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a set of two or more interrelated components interacting to achieve a goal

Goal Conflict

components act in their own interest without regard for overall goal

Goal congruence

Act in own interest to achieve overall goal


Facts recorded and stored; a companies main resources


processed data used in decision making

information overload

too much information to make a decision

Benefits of Information

reduce uncertainty, improve decisions, improves planning, improves scheduling

Costs of Information

Time and resources

Relevant, reliable, complete

What makes information useful?


The capacity of information to make a difference in a decision by helping users to form predictions about the outcomes of past, present, and future

Business Process

A set of related, coordinated, and structured activities performed to carry out a certain goal


is an agreement between two two entities to exchange goods or services

Transaction Processing

The process that begins with capturing transaction data and ends with informational output, such as the financial statements

Give-get exchange

An agreement between two entities to exchange goods or services

Revenue, expenditure, production, human resource, financing

5 business process transaction cycles

revenue cycle

where goods and services are sold for cash or a future promise to receive cash

expenditure cycle

where companies purchase inventory for relsale or raw materials to use in producing products in exchange for cash or future promise to pay cash

production cycle

where raw materials are transformed into finished goods

Human resources/payroll cycle

where employees are hired, trained, compensated, evaluated, promoted, and terminated


where companies sell shares in the company to investors and borrow money and where investors are paid dividends and interest is paid on loans

General ledger and reporting system

used to generate information about business transactions for both management and external parties; at the heart of the AIS in fig 1-2

Accounting information system

collects, records, stores, and processes accounting and other data to produce information for decision makers; primary information system for an organization; information providing vehicle; can be paper and pencil or a computer system

predictive analysis

uses data warehouses and complex algorithms to forecast future events, based on historical trends and calculated probabilities

value chain

consists of five primary activities that directly provide value to customers

primary activities of value chain

inbound logistics, operations, outbound logistics, marketing and sales, service

support activities

firm infrastructure, human resources, technology, purchasing

supply chain

a set of activities a product or service moves along before as output it is sold to a customer

inbound logistics, operations, outbound logistics, marketing and sales, service

5 primary activities of the value chain

firm infrastructure, human resources, technology, purchasing

4 support activities of the value chain

business strategy, organizational culture, business developments

3 factors that influence the design of AIS

Components of AIS

1. the people who use the system 2. the procedures and instructions used to collect, process, and store data 3. the data about the organization and its business activities 4. the software used to process the date 5. the information technology infrastructure 6. The internal controls and security measures that safeguard AIS data

How AIS adds value

improves quality and reduces costs of products or services, improves efficiency, shares knowledge, improves the efficiency and effectiveness of its supply chain, improving the internal control structure, improving decision making

Data processing cycle

The operations performed on data to generate meaningful and relevant information

Data Input, data storage, Data processing, information output

4 Stages of the data processing cycle

Source Documents

paper documents, like a purchase order

turnaround documents

company output sent to an external party, who often adds data to the document, and then are returned to the company as an input document, usually paper based

Source data automation

devices capture transaction data in machine-readable form at the time and place of their origin. ATMs, POS Scanners, bar codes

okay got it

Review Table 2-1

Accurate and Complete

well designed documents and screens improve this by providing instructions or prompts, grouping logically related pieces of information, using checkoff boxes or pull down menus to present the available options and using appropriate shading and borders to clearly separate data items.

General ledger

contains SUMMERY-level data for every asset, liability, equity, revenue, and expense account

subsidiary ledger

contains DETAILED data for any general ledger account with many individual sub accounts

General Journal

used to record INFREQUENT or non routine transactions such as payments and end of period adjusting and closing entries

Specialized journal

records large numbers of REPETITIVE transactions such as sales, cash receipts, and cash disbursements


companies assign systematic assignment of numbers or letters to items to classify and organize them

sequence codes

items are numbered consecutively (pre-numbered checks)

block code

numbers are reserved for specific categories of data

Group codes

tow or more subgroups of digits used to code items, are often used in conjunction with block codes

mnemonic codes

letters and numbers are interspersed to identify an item. dry300w05, or low end (300), white (W), dryer (dry), whirlpool (05)

Guidelines for a better coding system

consistent with intended use, allow for growth, simple as possible, consistent with the company's organizational structure

Audit trail

traceable path of a transaction through a data processing system from point of origin to final output, or backwards from final output to point of origin


something an orginization wants to tore data about


a collection of integrated files

transaction file

contains data used to update master file

master file

all permanent records

4 main activities of data processing

create new records, read existing records, update records, delete records C.R.U.D.

batch processing

update something periodically - once a week updating sales records

Online/Real-time processing

updates as they occur

hard copy

printed on paper

soft copy

on a computer

Enterprise Resource Planning systems (ERP)

Provides a single view of an organization's data in one place, integrate all aspects of a company's operations with a traditional AIS

Advantages of an ERP system

Greater visability, data entered once, one stop shop

Disadvantages of an ERP system

extremely costly, time consuming (lots of testing), extremely complicated


gain an unfair advantage over another person, must have a false statement, material fact that induces someone to act, intent to deceive, justifiable reliance, injury or loss suffered by another person

white collar criminal

people who commit fraud

misappropriation of assets

theft of company assets, largest factors are absence of internal control system and failure to enforce internal control system

fraudulent financial reporting

intentional or reckless conduct, whether by act or omission, that results in materially misleading financial statements

Reasons for fraudulent financial reporting

deceive invested creditors, increases a companies stock price, meet cash flow needs, hide company losses or other problems

Tread way commission

commission suppose to reduce fraud, recommends four actions to reduce fraudulent financial reporting. establish an environment that contributes to integrity, identify and understand the factors that lead to fraudulent financial reporting, assess the risk of FFR within the company, design and implement internal controls to provide reasonable assurance of preventing fraudulent financial reporting

SAS # 99

in their responsibility to detect fraud it requires auditors to: understand fraud, discuss the risks of material fraudulent misstatements, obtain information, identify asses and respond to risks, evaluate the results of their audit tests, document and communicate findings, incorporate a technology focus

Fraud triangle

Pressure, Opportunity, Rationalization


motivation to commit fraud; two types employee and financial reporting

employee pressure

needs more money, life style, emotional

financial statements pressure

industry conditions, management characteristics


condition that allows someone to: commit fraud, conceal fraud (lapping, kiting), or convert theft of misrepresentation to personal gain


Justification, attitude, lack of personal integrity


a perpetrator steals the cash or check payments customer A mails in to pay its accounts receivable, later funds from customer B are used to pay off A's balance, funds from customer C are used to pay B's balance and so on


cash is created using the lag between the time a check is deposited and the time it clears the bank.

computer fraud

illegal act in which computer technology knowledge is used for perpetration, investigation, or procecution

Input fraud

altering or falsifying input

processor fraud

unauthorized system use

computer instructions fraud

modifying software, illegal copying of software in an unauthorized manner, creating software

Data fraud

illegally using copying, browsing, searching, or harming company data


unauthorized access, modification or use of a computer sytem or other electronic data

social engineering

Techniques that trick a person into disclosing confidential information, used to gain access to a secure environment


Network of hijacked computers, carry out processes without user's knowledge


hijacked computer

Denial-of-service attack

constant stream of requests made to a web-server, usually in a botnet, that overwhelms and shuts down service


making electronic communication look like it came form a trusted source


attacks on computers/programs


attacks on networks

password cracking

penetrating system defenses, stealing passwords, and decrypting them to access system programs, files, and data

war dialing

dialing phone lines to find idle modems to use ro enter a system, capture the attached computer, and gain access to its networks


attacking phone systems to get free phone access; using phone lines to transmit viruses and to access, steal and destroy data

data diddling

changing data before, during, or after it is entered into the system

data leakage

unauthorized copying of company data

salami technique

stealing tinay slices of money over time

economic espionage

the theft of information, trade secrets , and intellectual property

cyber bullying

using computer technology to harm another person

internet terrorism

using the internet to disrupt communications and ecommerce

internet auction

using an internet auction site (ebay) to defraud another person

internet misinformation

using the internet to spread false or misleading information

identity theft

assuming someone's identity by illegally obtaining confidential information such as a social security number


creating a seemingly legitimate business, collecting personal data while making a sale, and never delivering items sold


communications that request recipients to disclose confidential information by responding to an email or visiting a web site

type squatting

web sites with names similar to real web sites users making typographical errors are sent to a site filled with malware


searching for confidential information by searching for document and records in garbage cans, communal trash bins, and city dumps

shoulder surfing

watching or listening to people enter or disclose confidential data

Lebanese looping

inserting a sleeve into an ATM so that it will not eject the victim's card, pretending to help the victim as a means to discover his or her pin, and then using the card and pin to drain the account


planting a chip that records transaction data in a legitimate credit card reader


Listening to private voice or data transactions


secretly goes in your computer, gets information and sends it to someone else


type of spyware that collects information about spending habits

Trojan Horse

Malicious computer instructions in an otherwise properly functioning program

Time bomb/ logic bomb

software that sits idle until a specified circumstance or time triggers it, destroying programs, data, or both

Trap door/ back door

a back door into a system that bypasses normal system controls

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