Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Accounting Information Systems
for the "new" systems were not properly developed and evaluated.
c. Identify and describe the weaknesses in Mickie’s approach to implementing the new
AIS. How could you improve the development process for the remaining parts of the
AIS?
Weaknesses
Recommendations
No systems analysis or feasibility
study.
Perform a thorough systems analysis that includes a
feasibility study.
Poor planning
Prepare a development plan, a budget, and a schedule for
project completion. An accepted implementation plan for
each module must be formalized and followed
Accounting Information Systems
22.5 Ryon Pulsipher, manager of Columbia’s property accounting division, has had difficulty
responding to the following departmental requests for information about fixed assets.
1. The controller has requested individual fixed assets schedules to support the general
2. The maintenance manager wants to verify the existence of a punch press that he
4. The tax department has requested data to determine whether Columbia should switch
depreciation methods for tax purposes.
5. The internal auditors have spent significant time in the property accounting division
to confirm the annual depreciation expense.
Ryon’s property account records, kept in an Excel spreadsheet, show the asset acquisition
date, its account number, the dollar amount capitalized, and its estimated useful life for
depreciation purposes. After many frustrations, Ryon realizes his records are inadequate
and that he cannot supply data easily when requested. He discusses his problems with the
controller, Gig Griffith.
RYON: Gig, something has to give. My people are working overtime and can’t keep
up. You worked in property accounting before you became controller. You know I
a. Identify and justify four major objectives Columbia’s automated property accounting
system should possess to respond to departmental requests for information.
Chapter 1 lists the following seven characteristics of useful information
• Relevant. Information is relevant if it reduces uncertainty, improves decision-making, or
confirms or corrects prior expectations.
Accounting Information Systems
b. Identify the data that should be included in the database for each asset.
• Asset name
• Manufacturer
• Model
Accounting Information Systems
22.6 A credit union is developing a new AIS. The internal auditors suggest planning the systems
development process in accordance with the SDLC concept. The following nine items are
identified as major systems development activities that will have to be completed.
1. System test
3. Conversion
5. Technical specifications
7. Implementation planning
9. Programming
Adapted from the CIA Exam.
a. Arrange the nine items in the sequence in which they should logically occur.
The logical sequence of occurrence is as follows:
1. Systems Survey
3. Technical Specifications
5. Programming
7. System Test
9. Postimplementation Planning
b. One major activity is converting data files from the old system to the new one. List
three types of file conversion documentation that would be of particular interest to an
auditor.
1. Conversion completion documentation indicating that all previously existing files have
been converted at a satisfactory level of quality.
22-18
22.7 MetLife, an insurance company, spent $11 billion to acquire Travelers Life and Annuity from
Citicorp in one of the largest insurance company acquisitions of all time. The Metlife CIO
estimated it would take three years to integrate the two systems. Because the integration
project was especially critical, he figured he could accomplish the integration in 18 months if
he pulled out all the stops. The MetLife CEO gave him nine months to complete the task. To
pull off the integration in nine months, he had to:
• Integrate over 600 IS applications, all with their own infrastructure and business
processes. The new systems had to comply with “One MetLife,” a company policy that all
information systems had to have a common look and feel companywide and be able to
function seamlessly with other MetLife systems.
a. What tasks do you think MetLife would have to perform to successfully integrate the
Traveler systems into MetLife’s?
• Separate Travelers’ IS operations and assets from Citicorp’s so MetLife could begin the
systems integration process.
Accounting Information Systems
22-19
b. Search the Internet for articles that describe the integration process. Write a two-page
summary of the problems and successes that MetLife experienced while integrating the
two systems.
A number of articles describe MetLife’s experience. A particularly good article is “Nine
Months to Merge” found in the February 20, 2006 issue of Information Week.
Accounting Information Systems
22-20
22.8 During final testing, just before launching a new payroll system, the project manager at
Reutzel Legal Services found that the purchased payroll system was doing the following:
• Writing checks for negative amounts
• Writing checks for amounts greater than a full year’s salary
Fortunately, payroll was still installed on time, and only 1.5% of the checks had to be
manually reissued every payday until the problem was solved.
Other problems were that no one had made sure the new system was compatible with the
existing payroll database, and there appeared to be no formal transition between the
development of the project and the implementation of the project. The system was never run
in parallel.
a. What does “the system was never run in parallel” mean?
Running in parallel refers to operating the old and new systems simultaneously for a period.
b. If the company had run the system in parallel, what should have occurred?
Parallel processing protects companies from errors, but it is costly and stressful because the
same set of transactions and activities must be processed twice. This places a significant
c. What other testing methodologies could have been used by the firm?
The company could have implemented a pilot conversion where one office or branch of the
Accounting Information Systems
d. What other types of problems are evident from reading the case?
There does not appear to be proper management or leadership of the system development,
implementation, or testing processes involved in this system. For example
Accounting Information Systems
22-22
22.9 A new program at Jones and Carter Corporation (JCC) was supposed to track customer
calls. Unfortunately, the program took 20 minutes to load on a PC, and it crashed frequently.
The project did not have a traditional reporting structure, and it appeared that no one was
actually in charge. The lead project manager quit halfway through the project, the in-house
programmers were reassigned to other projects or let go, and two layers of management
loosely supervised the systems analyst.
a. Identify potential causes for the system implementation failure.
• Leadership and managerial oversight is clearly lacking at Jones and Carter Corp (JCC).
When the project was managed internally, the following problems existed:
o There was no evident reporting structure to support and manage the project. It
appeared that no one was actually in charge
• Management falsely assumed that the problems could be solved by hiring a consultant.
In truth, the problem with the project was internal and caused by poor management,
supervision, and project management.
b. What steps should JCC have taken to successfully design and implement the call
tracking system?
• Start and end the process with a clearly designated manager over the project and with
clearly defined lines of authority.
Accounting Information Systems
22-23
SUGGESTED ANSWERS TO THE CASES
22.1 Citizen’s Gas Company (CGC) provides natural gas service to 200,000 customers. The
customer base is divided into the following three revenue classes:
Residential customer gas usage is highly correlated with the weather. Commercial customer
usage is partially weather dependent. Industrial customer usage is governed almost entirely
by business factors.
To match customer demand with supply, gas is pumped into a storage field when supply
exceeds customer demand. Gas is withdrawn when demand exceeds supply. There are no
restrictions on the gas storage field except that the field must be full at the beginning of each
gas year (September 1). Consequently, when the contractual supply for the remain- der of the
gas year is less than that required to satisfy projected demand and fill the storage field, CGC
curtails service to industrial customers (except for heating quantities). The curtailments must
be carefully controlled to prevent either an oversupply at year-end or a curtailing of
commercial or residential customers so the storage field can be filled at year-end.
1. Discuss the criteria to consider in specifying the structure and features of CGC’s new
system.
• Need for market information The factors that affect the demand and supply for gas must
be isolated, their relative importance determined, and their effect quantified.
Class
Customers
Sales in Cubic Feet
Revenues
Residential
160,000
80 billion
$160 million
Commercial
38,000
15 billion
$ 25 million
Industrial
2,000
50 billion
$ 65 million
Totals
145 billion
$250 million
Accounting Information Systems
22-24
• Turnaround required The need for timely reporting at month end provides guidance as to
the degree of automation and the level of complexity that will be appropriate. Because
the system is to be used for both multi-year planning and monthly tactical planning, the
system should be designed to provide for quick turnaround of results at month end.
Accordingly, consideration must be given to minimizing data input requirements.
2. Identify the data that should be incorporated into CGC’s new system to provide adequate
planning capability. Explain why each data item it is important and the level of detail
needed for the data to be useful.
• Number of customers The customer count should be projected by month, unless customer
growth is regular, in which case a base customer count can be used in conjunction with a
growth factor. The customer count should be broken into categories based upon use
which will facilitate estimating demand, [i.e., residential, commercial heating,
commercial nonheating, industrial heating, industrial non-heating].
Accounting Information Systems
22-25
• Customer rate structure The customer rate structure should provide monthly rate
information at the revenue class level, i.e., residential, commercial, and industrial. Data
must be monthly to provide for periodic rate changes by revenue class.
• Supplier contract terms For each supply contract, the contract term (beginning and end
dates), monthly volumes, unit costs, and take-or-pay conditions must be maintained.
