978-1118742938 Chapter 1 Part 2

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Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

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accessing needed data or generating ad-hoc reports, and (5) the potential for more-timely

reports. Where club treasurers can use an existing personal computer for club tasks

effectiveness of computerization becomes less clear.

1-18. In this case, students are asked to look at three different sources of information to

help them invest $10,000 in the common stock of a publicly-held company. In general, they will

find the following:

negative factors that may affect it; (3) the information may not include substantiated

predictions about the value of the company’s stock in the future.

b. Information found at brokerage or investment firms: For investment purposes, the

written by independent and presumably objective reviewers.

c. Information from investment services: This information typically includes dispassionate

reviews of a company’s operations, its successes and failures, important management

b above.

d. A large number of dry facts about a company are rarely as informative as an objective

analysis of it and a recommendation to “buy” or “sell” its stock. After performing this

exercise, students should have a much better feel for the difference between “data” and

“information.”

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1-19. This problem requires students to do some research on the Internet about suspicious

gemstones with cash. There are usually dollar thresholds for such activities—e.g., $50,000 in

government agencies.

1-20. This story is a remarkable case of an individual trying to “whistleblow” on a fraud,

over the course of many years, and no one would listen! Mr. Markopolos notified the Boston

a. What happened when Mr. Markopolos notified the SEC in 2000? In May of 2000, he

submitted an 8-page report to the Boston Regional Office of the SEC, listing red flags

with protection from the inside.

c. What was the result of Mr. Markopolos’ efforts to notify the authorities about his

he had been operating a huge Ponzi scheme—as it turned out, the largest in history.

Case Analyses

1-21. Berry & Associates, LLP

1. It is usually easier to offer extra services to existing clients than to obtain new clients. One

of the issues Berry & Associates (B&A), LLP will have to consider is the appearance of

organization to poll its clients to learn what they most value and then offer only two or three

new services based on the results.

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2. The firm’s expertise is currently in retailing, wholesaling, and property management. It

would be a good idea to try to learn what the issues are for these industries (and look at

internal auditors with information systems expertise. Offering assurance services, such as

Information Technology Risk Assessment, might be a good practice for B&A. Finally, the

3. The new hires’ expertise in information systems can be leveraged in several ways. First, the

new hires can help train the older staff in computers and information systems. This is a

The new hires can also work with audit teams to develop new approaches to auditing

computerized AISs. For example, they may be able to suggest ways to use computer assisted

Probably the most important point here is for B&A to be willing to recognize these skills and

with rewards for the “best new ideas.”

1-22. Organizational Reports to Stakeholders

1. This question asks students to do some Internet research to learn more about how the SEC

involves itself in the annual financial reports that organizations make available to their

One of the ways that the SEC accomplishes their mission is by enforcing laws, such as:

 Securities Act of 1933

Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

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 Manipulating the market prices of securities

 Stealing customers’ funds or securities

 Violating broker-dealers’ responsibility to treat customers fairly

material, non-public information about a security)

 Selling unregistered securities

2. a. An annual financial report is a one-way communication device. It emphasizes clarity and

appropriate to users or readers.

The preparer must also consider the length, content, and organization of the material in

Finally, a logical ordering and an attractive format can also help transmit ideas . At one

b. The different users of annual reports have differing information needs, backgrounds, and

 In attempting to reach several audiences, companies try to include information for

value.

Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

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some may be meaningless to others.

3. Other than the financial statements and accompanying footnotes, an annual report often

contains:

 A discussion and analysis of operating results

 Information on new initiatives and research

 Recent stock price history and stock information

4. Stating well-defined corporate strategies in a company’s annual report accomplishes the

following advantages:

interests

 It alerts investors to potential adverse, long-term forces in the company’s industry

that may cause inflexibility

 It communicates to unintended parties who could put the company at risk (i.e.,

competitors)

in print.

5. Annual reports fulfill users’ information needs as discussed below.

a. Shareholders. Annual reports meet the statutory requirement that publicly-held

corporations report annually to stockholders and potential stockholders about the

reduces the value of the reports. Confusion can also result from reducing technical

Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman

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forms of media.

b. Creditors. The annual report of public companies provides financial information that

allows creditors to project a company’s financial solvency and therefore its ability to

repay its loans. This can be a good thing if the company is doing well.

organization’s values and objectives, and sensitizes them to the aspects of the

organization with which they are not familiar. On the other hand, many employees may

already know how their organization is performing so the annual report may not provide

any substantive additional information to them.

e. Financial analysts. The set of audited comparative financial statements provides the basis

for the research done by financial analysts. Notes, which are an integral part of the

annual report, describe or explain various items in the statements, provide additional

details, or summarize significant accounting policies. Financial analysts are the most

6. Management may decide to omit competitive information entirely from the annual report, or

competitive edge.

1-23. North Gate Manufacturing

one that can create many problems for organizations.

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1. It is probably useful for budget specialists to work with management to develop a

performance evaluation system. However, it is not a good idea for special staff to be charged

Students may differ on the matter of who best explains the variances. The managers are

is easy to blame others—including each other—for problems that are well within their own

control. Allowing managers to explain variances begs the question: “are self-reported

2. Decentralizing performance evaluation is probably a good idea for this organization. Under

the old system, revenues and expenses were consolidated for all plants to produce one

between direct revenues and expenses would be a good measure. Return on investment

which uses current values and the segment margins might be another. Nonfinancial

the evaluation system.

3. The performance evaluation report Mr. Stewart receives should be short and concise.

Ideally, one page per month per plant should be sufficient. The report can also compare all

for investigation.

Note to Instructor: You might want to have your students design a sample report using

spreadsheet software.