Chapter 1 C an Introduction To

CHAPTER 1 C AN INTRODUCTION TO ACCOUNTING, INFORMATION TECHNOLOGY (IT), AND BUSINESS SOLUTIONS

CHAPTER OBJECTIVES:

1. DESCRIBE HOW ORGANIZATIONS CREATE VALUE

2. DESCRIBE THE HISTORICAL RELATIONSHIP BETWEEN ACCOUNTING AND IT PROFESSIONALS

3. DESCRIBE 3 WAYS THAT ACCOUNTING PROFESSIONALS CAN INCREASE THEIR VALUE

4. IDENTIFY THE JUSTIFICATIONS/REASONS FOR CHANGING THE NATURE OF ACCOUNTING AND HOW THE USE OF INFORMATION TECHNOLOGY (IT) CAN ENABLE SUCH CHANGE

INFORMATION TECHNOLOGY=S THIRD WAVE--BOB ELLIOT

AMANAGERS NOW NEED NEW TYPES OF INFORMATION.... SO INTERNAL AND EXTERNAL ACCOUNTING MUST BE CHANGED@

ATHE CONTROLLER=S STAFF WILL ADD VALUE TO THE BUSINESS OR IT WON=T EXIST@...... AL PIPKIN

THE QUESTION OF HOW TO EFFECTIVELY USE IT TO BRING

1 ABOUT THESE CHANGES IS AS OF YET UNDEFINED....

1. DESCRIBE HOW ORGANIZATIONS CREATE VALUE

ALL ORGANIZATIONS--FOR PROFIT AND NOT-FOR-PROFIT SEEK TO CREATE VALUE BY PROVIDING GOODS AND SERVICES

IN THE LONG RUN ORGANIZATIONS THAT PROVIDE GOODS AND SERVICES THAT ARE VALUED WILL SURVIVE AND GROW

ALTHOUGH THEY MAY DELAY THEIR DEMISE ALL ORGANIZATIONS WILL ULTIMATELY BE ACCOUNTABLE TO THE CUSTOMER

EXHIBIT 1-1 ORGANIZATIONS CREATE VALUE THROUGH MANAGING, MAKING DECISIONS, ABOUT BUSINESS AND INFORMATION PROCESSES--MANAGEMENT PROCESSES

BUSINESS PROCESSES--DEFINE HOW THE ORGANIZATION CREATES VALUE 3 MAIN TYPES: 1. ACQUISITION/PAYMENT PROCESS 2. CONVERSION PROCESS 3. SALES/COLLECTION PROCESS

INFORMATION PROCESSES--INCLUDE RECORDING DATA, KEEPING DATA CURRENT, REPORTING USEFUL INFORMATION

AS BUSINESS AND MANAGEMENT PROCESSES CHANGE, SO MUST INFORMATION PROCESSES

TO ACHIEVE VALUE THEY MUST WORK TOGETHER AND BE INTEGRATED

2 2. DESCRIBE THE HISTORICAL RELATIONSHIP BETWEEN ACCOUNTING AND IT PROFESSIONALS

LOVE--HATE RELATIONSHIP

EACH ORGANIZATION CAN FIND THE RELATIONSHIP BETWEEN ACCOUNTING AND IT AT SOME POINT ALONG A TIME LINE WITH 3 MAJOR PHASES:

1. THE FIRST KISS --automating primarily clerical aspects of accounting

2. THE SEPARATION --other functional areas of the business (outside of accounting) spin off their own info systems due to unique information needs--poorly coordinated, conflicting information, battleground, data rich but information poor......

3. THE COURTSHIP AND MARRIAGE --growth of new technologies that allow new synergistic information, real time information, bringing together separate application architectures into one enterprisewide architecture

3 3. DESCRIBE 3 WAYS THAT ACCOUNTING PROFESSIONALS CAN INCREASE THEIR VALUE

AOur financial reporting system must be as dynamic as the financial markets themselves@

AIn times of change, learners inherit the earth...... @ Hoffer the business solution framework--fig. 1--5 all factors are important they are aligned to business processes they change or learn over time

ACCOUNTING CAN ENHANCE ITS VALUE BY IMPROVING ITS ABILITY TO: ( 3 FACTORS )

1. PROVIDE USEFUL INFORMATION FOR DECISION MAKERS OF THE ORGANIZATION

2. HELP EMBED INFORMATION PROCESSES INTO BUSINESS PROCESSES

3. HELP MANAGEMENT DEFINE BUSINESS RULES OR POLICIES THAT SHAPE THE NATURE OF BUSINESS PROCESSES

4. IDENTIFY THE JUSTIFICATIONS/REASONS FOR CHANGING THE

4 NATURE OF ACCOUNTING AND HOW THE USE OF INFORMATION TECHNOLOGY (IT) CAN ENABLE SUCH CHANGE

REENGINEERING--USE THE POWER OF MODERN IT TO RADICALLY REDESIGN OUR BUSINESS PROCESSES IN ORDER TO ACHIEVE DRAMATIC IMPROVEMENTS IN PERFORMANCE

1. MUCH OF CURRENT ACCOUNTING IS BASED ON >PRE- COMPUTER THINKING=--ACCOUNTANTS COULD BE REPLACED BY A NEW TYPE OF PROFESSIONAL

2. AUDIT AND TAX --THE TRADITIONAL SOURCES OF REVENUE ARE IN THE LATTER STAGES OF THEIR PRODUCT LIFE CYCLE

3. MANY INFORMATION CUSTOMERS-DISSATISFIED WITH TRADITIONAL ACCOUNTING SYSTEMS HAVE BEGUN COLLECTING THEIR >OWN= INFORMATION.....MANAGEMENT CONSIDERS THESE OTHER INFORMATION SOURCES TO BE ESSENTIAL!

4. TRADITIONAL FINANCIAL STATEMENTS ARE EXTREMELY COMPRESSED AND NOT TIMELY--USERS MAY ULTIMATELY BE ABLE TO GET MORE TIMELY INFO OFF THE WEB--STOP RELYING ON FINANCIALS

5. THE EXPECTATION GAP OF THE GENERAL PUBLIC--MOST DO NOT READ THE AUDITOR=S OPINION