Accounting Information Systems

Third-Party Assurance

The AICPA introduced Trust Services an
assurance service.
The principles of Trust Services are

 security,
 availability,
 processing integrity,
 online privacy, and
 confidentiality.

Chapter 11
Accounting on the Internet

• Introduction
• The Internet and the World Wide Web
• XBRL – Financial Reporting on the Internet
• Electronic Commerce
• Privacy and Security on the

Internet

The Internet and
World Wide Web

• The Internet is a collection of local and
wide-area networks that are now
connection together via the Internet
backbone.

• An Internet service provider
(ISP) maintains its own Internet
computers.

Intranets and Extranets

• Intranets are internal company networks
that use the same software as the
Internet.

• Some businesses create Extranets that
enable selected outside users to access
their Intranets.

The World Wide Web

• The multimedia portion of the Internet is
called the World Wide Web or just “the
web.”

• A web browser enables users to view
the graphics files of the Internet.

• Web pages are created in an editing
language such as hypertext markup
language (HTML).

The World Wide Web

• The Internet transfers web pages from one
computer to another using a communications
protocol such as hypertext transfer protocol
(http).

• A home page is the first page a user
sees when he or she supplies a
web browser with a domain
address.

• Home pages act as a table of
contents with hyperlinks to other
web pages.

Groupware, Electronic

Conferencing, and Blogs

• Groupware allows users to send and receive
email, plus perform a wide range of other
document-editing tasks.

• Groupware allow users to collaborate on work
tasks, make revisions to the same document,
schedule appointments on each
other’s calendars, share files
and databases, conduct
electronic meetings, and
develop custom applications.

Groupware, Electronic
Conferencing, and Blogs

• Instant Messaging Software enables remote
users to communicate with each other via
the internet.

• Electronic Conferencing
enables several users to
join a discussion instead
of just two.

Groupware, Electronic
Conferencing, and Blogs

• Electronic mail enables individuals or
companies to communicate with other
Internet users around world.

Groupware, Electronic
Conferencing, and Blogs

• Blogs or web logs allows users with Web
browsers and easy-to-use software to
publish a personalized diary online. Blogging
introduces a new way to create, share,
and leverage knowledge in
an organization.

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XBRL – Financial Reporting
on the Internet

• EdgarScan’s common format allows users to
extract data from multiple companies and
compare it.

• However, such comparisons are limited to formal
financial report filings for a limited set of
enterprises.

• The eXtensible Business Reporting Language
(XBRL) is a specialized software language for
the financial reporting industry.

Electronic Commerce

• Electronic Commerce (EC) refers to
conducting business with computers and
data communications.

• EC can be performed over the Internet or
using proprietary lines.

• General categories of EC include
retail sales, E-payments and
E-wallets, and electronic data
interchange.

E-Payments

• With the use of credit cards over the Internet,
identity fraud can be a problem.

• Electronic payment (E-payment) may be a more
desirable payment method.

• The most important advantage of E-payment is
the ability to identify its users.

• E-payment eliminates the
need to transmit credit card
numbers over the Internet.

E-Wallet

• E-wallets are software applications that
store a consumer’s personal
information, including credit card
numbers, email addresses, and
shipping addresses.

• The advantage of an e-wallet is
that you do not have to enter
all your personal information
every time you make an
online purchase.

Business-to-Business
E-Commerce

• Most e-commerce is business-to-business
(B2B).

• A major part of B2B e-commerce concerns
purchases of supplies and equipment
electronically or electronic procurement.

• Companies may manage their supply chain
by linking e-commerce to internal enterprise
resource planning (ERP) systems.

Electronic Data Interchange

• Electronic Data Interchange (EDI) allows
organizations to transmit standard business
documents over high-speed data
communications channels.

• EDI streamlines processes because

1) business partners exchange documents quickly and
easily,

2) there are no postal delays, and
3) EDI eliminates most of the paperwork.



Privacy and Security
on the Internet

• The Internet and WWW have the
advantage of being very accessible.

• Accessibility can also mean “vulnerability.”
• Email, web pages, and computer

files can be accessed by
someone posing as an
authorized user.

Privacy and Security

• An Internet presence for companies
introduces unique privacy and security
concerns.

• These concerns call for specialized controls
that limit data and information access to
authorized users.

• Authentication involves
verifying that users are
who they say they are.

Firewalls

• A firewall guards against unauthorized access to
sensitive file information from external Internet
users.

• This is security software that a company installs on
Internet computers and that limits file accesses to
authorized users.

• Firewall software examines packets of
incoming messages using an access
control list.

• Firewalls cannot prevent spoofing,
or masquerading as an authorized user.

Proxy Servers

• A Proxy Server is a computer and related
software that creates a transparent
gateway to and from the Internet, and that
can be used to control Web accesses.

Data Encryption

• Data Encryption transforms plaintext
messages into unintelligible cyphertext ones
using an encryption key.

• Data encryption standard (DES) is an
encryption scheme used by the U.S.
government.

• A single key is shared by communicating
parties in secret key cryptography.

• Public key encryption requires each party to
use a pair of public/private encryption keys.

Digital Signatures

• A digital signature is used to authenticate
business documents transmitted or received
over the Internet.

• In 1994, the digital signature
standard (DSS) was adopted by
the National Institute of Standards
and Technology.

• The presence of the digital signature
authenticates a document.

Digital Certificate

• Another authentication technique is the
digital certificate.

• Digital certificates are verification of
identity provided by an independent third
party called a certificate authority.

• These certificates are signed documents
with sender names and public key
information.

Digital Time Stamping

• Many important documents transmitted over
the Internet are time sensitive.

• Digital time-stamping services (DTSSs)
attach digital time stamps to documents.

• Time stamps enable businesses
to overcome problems of downed
file serves or power failures
that delay transmission.

Chapter 12

Data Modeling

• Introduction
• An Overview of Databases
• Steps in Creating a Database Using Rea
• Creating Database Tables and Records

Introduction

Modern AISs use computers
• to systematically record data,

– in convenient and
– useful formats

• to provide easy access to required
information.

An Overview of Databases

A database is a collection of data that is stored in
related files.

Databases are important because they:

• contain valuable information,
• are very large in volume,
• store data in all its complexity
• have to maintain privacy
• contain irreplaceable data
• have to be complete, comprehensive, and accurate
• are priceless to Internet users

The structure of a database
is a particular method used to
organize records aims to develop
this efficiently so that data can be
accessed quickly and easily.

The five types of structures

Hierarchical Database model
Network Database model
Relational Database model
Object-Oriented Database model
Multidimensional Database model

Data Hierarchy

Storing accounting data in computer files involves
organizing the data into a data hierarchy.

• The lowest level of information in a file is a binary digit or
bit.
• Eight bits create a byte that represents a character.
• A data field combines several characters or bytes.
• A record combines related data fields.
• A set of records forms a file.
• A database is a collection of files that

contain all the information for an application.

Hierarchical Database model

Network Database model

Relational Database model

Object-Oriented Database model

Multidimensional Database model

Record Structures and
Record Keys

The specific data fields in each record of a computer
file are part of the record structure.

Record Keys are identifiers for records:

• Primary keys are unique to each record
• Secondary keys are

– non-unique identifiers for records and
– used for searching files for specific information

• Foreign keys enable database records to
reference one or more records in other files

Administration and
Documentation

A database administrator

• supervises the design, development, and installation of a
large database system, and

• is responsible for its maintenance, security and revision

Documentation involves descriptions of

• database structures,
• contents,
• security features,
• E-R diagrams, and
• password policies

A data dictionary is a data file about data.

Concurrency
Backup and Security

Concurrency controls are necessary to

• prevent multiple-user access to the same file
• execute transactions sequentially

Information in many accounting databases

• must be protected

– is stored by backup procedures for retrieval
– is protected from unauthorized access by use of

• passwords
• encryption techniques

Steps in Creating
Databases with REA

• An events-based accounting system (EBA) records
activities that actually happen.

• The REA is a tool for designing databases.
• An AIS captures data about an organization’s

resources, events and agents (REA).

– Resources are an organization’s assets.
– Events are identifiable activities associated with

a business processes.
– Agents are the people associated with business

activities.

Steps in Creating
Databases with REA

The REA model requires the following steps:

• identify business and economic events,
• identify entities,
• identify relationships among entities,
• create Entity-Relationship diagrams,
• identify the attributes of data entities, and
• create database tables and records to

validate the database.

Identify Events and Entities

Business processes involve two types of events:

• economic events that
– impact an organization’s financial statements

• business events, that
– impact an organization in a value-added way

Database entities include

• business and economic events
• information about the agents were involved in them

• the resources that events use or generate.

Identify Relationships
Among Entities

An entity-relationship (ER) diagram
graphically depicts a database’s contents.
An entity relationship may be

• direct relationship or
• indirect relationship

ER diagrams depict

• entities being modeled and
• the relationships (cardinalities) among them.

Entity-Relationship
Modeling

The E-R model

• uses diamond symbols to represent relationships.
• include symbols (“1” or “*”) that provide

information
on cardinality.

The cardinality of a relationship describes the
number of occurrences of one entity that may
be associated with a single occurrence of the
other entity.