AIS-Discussion - 212 PDF

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Discussion question D1.4 p. 27 How do an organization’s business processes and lines of business affect the design of its AIS? Give several examples of how differences among organizations are reflected in their AIS.

An organization’s AIS must reflect its business processes and its line of business. For example:  Financial institutions do not need extensive inventory control systems.  Passenger service companies (e.g., airlines, bus, and trains) generally receive payments in advance of providing services. Therefore, extensive billing and accounts receivable procedures are not needed; instead, they must develop procedures to account for prepaid revenue.

Discussion question D1.8 p. 27 Information technology enables organizations to easily collect large amounts of information about employees. Discuss the following issues:

These questions involve traditional economic cost/benefit issues and less welldefined ethical issues.

a. To what extent should management monitor employees’ e-mail?

Generally, the courts have held that organizations have the right to monitor employees’ email. Such monitoring can have disastrous effects on employee morale, however. On the other hand, it might provide legitimate information about group members’ individual contributions and productivity.

b. To what extent should management monitor which Web sites employees visit?

Students are likely to argue whether or not this should be done. One potential benefit that could be argued is the likelihood that if employees are

aware that they will be monitored they will be less prone to surf the Web for non-work-related uses.

c. To what extent should management monitor employee performance by, for example, using software to track keystrokes per hour or some other unit of time? If such information is collected, how should it be used?

Arguments pro and con can be generated about the effects of such monitoring on performance and on morale. Clearly, the specifics of any incentive schemes tied to such metrics are important.

d. Should companies use software to electronically “shred” all traces of email?

Arguments can be raised on both sides of this issue. Try to get students to go beyond the legal ramifications of recent news stories and to explore the ethical implications of destroying different kinds of email.

e. Under what circumstances and to whom is it appropriate for a company to distribute information it collects about the people who visit its Web site?

Direct students to the guidelines followed by organizations that certify how various web sites use the information they collect. Students are likely to make the argument that personal information is inherently private and sacrosanct. To challenge that view, ask them about the legitimacy of developing and maintaining a reputation. Doesn’t that involve the divulgence and sharing of personal information among strangers? Ask the class if it is feasible (or undesirable) to totally prevent or prohibit such sharing of information.

The instructor should also refer the students to Generally Accepted Privacy Principles (GAPP), as one of its criteria concerns sharing information with

3rd parties. The instructor and the students could read the GAPP criterion about sharing data together, and then discuss what they think. Remind the students that GAPP is not regulatory law – just recommended best practice.

Discussion question D2.2 p. 53 With respect to the data processing cycle, explain the phrase “garbage in, garbage out.” How can you prevent this from happening?

When garbage, defined as errors, is allowed into a system that error is processed and the resultant erroneous (garbage) data stored. The stored data at some point will become output. Thus, the phrase garbage in, garbage out. Data errors are even more problematic in ERP systems because the error can affect many more applications than an error in a non-integrated database.

Companies go to great lengths to make sure that errors are not entered into a system. To prevent data input errors: 

Data captured on source documents and keyed into the system are edited by the computer to detect and correct errors and critical data is sometimes double keyed.

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Companies use turnaround documents to avoid the keying process.

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Companies use source data automation devices to capture data electronically to avoid manual data entry with its attendant errors.

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Well-designed documents and screens improve accuracy and completeness by providing instructions or prompts about what data to collect, grouping logically related pieces of information close together, using check off boxes or pull-down menus to present the available options, and using appropriate shading and borders to clearly separate data items.

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Data input screens are preformatted to list all the data the user needs to enter.

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Prenumbered source documents are used or the system automatically assigns a sequential number to each new transaction. This simplifies verifying that

all transactions have been recorded and that none of the documents has been misplaced. 

The system is programmed to make sure company policies are followed, such as approving or verifying a transaction. For example, the system can be programmed to check a customer’s credit limit and payment history, as well as inventory status, before confirming a sale to a customer.

Discussion question D21.3 p. 692 How can REA diagrams help an auditor understand a client’s business processes?

An REA diagram presents a model of the company’s database. Included in the model is a representation of all the tables contained in the database as well as all of the relationships that exist between the tables within the database. These tables and relationships reflect the business processes and business events of the company. Thus, an auditor can use an REA diagram to understand which events affect the organization’s resources and which agents participate in them. The information about cardinalities in an REA diagram provides useful information about an organization’s business practices, such as whether it permits customers to make installment payments. Thus, auditors can use REA diagrams to plan the audit. For example, examination of an REA diagram would reveal whether the organization extends credit to its customers, which would then require audits of accounts receivable, or only makes cash sales. In addition, an auditor can use an REA diagram to test a client’s business processes for compliance with various controls that the client has created. For example, the auditor can design queries linking various employees to different events in order to evaluate whether there is adequate segregation of duties.

Discussion question D19.7 p. 632 For years, Jerry Jingle’s dairy production facilities led the state in sales volume but recent declines worry him. Customers are satisfied with his products but are troubled

by the dairy’s late deliveries and incomplete orders. Production employees (not the cows) are concerned about bottlenecks in milk pasteurisation and homogenisation due to poor job scheduling, mix-ups in customers’ orders, and improperly labelled products. How should Jerry address the problems? What data-gathering techniques would be helpful at this early stage?

Jerry could install an information system that coordinates job scheduling, tracks customer orders, and controls product labeling. The system can also help reduce bottlenecks in the milk pasteurization and homogenization process by controlling production schedules.

It appears that Jerry has conducted an initial investigation and determined that actual problems exist. Jerry now needs to conduct a more in-depth investigation to verify the nature of the problem and to identify customer and the user needs.

1.

The person conducting the investigation should interview the employees

who process, bottle, and deliver the milk. These employees will be able to identify what is wrong with the current process and make suggestions for improvement. 2.

Customers should also be interviewed to find out their needs, since

meeting customer's needs is the ultimate goal of the company. 3.

Jerry and supervisory personnel should be interviewed to get their insights

about the problems and possible solutions.

Interviewing from the bottom up can result in better problem identification and solutions than from the top down. Lower level employees are more likely to accept a change in the system when they were the ones who first suggested the changes.

At this stage, Jerry and those he hires to help him will find interviewing techniques most useful in developing a problem statement. He will also probably find observation and reviewing whatever documentation is available to be of some use. A customer questionnaire may also produce useful information.

Discussion question D19.9 p. 632 Ajax Manufacturing installed a new bar code based inventory tracking system in its warehouse. To close the books each month on a timely basis, the six people who work in the warehouse must scan each item in a 36-hour period while still performing their normal duties. During certain months, when inventory expands to meet seasonal demands, the scan takes as many as 30 hours to complete. In addition, the scanners do not accurately record some inventory items that require low operating temperatures. A recent audit brought to management’s attention that the inventory records are not always accurate. Which aspect(s) of feasibility did Ajax fail to consider prior to installing the inventory tracking system.

Ajax Manufacturing failed to consider operational and technical feasibility when implementing their inventory tracking system. Operational feasibility considers whether the organization’s personnel can and/or will use the system. For Ajax, the 30 hours required to scan all inventory in a 36-hour period was very difficult on personnel and most likely led to human error in the inventory count due to fatigue. Technical feasibility deals with whether the technology is in place for the system to work. For Ajax, although the technology was in place and worked under normal circumstances, the scanners did not always work in the cold conditions of Ajax’s warehouse. Therefore, the technology sometimes failed, which resulted in inventory errors.

Discussion question D20.2 pp. 660-661 When a company converts from one system to another, many areas within the organisation are affected. Explain how conversion to a new system will affect the following groups, both individually and collectively: a. personnel b. data storage c. operations d. policies and procedures e. physical facilities

The following are recommended responses to each of the five areas:

a. Personnel: The employees will be affected in at least two important ways. First, they may be reluctant to accept the new system. They may fear for their jobs, feel as if they are no longer vital components of the organization, or they may completely reject the new system and refuse to utilize it. Second, the employees will have to learn new policies and procedures to work with the new system. Initially, this may cause a slight reduction of overall productivity as the employees learn the system.

b. Data Storage: One of the primary logistical concerns of implementing a new system is making the required data accessible to the new system. This often requires that files be converted to new formats and that the company's data bases are restructured to accommodate the new system's information requirements. In addition, new sources of input may be required which will increase the need for employee instruction and training.

c. Operations: New personnel may have to be hired or current employees may need to be trained to run the new system. In addition, the users of the system will have to adjust to new types of input and output associated with the system. Finally, the company as a whole will be affected by changes in employee morale and productivity until the personnel are accustomed to and proficient with the system.

d. Policies and Procedures: A new information system almost always requires that new operating policies and procedures be implemented. These include data security and control, error checking, documentation, backup and recovery procedures, and file maintenance, among others. These new policies and procedures should be disseminated to the employees before the actual conversion takes place to ensure that the employees are aware of the new requirements and to facilitate the actual system conversion.

a. Physical Facilities: The effect on the physical facilities will be largely determined by the size and nature of the system being installed. For example, a micro- or minicomputer will only require a desk or perhaps a small room, whereas a mainframe may require a large facility. In any event, the company will need to be concerned about physical access to the system; off-site backup and recovery procedures; protection from fire, flooding, and other disasters; office space for programmers and operators; lighting, air conditioning, and humidity control; and data communications facilities.

Discussion question D20.3 p. 661 The following notice was posted in the employee cafeteria on Monday morning: To: All Accounting and Clerical Employees From: I. M. Krewel, CEO Subject: Termination of Employee Positions Effective this Friday, all accounting and clerical employees not otherwise contacted will be terminated. Our new computer system eliminates the need for most of these jobs. We’re grateful for the loyal service you’ve rendered as employees and wish you success. You may wish to pick up your final cheques on Friday before you go. Discuss the president’s approach to human resource management. What are the possible repercussions of this episode? Assuming that job termination is the best alternative available, how should management approach the situation.

This approach is clearly unproductive and would not work. The possible repercussions of this action include the following: 

Sabotage of the new system by disgruntled employees.

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Employees not released will probably harbor ill feelings towards the company. Employees will reflect these feelings through poor work performance, lower productivity, higher absentee rates, and resentment towards the new system.

Management should have discussed the situation in person with each employee. The changes that were being made should have been clearly communicated with each employee. Every effort should have been made to relocate the employees within the company and offer early retirement where possible. Employees that were being terminated should have been told in person. Giving employees a week's notice that they are "being replaced by a computer" may well result in the system being sabotaged. Therefore, employees should be terminated on Friday afternoon and given the appropriate severance pay. However, the termination should not come as a complete surprise to the employees. The employees should have already known that every effort was made to relocate them within the company and that termination was a last resort....