Accounting Information Systems Have Emerged as Very Essay

  • Length: 5 pages
  • Sources: 4
  • Subject: Business - Management
  • Type: Essay
  • Paper: #48055

Excerpt from Essay :

Accounting Information Systems have emerged as very famous components of modern businesses mainly because they offer beneficial and timely information to management in addition to being cost-effective. Generally, these systems are helpful in book account payables, cash transactions, receivables, and every other accounting function in an orderly manner. The need for an effective accounting information system in an organization is attributed to the huge volume of data handled by accounting departments. Accounting Information Systems provide helpful and timely accounting information because they perform accounting functions automatically rather than manually though the principles are similar. These systems are primarily based on computerized procedures that usually comprise modules known as sub-systems. While they remain an important facet of organizational decision-making, the management may make several incorrect assumptions about these systems.

Ackoff's Management Misinformation Systems:

According to Ackoff (1967), there is a growing pre-occupation with Management Information Systems by operations researchers and management scientists (p.147). This pre-occupation has contributed to the development of Management Information Systems that are synonymous with management science or operations research. The main reason underlying pre-occupation with these systems is that they engage the researcher or scientist in a romantic relationship with the computer. However, regardless of the enthusiasm, few computerized management information systems have been implemented.

In addition to the minimal implementation of computerized management information systems, managers seem to make five common and incorrect assumptions regarding the design of these systems. Nonetheless, these assumptions are not justified in many cases, which contribute to significant deficiencies in the developed systems. The first assumption is lack of relevant information, which is a crucial deficit that many managers operate with. Secondly, managers assume that they need the information they want when using the computerized management information systems. Third, the management assumes that improved decision-making will be achieved once the needed information is obtained. The fourth assumption is that improved communication among managers contributes to enhanced organizational performance. The fifth critical deficiency is that a manager only needs to understand how to use the system rather than understanding how the system functions. As previously mentioned, these assumptions have significant impacts on the efficiency of the management information systems.

Incorrect Assumptions about Accounting Information Systems:

Accounting Information Systems have been developed as part of attempts to revolutionize the processes of the accounting department and functions. Since these systems involve the use of computerized processes, they tend to provide accurate and timely information. This is mainly enhanced by the separation of the systems into various sub-systems like General Ledger module, Accounts Payable module, Accounts Receivable module, and Inventory module. Each of these modules has different purpose and functionality that are integrated to provide organizations with an extremely efficient accounting information system (Shanker, n.d.).

While the systems help in provision of helpful and timely accounting information, there are some related incorrect assumptions made by management. The first incorrect assumption related to accounting information systems is the fact that management tend to consider the security of accounting information as a responsibility of the IT department or bookkeeping staff. Actually, the security of accounting information contained in the systems has usually been left or delegated to the Information Technology department who are responsible for the design of these systems. This assumption has led to the establishment of regulations stipulating that the security of accounting information is a top management responsibility. For instance, Section 404 of the Sarbanes-Oxley Act made it compulsory for organization's management to preserve internal controls over financial reporting. This regulation incorporates accounting information systems because it generates numbers for the financial reports.

Secondly, the management assumes that accounting information systems generate accurate accounting information. While this is true when compared to manual systems, the reality is that accounting information systems can contain mistakes. These mistakes are likely to occur because the accounting department handles a huge volume of transactions. Some of the most common errors include mistyped numbers, wrong accounts of journal entries, and misclassification of transactions. Third, the costs of purchasing, implementing, and maintaining these systems are major assumptions attributed to the substantial decrease in their costs. However, the management may be required to spend additional costs in maintaining the systems and training new employees when implementing the systems. There are other extra costs related to accounting information systems including the costs for customizing reports.

Similar to Management Information Systems, the assumption that a manager needs the information he wants is an assumption related to accounting information systems. In this case, the management assumes that they can generate the financial information that they need to accomplish specific goals. However, accounting information basically evaluates business activities and communicates the information to investors and creditors ("Accounting Information and Decision Making," n.d.). The final assumption is that accounting information systems should provide positive financial information in order to be effective. Since these systems only help managers to manage, they show the actual financial position of the organization.

The most negative potential impacts on business operations related to these assumptions is that they could result in ineffective business practices that lead to poor productivity of the organization. The likelihood of ineffective and inefficient business practices is attributed to the incorrect financial information, unauthorized use of private and confidential financial information, theft of important information, huge costs, and reduced accuracy and efficiency of accounting operations.

Organizational Performance and Proper Information Management:

Proper management of information in a business system has developed to become an important aspect of management in today's world because of its link to improved organizational performance and success. The need for proper information management at various management levels in a business system has been necessitated by the ever changing business environment and circumstances. Notably, there are various ways in which organizational performance may be improved when information is properly managed within a business system.

First, organizational performance can be enhanced when information is properly managed through establishing management control systems. These systems are basically methods of gathering information that are used to direct and govern behavior of the management and employees towards the achievement of organizational goals ("What are Management Control Systems?" n.d.). While these management control systems use several techniques, they evaluate various areas in the business system to enhance performance and productivity.

Secondly, organizational performance can be improved when information is properly managed through conducting complete and accurate performance evaluations. These evaluations help in identifying a worker's strengths and retaining efficient and most competitive workers. The third way for improving organizational performance in the presence of proper information management is through integrating systems in order to improve the efficiency of the generated information on the performance of the organization. The integration of organizational systems ensures proper flow of information among the various organizational departments. The adequate and proper flow of information in turn leads to effective decision-making, which enhances organizational performance.

Level of Security to Ensure Information Integrity:

Information integrity within automated business systems is an important aspect of these systems because of its effect on privacy. As the field of information security has significantly developed in recent years, information security has emerged as an important issue for automated business systems. This is primarily because unauthorized use or access to private and confidential information about a business could result in negative consequences, especially with regards to the business' competitiveness. Therefore, protecting information and promoting information integrity is not only a business requirement but also legal and ethical requirement. This implies that there is need for high level of security in order to ensure information integrity within automated business systems.

The need for high level of security for information integrity is because this measure is associated with several major concepts i.e. confidentiality, availability, and authenticity. High levels of information security are crucial parts of this process because automated business systems normally function in a complex business environment characterized by uncertainties. In addition, the…

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