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Textbook Accounting Information Systems The Processes and Controls Leslie Turner Ebook All Chapter PDF
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Accounting Information Systems
Third Edition
Leslie Turner
Andrea Weickgenannt
This book was set in 10/12 ITC New Baskerville Std by SPi Global and printed and bound by Lightning Source Inc.
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Outside of the United States, please contact your local sales representative.
Names: Turner, Leslie, author. | Weickgenannt, Andrea, author. | Copeland, Mary Kay, author.
Title: Accounting information systems : controls and processes / Leslie
Turner, Andrea Weickgenannt, Mary Kay Copeland.
Description: Third edition. | Hoboken, NJ : John Wiley & Sons Inc., [2017] |
Includes bibliographical references and index.
Identifiers: LCCN 2016036148 | ISBN 9781119329565 (pbk. : alk. paper)
Subjects: LCSH: Accounting—Data processing.
Classification: LCC HF5679 .T87 2017 | DDC 657.0285—dc23 LC record available at https://lccn.loc.gov/2016036148
The inside back cover will contain printing identification and country of origin if omitted from this page. In addition, if the ISBN on the
back cover differs from the ISBN on this page, the one on the back cover is correct.
Leslie D. Turner is Dean and a professor of accounting at Palm Beach Atlantic University.
He previously taught at Northern Kentucky University and the University of North
Carolina at Greensboro. He earned a DBA in accounting from the University of Kentucky,
an MBA from Wheeling Jesuit University, and a BBA in accounting from Ohio University.
Dr. Turner is a Certified Management Accountant (CMA) and a Certified Financial
Manager (CFM).
Professor Turner’s research interests are in internal controls and Sarbanes–Oxley com-
pliance, educational pedagogy, and ethics. His research has been published in The
Accounting Educators’ Journal Management Accounting Quarterly, Accounting Horizons, Journal
of Accounting and Public Policy, Journal of Internet Commerce, Journal of Information Systems,
Management Accounting, The Review of Accounting Information Systems, The Journal of
Management Accounting Research, Strategic Finance, The CPCU Journal, National Accounting
Journal, The Oil and Gas Tax Quarterly, Accounting Systems Journal, and The Journal of
Accounting Case Research.
Professor Turner is a member of the American Accounting Association, the Institute of
Management Accountants, and the Information Systems Audit and Control Association.
v
vi About the Authors
Instructor
Overview Each of us who teaches Accounting Information Systems (AIS) faces the
problem of providing students a comprehensive, but interesting knowledge base of AIS.
However, we all know that it is difficult to find the right balance of coverage of technical
concepts and student comprehension. When addressing this issue of balance, we began
to see clearly that a better, more comprehensible approach was needed. With this book,
we have achieved a good balance of covering technical concepts while still making the
text easy to read and understand. Our textbook also reinforces AIS concepts with rele-
vant, real‐world examples and reasonable end‐of‐chapter materials.
This text incorporates the important content found in a typical AIS course, but has five
distinguishing characteristics. Five characteristics we focus on throughout the text are
simplicity and understandability of the writing, business processes, accounting and IT
controls, examples from Microsoft Dynamics GP (an ERP/AIS system), and ethics as it
relates to accounting systems.
We place extra emphasis on the students’ understanding. We explain AIS in the con-
text of business processes and incorporate many real‐world examples. The richness of
these examples improves the text, the discussion questions, and end‐of‐chapter exercises
and cases. We explain IT controls by employing the framework in the AICPA Trust Services
Principles. This is an encompassing, but easy to understand, framework of IT controls.
We provide examples in the text of an AIS/ERP system, Microsoft Dynamics GP. Instructors
are able to add a hands‐on learning of Microsoft Dynamics GP that complements the
theoretical concepts in the text. Finally, we believe that ethics continues to increase in
importance as a topic to be included in accounting texts. We have included an ethics sec-
tion in each chapter.
We think that including all these characteristics in a single text has resulted in an
extremely user‐friendly product: one that will help your students achieve a better founda-
tion in AIS.
Features
The book is designed to enhance student learning with a focus on ease of use, business
processes and the related controls, and ethics and corporate governance as they relate to
accounting information systems (AIS).
Ease of Use This AIS textbook will allow students to easily read and comprehend the
material, understand the charts and graphs, and successfully answer questions and cases
at the end of the chapters. To attain ease of use, we included several features, including
the following:
• An approach to technical topics with a writing style that is easy to understand.
vii
viii Preface
• Process maps and document flowcharts that provide a picture of business processes
and that are easy to understand. While there are several approaches to charts that
depict systems, we have used the types of charts that illustrate business processes in
the simplest, yet complete manner. Especially in the chapters focused on business
processes, we use matched process maps, document flowcharts, and data flow dia-
grams to illustrate the processes that occur, and the related flow of information and
documents. These charts are easy to follow and they will enhance the understanding
of the business processes.
• AICPA Trust Services Principles framework for IT controls. Controls within
Information Technology can be a very difficult subject to comprehend because of
the underlying complexity of the technology. While COBIT is the most comprehen-
sive source of IT control information, it is not typically easy for students to under-
stand. This is especially true for students who have not had the opportunity to gain
work experience with IT systems and business processes. We use the simplest
framework available for the explanation of IT controls: the AICPA Trust Services
Principles. The Trust Services Principles categorize IT Controls into five areas: secu-
rity, availability, processing integrity, online privacy, and confidentiality.
• Control and risk tables that summarize internal controls and the related risks.
Internal controls are easier to understand when students can see the corresponding
types of risks that the controls are intended to lessen. We use control/risk exhibits to
present risks that are reduced when controls are used.
• Real‐world examples to illustrate important concepts. Concepts are often easier to
comprehend when presented in a real‐world scenario. Each chapter includes exam-
ples of issues faced by actual business organizations that help illustrate the nature
and importance of concepts in the chapter. Real‐world discussions are boxed in a
feature titled “The Real World.”
• Microsoft Dynamics GP screen shots to present topics in the context of a real com-
puter system. New concepts are often easier for students to understand while pre-
sented within a real‐life application. We use screen shots from Microsoft Dynamics
GP software to show how various aspects of business processes would appear in this
computer system. In addition, in this version, we have added the ability for instruc-
tors to add hands‐on learning of Microsoft Dynamics GP to the coursework. See the
textbook website for details. This add‐on tool provides access to a cloud‐based ver-
sion of Microsoft Dynamics minimizing the involvement of a university’s IT staff.
• The IT technology that underlies AIS continually evolves and allows enhancements
to those systems. Several chapters integrate the concept of cloud computing and the
increasing use of cloud computing. The effects of cloud computing on the risk
benefits and auditing in AIS are also described.
• End‐of‐chapter questions, problems, and cases that match well with the chapter con-
tent. It is important to provide material at the end of each chapter that helps stu-
dents reinforce the topics presented. It is equally important that this material be
relevant and understandable. We have devoted our attention to providing a variety
of end‐of‐chapter activities that are meaningful and manageable, including a con-
cept check, discussion questions, brief exercises, Web exercises, problems, cases, and
a continuing case. In addition, most chapters include activities adapted from profes-
sional (CPA, CMA, and CIA) examinations.
We incorporate the COSO framework and integrate discussions of risks and controls
in all business process chapters. These discussions are also carried out in as many of the
other chapters as possible. The COSO framework, especially the control procedure com-
ponent, is used as a framework to describe accounting controls. This continued use of the
framework across several chapters is intended to increase student understanding and
retention of risk and control concepts.
In addition, we place a strong emphasis on IT controls. We accomplish this by using
the guidance provided by the AICPA in the revised (2009) Trust Services Principles for
WebTrust® and SysTrust® assurance engagements. The Trust Services Principles are the
AICPA’s guidance that is closely related to COBIT.
The Trust Services Principles risk and control procedures are incorporated into the
chapters covering business processes and controls. These controls are also discussed
in chapters on databases, ERP systems, auditing IT systems, and the system development
life cycle.
Ethics and Corporate Governance It is indisputable within the business world that
honest, consistent reporting and management of information has never been more
important. Considering the increased responsibility on corporate managers for the over-
all financial reporting of the company, the study and use of accounting information sys-
tems is critical. Accordingly, business ethics and corporate governance continue to
increase in focus and we made them a focus of this textbook. An ethics discussion is
also found at the end of each chapter and an ethics icon highlights applicable end‐of‐
chapter material.
In order to place emphasis on business ethics in many chapters, it is important to estab-
lish a foundation of ethics to build upon. Chapter 3 includes a significant section on eth-
ics in the current environment and the relation of ethical problems to the need for
internal controls and ethics codes. We establish Chapter 3 as the foundation for the
chapters that follow. The ethics and control concepts in Chapter 3 are reinforced as
themes throughout the text. We also include ethics‐related questions or cases in the
end‐of‐chapter materials.
In addition to business ethics, corporate governance is a related topic that has received
much attention in the business world without a corresponding increase in focus by AIS
texts. In addition, each process chapter in Module 3 discusses corporate governance in its
application to the various business processes. Sarbanes–Oxley discussions are highlighted
in the textbook margins with the letters “SOX.”
Supplements
A solutions manual, test bank, computerized test bank, instructor outlines, and PowerPoint
presentations accompany this textbook. They are available on the instructor companion
site available with this textbook. The third edition of the text also provides instructors the
option of adding hands‐on learning of an ERP/AIS system, Microsoft Dynamics GP, to
their coursework. This additional supplement provides instructional materials and cloud
access to Microsoft Dynamics GP at a nominal cost. Details are provided in the textbook
website. The authors would like to thank Patricia Fedje, Minot State University; Yvonne
Phang, Borough of Manhattan Community College; and Coby Harmon, University of
California–Santa Barbara for their help in developing the test bank and PowerPoint
presentations.
ACKN OWL E DGM E N T S
We would like to thank every instructor whose feedback helped us in all stages of the
writing, editing, and production of this textbook. In particular, we thank Amelia Baldwin,
University of Alabama; Somnath Bhattacharya, Florida Atlantic University; Pascal A.
Bizzaro, University of Mississippi; Richard Dull, Clemson University; John Butler, Ohio
State University; Stephanie Farewell, University of Arkansas–Little Rock; Lawrence Grasso,
Central Connecticut State University; Neal Hannon, University of Hartford; Michael
Harkness, University of Michigan–Dearborn; Kenneth Henry, Florida International
University; Frank Ilett, Boise State University; Jack Kissinger, Saint Louis University; David
Knight, Borough of Manhattan Community College; Antoinette Lynch, Miami University;
Dorothy McMullen, Rider University; Johna Murray, University of Missouri–St. Louis;
Michael Palley, Baruch College; Karen Otto, University of Arizona; Tom Oxner, University
of Central Arkansas; Jeffery Payne, University of Kentucky; Georgia Smedley, University of
Nevada–Las Vegas; George Schmelzle, Indiana University–Purdue University Fort Wayne;
Wallace Wood, University of Cincinnati; Curt Westbook, California State University–San
Bernadino; and Yan Xiong, California State University–Sacramento.
xi
TO T H E STU DE N TS
Businesses, and the products and services they provide, are unquestionably a critically
important part of our society. We would not have food, shelter, cars, computers, iPhones,
or the other things we need and use daily without smoothly functioning businesses to
provide those goods and services. Likewise, individual businesses could not operate at a
level to sustain our society without accounting information. Accounting information is
the lifeblood of business. Without the regular flow of accurate accounting information to
managers and investors, businesses would collapse. Operating a business or investing in
businesses without accounting information would be as difficult as driving with a covered
windshield. You would have no feedback information about where you are going and
what corrections you must make to get there. Just as your view through the windshield
tells you when to make steering, braking, and accelerating corrections, accounting infor-
mation allows managers and investors to determine how to make corrections that will
allow them to achieve business objectives.
Accountants generate, evaluate, summarize, report, and confirm the information that
managers and investors need to make good choices in their operations or objectives. The
system that allows accountants to accomplish this is the accounting information system.
The study of AIS provides a very important set of concepts to prepare you for an
accounting and business career. We hope the features of this book make your study of AIS
a little more pleasant, interesting, and understandable. Now, go forward and learn more
about AIS and its role in providing critical information to managers and investors!
xiii
A LI S T OF R E A L - WO R L D E X A M P L E S
I N T H IS TE X TBOOK
xv
xvi A List of Real-World Examples in This Textbook
1 Introduction to AIS 1
Overview of Business Processes (Study Objective 1), 1
Overview of an Accounting Information System (Study Objective 2), 4
Business Process Linkage Throughout the Supply Chain (Study
Objective 3),5
IT Enablement of Business Processes (Study Objective 4), 7
Basic Computer and IT Concepts (Study Objective 5), 10
Basic Computer Data Structures, 10
File Access and Processing Modes, 11
Data Warehouse and Data Mining, 12
Structured, Unstructured, and Big Data, 13
Networks and the Internet, 14
Examples of IT Enablement (Study Objective 6), 15
E‐Business,15
Electronic Data Interchange, 15
Point of Sale System, 16
Automated Matching, 16
Evaluated Receipt Settlement, 16
E‐Payables and Electronic Invoice Presentment and Payment, 16
Enterprise Resource Planning Systems, 17
The Internal Control Structure of Organizations (Study Objective 7), 17
Enterprise Risk Management, 18
xix
xx Contents
A Code of Ethics, 20
Coso Accounting Internal Control Structure, 20
IT Controls, 20
Corporate Governance, 20
IT Governance, 21
The Importance of Accounting Information Systems to
Accountants (Study Objective 8), 22
Users of the AIS, 22
Design or Implementation Team, 22
Auditors of the AIS, 22
The Relation of Ethics to Accounting Information Systems (Study
Objective 9),22
Summary of Study Objectives, 24
Key Terms, 25
End of Chapter Material, 26
■ Concept Check, 26
■ Discussion Questions, 26
■ Brief Exercises, 27
■ Problems, 27
■ Cases, 29
Solutions to Concept Check, 29
System Flowcharts, 52
Document Flowcharts, 53
Data Flow Diagrams, 55
Entity Relationship Diagrams, 55
Ethical Considerations at the Foundation of
Accounting Information Systems(Study Objective 10), 59
Summary of Study Objectives, 60
Key Terms, 61
End of Chapter Material, 62
■ Concept Check, 62
■ Discussion Questions, 63
■ Brief Exercises, 63
■ Problems, 64
■ Cases, 65
Solutions to Concept Check, 66
MODULE 2
CONTROL ENVIRONMENT Describes the proper
control environment to oversee and control processes.
5 IT Governance 148
Introduction to IT Governance (Study Objective 1), 148
An Overview of the SDLC (Study Objective 2), 152
The Phases of the SDLC, 155
Elements of the Systems Planning Phase of the SDLC
(Study Objective 3), 155
The Match of IT Systems to Strategic Objectives, 156
Feasibility Study, 156
Planning and Oversight of the Proposed Changes, 158
Elements of the Systems Analysis Phase of the SDLC
(Study Objective 4), 158
Preliminary Investigation, 158
System Survey: The Study of the Current System, 158
Determination of User Requirements, 160
Analysis of the System Survey, 161
Systems Analysis Report, 161
Elements of the Systems Design Phase of the SDLC
(Study Objective 5), 162
The Purchase of Software, 163
In‐House Design, 164
Conceptual Design, 164
Evaluation and Selection, 165
Cloud Computing as a Conceptual Design, 167
Detailed Design, 167
Elements of the Systems Implementation Phase
of the SDLC (Study Objective 6), 169
Software Programming, 170
Training Employees, 170
Software Testing, 171
Documenting the System, 171
Data Conversion, 171
System Conversion, 171
User Acceptance, 172
Post‐Implementation Review, 172
Elements of the Operation and Maintenance Phase of the SDLC
(Study Objective 7),172
The Critical Importance of IT Governance in an Organization
(Study Objective 8), 173
SDLC as Part of Strategic Management, 173
SDLC as an Internal Control, 173
xxiv Contents
MODULE 3
BUSINESS PROCESSES The sets of business
processes and the internal controls in organizations.
With process maps, document flowcharts, and data flow
diagrams, the core business processes are described and
the necessary controls to manage risk are discussed.