Chapter 3 Information Systems and its Components

INFORMATION ITS
SYSTEMS AND
COMPONENTS

r 'I
LEARNING OUTCOMES

After reading this chapter, you will be able to

□ Understand about working of Financial and Accounting

System.

□ Comprehend the knowledge about various components of

an Information System and its working.

□ Appreciate nuances of Application Systems, Operating

Systems, Database Systems, Networking and Communication
Systems.

□ Grasp various types of threats and their mitigating controls

to minimize the impact.

□ Understand types of controls and audit aspects of various

systems.
D Comprehend about an organization structure and individual

roles and responsibilities.

© Tht> Institute of Chartt>1·t>d Accountants of India

ENTERPRISE INFORMATION SYSTEMS

(CHAPTER OVERVIEW[j:::r

SInyfsotremmasti(oISn) Components People Hardware
Resources Software
Controls
Auditing Computer Objectives of
Audit Trail System Controls
Nature of
Data Resources
Information
Networking and System
Communication
Resources
System Audit Functions

Objectives

Classification

Environmental
Controls

Physical Security
Controls

Logical Access
Controls

Managerial
Controls

Application
Controls

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- 3.3

INFORMATION SYSTEMS AND ITS COMPONENTS

(Q;/ 3.1 INTRODUCTION

Over the past few centuries, the world has moved on from connection amongst
individuals to more of connection amongst systems. We now have systems that
are constantly exchanging information about various things and even about us,
many a times without human intervention. This inter-networking of physical
devices, vehicles, smart devices, embedded electronics, software, sensors or any
such device is often referred to as loT (Internet of Things).
What is interesting about various emerging technologies is that at its core we
have some key elements, namely, People, Computer Systems (Hardware,
Operating System and other Software), Data Resources, Networking and
Communication System. In this chapter, we are going to explore each of those
key elements.

((S· 3.2 INFORMATION SYSTEMS

Information System: Information System (IS) is a combination of people,
hardware, software, communication devices, network and data resources that
processes (can be storing, retrieving, transforming information) data and
information for a specific purpose. The system needs inputs from user (key in
instructions and commands, typing, scanning) which will then be processed
(calculating, reporting) using technology devices such as computers, and produce
output (printing reports, displaying results) that will be sent to another user or
other system via a network and a feedback method that controls the operation.
The main aim and purpose of each Information System is to convert the data into
information which is useful and meaningful. An Information System depends on
the resources of people (end users and IS specialists), hardware (machines and
media), software (programs and procedures), data (data and knowledge bases),
and networks (communications media and network support) to perform input,
processing, output, storage, and control activities that transform data resources
into information products. This information system model highlights the
relationships among the components and activities of information systems. It also
provides a framework that emphasizes four major concepts that can be applied to
all types of information systems. An Information System model involves following
steps well depicted in the Fig. 3.2.1:
♦ Input: Data is collected from an organization or from external environments

and converted into suitable format required for processing.

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ENTERPRISE INFORMATION SYSTEMS

• Process: A process is a series of steps undertaken to achieve desired
outcome or goal. Information Systems are becoming more and more
integrated with organizational processes, bringing more productivity and
better control to those processes.

• Output: The system processes the data by applying the appropriate
procedure on it and the information thus produced is stored for future use
or communicated to user. Three basic activities of an information system
that are defined above, helps enterprise in making decisions, control
operations, analyze problems and create new products or services as an
output.

INPUT PROCESSING OUTPUT
(Business problems in the (Software, Programs, (Solution to problems in
form of data, information,
instructions, opportunities) people, the form of reports,
communication, graphics, calculations,
equipment, storage)
voices)

CONTROL FEEDBACK
(Decision Makers,

Auto Control)

User

Fig. 3.2.1: Functions of Information Systems

• Feedback: Apart from these activities, information system also needs
feedback that is returned to appropriate members of the enterprises to help
them to evaluate at the input stage.

(Q;;· 3.3 COMPONENTS OF INFORMATION SYSTEMS

With the help of information systems enterprises and individuals can use
computers to collect, store, and process, analyze, and distribute information.
There are different types of information systems, i.e. Manual (paper and pencil)
information system, Informal (word of mouth) information system, Formal (written
procedures) information system and Computer based information system. This
chapter mainly focuses on Computer Based Information System. A Computer
Based Information system is a combination of people, IT and business processes
that helps management in taking important decisions to carry out the business
successfully.

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- 3.5

INFORMATION SYSTEMS AND ITS COMPONENTS

Information Systems are networks of hardware and software that people and
organizations use to create, collect, filter, process, transform and distribute data.
Information Systems are interrelated components working together to collect,
process, and store and disseminate information to support decision-making,
coordination, control, analysis and visualization in an organization. An
Information System comprise of People, Hardware, Software, Data and
Network for communication support shown in Fig. 3.3.1.
Here, people mean all those who operate, manage, maintain and use the system
i.e. system administrator, IS personnel, programmers and end users i.e. the
persons, who can use hardware and software for retrieving the desired
information. The hardware means the physical components of the computers i.e.
server or smart terminals with different configurations like
corei3/corei5/corei7/corei9 processors etc. and software means the system
software (operating systems), application software (different type of computer
programs designed to perform specific task) and utility software (e.g. tools). The
data is the raw fact which is input to the system. It may be alphanumeric, text,
image, video, audio, and other forms. The network means communication media
(Internet, Intranet, Extranet etc.).

Components of Information Systems

I I I I
Co�uter System Network &
People I
II Cornroonication System
Data Resources

Hardware Software

Fig. 3.3.1: Components of Information Systems

3.3.1 People Resources
While thinking about Information Systems, it is easy to get too focused on the
technological components and forget that we must look beyond these tools at
the whole picture and try to understand how technology integrates into an
organization. A focus on people involved in Information Systems is the next step.

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