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Accounting Information Systems
Thinking, Development, and Evaluation

v1.0 Robyn L. Raschke and John A. Schatzel
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1.5 End-of-Chapter Exercises

Exercises

  1. After reading the Joe's Ristoranté case, answer the following:

    1. Does Joe understand the need for accounting information?

    2. What information will be needed in general and in specific to the restaurant?

    3. What will be required to get it?

    4. Should the company do the accounting itself or outsource it (totally or partially) to an accounting service provider such as a CPA?

    5. What would you recommend that Joe should do?

  2. Generally, what is a system? Can you provide an example of a system?

  3. What is a system problem? Using this concept, what would be a good example and a possible cause?

  4. What is an AIS? What is the difference between an accounting system and a system in general? What is similar and different about errors and irregularities?

  5. What is critical thinking? In what context is it important?

  6. What are the components of an AIS? Provide examples of each using the Joe's Ristoranté case.

  7. Is an accounting systems course about accounting, per se?

  8. What makes a system complex, and why is it better to illustrate a simple system when attempting to understand the basic concept?

  9. What makes information useful, and how does usefulness relate to value? Can useful information not be valuable?

  10. What effect has technology had on accounting systems and is it expected to continue?

  11. Can information technology be used to create competitive advantage?

  12. Why are advanced ERP systems that rely on transaction-based data no longer sufficient?

  13. How important are accounting systems, and why should we study them?

  14. Which of the following would not be part of a system according to general system theory?

    1. An objective

    2. Interacting parts

    3. Things that work together

    4. A general ledger

  15. Systems problems always occur when

    1. a part is missing.

    2. the objective is clear.

    3. parts interact.

    4. the objective is not being met.

  16. For information to be useful, it must be

    1. relevant.

    2. reliable.

    3. complete.

    4. timely.

    5. All of the above

  17. Which of the following is not a major component of an AIS?

    1. People

    2. Education

    3. Technologies

    4. Controls

  18. The value of an accounting system is generally determined by

    1. quantifying all of its benefits.

    2. ensuring that its costs are low.

    3. estimating its salvage value.

    4. subtracting its cost from its benefit.

  19. Which of the following would be the best way to improve your critical thinking skills?

    1. Listening to lectures

    2. Questioning your own thinking

    3. Engaging in activities that challenge you to express your opinion based on sound reasoning

    4. Both b and c

  20. PROBLEM-SOLVING IN THE REAL WORLD

    1. After graduating from college, you took a position with a public accounting firm as a staff auditor. Two and a half years later, you were up for promotion to senior, but one of your publicly held clients offered you a job for roughly $50,000 more than you were making currently plus stock options with no travel and very little overtime. Interestingly, you accepted the offer and within a few months were faced with the following situations:

      1. Although your pay is great, there seems to be a lot of complaining at the company about its software. The company has been using Windows 7 on its office computers for years and has been quite satisfied. The accounting staff has also been using Excel, Access, and Word as part of Office 2013 for a number of accounting tasks, such as budgets, cost analysis, projections, scheduling, and communication among team members. Although the software has generally met company needs, there has been concern about viruses, malware, backing up important files, and sharing files among team members. The company also does not want to spend the money to upgrade its operating system even though Microsoft announced that it will no longer support Windows 7.

      2. One of the sales managers says that she would like to know who the sales people were for certain sales made in a particular region of the country, how much each sales person sold during the year so far, and what types of sales training they had received (but said that such information was not available).

      3. A customer called and complained to customer service that she had ordered certain merchandise online (in used condition) during a sale on used items two weeks earlier but had not received the merchandise. The customer had an order number and a UPS tracking number. Upon review of the UPS tracking system, UPS showed that they had received the information from your company, but no further updates were available.

      4. Much to your surprise and disappointment, you recently learned that your company had acquired another company fourteen months ago for cash and common stock at a price significantly higher than book value only to find out that the acquired company had been inflating its sales through a revenue recognition scheme that was at variance with generally accepted accounting principles. From a preliminary investigation, you believe that the numbers may be large enough to warrant a restatement of your current quarterly and prior year’s sales figures and a significant write-down of goodwill from the acquisition. In addition, you discover that the subsidiary has some nonexistent inventory and has been using month-end adjusting entries to meet your home office’s budgetary and cash flow targets. If this information becomes known, it will likely have a significant negative effect on the company’s stock price, precipitate a Security and Exchange Commission investigation, and wipe out the value of your stock options.

Required: For each of the scenarios above,

  1. Analyze and indicate whether you think that there is a system problem (including your rationale).

  2. If so, explain what you believe is the cause or if not, why not.

  3. If so, propose a solution (including alternatives, if any).

  1. Critical Thinking

    1. Do some research on a company that has a product you admire (e.g., Apple, Nike, Marvel) and find out the following:

      1. What kind of internal and external data do you think would be important to them?

      2. Identify if this data would be quantitative or qualitative.

  2. Reflective Learning

    1. Boyd and Fales (1983) state that reflective learning is the process of internally examining and exploring an issue of concern, triggered by an experience, which creates and clarifies meaning in terms of self, and which results in a changed conceptual perspective.

      1. Based on reading and reflecting on this chapter, what have you learned?

      2. What was the most difficult concept in the chapter? Why was it difficult?

      3. Does the material in this chapter relate to anything you have covered in another course or seen in any of your prior experiences?

  3. After studying this chapter, how would you go about creating an effective accounting system for the two following organizations?

    1. You founded a company and have been running it for approximately one year.

    2. The company has been operating for 20 years, and you have just become its controller.

    3. What are the decisions one has to make with solving system problems with a company that has been operating for 20 years compared to a company operating within the first year?