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Computer-Based Transaction Processing Transaction Processing Systems  

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A fundamental task in any AIS is to process transactions affecting the organization Transaction processing systems involve three stages:  Data entry  Data and file processing  Output preparation Benefits of Understanding Transaction Processing Systems Recognize limitations in currently installed Transaction Processing Systems such as:  inadequate data controls  inefficient processing  out-of-date files  stored data that cannot be accessed quickly  data that is poorly classified and coded Recommend new or improved processing approaches and storage methods.

Data Entry   

Most transactions are initiated by business events triggered by various agents or by instructions within a computer program. Other transactions are initiated by the passage of time, e.g., interest accruals. Computer-based systems employ an off-line or on-line approach to data entry.

Off-line Data Entry    

Off-line refers to input devices not directly connected to the computer. Examples are to-tape, key-to-disk, and OCR readers. Data must be first captured on source documents and similar transactions are batched together. Batched transactions are transcribed into machine-readable form using an off-line device. Turnaround documents may be used as direct input into a system.

On-line Data Input   

On-line refers to devices that are directly and continuously connected to a computer system In on-line data entry, transaction data are entered into the computer directly as they occur Characteristics of on-line data entry may include:  nonexistence of source documents (telephones, face-to-face conversations)  input of data using source data automation (scanners at POS terminals)  origination of data by parties external to the firm (ATM machines, telephone touch-tone based transactions)  capture of data at remote sites (remote job entry or remote batch processing)

Input Documents 

Input documents typically do the following:  Authorize Subsequent Transactions  Trigger Desired Actions  Reflect Accountability  Provide Data for Output and Reference

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On-line Data Entry design 

Four factors that can reduce the tendency for errors in on-line data entry are:  Menus that clearly define alternative actions  Dialogue prompts that display suggestions or questions to the user  Graphical user interfaces that allow a user to make selections  Preformatted screens that display formats for transaction documents. These can be associated with menu options

Advantages of On-line versus Off-line Data Entry  

Off-line data entry offers the advantages of economy and productivity On-line data entry offers the advantages of timeliness, flexibility, and simplicity

Data Processing Methods  

Batch data processing involves the processing of data in groups (or batches) of like transactions at periodic intervals. Used when transaction activity is low or periodic. Real-time processing consists of processing each transaction as it arises and is captured.

Batch Processing Method 

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In batch processing, transaction data are stored in a transaction file until a master-file update is performed. The storing of transaction data in a transaction file may occur either through off-line or online entry of data Advantages of batch processing include:  processing can be done in background mode  processing is only performed when needed  batch processing leaves a good audit trail Disadvantages:  The master-file is only as current as last processing run.  If transactions are batched before entry, any errors in transaction data cannot be corrected at the time of entry. They must be corrected and reentered either through a separate run or during the next processing cycle.

Real-time Processing Method    

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Real-time processing involves the processing of each transaction as it arises and is captured Data from each transaction are entered via an online device and posted directly and immediately to the affected record(s) in one or more master files Real-time processing may be interactive in that it may involve direct interactions between humans and computerized systems Advantages of real-time processing include:  This method keeps the master file more current than the batch runs  Errors are caught at the time of data entry Drawbacks of real-time processing include:  More complex and expensive than batch systems  Harder to audit  Controls and backup procedures are more elaborate in order to guard against unwarranted access and human error

Document Flowcharts   

Flowcharts are pictorial representations of transaction processing systems that portray flows of some type A Document Flowchart emphasizes the hardcopy inputs and outputs and their flows through organizational units Auditors and accountants may use document flowcharts when analyzing a current system for weaknesses in controls and reports

System Flowcharts   

System Flowcharts depict the flows of data and processing steps in an AIS They use symbols that are industry conventions standardized by the American National Standards Institute (ANSI) Flowcharting symbols are grouped as input-output symbols, processing symbols, storage symbols, data and information flow symbols, and miscellaneous symbols

Structure Charts     

A structure chart portrays the hierarchy of levels and interrelationships within a system Computer programmers use high-level structure charts to determine the overall structure of program modules required to operationalize a system Low-level structure charts, prepared during the detailed design phase, enable computer programmers to create source code sub-routines that help in the implementation of systems Source code sub-routines are frequently written in Structured English Structured English are English-like statements generated from low-level structured charts. These statements are then converted to detailed source programming code instructions

Sequential vs. Direct Updating 

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Sequential Updating from Batched/Online Inputs: To update a master file sequentially within a computerbased application, the processing program starts at the beginning master file record. It then reads every record in the file, changing data in each record affected by a transaction (see Figs. 5-6 and 5-7 & 5-8). Sequential Updating requires sorting of the transaction file by the master file sorting key (e.g., transactions originally sorted on transaction_no. must now be resorted by master-file customer_no.). Since all the records in a master file are read during the update, sequential updating increases the processing time significantly if only a few records are to be updated. Direct Updating: Instead of processing a batch of transactions sequentially against an entire master file, each transaction in the batch can be posted directly to the affected records. Direct Updating with batched transactions eliminates the sorting step. Direct Updating is only feasible if the master files are stored on direct-access storage.

Enterprise Resource Planning   

ERP is a software with an integrated set of applications for enterprise-wide use in functional areas such as finance, accounting, human resource management, manufacturing, logistics, etc. ERP systems permit an integration of data and applications. Both financial and non-financial data can be integrated ERP systems also facilitate access to data that are within the firm but outside the ERP system

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Standardization of worldwide systems, consistent and accessible data, and on-line processing of data result in firm-wide data availability

File Management Issues   

A File is a collection of related data stored together for future use All computerized applications involving transaction processing typically employ one or more files Because of their involvement with transaction processing, and auditing of such processing, accountants need to be aware of file management issues

File Access – I 

Sequential Access: This requires each record in a file to be scanned, beginning with the first record in the file  The sequential access method is inefficient for finding individual records. However, it is very effective if a large number of records in a file need to be accessed

File Access – II  

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Direct Access: This denotes any method that involves the accessing of desired records in some way other than by an exhaustive search through all the records in a file Significant methods of Direct Access include:  Indexed sequential file  Randomization  Binary searches  Linked lists  Inverted lists All Direct Access methods require direct-access storage media such as magnetic disks and the use of Pointers Pointers are data elements whose values specify or “point to” the physical storage addresses where associated data are stored. In contrast to the other data elements of a record, a pointer provides direction rather than content

Indexed Sequential File – I  

This type of file combines a sequential arrangement of records with an index that cross-references the primary key values of the records The index enables individual records to be retrieved quickly, while the file retains the benefits of sequential processing

Randomization     

This is the access procedure in which computations are performed to generate addresses for individual records. These computational procedures are known as “Hashing Schemes.” When the records of a file are located throughout a direct access storage medium by means of a randomizing procedure, the file is described as a random file. A Hashing Scheme provides a random file with its major advantage: fast access. Hashing schemes are typically faster than the table lookup procedures required with indexed sequential files.

Coding   

AISs depend on coding to record, store, classify and retrieve financial data. Computer systems most often use numeric codes or alphanumeric codes for processing accounting transactions. Purposes of coding:  uniquely identifies transactions and accounts  compresses data  aids in classification process  conveys special meanings

Coding Systems    

Mnemonic Codes give visible clues concerning the objects they represent Sequence Codes are the simplest type of coding scheme that assign numbers or letters in consecutive order Block Codes assign a series of numbers within a sequence to entities or events having common features Group Codes reveal two or more dimensions or facets pertaining to an object

Design Considerations in coding    

Codes should serve some useful purpose Codes should be consistent Codes should be standardized throughout the organization Codes should plan for future expansion

Accounting Information Systems: Essential Concepts and Applications Fourth Edition by Wilkinson, Cerullo, Raval, and Wong-On-Wing

Copyright © 2000 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.

Accounting Information Systems AIS Development Strategies Purchase Software   

Canned software is written by software development companies and is sold on the open market to a broad range of users with similar requirements. Turnkey systems are a combination of software and hardware sold as a package. The vendor installs the entire system and user needs only to “turn the key”. The Internet has given companies a new way to acquire software:  Application service providers (ASPs) host Web-based software on their computers and deliver the software to their clients over the Internet.

Purchasing Software and The SDLC  1. 2. 3. 4. 5.

Companies that buy rather than develop AIS software still go through the systems development life cycle (SDLC). Purposes of coding: uniquely identifies transactions and accounts compresses data aids in classification process conveys special meanings

Development by In-House IS Department   

Most often, organizations develop their own custom software, because canned software that fit their specific needs is not available. Developing custom software is difficult and error-prone. It also consumes a great deal of time and resources.

Custom Software Development by an Outside Company 

When contracting with an outside organization, a company should maintain control over the development process. Some guidelines:  Carefully select a developer  Sign a contract  Plan and monitor each step  Maintain effective communication  Control all costs

End-User-Developed Software  

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End-user computing (EUC) is the hands-on development, use, and control of computer-based information systems by users. With the advent of inexpensive PCs and powerful, inexpensive software, users began developing their own systems to create and store data, access and download company data, and share data and computer resources in networks. Examples of end user development uses:  Retrieving information from company databases to produce simple reports or to answer one-time queries  Performing “what if” sensitivity or statistical analyses

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 Developing applications using prewritten software (spreadsheet or database system)  Preparing schedules and lists, such as depreciation schedules, accounts receivable aging, and loan amortizations Benefits of End-User-Developed  User creation, control, and implementation  Systems that meet user needs  Timeliness  Freeing up IS resources  Versatility and ease of use Risks of End-User-Developed Software  Logic and development errors  Inadequately tested applications  Inefficient systems  Poorly controlled and documented systems  Systems incompatibility  Duplication of systems  Increased costs Managing and Controlling End-User Computing  Organizations use several different approaches to manage and control end-user computing. For example, a help desk can encourage, support, coordinate and control end-user activities.

Functions of a Help Desk      

Providing hot-line assistance to help resolve problems Serving as a clearinghouse for information, coordination, and assistance training end users, and providing corresponding technical maintenance and support Evaluating new end-user hardware and software products Assisting with application development Developing and implementing standards Controlling corporate data

Outsource the System    

Outsourcing is hiring an outside company to handle all or part of an organization’s data processing activities. In a mainframe outsourcing agreement, the outsourcers buy their client’s computers and hire all or most of the client’s employees. In a client/server or PC outsourcing agreement, an organization outsources a particular service, a segment of its business, a particular function, or PC support. Benefits of Outsourcing  A business and information solution  Asset utilization  Access to greater expertise and  more advanced technology  Lower costs  Improved development time  Elimination of peaks and valleys usage  Facilitation of downsizing

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Risks of Outsourcing  Inflexibility  Loss of control of system and/or data  Reduced competitive advantage  Locked-in system  Unfulfilled goals  Possibility of poor service

Business Processes Reengineering     

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It is the thorough analysis and complete redesign of business process and information systems to achieve performance improvements. It is a process that challenges traditional organizational values and cultures associated with underperformance. BPR reduces a company to its essential business processes and focuses on why they are done rather than on the details of how they are done. It completely reshapes organizational work practices and information flows to take advantage of technological advancements. Principles of Reengineering 1. Organize around outcomes, not tasks. 2. Require those who use the output to perform the process. 3. Require those who produce information to process it. 4. Centralize and disperse data. 5. Integrate parallel activities 6. Empower workers, use built-in controls, and flatten the organization chart. 7. Capture data once, at its source. Challenges Faced by Reengineering Efforts  Tradition  Time requirements  Lack of management support  Retraining  Resistance  Risk  Skepticism  Controls

Prototyping   

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It is an approach to systems design in which a simplified working model of a system is developed. A prototype, or “first draft,” is quickly and inexpensively built and provided to users for testing. Steps: 1. Resistance 2. Risk 3. Skepticism 4. Controls Benefits of Prototyping  Better definition of user needs  Higher user involvement and satisfaction  Faster development time

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 Fewer errors  More opportunity for changes  Less costly Disadvantages of Prototyping  Significant user time  Less efficient use of system resources Incomplete systems development  Inadequately tested and documented systems  Negative behavioral reactions  Unending development

Computer-Aided Software Engineering (CASE)      

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CASE is an integrated package of computer-based tools that automate important aspects of the software development process. CASE tools are used to plan, analyze, design, program, and maintain an information system. They are also used to enhance the efforts of managers, users, and programmers in understanding information needs. CASE tools do not replace skilled designers; instead they provide a host of self-integrated tools that give developers effective support for all SDLC phases. CASE software typically has tools for strategic planning, project and system management, database design, screen and report layout, and automatic code generation. Advantages of CASE Technology  Improved productivity  Improved program quality  Cost savings  Improved control procedures  Simplified documentation Disadvantages of CASE Technology  Incompatibility  Cost  Unmet expectations

Marshall B. Romney Paul John Steinbart ©2003 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, Romney/Steinbart