Information Technology Reference
In-Depth Information
SUMMARY
Principle
An organization must have information systems that
support the routine, day-to-day activities that occur
in the normal course of business and help a company
add value to its products and services.
Organizations conduct ongoing transaction processing
system audits to avoid accounting irregularities and loss of
data privacy that could put their firm into legal difficulty or
destroy investor confidence.
The TPS audit attempts to answer four basic questions:
(1) Does the system meet the business need for which it was
implemented? (2) What procedures and controls have been
established? (3) Are these procedures and controls being
used properly? and (4) Are the information systems and pro-
cedures producing accurate and honest reports?
Transaction processing systems (TPSs) are at the heart of
most information systems in businesses today. A TPS is an
organized collection of people, procedures, software,
databases, and devices used to capture fundamental data
about events that affect the organization (transactions) and
use that data to update the official records of the organization.
The methods of transaction processing systems include
batch and online. Batch processing involves the collection of
transactions into batches, which are entered into the system
at regular intervals as a group. Online transaction processing
(OLTP) allows transactions to be entered as they occur.
Order processing systems capture and process customer
order data from receipt of order through creation of a cus-
tomer invoice.
Accounting systems track the flow of data related to all
the cash flows that affect the organization.
Purchasing systems support the inventory control, pur-
chase order processing, receiving, and accounts payable
business functions.
Organizations today, including SMEs, typically implement
an integrated set of TPSs from a single or limited number of
software vendors to meet their transaction processing needs.
Organizations expect TPSs to accomplish a number of
specific objectives, including processing data generated by
and about transactions, maintaining a high degree of accu-
racy and information integrity, compiling accurate and timely
reports and documents, increasing labor efficiency, helping
provide increased and enhanced service, and building and
maintaining customer loyalty. In some situations, an effective
TPS can help an organization gain a competitive advantage.
All TPSs perform the following basic activities: data col-
lection, which involves the capture of source data to complete
a set of transactions; data editing, which checks for data
validity and completeness; data correction, which involves
providing feedback of a potential problem and enabling users
to change the data; data manipulation, which is the perfor-
mance of calculations, sorting, categorizing, summarizing,
and storing data for further processing; data storage, which
involves placing transaction data into one or more databases;
and document production, which involves outputting records
and reports.
Because of the importance of TPSs to ongoing operations,
organizations must develop a disaster recovery plan that
focuses on the actions that must be taken to restore computer
operations and services in the event of a disaster.
Principle
A company that implements an enterprise resource
planning system is creating a highly integrated set of
systems, which can lead to many business benefits.
Enterprise resource planning (ERP) is software that supports
the efficient operation of business processes by integrating
activities throughout a business, including sales, marketing,
manufacturing, logistics, accounting, and staffing.
Implementation of an ERP system can provide many
advantages, including providing access to data for operational
decision making; elimination of costly, inflexible legacy sys-
tems; providing improved work processes; and creating the
opportunity to upgrade technology infrastructure.
Some of the disadvantages associated with an ERP system
are that they are time consuming, difficult, and expensive to
implement.
Many SMEs are implementing ERP systems to achieve
organizational benefits. In many cases, they choose to imple-
ment open source systems because of the lower total cost of
ownership and their ability to be easily modified.
Although the scope of ERP implementation can vary from
firm to firm, most firms use ERP systems to support business
intelligence, production and supply chain management, cus-
tomer relationship management and sales ordering, and
financial and managerial accounting.
The production and supply chain management process
starts with sales forecasting to develop an estimate of future
customer demand. This initial forecast is at a fairly high level,
with estimates made by product group rather than by each
individual product item. The sales and operations plan takes
demand and current inventory levels into account and deter-
mines the specific product items that need to be produced and
when to meet the forecast future demand. Demand manage-
ment refines the production plan by determining the amount
of weekly or daily production needed to meet the demand for
individual products. Detailed scheduling uses the production
plan defined by the demand management process to develop
a detailed production schedule specifying details such as
