Department of Accounting & Information Systems

BBA 25th Batch Final

th st
4 Year 1 Semester Final Examination 2022
Accounting Information Systems (4103)
Course Instructor: Dr. Minhaj Ferdous and Ahmed Rizvan Hasan

Question 01
a) What is an Accounting Information System? What are the six major components of an Accounting
Information System? Describe.

Answer

Accounting Information System refers to a system that collects, records, stores, and processes data to produce
information for decision makers. If accounting is the language of business, then AIS is the intelligence—the
information-providing vehicle—of that language. An AIS can be a paper-and-pencil manual system, a complex
system using the latest in IT, or something in between. Regardless of the approach taken, the process is the
same. The AIS must collect, enter, process, store, and report data and information. The paper and pencil or the
computer hardware and software are merely the tools used to produce the information.
There are six components of an 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 data
5. The information technology infrastructure, including the computers, peripheral devices, and network
communications devices used in the AIS
6. The internal controls and security measures that safeguard AIS data

b) How Accounting Information Systems add value to an organization? Discuss.

Answer

A well-designed AIS can add value to an organization by:

1. Improving the quality and reducing the costs of products or services. For example, an AIS can monitor
machinery so operators are notified immediately when performance falls outside acceptable quality limits.
This helps maintain product quality, reduces waste, and lowers costs.
2. Improving efficiency. For example, timely information makes a just-in-time manufacturing approach
possible, as it requires constant, accurate, up-to-date information about raw materials inventories and their
locations.
3. Sharing knowledge. Sharing knowledge and expertise can improve operations and provide a competitive
advantage. For example, CPA firms use their information systems to share best practices and to support
communication between offices. Employees can search the corporate database to identify experts to
provide assistance for a particular client; thus, a CPA firm’s international expertise can be made available
to any local client.
4. Improving the efficiency and effectiveness of its supply chain. For example, allowing customers to directly
access inventory and sales order entry systems can reduce sales and marketing costs, thereby increasing
customer retention rates.

Answered – Nurun Nabi Mahmud, A&IS 26th

5. Improving the internal control structure. An AIS with the proper internal control structure can help protect
systems from fraud, errors, system failures, and disasters.
6. Improving decision making. Improved decision making is vitally important and is discussed below in more
detail.
 It can identify situations requiring management action. For example, a cost report with a large variance
might stimulate management to investigate and, if necessary, take corrective action.
 It can reduce uncertainty and thereby provide a basis for choosing among alternative actions.
 It can store information about the results of previous decisions, which provides valuable feedback that
can be used to improve future decisions. For example, if a company tries a particular marketing
strategy and the information gathered indicates that it did not succeed, the company can use that
information to select a different marketing strategy.
 It can provide accurate information in a timely manner. For example, Walmart has an enormous
database that contains detailed information about sales transactions at each of its stores. It uses this
information to optimize the amount of each product carried at each store.
 It can analyze sales data to discover items that are purchased together, and it can use such information
to improve the layout of merchandise or to encourage additional sales of related items. For example,
Amazon uses its sales database to suggest additional books for customers to purchase.

c) Describe the role of the Accounting Information Systems in the value chain with the help of figure.

Answer

To provide value to their customers, most organizations perform a number of different activities. Value chain
is nothing but linking together of all those primary and support activities in a business. Thus, value is added
as a product passes through the chain.

Figure 01: The Value Chain

How AIS add value (role) to Value Chain:

1. In case of INBOUND LOGISTICS, AIS help in Cost Optimization, such as transportation and
procurement cost. Also help in Inventory Management by provide real-time data on inventory levels,
helping businesses optimize stock levels and reduce carrying costs. It can also help in Supplier

Answered – Nurun Nabi Mahmud, A&IS 26th

 Management by keeping track supplier performance, payment terms, and discounts, enabling better
negotiation and management of supplier relationships.
2. In OPERATIONS, AIS can help by increasing Efficiency and Productivity, for example by automating
routine tasks and providing real-time data. It can highly help in Quality Control by allowing for better
tracking of defects and ensuring product quality. It can also help in Resource Allocation, such as
allocating resources efficiently by providing insights into costs and resource utilization.
3. In case of OUTBOUND LOGISTICS, AIS can help in Order Fulfilment, like say, reducing lead times
and ensuring timely deliveries to customers. By tracking distribution costs and helping in selecting the
most cost-effective shipping methods and routes, AIS can play a great role Distribution Optimization.
The most important contribution of AIS is Customer Relationship Management (CRM), by integrating
with CRM systems to enhance customer interactions and provide better service.
4. In case of MARKETING AND SALES, AIS can add value by providing Customer Insights, i.e.,
valuable customer data, such as purchasing patterns, preferences, and demographics, enabling targeted
marketing efforts. As AIS is all about data mechanisms, Marketing ROI Analysis become handy because
of keeping track of marketing expenditures and assess their impact on sales and profitability.
5. SERVICE like Customer Support i.e., customer service inquiries and track service requests, improving
response times and customer satisfaction become easy because of AIS. Also in Warranty and
Maintenance Tracking, i.e., tracking warranty information and scheduling maintenance, ensuring timely
service to customers can be very precise. By using AIS tools, Customer Feedback Analysis can be very
easy.

Figure 02: Factors Influencing Design of the AIS

Besides helping in primary activities management, AIS can also play vital roles in managing Support
Activities - such as firm infrastructure, technology, purchasing, and human resources that enable primary
activities to be performed efficiently and effectively. For example, AIS can highly help in recruiting, hiring
and training employees.

Answered – Nurun Nabi Mahmud, A&IS 26th

Question 02
a) What do you understand by 'Documentation'? Why is Systems Documentation so important? Discuss
various Documentation Techniques in brief along with their use cases.

Answer

Documentation is the narratives, flowcharts, diagrams, and other written materials that explain how a system
works. It explains how a system works, including the who, what, when, where, why, and how of data entry,
data processing, data storage, information output, and system controls. Documentation tools are important on
the following levels:
1. At a minimum, you must be able to read documentation to determine how a system works.
2. You may need to evaluate documentation to identify internal control strengths and weaknesses and
recommend improvements as well as to determine if a proposed system meets the company’s needs.
3. More skill is needed to prepare documentation that shows how an existing or proposed system operates.
The various Documentation Techniques are:
1. Data flow diagram (DFD), a graphical description of data sources, data flows, transformation processes,
data storage, and data destinations
2. Flowchart, which is a graphical description of a system. There are several types of flow charts, including:
a. Document flowchart, which shows the flow of documents and information between departments
or areas of responsibility
b. System flowchart, which shows the relationship among the input, processing, and output in an
information system
c. Program flowchart, which shows the sequence of logical operations a computer per forms as it
executes a program.
3. Business Process diagrams, which are graphical descriptions of the business processes used by a company

b) Pickle Corp. has asked you to document cash receipts system at their organization. Mr. Rick Sanchez, the
Accounts Manager, liaised with you for the task. Mr. Sanchez's narrative of the system follows:
Customer payments include cash received at the time of purchase and payments received in the mail. At
day’s end, the treasurer endorses all checks and prepares a deposit slip for the checks and the cash. A clerk
deposits the checks, cash, and deposit slip at the local bank each day. When checks are received as payment
for accounts due, a remittance slip is included with the payment. The Treasurer sends this to accounts
receivable. Data from the remittance slips are entered into the computer, and the accounts receivable
database is updated. The remittance slips are stored in a file drawer by date. Every week, accounts
receivable generates a cash receipts report and an aged trial balance using the accounts receivable ledger.
The cash receipts report is sent to Morty and Summer and one of them reviews it. A copy of the aged trial
balance is sent to the credit and collections department, where it is reviewed.
Required:
1. Develop a context diagram and a Level 0 DFD for the cash receipts system at Pickle Corp.
2. Prepare a document flowchart for the cash receipts system at Pickle Corp.

Answered – Nurun Nabi Mahmud, A&IS 26th

1) a context diagram and a Level 0 DFD for the cash receipts system at Pickle Corp:

Answered – Nurun Nabi Mahmud, A&IS 26th

Answered – Nurun Nabi Mahmud, A&IS 26th
2) A document flowchart for the cash receipts system at Pickle Corp:

Answered – Nurun Nabi Mahmud, A&IS 26th

Question 03
a) What do you understand by Information System Audit? What are the IS-related audit objectives that the
system auditor must pursue?

Answer

An information systems, or internal control, audit reviews the controls of an AIS to assess its compliance with
internal control policies and procedures and its effectiveness in safeguarding assets. The purpose of it is to
review and evaluate the internal controls that protect the system. The audits usually evaluate system input and
output, processing controls, backup and recovery plans, system security, and computer facilities. When
performing an information systems audit, auditors should ascertain that the following six objectives are met:
Objective 1: Overall Information System Security (Security provisions protect computer equipment,
programs, communications, and data from unauthorized access, modification, or destruction)
Objective 2: Program Development and Acquisition (Program development and acquisition are performed in
accordance with management’s general and specific authorization)
Objective 3: Program Modification (Program modifications have management’s authorization and approval)
Objective 4: Computer Processing (Processing of transactions, files, reports, and other computer records is
accurate and complete)
Objective 5: Source Data (Inaccurate or improperly authorized source data are identified and handled
according to prescribed managerial policies)
Objective 6: Data Files (Computer data files are accurate, complete, and confidential)

b) Briefly discuss the components and some of the principles therein suggested by the COSO's Internal
Control Model Explain how upholding these principles are expected to better risk management for the
enterprise result in better risk management for the enterprise.

Answer

The Committee of Sponsoring Organizations (COSO) proposed framework that defines internal controls and
provides guidance for evaluating and enhancing internal control systems.

A. Control Environment
This is the foundation for all other components of internal control. The core of any business is its people—
their individual attributes, including integrity, discipline, ethical values, and competence — and the
environment in which they operate. They are the engine that drives the organization and the foundation on
which everything rests.

Answered – Nurun Nabi Mahmud, A&IS 26th

1 Commitment to integrity and ethics
2 Internal control oversight by the board of directors, independent of management
3 Structures, reporting lines, and appropriate responsibilities in the pursuit of objectives established by
management and overseen by the board
4 A commitment to attract, develop, and retain competent individuals in alignment with objectives
5 Holding individuals accountable for their internal control responsibilities in pursuit of objectives

B. Risk Assessment
The organization must identify, analyze, and manage its risks. Managing risk is a dynamic process.
Management must consider changes in the external environment and within the business that may be
obstacles to its objectives.

6 Specifying objectives clearly enough for risks to be identified and assessed

7 Identifying and analyzing risks to determine how they should be managed
8 Considering the potential of fraud
9 Identifying and assessing changes that could significantly impact the system of internal control

C. Control Activities
Control policies and procedures help ensure that the actions identified by management to address risks and
achieve the organization’s objectives are effectively carried out. Control activities are performed at all levels
and at various stages within the business process and over technology.

10 Selecting and developing controls that might help mitigate risks to an acceptable level
11 Selecting and developing general control activities over technology
12 Deploying control activities as specified in policies and relevant procedures

D. Information and Communication

Information and communication systems capture and exchange the information needed to conduct, manage,
and control the organization’s operations. Communication must occur internally and externally to provide
information needed to carry out day-to-day internal control activities. All personnel must understand their
responsibilities.

13 Obtaining or generating relevant, high-quality information to support internal control

14 Internally communicating information, including objectives and responsibilities, necessary to support
the other components of internal control
15 Communicating relevant internal control matters to external parties

E. Monitoring
The entire process must be monitored, and modifications made as necessary so the system can change as
conditions warrant. Evaluations ascertain whether each component of internal control is present and
functioning. Deficiencies are communicated in a timely manner, with serious matters reported to senior
management and the board.

16 Selecting, developing, and performing ongoing or separate evaluations of the components of internal
control
17 Evaluating and communicating deficiencies to those responsible for corrective action, including
senior management and the board of directors, where appropriate

Answered – Nurun Nabi Mahmud, A&IS 26th

c) Mention some of the control procedures applied in organizations. Explain how segregation of duties acts
as a deterrent to fraud.
Some of the control procedures applied in organizations are:
1. Proper authorization of transactions and activities
2. Segregation of duties
3. Project development and acquisition controls
4. Change management controls
5. Design and use of documents and records
6. Safeguarding assets, records, and data
7. Independent checks on performance
Good internal control requires that no single employee be given too much responsibility over business
transactions or processes. An employee should not be in a position to commit and conceal fraud. Segregation
of duties is discussed in two separate sections:

 Segregation of accounting duties – separating the accounting functions of authorization, custody, and
recording helps to minimize an employee’s ability to commit fraud and conceal that, thus they get low
chances to commit fraud or fear to commit fraud
 Segregation of systems duties – implementing control procedures to clearly divide authority and
responsibility within the information system function. Restricted access to the computer, its programs, and
live data work as deterrent to perpetrate and conceal fraud.

Question 04
a) What do you mean by Internal Control? Describe Control the three major functions of Internal Control.

Answer

Internal controls are the processes implemented to provide reasonable assurance that the following control
objectives are achieved:
1. Safeguard assets—prevent or detect their unauthorized acquisition, use, or disposition.
2. Maintain records in sufficient detail to report company assets accurately and fairly.
3. Provide accurate and reliable information.
4. Prepare financial reports in accordance with established criteria.
5. Promote and improve operational efficiency.
6. Encourage adherence to prescribed managerial policies.
7. Comply with applicable laws and regulations.
Internal controls perform three important functions:
1. Preventive controls deter problems before they arise. Examples include hiring qualified personnel,
segregating employee duties, and controlling physical access to assets and information.
2. Detective controls discover problems that are not prevented. Examples include duplicate checking of
calculations and preparing bank reconciliations and monthly trial balances.
3. Corrective controls identify and correct problems as well as correct and recover from the resulting errors.
Examples include maintaining backup copies of files, correcting data entry errors, and resubmitting
transactions for subsequent processing.

Answered – Nurun Nabi Mahmud, A&IS 26th

b) Compare and contrast three major frameworks which are used to develop Internal Control System.
Check page 200 – 204 of the 14th edition.

Question 05
a) What do you mean by System Development Life Cycle (SDLC)? Briefly describe the five-step SDLC with
the help of figure.

Answer

A five-step process used to design and implement a new system: systems analysis, conceptual design, physical
design, implementation and conversion, and operation and maintenance.
1) Systems analysis - First SDLC step where the information needed to purchase, develop, or modify a system
is gathered.
2) Conceptual design - Second SDLC step where analysts decide how to meet user needs, identify and
evaluate design alternatives, and develop detailed specifications for what the system is to accomplish and
how it is to be controlled.
3) Physical design - Third SDLC step where broad, user-oriented conceptual design requirements are
translated into the detailed specifications used to code and test software, design input/output, create
files/databases, develop procedures, and implement controls.
4) Implementation and conversion - Fourth SDLC step where the company hires and trains employees, tests
and modifies procedures, establishes standards and controls, completes documentation, moves to the new
system, and detects and corrects design deficiencies.
5) Operations and maintenance - Fifth SDLC step where the system is periodically reviewed and necessary
modifications and improvements are made.

Answered – Nurun Nabi Mahmud, A&IS 26th

b) During System Development process, what are the two major planning techniques are used? Explain.

Answer

PERT and Gantt charts are two major techniques for scheduling and monitoring systems development
activities.
1) Program evaluation and review technique (PERT) – way to plan, develop, coordinate, control, and
schedule systems development activities; all activities, and precedent and sub sequent relationships among
activities, are identified and shown on a PERT diagram. Completion time estimates are made, and the
critical path—the path requiring the greatest amount of time—is determined. If any activity on the critical
path is delayed, then the whole project is delayed. If possible, resources can be shifted to critical path
activities to reduce project completion time.
2) Gantt chart – is a bar chart with project activities on the left-hand side and units of time across the top.
For each activity, a bar is drawn from the scheduled starting date to the ending date, thereby defining
expected project completion time. As activities are completed, they are recorded on the Gantt chart by
filling in the bar; thus, at any time it is possible to determine which activities are on schedule and which
are behind. The primary advantage of the Gantt chart is the ability to show graphically the entire schedule
for a large, complex project, including progress to date and status. A disadvantage is that the charts do not
show the relationships among project activities.

Answered – Nurun Nabi Mahmud, A&IS 26th

c) Discuss the five important aspects to be considered during a feasibility study.

Answer

Feasibility study is an investigation to determine whether it is practical to develop a new application or system.
There are five important aspects to be considered during a feasibility study:
1. Economic feasibility: Will system benefits justify the time, money, and resources required to implement
it?
2. Technical feasibility: Can the system be developed and implemented using existing technology?
3. Legal feasibility: Does the system comply with all applicable federal and state laws, administrative agency
regulations, and contractual obligations?
4. Scheduling feasibility: Can the system be developed and implemented in the time allotted?
5. Operational feasibility: Does the organization have access to people who can design, implement, and
operate the proposed system? Will people use the system?

Question 06
a) "ERP Systems are often modularized"-explain the statement with appropriate examples.

Answer

ERP systems are modular, with each module using best business practices to automate a standard business
process. It integrates all aspects of an organization’s activities—such as accounting, finance, marketing, human
resources, manufacturing, inventory management etc. into one system. This modular design allows businesses
to add or delete modules as needed. For example, typical ERP modules include:

Answered – Nurun Nabi Mahmud, A&IS 26th

b) What are the menus seen in the Tally Prime gateway? Briefly discuss their use. Also, list a few of the
operations that can be conducted using the Tally Prime.
c) In Tally Prime, what is the purpose of vouchers? Discuss the various types of vouchers.
d) Many studies (Fawaz et al. 2008; SW Chou & YC Chang, 2008) suggest that there are lots of benefits that
can be reaped from the use of ERP in an organization, besides some potential drawbacks. In your opinion,
what are the Critical Success Factors that may prove to be vital for successful ERP implementation?
e) In the practical sessions of this course, you received hands-on experience in using an ERP package. How
is this experience going to benefit you once you encounter an ERP at your workplace?

Answered – Nurun Nabi Mahmud, A&IS 26th