Definition and diagram of a system and its principal components

Management do not always know what information they need and information specialists often do not know enough about management in order to produce relevant information for the managers they serve. An example given by Professor Kaplan graphically illustrates this point. He reported that a group of American industrialists visiting Japan found that their counterparts were regularly supplied with information on the proportion of products which pass through the factory without re-working or rectification. They found that a typical percentage of products that needed no re-working was 92%. The American managers found that this information was not available to them at their factories at home but on investigation it was found that their ratio was 8%. They then worked on this factor for 6 months at which point the ratio had moved up to 66% and, more importantly, productivity was 25% higher (Lucy, 2000: 3).


Assume that you are the Information Systems Director of Test Kits Ltd. This is a growing company that produces a range of chemical test kits for a wide range of products and markets. Currently the company is experiencing a boom in demand for its BSE test kit for beef. You were planning a presentation to the Board of Directors entitled ‘The accounting information system – an abstract representation of the company’, when your Managing Director hands you the above quotation. He asks you to address those issues raised in the quotation in your presentation and also how they affect lower, middle and senior management. Draft out the main points of the Information Systems Director’s presentation. Ensure that you include a definition and diagram of a system and its principal components, explain the main systems concepts and address the practical problems raised in the quotation.

“When a company has a strong internal control structure, stockholders can expect the elimination of fraud.” Comment on the soundness of this statement.


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