ACCOUNTING INFORMATION SYSTEMS: AN OVERVIEW SUGGESTED ANSWERS TO DISCUSSION QUESTIONS 1.1 The value of information is the difference between the benefits realized from using that information and the costs of producing it. Would you, or any organization, ever produce information if its expected costs exceeded its benefits? If so, provide some examples. If not, why not? Most organizations produce information only if its value exceeds its cost. However, there are two situations where information may be produced even if its cost exceeds its value. a. It is often difficult to estimate accurately the value of information and the cost of producing it. Therefore, organizations may produce information that they expect will produce benefits in excess of its costs, only to be disappointed after the fact. b. Production of the information may be mandated by either a government agency or a private organization. Examples include the tax reports required by the IRS and disclosure requirements for financial reporting. 1.2 Give an example of how an AIS can improve decision making, and describe the multistep activities involved in the process. Decision making is a complex, multistep activity: identify the problem, collect and interpret information, evaluate ways to solve the problem, select a solution methodology, and implement the solution. An AIS can provide assistance in all phases of decision making. Reports can help to identify potential problems. Decision models and analytical tools can be provided to users. Query languages can gather relevant data to help make the decision. Various tools, such as graphical interfaces, can help the decision maker interpret decision model results, evaluate them, and choose among alternative courses of action. In addition, the AIS can provide feedback on the results of actions. An AIS can help improve decision making in several ways: ● It can identify situations requiring management action. For example, a cost report with a large variance might stimulate management to investigate and, if necessary, take corrective action. ● It can reduce uncertainty and thereby provide a basis for choosing among alternative actions. ● It can store information about the results of previous decisions, which provides valuable feedback that can be used to improve future decisions. For example, if a company tries a particular marketing strategy and the information gathered indicates that it did not succeed, the company can use that information to select a different marketing strategy. ● It can provide accurate information in a timely manner. For example, Walmart has an enormous database that contains detailed information about sales transactions at each of its stores. It uses this information to optimize the amount of each product carried at each store. ● It can analyze sales data to discover items that are purchased together, and can use such information to improve the layout of merchandise or to encourage additional sales of related items. For example, Amazon uses its sales database to suggest additional books for customers to purchase.