Roles of Accounting Information Systems in the Business Environment

 SYSTEMS, DATA, AND INFORMATION

 

Ø  A system is a set of interrelated components that interact to achieve a goal.  Most systems are composed of smaller subsystems and vice versa.

Ø  The systems concept encourages integration

Ø  Data are facts that are collected, recorded, stored, and processed by an information system.

Ø  Organizations collect data about events that occur, resources that are affected by those events, and agents who participate in the events

Ø  Information is different from data.  Information is data that have been organized and processed to provide meaning to a user.  Usually, more information and better information translates into better decisions.  However, when you get more information than you can effectively assimilate, you suffer from information overload.  When you’ve reached the overload point, the quality of decisions declines while the costs of producing the information increases.

Ø  The value of information can be measured as its benefits minus its costs.  Costs are more difficult to quantify.

•         Characteristics that make information useful:

–     Relevance—reduces uncertainty by helping predict or confirm;

–     Reliability—dependable and free from error or bias;

–     Completeness—doesn’t leave out anything important;

–     Timeliness—received in time to affect the decision;

–     Understandability—presented so it’s comprehensible and useful;

–     Verifiability—independent people would produce the same result; and

–     Accessibility—available when needed in a useable format.

–     Information is provided to both external and internal users. 

–     External users primarily use information that is either mandatory (e.g., required by government) or essential (needed to conduct business). 

–     In providing mandatory or essential information, the focus should be on minimizing costs, meeting regulatory requirements, and meeting minimum standards of reliability and usefulness.

•         Internal users primarily use discretionary information.

–     The primary focus in producing this information is ensuring that benefits exceed costs, i.e., the information has positive value.