Accounting Information System Failure - Assignment Example

Accounting Information System Accounting Information System Identify three to five (3-5) factors that contributed to the accounting information system failure within the business that you have identified. Indicate the impact to the business. Provide support for your rationale. IBM is one of the most well-known organizations in the field of engineering that has existed over the past 100 years whereas the organization has existed for more than a hundred years. With the passage of time the organizations has to keep up with the passage of time and continually modify their systems to meet up with the universal changes within the system and for this the organizations also have to modify their accounting systems. These changes are usually due to advancements in regulation which in turn alters the pattern of the principles of accounting whereas the field of engineering alters the way in which any information related to the accounting is introduced, updated and then be put down. The accounting information system can be both of manual and automated types. However, the organizations that run on manual accounting information system are trying to adapt themselves to the advancements and hence going towards the automatic accounting information system. The AIS is not so much concerned with the consumption of the machine used in the AIS, rather the machine is used as an accessory tool that helps in the implementation of the system and is not considered as the controller of the AIS. The information available on the electronic system could be accessed from any place at any time only if the instrument would have been linked to the internet or the World Wide Web. The basic reason to shift towards another system of accounting is because of the lack of compatibility with other organizations concerning the accounting system. Those companies that exist for more than 100 years also have to confront the advancements in regulations and the requirements of such regulations was the development of the system (OECD, 2002). A company like IBM which has existed for over 100 years of age has modified their AIS in response to the progress in the field of information and engineering. The progression of learning is based on the subject while the development of modernization is not based on the subject; because the circuits being used in the process of making of machines are not given any priority regarding to two fold passage accounting. However, these circuits are being used as a component of the machines and hence are being consumed by the AIS, which in turn provide the usage of the electronic engineering in the accounts system. The automated AIS allow the accumulation of a uniformed data which can be compared with the other information controls. The rationale behind the implementation of uniformity is to makes use of standard measures of AIS, which will be made available to various companies and this international information, can also be utilized by government organization such as the security trade commission (Frier, 2013). IBM has also thought of amalgamating the above mentioned process in to their practice, the modern approaches are then linked and the systems of accounting are also modified for the purpose of regulations and assessments that occur in current era (Frier, 2013). IBM is considered as the leader in the fields of development and innovation, and to maintain this status the company tries to constantly evolve their accounting system. Hence the AIS should be examined for engineering purposes and the organization should also upgrade their accounting systems on a regular basis in order to reduce the permitting issues that occur due to outdated programming or equipments. Assess senior management responsibility for the failure in question. Specify what the senior management could have done differently to avoid the failure. Provide support for your rationale. Switching to an alternate AIS is not easy as it may seem. If and when the AIS is switched from manual AIS to a computerized one it will have many implications. This will also result in the less utilization of work from administration and methodology regarding the control of processes will also be altered. This change may expose the business to a number of risks and problems and hence may result in the failure of a business. To have a certain amount of control over the processes is one of the ways to prevent such failure from occurring since the switch between manual and computerized systems require a certain amount of expertise in the field. Systems which operate manually demand proficiency in the field of accounting and therefore the standards practices of accounting need to be acclimatized. Furthermore, one should also hold command over drafting. On the other hand, the computerized systems do not require much relating to the standards of the accounting, but it does need an ample amount of learning and the ability to enter information. This information compels to be released a certain time period before the transaction have been made and the machine should have the capacity to deal with this information on its own without going through any sort of arithmetical error or failure (Shanker, 2014). Arithmetical errors are not the main reason of concern in manual systems rather the check of control holds more importance. The AIS utilizes the machine to an astounding amount; it helps to establish the dexterity and feasibility of a company. However, in the same manner it expands the extent to which the organization relies on engineering, the risks will be visible to a greater extent. Risks relating to the internal controls can be minimized to a great extent (Shanker, 2014). Organizations cannot do much regarding the external systems and so the administration department of an organization is responsible to avoid any sorts of risks or damages that might be inflicted to the system. Evaluate whether the most significant failure occurred within the system design, implementation, or operational phase of the process. Indicate what the company could have done to avoid the failed outcome. Provide support for your rationale. Advancements that occur within an AIS maybe of two types; alteration in regulations or accounting policies and alterations in the accounting system itself due to employment of internal controls. The alteration in the accounting policies generally necessitate a contemplative effect to be implemented. The information is attuned in relation to the information of the past in order to develop an analysis for the organization and for various other organizations that exist. Accounting policy may go through some changes because of demand made by the organization or due to compulsion of the accounting policy (Sylvan, 2014). The accounting regulation often go through a lot of amendments as time passes and often the main cause of such alterations is due to the development of skills and knowledge, the environment of the organization also affect the changes in regulation. The regulators often implement harsher ways in order to unify the organization so that the information that is made available can be compared to the other sources of information. The basic reason for adapting harsh ways of implementation is due to the misconduct that occurs within an organization and the most important factor in such situation is that the information being provided is accurate and impartial. The information being provided by the organization is often based on complicated arithmetical calculations (Sylvan, 2014). The regulations are responsible for altering the accounting system. Such as if a company chooses a wrong policy for the devaluation, but for this purpose the organization has to keep record of the international or local standards both reporting and accounting, the organization has the right to implement such alteration even though they are not recommended just as long as they are not limited to utilization. But in order to promote the value of the resources it is necessary that proper protocols are to be followed and the organization follows the widely used principles and regulation but for this conformity with the regulations holds a certain amount of importance. If a company is not compliant, it may eventually cause a variation is valuation of the resource, which in turn will impact the balance sheets and hence the information being provided will not be honest and the information being provided will be altered from the true information (Lin and Hang, 2011). Systems that completely automated often do not need to be controlled and does not require the manual filling of forms or signing of the documents that occurs in a conventional setup. However, a company may still perform these functions manually if they want. The information being provided can be done manually and then be signed by the authority figure in case if authorization is required (Sylan, 2014). The data available on the computer needs to be protected from external sources and this protection can be implemented from remote access or hacking of the data of any sort. For this the organizations usually restrict the access to the system (Sylan, 2014). In order to store the data, certain safety controls need to be implemented which makes sure that the company is being protected from any sort of thefts and accidents which can be both intentional and unintentional. It is considered that the accidents that occur unintentionally are more prone to damage as it is difficult to track down such sort of accidents. Evaluate how implementing best practices would have reduced the chances for failure. Provide support for your rationale. The best way to reduce chances of failure is to maintain the internal controls within an organization which helps to maintain a check and balance and also prevents any mishap from occurring. Many companies also switch to computerized systems because they provide protection from risks since everything on this system is unified with other systems or standards and when a company switches from manual to automated system the computer automatically transfers the data to files, folders or ledges within the system (Castle, 2008). The automated system often does not ask more than once regarding any source of information, where to transfer it and how to transfer it and hence the recovery of the data becomes an easy task. The system also protects any sort of breach in confidentiality and hence all the data regarding the employees are kept secretive. In order to reduce the risks and dangers, one must implement good internal controls whereas if an organization requires less legal issues then they should implement good regulations (Castle, 2008). Based on your research, develop a list of between four (4) and six (6) best practices that organizations should use today to reduce the chances for failure. Provide support for your rationale. If an organization wants to reduce the occurrence of failure then they must follow the following practices Setting up of standard internal controls Establishing an audit department and making sure that the auditing department is not affected by the external factors and is non biased. To follow certain guidelines which are mentioned in the regulation To adopt policies which are set according to the generally accepted accounting principles (GAAP). The basic controls for any organizations are those which are set up internally as they prevent any sort of accidental error from occurring and also minimize any sort of risks, fraudulent activities and the occurrence of crime. The organization should focus on implementing controls which should also prevent the occurrence of minor errors (Morrow, 2009). The audit department ensures the implementation of these internal control systems and the internal and external auditing departments should not be linked to each other in any way and both should exist independently. The regulation being implemented in the organization must be the most recent and the policies to be utilized must be in accordance to GAAP because this policy is the most widely accepted policy all over the world and hence helps in developing the standardization and reducing accounting risks (Morrow, 2009). Using the information provided by IBM and others, indicate which of the principles designed to provide insight into effective and efficient strategies on how to best deploy financial management systems, which were outlined within the related article, should serve as an example of what not to do when establishing the foundation for a firm to follow. Your proposed foundation should consist of at least two (2) principles, but no more than six (6). Provide support for your rationale. A financial management system which is accepted worldwide and complies with the international standards should be implemented within an organization. This ensures a uniformity of systems and a company can also face the problem and come up with a solution in the same was as other organizations deal with it. These standardized protocols are not only made up by the organization but are also deemed compulsory by the governing authorities and so it becomes a legal responsibility of an organization to implement these financial managements systems but this law may not be applicable to all organizations. Such companies include those that are private based or are based on a partnership, Such organizations are also not required to follow other legislative acts like the Sarbanes Oxley Act, because of the fact that these organizations are not a part of the stock exchange list, but the organizations can follow these regulations in order to adapt to the standard practices and reduce the occurrence of risks but this completely depend on the organization whether they wish to implement the system or not. The implementation of risk management strategy within an organization helps the company to make use of its current knowledge (Hall, 2010). The application controls which are linked to the financial management system are greatly affected by any sort of lapse within the computer’s security, therefore, the external environment should be in conformity with the Sarbanes Oxley Act and the relevant standard measures of control should also be applied (Hall, 2010). For this purpose, there should be a good level of understanding regarding the differentiation between an automatic computerized system and the conventional manual system. The standard protocols relating to the automated AID should also be applied. Such measures protect the company from any sort of malware and hacking activity. These internal controls should be placed all over the system and assessment of risk should also be conducted. In order to assess the risk, it is important to be familiar of the type of business being carried out in the organization and this knowledge is directly proportional to the assessment of risk, a better understanding regarding business results in a better assessment of risk factors. An efficient working of internal controls is necessary for the implementation of these controls and if the internal controls are not functioning properly, it means that the internal controls have ceased to exist within a system and to avoid such a situation these controls need to be checked and assessed on a regular basis (Hall, 2010). Risk inventory tests are carried out in organizations which are involved in the process of E-commerce. This is particularly helpful in examining the weak point within an organization. The risk inventory tests should be conducted to the organization and also to the business partners with whom the data is being shared (Hall, 2010). The organization should look forward to adopting policies which help in prevention of risk and also expands to areas which cover the risks that are related to the business partners. However, the risk can also result from any process that is being carried out. The organizations have the capacity to expand their area of operation but this results in an increase in the occurrence of risks which cannot be prevented as it concerns areas other than the organization itself. In case any thing happens which involves any fraudulent activity, the company will be responsible for that and no blame will be placed on the business partners or even the account service providers. Therefore, the companies which are seeking opportunities of expanding their area of business should also take into account the risks associated with it and hence, should also prepare a strategy in case such event takes place. References IBM Corporation,. (2012). The path to smarter government. Retrieved 22 May 2015, from http://www-304.ibm.com/industries/publicsector/fileserve?contentid=242410 OECD. (2002). Models of Public Budgeting and Accounting Reform, Volume 2 Supplement 1: Volume 2 Supplement 1. OECD Publishing. Retrieved 22 May 2015, from http://www.oecd.org/gov/budgeting/43506587.pdf Frier S., (2013), “IBM Defends Cloud-Computing Accounting Amid SEC Probe”. Retrieved 22 May 2015, from http://www.bloomberg.com/news/2013-07-31/ibm-says-sec-investigating-its-cloud -csomputin-revenue-figures.html Shanker S., (2014), “Differences Between Manual Computerized Accounting Systems”. Retrieved 22 May 2015, from http://smallbusiness.chron.com/differences-between-manual-computerized-accounting-systems-3764.html Sylan R., (2014), “How to Replace Mannual Accounting Information System with Electronic System”. Retrieved 22 May 2015, from http://smallbusiness.chron.com/replace-manual-accounting-information-systems-electronic-systems-44735.html Lin, S., & Huang, X. (2011). Advances in Computer Science, Environment, Ecoinformatics, and Education, Part V: International Conference, CSEE 2011, Wuhan, China, August 21-22, 2011. Proceedings. Springer. Castle L., (2008), “Use the Guidance and Tools of your Software and Service Providers to Prevent, Anticipate, and Mitigate System Downtime”. Retrieved 22 May 2015, from http://www.lauracastle.com/portfolio/qedmktg.pdf Morrow S., (2009), “General Accepted Accounting Principles or GAAP: What does it mean?”. Retrieved from: https://www.legalzoom.com/articles/general-accepted-accounting- principles-or-gaap-what-does-it-mean Hall, J. A. (2010). Accounting Information Systems. Cengage Learning. Read More