The Use of Accounting Information Systems in the Evaluation of Environmental Costs - Article Example

Article Critique: The Use of Accounting Information Systems in the Evaluation Of Environmental Costs: A Cost–Benefit Analysis Model Proposal Submitted by: XXXXXXX Student Number: XXXXXXX Tutor’s Name: XXXXXXX Subject: XXXXXXX Subject Code: XXXXXXX University of XXXXXXX Date of Submission: XX – XX – 2010 Number of Words: 1534 (Excluding Bibliography) Introduction: With the growing society, there is a major growth in the complications as well. There have been a number of changes both positive as well as negative in the field of accounting information systems. The main aim of this paper is to analytically critic an article that has been presented by John Mylonakis and Panayiotis Tahinakis, in the International Journal of Energy Research on 16th May 2006. This paper will firstly provide a brief overview of the article. This will help gain a clear and concise idea of what the article’s main purpose, hypotheses, and findings are. This will be followed by a critical discussion of the findings and the limitations of the research. However before moving into these aspects of the article, it is essential to view the importance of this article, i.e. “The Use of Accounting Information Systems in the Evaluation of Environmental Costs: A Cost–Benefit Analysis Model Proposal”. The next section will deal with the importance of the article in the field of the study as well as the reasons for choosing this article. Importance of the Article and Reasons for Choice: The main reason that this article has been chosen here is because the paper deals with a very essential aspect of the accounting information systems and examines the cost benefit analysis model for the environmental revenues and the costs that were incurred in Greece. The paper discusses an essential aspect of the relationship of the environment and the economic performance. This helps provide a wide range of information to the field and also contributes to this field of study to a great extent (Mylonakis & Tahinakis, 2006). Hence having understood the importance of the findings of the research, it is evident that it can contribute a lot to the literature hence has been chosen here. The article provides the readers and audiences with a detailed view of how the cost benefit analysis can be adopted for the evaluation of environmental costs. This article has also proved to be very beneficial as it helps in decision making as it allows a method to quantify the benefits in a manner so that a comparison of the costs of the actions can be made. In terms of environmental costs, it can be difficult if not impossible to make such decisions hence this article provides a clear path that can be adopted to deal with the issue of environmental costs. As explained by the Environmental Literacy Council, “Cost-benefit analysis (CBA) is an analytical way for society to make decisions about complicated issues such as education, health care, transportation, or the environment” (The Environmental Literacy Council, 2008). Brief Overview of Article: The article has touched upon the external costs. This is an essential as the external cost generally arises when there is an impact of the social and economic activities of one group on the other groups (Valdalbero, 2003). The article touched upon in detail the past literature and this includes the views of many authors like, Lawrence and Cerf, Ranganathan and Ditz, Roth and Keller. The authors have also provided a detailed insight into the issues that are faced in defining the natural resources as well as the green taxes. A detailed discussion and statistics of the same have been clearly included in the article. The authors also move on to explain the monetary and non monetary criteria. Here an excellent point has been made by the authors where they explain that cost should be measured in terms of the preventive activities along with the readdress of environmental impact. A description of the cost benefit analysis method has also been made, along with a representative model of the evaluation. Here the authors touch upon the CBAs method of decision making. A detailed critic of the cost benefit analysis model has also been included however this is not very through and misses out on major aspects like external environmental factors that impact the implementation of the cost benefit analysis method. The article on the whole provides the implications of the cost benefit analysis method on the management and provides conclusions as well. The next section will detail a discussion of the findings of the article. Discussion of Findings: The authors have provided a very deep insight into the article and have effectively in an excellent manner covered all aspects of the research. The findings have been based on a descriptive study of the cost benefit analysis method as well as an analytical focus on the pros and cons of the method. The authors have also provided a deep insight into both the monetary and non monetary criteria and the major issue of defining the natural resources as well as defining the green taxes. Based on a holistic view of all these aspects along with a “Representative Model of Evaluation of Environmental Cost–Benefit Analysis” (Mylonakis & Tahinakis, 2006) the authors have expressed their findings in a very clear and concise manner and have divided the findings into four main objectives. The authors clearly explain that the first objective is to “lead the economy to a sustainable path or to provide with macroeconomic indicators that portray the role of environment in the economy” (Mylonakis & Tahinakis, 2006). In terms of the second objective, there is a clear need for easier analysis of the sectoral and macroecomic issues and this they explain can only be achieved by information accounting systems. Also in terms of the third objective is for development of the environmental teams which can be used for increased environmental protection (OECD, 2006). This however cannot be achieved using the cost benefit analysis model. Lastly, the fourth objective deals with, “environmental accounting by the usage of precise accounts and procedures will help companies to present more accurate environmental figures” (Mylonakis & Tahinakis, 2006). The authors have effectively and very effectively explained the need for the accounting information systems. They explain, “Also, a sector that requires systematic research is that of environmental accounting information systems, because there are no successful efforts of growth of such systems as there is an enormous difficulty in the pecuniary assessment of environmental data” (Mylonakis & Tahinakis, 2006). Limitation of the Research: The main limitation of the research is the lack of a comparitive risk analysis. The authors could have included a compartive risk analysis to provide a brief overview of another method as well. This will help in the development of valid and more reliable results. As explained by Heinzerling & Ackerman “Comparative risk analysis, in basic terms, attempts to consider the many different ways risk might be reduced in our society and to identify those risks that might be most effectively reduced with the resources we have. In colloquial terms, this analysis tries to get the “biggest bang” for our riskreducing “buck.” (The same is true of a similar method, “cost-effectiveness analysis.”)” (Heinzerling & Ackerman, 2002). Although the authors have included a wide range of information that the there has been growth of the information systems in terms of the environment, there is clearly a lacking of wnough evidences that has been included in the article. A major limitation of this article is that it lacks quantitative data and evidences to help determine the benefits of the cost benefit analysis systems. The authors do provide a number of excellent evidences and interesting points. Conclusions: A major positive point of the article is that the authors have included a detailed analysis of the implications for the management. This clearly provides a detailed understanding of the findings of the paper. The authors have also included excellent and well thought out questions in the conclusions which need to be examined in the case where the accounting models are extended in order to include the environmental information and details. The conclusion and implication to management however, brings in a new set of ideas which can prove to be a major limitation of the article. On the whole the article provides some excellent points and insights; however, it would prove to be more beneficial if the article also included a qualitative and quantitative study. This would increase the accuracy of the article and would also help in bettered overall findings and conclusions. Also, a major aspect that could be improved is the inclusion of a comparative risk analysis which will prove to provide more reliability and will also strengthen the case of the proposal for the cost cost–benefit analysis model. In conclusion, it is clear that the article has touched upon a major gap in the markets. As the authors explain, “The increasing pressures in the environment and the environmental social awareness have produced the need for studying interactions between the sectors of the economy and the environment. For a more comprehensive evaluation of sustainability and growth, the field of financial accounting needs to be expanded in order to comprise the use of natural resources and losses in the production process” (Mylonakis & Tahinakis, 2006). The authors have proposed an excellent method for evaluation of the environmental costs. This however could be more convincing if the authors had included a little details of the other possible methods as well and then pointed the benefits of the a cost–benefit analysis model. Bibliography Heinzerling, L., & Ackerman, F. (2002). Pricing the Priceless: Cost-Benefit Analysis of Environmental Protection. Georgetown University Law Center . Mylonakis, J., & Tahinakis, P. (2006). The use of accounting information systems in the evaluation of environmental costs: a cost–benefit analysis model proposal. International Journal of Energy Research , 915–928. OECD. (2006). Cost-Benefit Analysis and the Environment. COST-BENEFIT ANALYSIS AND THE ENVIRONMENT: RECENT DEVELOPMENTS , 14 - 27. The Environmental Literacy Council. (2008, March 30). Cost Benefit Analysis. Retrieved September 29, 2010, from http://www.enviroliteracy.org/article.php/1322.html Valdalbero, D. R. (2003). External Costs. European Commission Directorate-General for Research . Read More