Information Systems & its Component: Notes (Part - 1) | Financial Management & Strategic Management for CA Intermediate PDF Download

 Page 1


 
LEARNING OUTCOMES 
 
INFORMATION 
SYSTEMS AND ITS
COMPONENTS 
After reading this chapter, you will be able to - 
? Understand about working of Financial and Accounting 
System. 
? Comprehend the knowledge about various components of 
an Information System and its working. 
? Appreciate nuances of Application Systems, Operating 
Systems, Database Systems, Networking and Communication 
Systems. 
? Grasp various types of threats and their mitigating controls 
to minimize the impact. 
? Understand types of controls and audit aspects of various 
systems. 
?
Comprehend about an organization structure and individual 
roles and responsibilities.
 
CHAPTER 
3 
Page 2


 
LEARNING OUTCOMES 
 
INFORMATION 
SYSTEMS AND ITS
COMPONENTS 
After reading this chapter, you will be able to - 
? Understand about working of Financial and Accounting 
System. 
? Comprehend the knowledge about various components of 
an Information System and its working. 
? Appreciate nuances of Application Systems, Operating 
Systems, Database Systems, Networking and Communication 
Systems. 
? Grasp various types of threats and their mitigating controls 
to minimize the impact. 
? Understand types of controls and audit aspects of various 
systems. 
?
Comprehend about an organization structure and individual 
roles and responsibilities.
 
CHAPTER 
3 
 
 
ENTERPRISE INFORMATION SYSTEMS 
3.2 
 
 
Information 
Systems (IS)
Components
People 
Resources
Computer 
System
Hardware
Software
Data Resources
Networking and 
Communication 
System
Controls
Objectives
Classification
Objectives of 
Controls
Nature of 
Information 
System 
Resources
Audit Functions
Auditing
Audit Trail
Environmental
Controls
Physical Security 
Controls
Logical Access 
Controls
Managerial 
Controls
Application 
Controls
Page 3


 
LEARNING OUTCOMES 
 
INFORMATION 
SYSTEMS AND ITS
COMPONENTS 
After reading this chapter, you will be able to - 
? Understand about working of Financial and Accounting 
System. 
? Comprehend the knowledge about various components of 
an Information System and its working. 
? Appreciate nuances of Application Systems, Operating 
Systems, Database Systems, Networking and Communication 
Systems. 
? Grasp various types of threats and their mitigating controls 
to minimize the impact. 
? Understand types of controls and audit aspects of various 
systems. 
?
Comprehend about an organization structure and individual 
roles and responsibilities.
 
CHAPTER 
3 
 
 
ENTERPRISE INFORMATION SYSTEMS 
3.2 
 
 
Information 
Systems (IS)
Components
People 
Resources
Computer 
System
Hardware
Software
Data Resources
Networking and 
Communication 
System
Controls
Objectives
Classification
Objectives of 
Controls
Nature of 
Information 
System 
Resources
Audit Functions
Auditing
Audit Trail
Environmental
Controls
Physical Security 
Controls
Logical Access 
Controls
Managerial 
Controls
Application 
Controls
3.3 
INFORMATION SYSTEMS AND ITS COMPONENTS 
 
3.1 INTRODUCTION 
Over the past few centuries, the world has moved on from connection amongst 
individuals to more of connection amongst systems. We now have systems that 
are constantly exchanging information about various things and even about us, 
many a times without human intervention. This inter-networking of physical 
devices, vehicles, smart devices, embedded electronics, software, sensors or any 
such device is often referred to as IoT (Internet of Things). 
What is interesting about various emerging technologies is that at its core we 
have some key elements, namely, People, Computer Systems (Hardware, 
Operating System and other Software), Data Resources, Networking and 
Communication System. In this chapter, we are going to explore each of those 
key elements. 
3.2 INFORMATION SYSTEMS 
Information System: Information System (IS) is a combination of people, 
hardware, software, communication devices, network and data resources that 
processes (can be storing, retrieving, transforming information) data and 
information for a specific purpose. The system needs inputs from user (key in 
instructions and commands, typing, scanning) which will then be processed 
(calculating, reporting) using technology devices such as computers, and produce 
output (printing reports, displaying results) that will be sent to another user or 
other system via a network and a feedback method that controls the operation. 
The main aim and purpose of each Information System is to convert the data into 
information which is useful and meaningful. An Information System depends on 
the resources of people (end users and IS specialists), hardware (machines and 
media), software (programs and procedures), data (data and knowledge bases), 
and networks (communications media and network support) to perform input, 
processing, output, storage, and control activities that transform data resources 
into information products. This information system model highlights the 
relationships among the components and activities of information systems. It also 
provides a framework that emphasizes four major concepts that can be applied to 
all types of information systems. An Information System model involves following 
steps well depicted in the Fig. 3.2.1: 
? Input: Data is collected from an organization or from external environments 
and converted into suitable format required for processing.  
Page 4


 
LEARNING OUTCOMES 
 
INFORMATION 
SYSTEMS AND ITS
COMPONENTS 
After reading this chapter, you will be able to - 
? Understand about working of Financial and Accounting 
System. 
? Comprehend the knowledge about various components of 
an Information System and its working. 
? Appreciate nuances of Application Systems, Operating 
Systems, Database Systems, Networking and Communication 
Systems. 
? Grasp various types of threats and their mitigating controls 
to minimize the impact. 
? Understand types of controls and audit aspects of various 
systems. 
?
Comprehend about an organization structure and individual 
roles and responsibilities.
 
CHAPTER 
3 
 
 
ENTERPRISE INFORMATION SYSTEMS 
3.2 
 
 
Information 
Systems (IS)
Components
People 
Resources
Computer 
System
Hardware
Software
Data Resources
Networking and 
Communication 
System
Controls
Objectives
Classification
Objectives of 
Controls
Nature of 
Information 
System 
Resources
Audit Functions
Auditing
Audit Trail
Environmental
Controls
Physical Security 
Controls
Logical Access 
Controls
Managerial 
Controls
Application 
Controls
3.3 
INFORMATION SYSTEMS AND ITS COMPONENTS 
 
3.1 INTRODUCTION 
Over the past few centuries, the world has moved on from connection amongst 
individuals to more of connection amongst systems. We now have systems that 
are constantly exchanging information about various things and even about us, 
many a times without human intervention. This inter-networking of physical 
devices, vehicles, smart devices, embedded electronics, software, sensors or any 
such device is often referred to as IoT (Internet of Things). 
What is interesting about various emerging technologies is that at its core we 
have some key elements, namely, People, Computer Systems (Hardware, 
Operating System and other Software), Data Resources, Networking and 
Communication System. In this chapter, we are going to explore each of those 
key elements. 
3.2 INFORMATION SYSTEMS 
Information System: Information System (IS) is a combination of people, 
hardware, software, communication devices, network and data resources that 
processes (can be storing, retrieving, transforming information) data and 
information for a specific purpose. The system needs inputs from user (key in 
instructions and commands, typing, scanning) which will then be processed 
(calculating, reporting) using technology devices such as computers, and produce 
output (printing reports, displaying results) that will be sent to another user or 
other system via a network and a feedback method that controls the operation. 
The main aim and purpose of each Information System is to convert the data into 
information which is useful and meaningful. An Information System depends on 
the resources of people (end users and IS specialists), hardware (machines and 
media), software (programs and procedures), data (data and knowledge bases), 
and networks (communications media and network support) to perform input, 
processing, output, storage, and control activities that transform data resources 
into information products. This information system model highlights the 
relationships among the components and activities of information systems. It also 
provides a framework that emphasizes four major concepts that can be applied to 
all types of information systems. An Information System model involves following 
steps well depicted in the Fig. 3.2.1: 
? Input: Data is collected from an organization or from external environments 
and converted into suitable format required for processing.  
 
 
ENTERPRISE INFORMATION SYSTEMS 
3.4 
? Process: A process is a series of steps undertaken to achieve desired 
outcome or goal. Information Systems are becoming more and more 
integrated with organizational processes, bringing more productivity and 
better control to those processes.  
? Output: The system processes the data by applying the appropriate 
procedure on it and the information thus produced is stored for future use 
or communicated to user. Three basic activities of an information system 
that are defined above, helps enterprise in making decisions, control 
operations, analyze problems and create new products or services as an 
output. 
 
Fig. 3.2.1: Functions of Information Systems 
? Feedback: Apart from these activities, information system also needs 
feedback that is returned to appropriate members of the enterprises to help 
them to evaluate at the input stage. 
3.3 COMPONENTS OF INFORMATION SYSTEMS 
With the help of information systems enterprises and individuals can use 
computers to collect, store, and process, analyze, and distribute information. 
There are different types of information systems, i.e. Manual (paper and pencil) 
information system, Informal (word of mouth) information system, Formal (written 
procedures) information system and Computer based information system. This 
chapter mainly focuses on Computer Based Information System. A Computer 
Based Information system is a combination of people, IT and business processes 
that helps management in taking important decisions to carry out the business 
successfully.  
Page 5


 
LEARNING OUTCOMES 
 
INFORMATION 
SYSTEMS AND ITS
COMPONENTS 
After reading this chapter, you will be able to - 
? Understand about working of Financial and Accounting 
System. 
? Comprehend the knowledge about various components of 
an Information System and its working. 
? Appreciate nuances of Application Systems, Operating 
Systems, Database Systems, Networking and Communication 
Systems. 
? Grasp various types of threats and their mitigating controls 
to minimize the impact. 
? Understand types of controls and audit aspects of various 
systems. 
?
Comprehend about an organization structure and individual 
roles and responsibilities.
 
CHAPTER 
3 
 
 
ENTERPRISE INFORMATION SYSTEMS 
3.2 
 
 
Information 
Systems (IS)
Components
People 
Resources
Computer 
System
Hardware
Software
Data Resources
Networking and 
Communication 
System
Controls
Objectives
Classification
Objectives of 
Controls
Nature of 
Information 
System 
Resources
Audit Functions
Auditing
Audit Trail
Environmental
Controls
Physical Security 
Controls
Logical Access 
Controls
Managerial 
Controls
Application 
Controls
3.3 
INFORMATION SYSTEMS AND ITS COMPONENTS 
 
3.1 INTRODUCTION 
Over the past few centuries, the world has moved on from connection amongst 
individuals to more of connection amongst systems. We now have systems that 
are constantly exchanging information about various things and even about us, 
many a times without human intervention. This inter-networking of physical 
devices, vehicles, smart devices, embedded electronics, software, sensors or any 
such device is often referred to as IoT (Internet of Things). 
What is interesting about various emerging technologies is that at its core we 
have some key elements, namely, People, Computer Systems (Hardware, 
Operating System and other Software), Data Resources, Networking and 
Communication System. In this chapter, we are going to explore each of those 
key elements. 
3.2 INFORMATION SYSTEMS 
Information System: Information System (IS) is a combination of people, 
hardware, software, communication devices, network and data resources that 
processes (can be storing, retrieving, transforming information) data and 
information for a specific purpose. The system needs inputs from user (key in 
instructions and commands, typing, scanning) which will then be processed 
(calculating, reporting) using technology devices such as computers, and produce 
output (printing reports, displaying results) that will be sent to another user or 
other system via a network and a feedback method that controls the operation. 
The main aim and purpose of each Information System is to convert the data into 
information which is useful and meaningful. An Information System depends on 
the resources of people (end users and IS specialists), hardware (machines and 
media), software (programs and procedures), data (data and knowledge bases), 
and networks (communications media and network support) to perform input, 
processing, output, storage, and control activities that transform data resources 
into information products. This information system model highlights the 
relationships among the components and activities of information systems. It also 
provides a framework that emphasizes four major concepts that can be applied to 
all types of information systems. An Information System model involves following 
steps well depicted in the Fig. 3.2.1: 
? Input: Data is collected from an organization or from external environments 
and converted into suitable format required for processing.  
 
 
ENTERPRISE INFORMATION SYSTEMS 
3.4 
? Process: A process is a series of steps undertaken to achieve desired 
outcome or goal. Information Systems are becoming more and more 
integrated with organizational processes, bringing more productivity and 
better control to those processes.  
? Output: The system processes the data by applying the appropriate 
procedure on it and the information thus produced is stored for future use 
or communicated to user. Three basic activities of an information system 
that are defined above, helps enterprise in making decisions, control 
operations, analyze problems and create new products or services as an 
output. 
 
Fig. 3.2.1: Functions of Information Systems 
? Feedback: Apart from these activities, information system also needs 
feedback that is returned to appropriate members of the enterprises to help 
them to evaluate at the input stage. 
3.3 COMPONENTS OF INFORMATION SYSTEMS 
With the help of information systems enterprises and individuals can use 
computers to collect, store, and process, analyze, and distribute information. 
There are different types of information systems, i.e. Manual (paper and pencil) 
information system, Informal (word of mouth) information system, Formal (written 
procedures) information system and Computer based information system. This 
chapter mainly focuses on Computer Based Information System. A Computer 
Based Information system is a combination of people, IT and business processes 
that helps management in taking important decisions to carry out the business 
successfully.  
 
 
3.5 
 
INFORMATION SYSTEMS AND ITS COMPONENTS  
 
Information Systems are networks of hardware and software that people and 
organizations use to create, collect, filter, process, transform and distribute data. 
Information Systems are interrelated components working together to collect, 
process, and store and disseminate information to support decision-making, 
coordination, control, analysis and visualization in an organization. An 
Information System comprise of People, Hardware, Software, Data and 
Network for communication support shown in Fig. 3.3.1. 
Here, people mean all those who operate, manage, maintain and use the system 
i.e. system administrator, IS personnel, programmers and end users i.e. the 
persons, who can use hardware and software for retrieving the desired 
information. The hardware means the physical components of the computers i.e. 
server or smart terminals with different configurations like 
corei3/corei5/corei7/corei9 processors etc. and software means the system 
software (operating systems), application software (different type of computer 
programs designed to perform specific task) and utility software (e.g. tools). The 
data is the raw fact which is input to the system. It may be alphanumeric, text, 
image, video, audio, and other forms. The network means communication media 
(Internet, Intranet, Extranet etc.). 
 
Fig. 3.3.1: Components of Information Systems 
3.3.1 People Resources 
While thinking about Information Systems, it is easy to get too focused on the 
technological components and forget that we must look beyond these tools at 
the whole picture and try to understand how technology integrates into an 
organization. A focus on people involved in Information Systems is the next step.