The report details the resolution of two selected case studies which have been considered for implementation of AIS frameworks and plausible recommendations have been provided in each case alongside review of different features associated with accounting information systems such as the factors influencing the formulation of AIS and the components as well as distinct variants of accounting information systems (Boonstra, 2013).
Business organizations have to undertake management of their internal processes and resources in order to obtain cumulative benefits in the form of economic stability and sustainable competitive advantage. Financial stability ensures viable recovery of investments and opportunities to realize adaptability in complex situations. The financial documents of an organization are the sources which predict the stability of the organization and hence the significance of accounting is perceived in the figures which are generated from the financial statistics depicting the performance of the organization (Campbell, 2015). Computers and the internet have redefined the conventional strategies followed for management of accounting information. Accounting has been executed through maintenance of physical documents to maintain records of transactions, source documents and translation of document into ledgers. The usually adopted methods for accounting information management such as collection of data, interpretation, analysis and retrieval of data by authorized personnel. The contemporary systems have changed the normal methods followed by accounting instruments and flexibility is the foremost outcome which has been observed in the data management procedures.
Accounting information systems:
Connectivity has become a profound concern for accounting managers as they have to address the information management requisites of financial data acquired from distinct departments of the organization. Business strategies have derived ample of sophistication owing to the dynamic changes in the market environment (Galliers & Leidner, 2014). The transformation of manual accounting records into computerized systems served as a major outcome of implementation of AIS and hence it can be perceived that AIS served strategic outcomes for an organization. The apprehension of essential characteristics associated with AIS requires a comprehensive understanding of the functions, influencing factors and components associated with accounting information systems. The need for AIS can be characterized by three profound reasons. The objective of AIS is to ensure reliable collection and storage of data and the financial data of the organization is the primary input of the systems which is derived from the accounting and financial aspects of the organization (Gardner, Boyer & Gray, 2015). Financial data is obtained from the information collected from source documents and transactions details. Accounting systems are also required to monitor the statement of transactions in the journals and check that they are appropriately reiterated in the ledgers. The information derived from AIS is also necessary for decision making processes since accounting data is considered as the most quantifiable and credible resource for framing the proposals for future strategies. AIS systems are also characterized by the presence of the facility for internal controls established for individual processes in accounting data management. The controls implemented in the AIS systems are meant for security of the data and for monitoring the standards followed in data collection and processing thereby ensuring acquisition of credible information. Performance measurement systems are largely responsible for complementing the function of internal controls (Haux et al., 2013). The application of AIS in diverse industrial contexts can be validated by the varied assortment of functions and capabilities which can meet the strategic requirements of organizations.
Attributes of AIS:
The attributes of AIS refer to the entities which form the accounting information system. The evaluation of AIS attributes is essential in order to determine the suitability of the components with respect to the industrial context. Accounting information systems are associated with six major components which include procedure, people, data, software, security and the physical infrastructure. Each of the components has a definite contribution to the efficiency of AIS and hence the integration of each of the component in an accounting information management framework becomes imperative. People concerned with accounting information systems include business analysts, managers, accountants and consultants. The generic definition of people in context of AIS can be stated as relevant to the authorization allowed for access and modification of data. Therefore, AIS proficiency and skills in information management are necessary criteria to look out for in the people component. Procedures in case of AIS directly refer to the various measures taken for data collection, storage, processing and integration. The formal outlining of a procedure is meant for estimating the exact investments which are required in the system through perception of technical and financial resources needed by the organization (Hall, 2012). The aspect of data is derived from the accounting and financial documents of an organization and this attribute forms a major share of the accounting data management framework. Software or application programs intended for executing certain procedures such as data collection, storage and analysis are also a profound attribute of AIS. The final component of the AIS is found in the information technology infrastructure which describes the technical or hardware installations required for the system. Information and communication technologies have drastically modified the convenience and flexibility of data management which is reflected in the efficiency of organizations. Internal controls and performance measurement systems require consistent monitoring in order to safeguard data processing integrity as well as security of the data from unauthorized elements (Luse et al., 2013).
Business processes include revenue, expenditure, administrative and conversion transactions (Stair & Reynolds, 2013). The different processes mentioned in business transactions must be represented in the form of external and internal reports. Organizations are able to frame appropriate external reports in the form of balance sheet and cash flow statements and internal reports in the form of inventory report.
Development of Business Requirement
The objectives of an organization are considered as key influencing factors on the type of AIS selected for an organization. In addition to the objectives the industry as well as size of the organization in terms of capital and resources is also considered as prominent influence on the AIS implemented in an organization. AIS can be broadly classified into manual and legacy systems based on the long drawn history of accounting information systems. Manual systems are characterized by the implications of manual input and the consistent requirement of references to journals, source documents and ledgers of an organization (Samara, 2016). The avenue of manual information systems is generally preferred by organizations with smaller scale and home based enterprises which are associated with trivial amount of financial data. Computerization of information systems introduced a substantial degree of flexibility for storage of data. Legacy systems, on the other hand provide a descriptive approach to accounting information management. They are concerned with references to past accounts of the organization’s performance and hence they determine the relevancy of present financial statistics. The flexibility observed in the various applications of legacy systems showed the future to prepare opportunities for introduction of packages and accounting software which are customized to the requirement of organizations (Qrunfleh & Tarafdar, 2014). The capability of a legacy system would also be improved through acquisition of employee’s perception and the intended objectives of an organization.
Performance measurement in an accounting information system is dependent on five profound criteria which are necessary characteristics of the AIS implemented by an organization. Confidentiality, processing integrity, security, availability and privacy are the five factors which define the capability of an accounting information system. Efficiency and credibility of the AIS can be determined from the performance of a specific system in context of all the determinants. Security of accounting information systems can be verified through presence of internal controls and stringent guidelines for determining appropriate authorities who can access the data in AIS. Accounting information systems comprise of personal data of users and especially customers in case of business organizations (Markus & Benjamin, 2012). Therefore the AIS must be characterized by measures to limit exposure of confidential user information. The processing integrity of the AIS implemented in an organization is verified from the evaluation of standards implemented for the process, accuracy of data processing and the time needed for completing the data processing. The availability of AIS is verified by the capability of the system to address the requirements of the organization in terms of contractual or operational obligations. Privacy is observed in the performance of AIS if the data in the system is not vulnerable to unauthorized access (Pearlson, Saunders & Galletta, 2016). Disclosure of private information could result in misuse of accounting information systems and hence its performance can be compromised. Measuring the capability of AIS from the perspective of five distinct criteria enables the instatement of plausible strategies for resolution of management issues. While setbacks have been observed at many instances when organizations failed to implement AIS properly and had to deal with haphazard document arrangement, uncertainties related to taxable income and complicated cash flow statements. The information system requirements of an organization are considered viable when realized through productive data collection and interpretation into legible outcomes.
The changes which were induced in the business environment also influenced the nature of accounting information systems selected by organizations. Information systems and their design are largely derived from the significant characteristics such as volume and type of data as well as the magnitude of the organization in terms of resources and outreach. The usual mode of accounting information management was realized through relational database management systems and electronic data processing systems which facilitated the foundation for the sophisticated accounting packages and software which are available presently (Qrunfleh & Tarafdar, 2014). So for security the selection of Software is really necessary. It should be of perfect one otherwise there will be security issue.
The process of accounting is characterized by tedious processes starting from reiteration of financial transactions into ledgers and preparing a full-fledged outline of the financial documents. The introduction of new guidelines such as the Sarbanes-Oxley Act 2002 also assisted in the shift towards the contemporary approaches of accounting information systems. Classification of AIS is based on the different types of vender’s transactions and each type of transaction is characterized by certain essential considerations. So vender selection much more necessary.
Disk4U case study:
The consideration of an example of case study involving requirement of AIS and possible recommendations is essential for apprehending the practical application of AIS. The example case study refers to Disk4U which is a home-based enterprise and deals with sale of vinyl records and music CDs. The major turnaround observed in case of the company is its association with eBay for selling its products. The four outlets of the company in Sydney and its internet operations account for requirement of intricate and comprehensive AIS. Since the organization is readily struggling with the flaws in accounting and business reporting, it has to identify plausible strategies which could provide the necessary advantage required for monitoring the different activities of accounting and business consultants (Markus & Benjamin, 2012). The manual system of accounting is credible for smaller businesses but could result in proliferation of errors especially related to data management. The data related to accounts, transactions and sources became complex with the internet operations of the company. Furthermore, the small scale operations of Disk4U have to be analyzed with reference to the budget which could provide a formal impression of the essential requirements needed from an organization. QuickBooks can be recommended for the organization owing to its capabilities to address the complex nature of accounting data related to the organization alongside providing financial leniency (Qrunfleh & Tarafdar, 2014). The major concern to be addressed by the accounting software is the exponential increment of business intelligence which would be imperative in subsequent years of the organization’s presence in the market. The influx of large number of customers and relevant data is mandatory and hence the recommended AIS software must be capable of catering the needs of accommodation for colossal volumes of data. The establishment of the AIS for Disk4U would be accompanied with a monitoring system which can apprehend the behavioral preferences of individuals and comparative reviews of organizational performance in distinct financial years. The complexity of the transactions would be increased in event of the internet venture of the company which requires stringent monitoring of transactions among vendor (eBay), customers and the organization. The emphasis on such transaction provides a clear image of the different cost associated incurred in supply chain expenditures, replacements and product exchanges (Luse et al., 2013). The organization could derive ample benefits in for the cost accounting which is a formidable initiative for comparison of cost performance of the company according to the various standards which exist in the market. The interface provided by QuickBooks is flexible and offers feasible prospects for accountants to understand the various functionalities of the software. The software could project error-free predictions related to cash flow projections, income statements, comparison of performance reviews and sales report. The complete efficiency of AIS in Disk4U can be recommended through apt emphasis on the resolution of issues such as transformation of manual systems, integrating the features of legacy based systems in customized packages and specific consideration for crucial aspects of information management.
Sungate Foods case study:
Another example considered for the report involves a case study of Sungate Foods, which is a company producing rice and is associated with milling. Warehouse locations, milling facilities and various technical resources implemented by the organization are some of the features which indicate that the organization has substantial amount of resources. Therefore the recommended AIS for the organization must be aligned with the organization’s objectives and the size of the organization’s operations. The magnitude and extent of the data pertaining to Sungate foods and its production as well as distribution processes and other business transactions requires implementation of AIS frameworks which could address each business transaction individually (Haux et al., 2013). The key pitfalls which are observed in case of the organization’s accounting information management framework include references to inefficiency of personnel to deal with technical details, ambiguity in interaction in context of the existing communication channels. Estimation of the resources and perceived returns of an organization can be possible through understanding the distinct perspectives which are indicative of the business processes in an organization. Interplay among the different data fields could result in formulation of comprehensive strategies for AIS. Distinct statement and monitoring of data is realized in examples such as maintenance of data pertaining to revenue in the form of sales, collection of cash and sales returns (Gardner, Boyer & Gray, 2015). The organization could not utilize generic accounting software and packages since they cannot cope with the diverse and massive volume of data associated with Sungate Foods. The applications of AIS must be realized along the lines of organizational objectives and values. The extent of information associated with the organization also calls for the use of legacy system characteristics so that existing employees would not have to face any issue in coping with the format and size of data. The design of AIS for the organization also needs considerations with respect to the emphasis on significant issues such as cash flow. Primary setbacks imposed in this case refer to the financial constraint. However, a viable recommendation from business and accounting consultants with references to the volume of information shall be noted for focus on empirical and quantitative accounting facts. The varying establishments of the organization need to be encompassed in the accounting information system since real time data acquisition could help in improvisation of the accounting documentation framework. Real time data has become a convenient aspect in today’s domain of business as it has helped in establishing quantifiable references to the stock status, collection from farms, cost of production, packaging and distribution of rice and the details of consignment dispatch. Other profound recommendations would be clearly indicative of capitalization on the existing resources. While the organization faces conclusive issues with data management owing to the inefficiency of information management personnel and the inability to extract potential benefits from various resources. The issue of collection of data from various sources such as production, marketing, sales and expenses and collating it into a single document could create incomprehensible circumstances especially related to ambiguities. Therefore, Sungate Foods can derive managerial expertise through identification of pitfalls in existing models, emphasis on business transactions and the accounting information relevant to the company’s operations.
The report presented above has critically analyzed the various theoretical and applicative principles of Accounting Information Systems alongside the consideration for requirement of skills, vendor proficiency and other facets such as size and resource availability of an organization. The organization should be willing to invest resources in AIS for acquiring long term benefits. While the constraints on financial resources could limit the functionality of an accounting system, the presence of AIS cannot be negated from every organization in the present business scenario (Luse et al., 2013). The creation of the AIS framework has been largely considered from the perspective of nature of the organization, organization magnitude and the resources possessed by the organization. The above mentioned factors have a significant influence on the criteria established for standardization of information systems and the components of AIS which could deliver viable outcomes in context of the organization’s short and long term objectives (Qrunfleh & Tarafdar, 2014). Financial and accounting information require consistent monitoring and the implications of the same have been observed in the development of many large corporations which have utilized AIS flexibly within the standards. The report concludes with prominent references to the examples of two case studies of organizations with distinct backgrounds and the necessary considerations which are made by business and accounting consultants for proposing AIS framework for each case.
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