedures are necessary.
Database Terminologies
•
•
•
•
•
•
Database
Normalization
Database management system
Data independence
Data Dictionary
Structured query language
(SQL)
• Data definition language (DDL)
• Data manipulation language
(DML)
• Data control language (DCL)
Data modeling
• Entity-relationship modeling—entities (e.g.
“customer,” “product”) and relations (“buys,”
“pays for”).
– Primary key
– Foreign key
• REA data model
– Resources—Identifiable objects that have
economic value,
– Events—An organization’s business activities,
– Agents—People or organizations about which data
is collected.
Database structures
•
•
•
•
Hierarchical
Networked
Relational
Objectoriented
• Objectrelational
• Distributed
Database controls
• User department
• Access controls
– Restricting privileges
– Logical views
• Backup and recovery
– Backup of database and logs of transactions
(sometimes referred to as “systems logs”).
– Database replication.
– Backup facility.
• Database administrator (DBA)
• Audit software
Types of Network
• As to geographical scope
– Personal area network (PAN)
– Local area networks (LAN)
– Metropolitan area network (MAN)
– Wide area networks (WAN)
• As to Ownership
– Private
– Public
– Cloud computing/cloud services
• As to use of Internet
– Internet
– Intranet
– Extranet
ELECTRONIC DATA
INTERCHANGE (EDI)
Point-to-point
Advantages
a] No reliance on third parties
for computer processing.
b] Organization controls who
has access to the network.
c] Organization can enforce
proprietary (its own) software
standard in dealings with all
trading partners.
d] Timeliness of delivery may
be improved since no third
party is involved.
Disadvantages
a] Must establish connection
with each trading partner
b] High initial cost
c] Computer scheduling issues
d] Need for common protocols
between partners
e] Need for hardware and
software compatibility
Value-added network
(VAN)
Advantages
Disadvantages
a] Reduces communication and data
protocol problems since VANs can
deal with differing protocols
(eliminating need for trading partners
to agree on them).
b] Partners do not have to establish
the numerous point-to-point
connections.
c] Reduces scheduling problems since
receiver can request delivery of
transactions when it wishes.
d] In some cases, VAN translates
application to a standard format the
partner does not have to reformat. e]
VAN can provide increased security.
a. ] Cost of VAN
b] Dependence upon VAN’s systems
and controls c] Possible loss of data
confidentiality
Public networks
Advantages
a] Avoids cost of proprietary
lines
b] Avoids cost of VAN
c] Directly communicates
transactions to trading partners
d] Software is being developed
which allows communication
between differing systems.
Disadvantages
a] Possible loss of data
confidentiality on the Internet
b] Computer or transmission
disruption
c] Hackers and viruses
d] Attempted electronic frauds
Proprietary networks
• Organizations (e.g., health care,
banking) have developed their own
network for their own transactions.
• These systems are costly to develop
and operate (because of proprietary
lines), although they are often
extremely reliable.
Controls Required
• Authenticati
on
• Packets
• Encryption
ACCOUNTING
INFORMATION SYSTEM
The Role of the Accountant
• Accountants as Users
• Accountants as System
Designers
• Accountants as System Auditors
– External Auditing
– Internal Auditing
The Transaction Cycles
• The Expenditure Cycle
– Purchases/accounts payable system
– Cash disbursement system
– Payroll system
– Fixed asset system
• The Conversion Cycle
• The Revenue Cycle
– Sales order processing (order, credit, shipping,
billing)
– Cash Receipts (collecting, depositing, recording)
Accounting Records
• Manual Systems
– Documents (Source, Product, and Turnaround)
– Journals (general and Special)
– Ledgers (General and Subsidiary)
• Computerized
– Master files: contain account data that are updated
from transaction data: ledgers.
– Transaction files: hold records from events that will
change master files: journals.
– Reference files: hold the transaction processing
standards or rules: vendors, prices.
– Archive files: are historical files of past journals and
ledgers.
Mark Benedict M. Guia CPA
MBA
Reviewer
CRC-ACE The CPA Professional Review School
Information System
• Processes data and
transactions
• Provide users with
the information
needed
• Effectively and
efficiently manage
an organization
General Concept
Input
1. Transaction
Processes
2. Collection
of Data
3. Entering
data into the
system
Processing
Manual versus
Computerized
System
Output
Providing
users (external
and internal)
with
information
General Types of Information
Technology Systems
• Office automation systems (e.g.,
word processing, spreadsheets, etc.)
• Transaction processing systems (e.g.
ordering system, payroll recording,
cash receipts, cash disbursements)
• Management reporting systems
(MRS)
Accounting Information
System
• Transaction Processing System
– converts economic events into financial
transactions
• General Ledger/Financial Reporting
Systems
– Reports the status of financial resources
and the changes in those resources,
primarily for external users
• Management Reporting System
Types of Management Reporting
System
• Management
information systems
• Decision support
systems
• Expert systems
• Executive
information systems
General Model of AIS
• Data Sources – External sources of financial
transactions are those involving other legal entities
• Data Collection – ensure that data is valid, correct,
and free from material errors. Two rules govern data
collection: relevance and efficiency.
• Data Processing – can be as simple as sorting
events alphabetically or adding up like events, or as
complex as statistical modeling.
• Database management – involves the tasks of
storing, retrieving and deleting collected and
processed data.
SYSTEM DEVELOPMENT
AND LIFE-CYCLE
Systems Development and LifeCycle
•
•
•
•
•
•
•
Planning
Analysis
Design
Development
Testing
Implementation
Maintenance
SDLC – Planning Phase
1. Identify the problem
2. Define the system to be
developed.
3. Determine the project
scope.
4. Develop a project
(action) plan.
5. Evaluate the initial
feasibility of the project.
SDLC – Analysis Phase
• Development Team
• Needs assessment
• Current System
Analysis
• Gap analysis
Systems Characteristic Requirement
1.
2.
3.
4.
5.
6.
7.
8.
Performance levels
Reliability
Quality
Interfaces
Security and privacy
Constraints and limitations
Functional capabilities
Data structures and elements
SDLC – Design Phase
1. Databases
2. User interface
(boundary) for
input and output
3. Required reports
4. Programs
5. Infrastructure and
controls
SDLC – Development Phase
• Purchase
– Turnkey systems: finished, tested, and
ready for standard use.
– Backbone systems: basic structure
upon which you can build your system
to fit your particular needs.
– Vendor supported systems:
• Built or in-house development
SDLC – Testing Phase
SDLC – Implementation
Phase
• Parallel implementation
• Plunge implementation
• Pilot implementation
• Phased implementation
BASIC CONCEPTS OF
COMPUTERS
Types of computers
• Supercomputers
• Mainframe
computers
• Servers
• Microcomputers
(e.g., desktop
computers, laptop
computers)
• Tablets/Smart
Phones/Personal
Digital Assistants
Parts of a Computer –
Hardware
• Central Processing
Unit (CPU)
– Arithmetic/Logic Unit
– Primary Memory
• RAM (random-access
memory)
• ROM (read-only
memory).
– Control Unit
Parts of a Computer –
Hardware
• Storage Devices
– Magnetic tape
– Magnetic disks
– RAID (Redundant array
of independent
– Compact Discs
– Solid State Drives
(SSDs) also called “flash
drives,” or “USB drives”
– Cloud-Based Storage
Parts of a Computer –
Hardware
• Input Devices
– Key-to-tape and key-to-disk
– Visual display terminal/monitors
– Mouse, joystick, light pens
– Touch-sensitive screen
– Turnaround documents
– Magnetic tape reader
– Magnetic ink character reader (MICR)
– Scanner
– Automatic teller machine (ATM)
– Radio Frequency Identification (RFID)
– Point-of-sale (POS) recorders
– Voice recognition
– Electronic commerce and electronic data interchange
Parts of a Computer –
Hardware
• Output Devices
– Monitors
– Printers
– Plotters
– Computer
output to
microfilm or
microfiche
(COM)
Parts of a Computer –
Software
• General
Software
– Operating
system (e.g.,
Windows, Linux,
Unix)
– Utility
programs
– Communicatio
ns software
Parts of a Computer –
Software
• Application Software
– Word processing, graphics,
spreadsheets, email, and database
systems
– Accounting software
• Low-end (e.g. Peach Tree, Quickbooks)
• High-end(e.g., general ledger, receivables)
• Enterprise Resource Planning (ERP)
Methods of Processing
• Batch Processing
• Online real-time (OLRT) or direct
access processing – Online transaction processing
(OLTP) – (bank automatic teller systems
and Internet website sales)
– Online analytical processing (OLAP)
Data Processing Structure
• Centralized
– processing occurs at one location.
• Decentralized
– Processing and storage on computers at multiple
locations.
– Computers involved are not interconnected by a
network
• Distributed
– Processing at various sites but the overall information
is in one database.
– Processing may be on either a batch or online real-time
basis.
Data Organization
•
•
•
•
•
•
•
•
•
•
Bit
Byte
Field
Record
File
Table
Database
Array
Master file
Detail or
transaction file
DATA FILE STRUCTURE
Traditional file
processing
systems
Advantages
Disadvantages
1. Currently operational for many
existing (legacy) systems
2. Often cost effective for simple
applications
1] Data files are dependent upon a
particular application program.
2] In complex business situation
there is much duplication of data
between data files.
3] Each application must be
developed individually.
4] Program maintenance is
expensive.
5] Data may be isolated and difficult
to share between functional areas.
Database systems
Advantages
1] Data independence—Data can be
used relatively easily by differing
applications.
2] Minimal data redundancy—The
manner in which data is structured
results in information being recorded in
only one place, thus making updating
much easier than is the case with
traditional file systems.
3] Data sharing—The sharing of data
between individuals and applications is
relatively easy.
4] Reduced program maintenance.
5] Commercial applications are
available for modification to a
company’s needs.
Disadvantages
1] Need for specialized personnel with
database expertise
2] Installation of database costly
3] Conversion of traditional file
systems (legacy systems) costly
4] Comprehensive backup and
recovery procedures are necessary.
Database Terminologies
•
•
•
•
•
•
Database
Normalization
Database management system
Data independence
Data Dictionary
Structured query language
(SQL)
• Data definition language (DDL)
• Data manipulation language
(DML)
• Data control language (DCL)
Data modeling
• Entity-relationship modeling—entities (e.g.
“customer,” “product”) and relations (“buys,”
“pays for”).
– Primary key
– Foreign key
• REA data model
– Resources—Identifiable objects that have
economic value,
– Events—An organization’s business activities,
– Agents—People or organizations about which data
is collected.
Database structures
•
•
•
•
Hierarchical
Networked
Relational
Objectoriented
• Objectrelational
• Distributed
Database controls
• User department
• Access controls
– Restricting privileges
– Logical views
• Backup and recovery
– Backup of database and logs of transactions
(sometimes referred to as “systems logs”).
– Database replication.
– Backup facility.
• Database administrator (DBA)
• Audit software
Types of Network
• As to geographical scope
– Personal area network (PAN)
– Local area networks (LAN)
– Metropolitan area network (MAN)
– Wide area networks (WAN)
• As to Ownership
– Private
– Public
– Cloud computing/cloud services
• As to use of Internet
– Internet
– Intranet
– Extranet
ELECTRONIC DATA
INTERCHANGE (EDI)
Point-to-point
Advantages
a] No reliance on third parties
for computer processing.
b] Organization controls who
has access to the network.
c] Organization can enforce
proprietary (its own) software
standard in dealings with all
trading partners.
d] Timeliness of delivery may
be improved since no third
party is involved.
Disadvantages
a] Must establish connection
with each trading partner
b] High initial cost
c] Computer scheduling issues
d] Need for common protocols
between partners
e] Need for hardware and
software compatibility
Value-added network
(VAN)
Advantages
Disadvantages
a] Reduces communication and data
protocol problems since VANs can
deal with differing protocols
(eliminating need for trading partners
to agree on them).
b] Partners do not have to establish
the numerous point-to-point
connections.
c] Reduces scheduling problems since
receiver can request delivery of
transactions when it wishes.
d] In some cases, VAN translates
application to a standard format the
partner does not have to reformat. e]
VAN can provide increased security.
a. ] Cost of VAN
b] Dependence upon VAN’s systems
and controls c] Possible loss of data
confidentiality
Public networks
Advantages
a] Avoids cost of proprietary
lines
b] Avoids cost of VAN
c] Directly communicates
transactions to trading partners
d] Software is being developed
which allows communication
between differing systems.
Disadvantages
a] Possible loss of data
confidentiality on the Internet
b] Computer or transmission
disruption
c] Hackers and viruses
d] Attempted electronic frauds
Proprietary networks
• Organizations (e.g., health care,
banking) have developed their own
network for their own transactions.
• These systems are costly to develop
and operate (because of proprietary
lines), although they are often
extremely reliable.
Controls Required
• Authenticati
on
• Packets
• Encryption
ACCOUNTING
INFORMATION SYSTEM
The Role of the Accountant
• Accountants as Users
• Accountants as System
Designers
• Accountants as System Auditors
– External Auditing
– Internal Auditing
The Transaction Cycles
• The Expenditure Cycle
– Purchases/accounts payable system
– Cash disbursement system
– Payroll system
– Fixed asset system
• The Conversion Cycle
• The Revenue Cycle
– Sales order processing (order, credit, shipping,
billing)
– Cash Receipts (collecting, depositing, recording)
Accounting Records
• Manual Systems
– Documents (Source, Product, and Turnaround)
– Journals (general and Special)
– Ledgers (General and Subsidiary)
• Computerized
– Master files: contain account data that are updated
from transaction data: ledgers.
– Transaction files: hold records from events that will
change master files: journals.
– Reference files: hold the transaction processing
standards or rules: vendors, prices.
– Archive files: are historical files of past journals and
ledgers.
