By J. Hall
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However, because of faulty record keeping, the information was incorrect. The actual inventory levels of the product were insufficient to meet the order, and the necessary quantities could not be manufactured by the deadline. Failure to comply with the terms of the contract may result in litigation. This poor sales decision was a result of flawed information. Effective decisions require information that has a high degree of reliability. Accounting Independence Information reliability rests heavily on the concept of accounting independence.
Consider the following example: A marketing manager signed a contract with a customer to supply a large quantity of product by a certain deadline. He made this decision based on information about finished goods inventory levels. However, because of faulty record keeping, the information was incorrect. The actual inventory levels of the product were insufficient to meet the order, and the necessary quantities could not be manufactured by the deadline. Failure to comply with the terms of the contract may result in litigation.
1 ■ ■ Learning Objectives After studying this chapter, you should: ■ ■ Understand the primary information flows within the business environment. Understand the difference between accounting information systems and management information systems. ■ Understand the difference between a financial transaction and a nonfinancial transaction. ■ Know the principal features of the general model for information systems. ■ Be familiar with the functional areas of a business and their principal activities.