Computerized Accounting Information Systems in a Global Essay

Excerpt from Essay :

Computerized Accounting Information


In a global contemporary business environment, the computerized accounting information systems have become an integral part of organizational accounting systems. The development Information and Communication Technology (ICT) has assisted organizations to migrate from the traditional accounting method to a computerized accounting systems. The integration of ICT with accounting methods has given rise to Accounting Information System (AIS) that assist organizations to deliver timely and accurate financial information which consequently enhancing effective decision-making. (Romney, and Steinbart, 2011)

Accounting information system is very vital for organization survival because information system has become an effective tool that assists organizations to make effective decision. Reliable data produced by information systems is very critical for organizational effectiveness. Reliable data generally assists organizations to diagnose, plan as well as enhancing effective business operations. (Abdala, 2012). The reliability of accounting standard with the context of accounting information systems has been widely recognized by many organizations to produce reliable financial accounting statements. (Krishnan, James, Rema, et al. 2005). Additionally, organizations with multiple global subsidiaries are increasingly relying on the computerized accounting information systems over the web to enhance accounting functions globally. Web implementation of accounting information systems is an organizational strategic decision where accounting functions are connected and consolidated to centralized systems such as enterprise resource planning (ERP) application for the implementation of complex accounting process. The goal of computerized accounting information systems (AIS) and telecommunicating accounting information is to assist organizations to automatically match invoice against the initial purchase online without going through manual accounting process. Additionally, the AIS have assisted organizations to deliver real-time financial reporting to enhance greater transparency as well as enhancing the quality of accounting reporting.

The goal of this project is to evaluate the global implementation of computerized accounting information systems or telecommunicating accounting information over the web. The paper also investigates the greater risks that organizations may face with the application of AIS and the strategy to manage the new system to address the security breach of such systems.

Benefits of Accounting Information Systems

Accounting information, Systems (AIS) are the computer-based method that consists of collection, storage and processing of accounting and financial data for tracking of accounting activities. Accounting information systems assists organizations to record, collect, store and process data to produce effective information to enhance decision making. AIS generally combine the traditional accounting methods with modern information technology to provide users with effective information to manage organizations efficiently and effectively. However, organizations generally rely on the digital accounting technologies to implement accounting information system and this involves the use of electronic technology to transfer accounting data online.

To implement accounting information systems, global organizations largely rely on LAN (Local Area Network) and WAN (Wide Area Network) to share accounting information with their subsidiaries anywhere in the world over the web. Through LAN, a user could share accounting data and accounting application software at the same location. With WAN application, an organization with headquarter in the United States could easily share accounting data or accounting software with its subsidiaries in Japan, Australia and Singapore.

Salehi et al. (2010) argue, "the possibility of sharing very timely financial data and information on the Web has accelerated many new developments in financial reporting that have the active support of the corporate community. AIS is expected to make it easier to locate, retrieve, and use financial data that are published on the Web." (P 191). With AIS, corporations are now able to make timely real time information to market participants. Typically, corporations are now able to distribute the financial reporting to selected audience by using Web-based systems and sophisticated network technology.

In the contemporary global business environment, organizations are increasingly facing stiff competitions where more customers are demanding for more custom products at shortest possible period. Accounting information systems are the important aspect of the value chain that assists organizations to satisfy customer's requirements and make organizations to deliver faster and better services within the competitive market environments.

Accounting functions are the processing of activities and information that lead to the maintenance of general ledger accounting balance to make effective organizational decisions. Accounting information systems assists organizations to plan and diagnose financial operations to enhance business efficiencies. Typically, AIS assists organizations to produce financial statements with considerable scrutiny. (Kaplan, Krishnan, Padman, et al. 1998).

Despite the benefits that organizations are deriving from the implementation of AIS, increasing number of organizations is facing the risks of implementing accounting functions over the web. Organizations often face greater risks when operating the AIS over the web. The counter-claim of telecommunicating accounting system shows that the breaching of the security of the new systems has made organizations to face greater risks, which need to be managed effectively.

Security Risks in AIS

Salehi et al. (2010) argue, "the possibility of sharing very timely financial data and information on the Web has accelerated many new developments in financial reporting that have the active support of the corporate community. Constant updating of web pages has assisted firms to deliver organisational accounting and financial information on a real-time basis."(P 190-191).

However, the counter arguments of such practice show that the costs of disclosing accounting information real time over the web is greater than the benefits derived from such practice. Organizations could unknowingly pass sensitive accounting and financial information to competitors. Moreover, hackers are increasingly becoming sophisticated and they are now taking advantages of application of accounting information systems over the web to steal sensitive accounting information and use this information for monetary gain. Global organizations with subsidiaries scattered over the world are using the intranet to implement accounting functions over the web without allowing the third party to have access to the company's accounting information. (Lin, 2010). However, global organizations are facing the greater risks while transferring sensitive accounting information over the network. Typically, sophisticated hackers are increasingly developing sophisticated hacking tools to highjack organizational financial information over the web. Hackers could interfere with the company files over the network and steal sensitive information for financial gains.

Since accounting information system is highly computerized, there are always the risks of losing valuable information through system crashes and power outrages. When these issues happen, organizations may face the risks of losing all the information stored in the systems. Moreover, attackers often use worms or virus to tamper with company's network devices to steal user's password in order to gain access to sensitive financial information. Moreover, the issue of losing of capital outlay is another risk that organizations may face in the implementation of accounting information systems. Typically, the costs of IAS implementation are the capital costs that organizations needs to incur. The set-up costs and staff training costs are the initial costs that organizations need to incur which makes application of accounting information systems to be generally expensive. Moreover, some businesses often integrate ready-made accounting software in their business process, which may not be suitable for the needs of organizational business operations.

Additionally, the goal to decline the costs of accounting operations has made increasing number of organizations to engage external vendors to assist them with their accounting systems over the web. It is generally believed that vendors are able to reduce the unit costs of accounting operations thereby declining the overall costs of accounting operations. However, engaging the service of external vendors will require organizations to open their systems to public access and the system may make organizations to be vulnerable to attacks by fraudsters and hackers. There are also some occasions where organizations may experience AIS failure if AIS implementation is not effectively implemented and tailored to their business needs.

Despite the risks associated with the implementation of accounting information systems, organizations with AIS integration generally enjoy lower cost of operations compared to organizations that still operate the traditional accounting systems. To alleviate the security risks associated with AIS integration, firms need to implement effective AIS management in various ways. The paper discuses various strategies to manage AIS to alleviate the security risks associated with the AIS.

Strategy to Manage AIS over the Web

Effective strategy to manage accounting information systems is to protect the network that organizations use to transfer accounting information from one organization to the other. The use firewall is one of the effective security protocols that firms could employ to protect the network devices. The firewall system blocks external intruders from penetrating a company network system. The back up system is another strategy that organizations could employ to manage accounting information systems. The back-up system is the strategy of making the copies of all accounting data and stores them in a remote location usually an offline location. The implementation of back-up system is very critical since it is possible for an organization to lose all its valuable data in case of artificial and natural disasters such as fire, flood, earthquake, tornado or building collapse. If such incidents occur, the back up systems will assist organizations to have access to reliable data and continue business operations.

Another strategy used to manage AIS operations is…

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