The Evolution of Information System Models

Oleh: Lusianah, S.E., M.Ak.

Over the past 50 years, a number of different approaches or models have represented accounting information systems. Each new model evolved because of the shortcomings and limitations of its predecessor. An interesting feature in this evolution is that the newest technique does not immediately replace older models. Thus, at any point in time, various generations of systems exist across different organizations and may even coexist within a single enterprise. The modern auditor needs to be familiar with the operational features of all AIS approaches that he or she is likely to encounter. This book deals extensively with five such models: manual processes, flat-file systems, the database approach, the REA (resources, events, and agents) model, and ERP (enterprise resource planning) systems. Each of these is briefly outlined in the following section.

The Manual Process Model

The manual process model is the oldest and most traditional form of accounting systems. Manual systems constitute the physical events, resources, and personnel that characterize many business processes. This includes such tasks as order-taking, warehousing materials, manufacturing goods for sale, shipping goods to customers, and placing orders with vendors. Traditionally, this model also includes the physical task of record keeping. Often, manual record keeping is used to teach the principles of accounting to business students. This approach, however, is simply a training aid. These days, manual records are never used in practice.

            Nevertheless, there is merit in studying the manual process model before mastering computer-based systems. First, learning manual systems helps establish an important link between the AIS course and other accounting courses. The AIS course is often the only accounting course in which students see where data originate, how they are collected, and how and where information is used to support day-to-day operations.

            Finally, manual procedures facilitate understanding internal control activities, including segregation of functions, supervision, independent verification, audit trails, and access controls. Because human nature lies at the heart of many internal control issues, we should not overlook the importance of this aspect of the information system.

The Flat-File Model

            The flat-file approach is most often associated with so-called legacy systems. These are large mainframe systems that were implemented in the late 1960s through the 1980s. Organizations today still use these systems extensively. Eventually, modern database management systems will replace them, but in the meantime accountants must continue to deal with legacy system technologies. The flat-file model describes an environment in which individual data files are not related to other files. End users in this environment own their data files rather than share them with other users. Thus, stand-alone applications rather than integrated systems perform data processing. The data redundancy demonstrated in this example contributes to three significant problems in the flat-file environment: data storage, data updating, and currency of information.

Data Storage

An efficient information system captures and stores data only once and makes this single source available to all users who need it. In the flat-file environment, this is not possible. To meet the private data needs of users, organizations must incur the costs of both multiple collection and multiple storage procedures. Some commonly used data may be duplicated dozens, hundreds, or even thousands of times.

Data Updating

Organizations have a great deal of data stored in files that require periodic updating to reflect changes. For example, a change to a customer’s name or address must be reflected in the appropriate master files. When users keep separate files, all changes must be made separately for each user. This adds significantly to the task and the cost of data management.

Currency of Information

In contrast to the problem of performing multiple updates is the problem of failing to update all the user files affected by a change in status. If update information is not properly disseminated, the change will not be reflected in some users’ data, resulting in decisions based on outdated information.

Task-Data Dependency

Another problem with the flat-file approach is the user’s inability to obtain additional information as his or her needs change. This problem is called task-data dependency. The user’s information set is constrained by the data that he or she possesses and controls. Users act independently rather than as members of a user community. In such an environment, it is very difficult to establish a mechanism for the formal sharing of data. Therefore, new information needs tend to be satisfied by procuring new data files. This takes time, inhibits performance, adds to data redundancy, and drives data management costs even higher.

Flat Files Limit Data Integration

The flat-file approach is a single-view model. Files are structured, formatted, and arranged to suit the specific needs of the owner or primary user of the data. Such structuring, however, may exclude data attributes that are useful to other users, thus preventing successful integration of data across the organization. For example, because the accounting function is the primary user of accounting data, these data are often captured, formatted, and stored to accommodate financial reporting and GAAP. This structure, however, may be useless to the organization’s other (nonaccounting) users of accounting data, such as the marketing, finance, production, and engineering functions. These users are presented with three options: (1) do not use accounting data to support decisions; (2) manipulate and massage the existing data structure to suit their unique needs; or (3) obtain additional private sets of the data and incur the costs and operational problems associated with data redundancy.

The Database Model

An organization can overcome the problems associated with flat files by implementing the database model to data management. With the organization’s data in a central location, all users have access to the data they need to achieve their respective objectives. Access to the data resource is controlled by a database management system (DBMS). The DBMS is a special software system that is programmed to know which data elements each user is authorized to access. The user’s program sends requests for data to the DBMS, which validates and authorizes access to the database in accordance with the user’s level of authority. If the user requests data that he or she is not authorized to access, the request is denied. Clearly, the organization’s procedures for assigning user authority are an important control issue for auditors to consider.

Through data sharing, the following traditional problems associated with the flat-file approach may be overcome:

  • Elimination of data redundancy. Each data element is stored only once, thereby eliminating data redundancy and reducing data collection and storage costs. For example, customer data exists only once, but is shared by accounting, marketing, and product services users. To accomplish this, the data are stored in a generic format that supports multiple users.
  • Single update. Because each data element exists in only one place, it requires only a single update procedure. This reduces the time and cost of keeping the database current.
  • Current values. A single change to a database attribute is automatically made available to all users of the attribute. For example, a customer address change is immediately reflected in the marketing and product services views when the billing clerk enters it.

Flat-file and early database systems are called traditional systems. Within this context, the term traditional means that the organization’s information systems applications (its programs) function independently of each other rather than as an integrated whole. Early database management systems were designed to interface directly with existing flat-file programs. Thus when an organization replaced its flat files with a database, it did not have to spend millions of dollars rewriting its existing programs. Indeed, early database applications performed essentially the same independent functions as their flat-file counterparts.

The REA Model

REA is an accounting framework for modeling an organization’s critical resources, events, and agents (REA) and the relationships between them. Once specified, both accounting and nonaccounting data about these phenomena can be identified, captured, and stored in a relational database. From this repository, user views can be constructed that meet the needs of all users in the organization. The availability of multiple views allows flexible use of transaction data and permits the development of accounting information systems that promote, rather than inhibit, integration.

The REA model was proposed in 1982 as a theoretical model for accounting. Advances in database technology have focused renewed attention on REA as a practical alternative to the classical accounting framework. The following summarizes the key elements of the REA models.

REA Components:

  • Resources

Economic resources are the assets of the organization. They are defined as objects that are both scarce and under the control of the enterprise.

  • Events

Economic events are phenomena that affect changes in resources. They can result from activities such as production, exchange, consumption, and distribution. Economic events are the critical information elements of the accounting system and should be captured in a highly detailed form to provide a rich database.

  • Agents

Economic agents are individuals and departments that participate in an economic event. They are parties both inside and outside the organization with discretionary power to use or dispose of economic resources.

Enterprise Resource Planning Systems

Enterprise resource planning (ERP) is an information system model that enables an organization to automate and integrate its key business processes. ERP breaks down traditional functional barriers by facilitating data sharing, information flows, and the introduction of common business practices among all organizational users. The implementation of an ERP system can be a massive ndertaking that can span several years. Because of the complexity and size of ERPs, few organizations are willing or able to commit the necessary financial and physical resources and incur the risk of developing an ERP system in-house. Hence, virtually all ERPs are commercial products. The recognized leaders in the market are SAP, Oracle, Baan, J.D. Edwards & Co., and PeopleSoft Inc.

ERP packages are sold to client organizations in modules that support standard processes. Some common ERP modules include:

  • Asset Management
  • Financial Accounting
  • Human Resources
  • Industry-Specific Solutions
  • Plant Maintenance
  • Production Planning
  • Quality Management
  • Sales and Distribution
  • Inventory Management


  • Hall, A. J. 2008. Accounting Information System. Sixth Edition. South-Western Cengage Learning.
  • Google Image. 2020
  • Krogstie, J. 2012. Model-Based Development and Evolution of Information Systems. Springer Journal ISBN 978-1-4471-2936-3.
  • Susanto, A. & Meiryani. 2019. The Evolution of Accounting Information Systems. INTERNATIONAL JOURNAL OF SCIENTIFIC & TECHNOLOGY RESEARCH VOLUME 8 ISSN 2277-8616.