Accounting Information Systems (AIS) And Telecommunicating Accounting Information - Essay Example

Accounting Information Systems (AIS) And Telecommunicating Accounting Information Table of Contents Introduction 3 Evolution of Accounting System 3 Computerising Accounting Information System and its Impact 5 Impact of Telecommunicating of Accounting Information 6 Addressing the Security Issues of Using Computerizing AIS and Its Telecommunication of Accounting Information 7 References 8 9 Bibliography 10 Introduction Every business, big or small, must maintain proper records of their daily transactions. Keeping record of every transaction is very important to businesses because the business runs on the capital of the owners’ and all other entities are accountable to their stakeholders. Traditionally, the all meaningful transactions related to business were used to be recorded and maintained manually or in hand written registers or ledger books. But with the concept of globalization, the entire landscape of the accounting system in business changed. Every organization computerised their accounting system that reduced the work time considerably. Today almost every Multi National Company relies on Accounting Information system and telecommunicating of accounting information for running the business successfully and reaching clients all over the world (Carmona, Ezzamel and Gutiérrez, 1998, p.28). Evolution of Accounting System In the early 80’s, the computers were used to solve only mathematical problems and limited application programs. With time the software industry changed rapidly, from character user interface to graphical user interface. In the 90’s, we no longer needed to remember large codes to execute simple instruction as the mouse came into origin. People slowly started to realise the potential of the evolution of computers and its application in any industry. At the same time the internet, previously the Arpanet was evolving and the telecommunication system too changed the entire scenario. With globalization more and more subsidiaries, branches, franchises emerged and companies began to operate internationally (Ionescu, Ionescu, Mihai and Cojocaru, 2009, pp.1-3). Such companies which operate in their home country as well as in the foreign countries are known as the MNC or the Multi-national Companies. The globalization limited the scope of traditional accounting due to several reasons. Firstly, keeping records of all thousands of transactions, daily, for all business and communicating them to all the head office and other branches became the first issue recognizing the need for evolution of the complete accounting process. The companies spent millions of dollars annually to maintain and communicate accounting the details to investors, directors, managers, exchanges, etc. Not only that but the amount of time spent on simple accounting of transactions increased many folds. Secondly, with increased globalization, the companies realised that different customers’ requirements are different and must be addressed separately to keep them interested in the company’s product. Thus the marketing process evolved which gave the concept of product diversification. Now, the finance managers realised soon that if the basic accounting details are not arranged and presented differently according to product classification, the company will not be able to manage successfully its operations. With time, not only the importance of product classification was realised, but also the other kinds of presentation requirements were too realised like region wise classification, country wise classification, etc. And these were needed to be communicated to the respective headquarters of the companies where the management and control exists. The decision generally flows down from the head quarters, but now a day organization are slowly beginning to adapt de-centralization. The market slowly changed from oligopolistic to perfect competition. This was mainly due to increased income of individuals and consequent rise in the demand of products. The organizations can no longer delay in the transformation and transfer of information from one place to another. And loss of time will be equivalent to loss of revenues and the faster an organization can reach the customers, the better it is for them to sustain in the long run. Thus faster need of communication was soon realised. Thirdly, multiple updates of the same transactions in different subsidiaries lead to the error of duplicities. These partly due to clerical error and partly inconsistent system’s fault that the correct reports were reaching correct place on time and thus causing erroneous report. It is almost universally considered that no information is better than wrong information, and organizations thus needed an effective change that can tackle the above three problems primarily (McCarthy, Sangster, and Stoner, 2008, p.198). Thus, the accounting procedure evolved over the years and today we have the Accounting Information System. Computerising Accounting Information System and its Impact The accounting information system is an automated process that converts traditional accounting into computerised version without loss of any data. The process of automation is defined by three characteristics namely, input, process and the output. The AIS user only provides the first parameter, input and the rest of the function is automatically processed and saved. The installation of AIS though involves huge cost initially, but the maintenance and working capital costs are reduced drastically. This is because earlier many accountants along with mid-level managers were needed to be employed to ensure that all the data reaches its destination, intact and without any losses. Thus, when accounting process became automated, the overall manpower requirement for the organization reduced. Only a single back office executive is sufficient to handle the transactional data for commercial activities and transferring them as and when required. Accounting data can now be maintained more easily across the entire organization because the user only need to provide the input and all processing and output will be done automatically which will save time. Secondly, the accounting information can be represented accordingly as per the requirements of different users. Thus, for any MNC, the data can be classified and presented categorically product-wise, region-wise, country-wise, demographically, etc. Such classification is essential considering the fact that the competition has increased so drastically, that the organizations cannot afford to lose any chance that might give the competitors any advantage over them. Classifying the business in various angles help the organization understand customer requirements separately as different cultures exists in different countries. Thirdly, the availability of information in the internet websites brings transparency in the system. Earlier every stake holder and exchanges were to be given the records of transactions separately which increased the cost of maintenance of files. At the same time duplicity and other clerical errors were more prominent when copies were maintained across different units of same organization. But, AIS takes care of these problems and saves the organization’s precious time. The same data can now be updated across various units more easily and faster (Sori, 2009, p.5). Impact of Telecommunicating of Accounting Information Computerising the accounting information system and telecommunicating accounting information over the web enhanced the traditional accounting function and answered to all the problems faced by the global organizations mentioned earlier. Information access was now just a mouse click away. In few micro seconds the data can now be transmitted across the globe without any hassles no matter where the organization operates across the world. Any information, anyplace, any time can be successfully transferred without actual loss of data, which was one of the main constraints earlier. The organizations can now hire professionals with basic computer knowledge and accounting concepts who can perform the required work more easily and save the organization’s time and money. The user does not need to understand the internal workings or procedures that run behind the AIS software as the system already has a designed interface that guides user towards successful completion using various help tools. These pop ups and help tools aim to guide a novice user to successfully use the AIS software. The work is done much faster and efficiently without anyone requiring monitoring the progress. Thus, telecommunicating accounting information over the web has enhanced the accounting functions for the global business organizations (Xu, 2003, p.45). Addressing the Security Issues of Using Computerizing AIS and Its Telecommunication of Accounting Information But just like every coin has two sides, using Accounting Information System (AIS) is not risk-free. Any data that can be communicated across the internet or through satellite can be viewed and interrupted by a third party without main party’s prior consent. Such unwanted intrusion is also known as hacking into unauthorised systems. Every organization that has globalized over the years must ensure the safety of data of their customers when they operate. With thousands of new software built across the globe every day, the loop holes of the system penetration is getting more visible. Sometimes, it so happens that some hackers work so swiftly that even the organization to which they target to hack, cannot find out that they are being hacked until it’s too late to recover actual losses. This unsecured public network connection becomes vulnerable to such attacks frequently so the organizations decided to work under secured private networks with B-2-B and B-2-C network architecture. These are basically electronic commerce concepts that incorporate AIS and enable the organization to communicate in secured zones where third party cannot intrude as the network is privatised. In short we may say that with little responsibility on organizations’ behalf, if the AIS are implemented in secured private networks, its benefits outweigh risks for the customers as well as the organizations (Toch, Wang and Cranor, 2012, p.210). References and remedies in personalization-based systems [Pdf]. Available at: http://www.eng.tau.ac.il/~eran/papers/UMUAI_Toch_privacy.pdf. [Accessed on February 01, 2013]. Carmona, S., Ezzamel, M. and Gutiérrez, F. 1998. ACCOUNTING HISTORY RESEARCH: Ionescu, I., Ionescu, B., Mihai, F. and Cojocaru. S. 2009. FINANCIAL AND ACCOUNTING INFORMATION SYSTEMS INTEROPERABILITY. [Pdf]. Available at: http://www.oeconomica.uab.ro/upload/lucrari/1120091/35.pdf. [Accessed on February 01, 2013]. McCarthy, P., Sangster, A. and Stoner, G., 2008, Accounting History. [Pdf]. Available at: http://eprints.mdx.ac.uk/3199/1/final_printed_version_Pacioli_and_Humanism__030508.pdf. [Accessed on February 01, 2013]. Sori, Z., 2009. Accounting Information Systems (AIS) and Knowledge Management: A Case Study. [Pdf]. Available at: http://www.getbookee.org/get_book.php?u=aHR0cDovL3d3dy5ldXJvam91cm5hbHMuY29tL2Fqc3JfNF8wNC5wZGYKQWNjb3VudGluZyBJbmZvcm1hdGlvbiBTeXN0ZW1zIChBSVMpIGFuZCBLbm93bGVkZ2UgTWFuYWdlbWVudCAuLi4=. [Accessed on February 01, 2013]. Toch, E., Wang, Y. and Cranor, L. 2012. Personalization and privacy: a survey of privacy risks TRADITIONAL AND NEW ACCOUNTING HISTORY PERSPECTIVES. [Pdf]. Available at: http://www.decomputis.org/dc/articulos_doctrinales/carmona_ezzamel_gutierrez.pdf. [Accessed on February 01, 2013]. Xu, H., 2003. Critical Success Factors for Accounting Information Systems Data Quality. [Pdf]. Available at: http://dataquality.computing.dcu.ie/thesis/HJ%20Xu.disseratation.pdf. [Accessed on February 01, 2013]. Bibliography University of Gothenburg, Accounting Information Systems, available at: http://www.cfa.handels.gu.se/digitalAssets/1362/1362778_research-programme-ais.pdf. [Accessed on February 01, 2013]. Bharat University, INTRODUCTION TO ACCOUNTING, Available at: http://www.b-u.ac.in/sde_book/bbm_account.pdf. [Accessed on February 01, 2013]. Read More