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Core Concepts of Accounting Information Systems, 13th Edition, by Simkin, Rose, and Norman
SM 1.8
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.”
SM 1.9
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.
SM 1.10
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
SM 1.11
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
SM 1.12
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
SM 1.13
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.
SM 1.14
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.
