The Information System: An Accountant’s Perspective
Database Management Tasks. Database management involves three fundamental tasks:
storage, retrieval, and deletion. The storage task assigns keys to new records and stores them in their proper location in the database. Retrieval is the task of locating and extracting an existing record from the database for processing. After processing is complete, the storage task restores the updated record to its place in the database. Deletion is the task of permanently removing obsolete or redundant records from the database.
Information Generation
Information generation is the process of compiling, arranging, formatting, and presenting information to users. Information can be an operational document such as a sales order, a structured report, or a message on a computer screen. Regardless of physical form, useful information has the following characteristics: relevance, timeliness, accuracy, completeness, and summarization.
Relevance. The contents of a report or document must serve a purpose. This could be to support a manager’s decision or a clerk’s task. We have established that only data relevant to a user’s action have information content. Therefore, the information system should present only relevant data in its reports. Reports containing irrelevancies waste resources and may be counterproductive to the user. Irrelevancies detract attention from the true message of the report and may result in incorrect decisions or actions. Timeliness. The age of information is a critical factor in determining its usefulness. Information must be no older than the time period of the action it supports. For example, if a manager makes decisions daily to purchase inventory from a supplier based on an inventory status report, then the information in the report should be no more than a day old.
Accuracy. Information must be free from material errors. However, materiality is a difficult concept to quantify. It has no absolute value; it is a problem-specific concept. This means that, in some cases, information must be perfectly accurate. In other instances, the level of accuracy may be lower. Material error exists when the amount of inaccuracy in information causes the user to make poor decisions or to fail to make necessary decisions. We sometimes must sacrifice absolute accuracy to obtain timely information. Often, perfect information is not available within the user’s decision time frame. Therefore, in providing information, system designers seek a balance between information that is as accurate as possible, yet timely enough to be useful.
Completeness. No piece of information essential to a decision or task should be missing.
For example, a report should provide all necessary calculations and present its message clearly and unambiguously.
Summarization. Information should be aggregated in accordance with the user’s needs.
Lower-level managers tend to need information that is highly detailed. As information flows upward through the organization to top management, it becomes more summarized. We shall look more closely at the effects that organizational structure and managerial level have on information reporting later in this chapter.
Feedback
Feedback is a form of output that is sent back to the system as a source of data. Feedback may be internal or external and is used to initiate or alter a process. For example, an inventory status report signals the inventory control clerk that items of inventory have fallen
Part I
Overview of Accounting Information Systems
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