Accounting Information Systems:

Essential Concepts and Applications

Fourth Edition by Wilkinson, Cerullo, Raval,
and Wong-On-Wing

Chapter 3: AIS
Enhancements Through
Information Technology and
Networks
Slides Authored by Somnath Bhattacharya, Ph.D.
Florida Atlantic University
Importance of IT and Computer
Networks to Accountants

 To use, evaluate, and develop a modern

AIS, accountants must be familiar with IT
 Computers enable accountants to perform
their duties more quickly, accurately, and
consistently than by manual methods
 Software such as electronic spreadsheets
aid accountants in analyzing financial
statements and in developing budgets
IT Components of Interest
to Accountants
 Devices for data entry
 Data Processing
 Data Communication
 Information Generation
 Data Bases
 Data Modeling concepts
 Evaluation of internal controls in AIS
 Variety of software packages
 Computer Networks
 What is a Network?
 A network consists of two or more computers that are
linked in order to share resources (such as printers and
CDs), exchange files, or allow electronic
communications. The computers on a network may be
linked through cables, telephone lines, radio waves,
satellites, or infrared light beams.
 Two very common types of networks include:
 Local Area Network (LAN)
 Wide Area Network (WAN)
Networks & Accountants
 Because they transmit data and information,
networks are an integral part of AIS
 Networks are vulnerable to high level risk thus
requiring special controls and security measures.
 Need to prevent loss of accounting records &
information
 Need to ensure accuracy of data
 Networks may be used to consolidate data into
financial information
Gains from IT for Accountants
 Faster processing of transactions and other data
 Greater accuracy in computations of and
comparisons with data
 Lower cost of processing each transaction
 More timely preparation of reports and other
outputs
 More concise storage of data, with greater
accessibility when needed
 Wider range of choices for entering data and
providing outputs
 Higher productivity for employees and managers,
who learn to use computers effectively in their
routine and decision-making responsibilities
 Task Matching to Computers

 Manual  Computerized
 Exceptional/infrequent  Collecting and processing large
volumes of routine transactions
transactions
 Storing large quantities of data
 Setting objectives and policy- and information
making judgments  Monitoring and controlling
 New problems continuous processes
 Answering specific inquiries
 Supervising employees based on stored data
 Social communications  Preparing complex analyses
 Making complex strategic and extensive reports
 Helping gather data and
decisions understanding the relationships
between all types of decisions

Figure 3-1
Limitations of Infoage’s
Legacy AIS
 Large portion of personnel time and effort spent on
systems maintenance
 Little time & effort for value-added services
 Little flexibility to changing business conditions
 Financial and Operational data not integrated
 Difficult to generate data with both financial and non-financial components
 The transaction processing systems focus on chart of
accounts classification
 Ignore the multidimensional aspects of transactions
 Files related to applications are not integrated
 Inefficiencies of the manual system remodeled in
automated form
 Business processes and accounting procedures not analyzed and improved
upon prior to conversion to automated form
 System not geared to generate timely decision-support
information
 Computer programmers required to write new programs for ad hoc queries
Types of Network
Architectures

 Wide-Area Networks
 Formed among computers and inter-
connected devices that are geographically
distant from one another
 Local-Area Networks
 A type of distributed network created when
two or more linked computers are grouped
within a limited geographical area
Centralized WANs - I
 Concentrates all application processing at one geographical
location
 Consists essentially of one (or a cluster of) central
mainframe computer(s) and one or more physically remote
terminals
 Typically all hardware, software, and data processing
personnel are located at corporate headquarters
 Advantages include:
 the concentrated computing power of a large processor
 low operating costs per transaction leading to economies of scale
 can facilitate the use of a database approach
 facilitate better security provisions
 allow for greater standardization and professional planning and
control of information-related activities
Centralized WANs - II
 Best suited for
 Firms with centralized organizational structures
 Firms with homogeneous operations
 Firms with low processing activity at remote sites
 Examples include
 Savings and loan institutions
 Banks with many ATMs and branches
 Merchandizing chains
 Motels
 Airlines
 Drawbacks include
 Inflexibility
 Expensive and complicated software needed
 Vulnerable to disasters as a result of complete dependence on central
computer
 Not user-friendly
Distributed WANs - I
 This links fully functional computers in different
geographical locations.
 Each remote site processes its own applications.
However, users may not have easy access to
centralized data or be able to transmit data and
information rapidly.
 Computers may be interconnected by data
communications hardware and software to other
remote sites and to a central computer facility to
form an “enterprise-wide” network.
Distributed WANs - II
 Distributed databases are useful when:
 Large volumes of data need to be processed at remote locations
 Managers and employees need very fast access to data on a frequent
basis
 Databases may be distributed by replication or partition.
 Replication: Copies of files from the main data base are stored at
remote locations
 Partition: Segments of files are allocated to various locations within the
network
 This avoids data redundancy, but increases the complexity of transmitting
data throughout the network
 Likely to become the dominant approach as technology improves
 At present most data bases are a hybrid of the two approaches
Benefits of Distributed
WANs
 Can be responsive to diverse needs of users
 Enable network facilities to be used efficiently
since processing jobs can be routed to unused
computer systems in the network
 Are robust against individual computer failures
 Flexible and adaptable to change
 Best suited for firms with:
 Decentralized organizational structures
 Diverse operations or user groups
 Clustered functions at various locations
 Multiple products
 Manufacturing operations
 A variety of services
Drawbacks of Distributed
WANs
 Difficulty in maintaining adequate control and
security
 Each distributed processing location needs its own set
of controls and security measures
 Given the smallness of each location,
organizational independence is not easily achieved
 Managers may sacrifice control and security for
greater productivity
 Difficulty and cost of coordinating the relatively
independent and sometimes incompatible
computer systems
 Added costs for multiple computers, other system
components, and communication services
LANs

 A LAN may be connected to other LANs

and/or WANs via hardware devices known
as gateways or bridges
 At the heart of a LAN is the workstation
 Microcomputer-based workstation
 Traditional workstation
 Super workstation
Peer-to-Peer LANs
 In smaller LANs, every workstation
functions as both a client and a server
 This allows all users to share data and files on all
workstations
 Called peer-to-peer network since no workstations
are dedicated to perform only server functions
 Compared to a server network, peer-to-peer
networks are less costly, easier to install, and
compare well against server networks of similar
size
 Number expected to significantly increase in the
near future
Server Networks
 May interconnect hundreds of workstations
 More difficult to manage and interpret than peer-to-peer networks
 Provide greater security than peer-to-peer networks
 At least one workstation is dedicated to performing specific server
tasks
 Examples include:
 Servers
 Database servers
 Print servers
 Communications servers
 Transaction processing servers
 Large server networks often contain multiple servers