Accounting Information Systems for Decision Making - Term Paper Example

Information Management System By Professor Class University City Date of submission INTRODUCTION With the rising technological levels and quest for many businesses to explore these opportunities, there have been increased level of information flow combined with increment in sophisticated security attacks on the information. As a result, there is an urgent need of protecting the confidentiality, availability, and integrity of the information. Security products offer provision of protection to the information against damage but there is need to supplement them with monitoring mechanism. If accounting firms require gaining the trust of the partners and customers they serve, then they need to incorporate Information Security Management System (ISMS) in their management structures. It is important to note that accounting information should be accessible to both external and internal users (Mancini, Vaassen, & Dameri, 2013, 262). External stakeholders involve the investors, customers, vendors, and government agencies. An information security policy requires documentation and it should reveal clear management direction and support for the information security for the company. There policies require security principles, compliance, and standard requirements within the organization, which should be communicated to all the involved stakeholders within the organization. Moreover, the guidelines require regular review and update based on the results from the risk assessment to ensure that the organizational information security policies reflect the changes in technological needs that is relevant to the company. There is to define the framework of the management to ensure organizational operations and maintenance of the information security within the business. Therefore, the company needs to ensure that the management support, assign, and direct representatives to take responsibility in information security activities while defining and developing an authorization process. FLOWCHART OF DATA MANAGEMENT Historically, functional systems emerged into the market before the constituency and located within specific organizational departments like accounting, marketing sales, human resources, and production. In relation to sales and marketing systems, information system might assist businesses with the marketing processes through identification of customers and developing the products that would meet the specific needs of the customers. On the other hand, manufacturing and production management systems often assist with the planning, controlling of the production process, developing, and production of product and services that meet the needs of the clients. To tract organizational financial assets and the flow of funds, most business integrates finance and accounting information system. However, most financial systems are in the larger organizations. The management could use the system in establishing long-term investment goals for the organizations for provision of long-range forecast of organizational financial performance. The human resources information system uses various models in managing the records of the employees, tracking the sills and job performance, and improving the career development process. Business entities receive numerous pieces of information from different stakeholders. However, there is need to manage these pieces of information in an effective and efficient manner to prevent leakages of confidential information. To operate effectively, business entities have the responsibility of dealing with these pieces on information relating to the suppliers, invoices, payments, customers, employees, and product and services. As a result, they have to organize such responsibilities using information systems to operate effectively and improve their general performance. Information system often makes it possible to manage all organization information and allow them make better decisions through various subsystems. To some extent, information systems bring together the technologies that help to manage people and business processes to help solve problems. Additionally, management information system involves automation and decision making on behalf of the management including the expert systems, executive information system, and decision support systems. In business, information system involves careful and systematic collection of information, storing, and dissemination in the required forms within different organizational departments. Figure 1: Data Management Flow BUSINESS INTELLIGENCE MODELS In the ever-changing business environments, there is need to have a sensible and effective business information system that do not only ensure the success of the organization but also ensure its survival. Business intelligence (BI) as management concept incorporates managerial beliefs and tools to assist the business manage and purify their information and make decisions that are more precise. The commonly used model in business intelligence is the decision support system (DSS). Decision support systems play an important role in helping the management with non-routine decisions that they consider unique, not easily specified in advance, and rapidly changing. However, they are more analytical than the management information system since it involves the use of different models in analyzing both internal and external information. In addition, the management could as well use DSS in condensing large amounts of data required for the analysis. Each business entity has a unique information system. However, each information has its value to the overall organizational success, which makes it very important to manage such information strategically. Businesses that effectively use information system often advance in many areas which results in huge organizational success. The major success involves application of business intelligence that includes integration of technologies, practices for collection, and analysis of business information. The major aim of business intelligence is to improve organizational decision-making process. In relation to BI, businesses make effective decisions through application of fact-based support systems. Moreover, it involves incorporation of the intelligence systems to drive data. All the decisions made by the systems are based on the analysis of the models performing like the human brains. Besides the DSS, there are other subsystems used with the BI models especially within accounting departments. E-BUSINESS MODELS The major goal of most e-business models is to reduce the cost of management and improve customer related services. E-business models also refer to approaches used by the organizations to become profitable on the internet. Like any other business model, these models describe organizational functions, ways in which it provides goods and services, methods of revenue generations, and criteria in place to ensure realignment with the changing technology. These models involve the use of different subsystems including Business-to-Business (B2B), Business-to-Consumers (B2C), and Business-to-Government. Accounting information systems (AIS) conduct several responsibilities relating to accounting information like collection, processing, and storing of financial data for the decision makers. AIS as a computer based method; it tracks the accounting activities within the organization in corporation with other resources like information technology. The managers could use the statistical result retrieved from such activities both internally and externally and other interested parties like tax authorities, creditors, and investors respectively. The commonly used AIS are financial and auditing reporting modules. Particularly, the trained accountants often use AIS in ensuring there is highest level of accuracy within the organizational financial transactions and recordkeeping information. With such accuracy, generation of financial information would be easy and readily available for those who legitimately require access to them while also keeping the information intact and secure. The major reason behind the integration of the information system is to improve business processes, which mostly lie within the heart of the business. Therefore, before employing information system, it is important to properly understand business processes. Business processes reflect the manner in which organization manages, organizes, and coordinates its activities. Moreover, these processes involve the workflow of materials, information, and knowledge set of activities. Largely, organizational performance greatly depends on the manner in the business designs and coordinates its activities. If properly implemented, business process might help in providing a better, competitive advantage and enable the organization improve its innovative activities and execute better plans than that of the competitors. However, business processes might, as well turn to be organizational liabilities especially is the company uses outdated methods. There are different business information systems used by various organizations depending on methods used in viewing them. From functional perspective, systems are identified based on their functions while from constituency perspective, the systems relates to the number of organization department that it serves. Several sub-models ensure that businesses achieved the intended objectives. Electronic Data Processing (EDP) EDP stage of information management system involves using various computer components and associated technology in performing organizational transaction-oriented activities. In relation to data processing, these computer systems process information required by the organization more often, recurring, and for the general management processes. Management Information System (MIS) In most accounting firms, there are different management components carrying out distinct duties. In MIS, computer technology is used in provision of the required information to the management to assist in the decision-making process. Depending on the number of department the organization has, each department should have its information system and more importantly the financial information system. Any functional MIS subsystem should provide a logical method of implementing the MIS concept within the organization. Accounting Information System (AIS) With the rising amount of information involved in financial management, organizations are shifting to simpler methods of information management. AIS offers the simplest method of transforming accounting data into the required information. The system also involves processing transaction cycles, application of information technology, and development of information system. ISO 27001: Information Management System ISMS determines the manner in which organizations process, store, destroy, archive, and transfer information. Any secure information system should enhance confidentiality, availability, and integrity of the information in question. Confidentiality relates to the establishment of criterion that only allows authorized personnel to access certain information from the database. To ensure integrity, the information system employed within the firm should be accurate and complete while at the same time safeguarding the processes involved in sourcing, updating, and storing the information. Increasingly, most businesses carry out their activities over computer networks. However, all the events affecting the integrity of the information might affect the performance of the company. As a result, business entities need to have systems that would protect the information and prove the accountability of the firms to the clients. Information is crucial asset of the business with an ability to make or break the company. When there is effective and efficient management of information, businesses are likely to operate with confidence. The specification for the ISMS is the ISO 27001. The compliance with the ISO covers the concept of establishing, reviewing, operating, implementing, maintaining, and improving the quality of documents. These standards aim to bring information security under the control of the management. The standard ISO 27001 allow business entities to align their activities with the global standards in relation to practicing information security management. Moreover, the organizations can acquire practical frameworks and functional guidelines that would assist in improving security of the information. Most investors and loyal clients are more concerned with the manner in which business entities manages their information. In the near future, businesses, which have not complied with the requirements of the ISO for the information systems, are likely to lose clients and attract fewer clients. In addition, the concept of information offers businesses an opportunity to cost effectively manage security risks and comply with the required information management standards. Figure 2: Business Model Integration CLOUD COMPUTING With the rising levels of concerns exhibited by the stakeholders of different organizations, businesses are shifting to those models that would ensure that they access their desired information conveniently. Therefore, cloud computing involves the integration of various components of information technology (IT) to ensure that the external customers access organizational information through internet connectivity. The method offer a convenient access to the business configurable computing resources including the servers, storage facilities like the database, applications, and services. Moreover, cloud-computing technique allows the organization to provide the required information to the clients with less interaction. The physical infrastructures used in the computing process belong to the business but allow customers accessibility in a bid to prevent capital expenditures on the hardware, software, and services. The model offers numerous benefits to both the users and providers. Furthermore, there would be reduction in the shared infrastructural costs, overhead management, and immediate access to a wider range of business applications. With the rising needs to satisfy the needs of the end users, businesses are integrating cloud-computing technology to satisfy these needs. Since the model uses cloud for storage of information, organizations have unlimited storage, quick information deployment, automated software integration, and readily available backup and recovery system. For example, the Executive support systems (ESS) plays an important role in providing computing and communication processes required by the management to address strategic issues and identify long term trends within the business. Furthermore, ESS helps in addressing non-routine decisions required for judgment, evaluation, and insight in organizational performance since most businesses always have no efficient procedures of arriving at the required solution. In most cases, the ESS often presents graphs and information several internal and external sources through an interface that the management considers the simplest to use. In addition, the executive management always accesses the information through the portal that uses Web interface to present integrated personalized business contents. To function effectively, cloud-computing models generally consist of six components including procedures and instructions, people, data, software, internal controls, and information technology infrastructures. The people Within the AIS, the people refer to the users of the system. AIS brings together professionals from different fields including the accountants, business analyst, managers, financial consultant and officers, auditors, and managers. In addition, AIS brings together people from different organizational departments to work together. For example, the management could establish sales goals for which for the staffs can then order the appropriate amount of inventory. Consequently, the inventory order then notifies the accounting department of the new payable. Upon making the sales, sales people might then enter the orders of the customers, invoice the account of the customers, assemble the new order, and finally shipment of the product. Any AIS that is designed properly should allow only authorized personnel to access the system and retrieve information. Furthermore, the system also simplifies the required information for the external users whenever necessary. Consultant might decide to use the system in analyzing the effectiveness of the organizational pricing structures through looking at the cost data, revenue, and sales data. From the accounting point, the auditors might use the systems to access the internal control factors of the organization, compliance, and financial conditions. Therefore, while designing AIS, it is important that it meet the specific needs of the people who are to use it. Consequently, it should be easy to use and an ability to improve efficiency. Procedure and instructions AIS has to collect, store, retrieve, and process information. To perform all these duties, it uses procedures and instructions as methods guiding these responsibilities. The methods are both manual and automated and might originate from different sources, external and internal. AIS software then codes the procedures and instructions into the employees through documentation and training process. To ensure effectiveness and reliable performance of these methods, there is need to consistently follow and monitor their performance. Information storage requires a database structure like structured query language (SQL). Besides these structures, AIS also requires different input screens for various types of system users and data entry. Data Within the AIS, the data contained relates to organizational financial information pertinent to its business practices. Any information of the business that influences its operations should go into AIS. However, these data would depend on the nature of the business. Some data found in the AIS are sales orders, tax information, timekeeping, general ledger, payroll information, inventory data, and customer billing statements, purchase requisition, sales analysis reports, check registers, and vendor invoices. The organization should use these data in preparing accounting financial statements and reports such as profit and loss, trial balance, amortization schedules, and accounts receivable aging. Having these data in place, the AIS would be facilitating organizational activities such as recordkeeping, reporting, auditing, analysis, and decision-making processes. However, these data have to be complete, relevant, and correct to be useful to the organization. Other types of data that often go into AIS are memos, presentations, manuals, and correspondence. Nevertheless, there must be close relationship between these data and organizational finances. Software The software component relates to computer programmes used in storing, retrieving, processing, and analyzing organizational financial information. Before the emergence of the computers, the AISs were manual and paper based. However, today, many organizations are utilizing computer software as the foundation of establishing a stronger AIS models. Smaller business entities use programmes such as Quickbooks, Sage Pearchtree Accounting, and Microsoft’s Small Business Accounting. Medium sized businesses use SAP’s Business One, Microsoft’s Dynamic GP, Sage Group’s MAS 90, Oracle’s Peoplesoft or the Epicor Financial Management. Figure 3: Increasing use of internet globally ENTERPRISE COMPUTING Enterprise computing is a technology involving the use of computers in networks including local area connection (LAN) and wide area network (WAN) or a series of networks that are interconnected. Moreover, these networks use different operating systems, network architects, and protocols. There are different types of models such as retail, government, service, educational, wholesale, and transportation. Enterprise information involves gathering of data from the ongoing enterprise-sized organization. Enterprise computing encompasses different types of organizational software such as database management and relationship management. In addition, it could be sold to business users as an entire platform, which is applicable across the organization and further customized by the end users within each area. As a result, there is standardization of the processes involving analysis, reporting, database management, and other applications across the system. From such perspective, enterprise computing involves departure from finding software solutions to a specific organizational problem like the inventory or accounting software. Therefore, the aim of enterprise computing is to offer integrated solutions to these problems. From the constituency perspective point, the systems are viewed in terms of the various management levels and assistance in relation to the decision support they offer. Each of the organization has needs for different types of information depending on their responsibilities. The management often require summary of information that quickly inform them on the general organizational performance within the organization. There are different categories of systems from constituency perspective. Transaction processing systems involve business systems serving at operational levels of the company through recording daily routine transactions required for conducting business activities like the payrolls. Management information system (MIS) often helps the middle level managers by providing the historical and current performance information of the organization required to make important business decisions. Moreover, MIS helps in ensuring effective planning, controlling, and decision-making process at different levels within the company. Enterprise computing offers both organizations and customers several benefits. These benefits include improved accessibility to information, increased customer loyalty, increment in information content, convenience, global reach, and reduction in the cost of management. However, it is important to note that there are challenges associated with such activities. Some of the challenges are designing security systems that would ensure protection of the consumers, leveraging the existing systems and models, increasing liability, provision of security, and adherence to taxation rules. Moreover, to achieve organizational goals, businesses need to consider corporation with other entities through integration process. These processes would allow businesses to communicate adequately through the systems and eliminate discrepancy associated with manual entries. The tools used in the integration process include enterprise systems (ES) and enterprise application integration (EAI). ES involves provision of enterprise wide support and data accessibility for the organization’s operations and processes while EAI entails connection of plans, methods, and tools for integrating different enterprise systems. Consequently, enterprise computing integrates the aspect of cloud computing to enhance organization efficiency and performance. It is a special method of utilizing cloud computing technology to create a competitive advantage and break through to market opportunities to save on operational cost. More importantly, the system plays a crucial role in improving business innovations in relation to unprecedented speed and agility through enhanced collaboration between business partners and customers. Some years back, only the employees used computer servers on the intranet. Currently, organizations are shifting towards internet use. Through the rising demand of the customers and the stakeholders, business entities have been forced to move from the local servers and mainframe computing to the rising world order, which is multi-tier computing paradigm. Enterprise computing aims at selling business system development products that the survival of the business depends on including the database. Therefore, it provides effective and efficient business abstraction concept that needs to remain constant across the engaged business entities or within organizational departments. Enterprise systems should avoid incorporating proprietary components; therefore, both the database and platform have to be independent. Moreover, enterprise system should have the ability to support personalized user interfaces that would help enhance compatibility of the systems. Thus, it should be authoritative. Considering the benefits associated with enterprise systems, not only the giant business entities should embrace enterprise computing but also intermediate and small businesses. Essentially, smaller organizations need to make inventions that would ensure growth to greater company for competing adequately with the other organizations. The major drivers of enterprise computing are cost saving advantages. With the advent of the easy-to-use Web 2.0 and Consumer IT usage of the internet, social networks platforms are becoming important platforms for anchoring the systems. They change the way people live, learn, work, collaborate, and communicate. These huge changes in the society might also disrupt ways in businesses design and manage their organizations and values that would deliver value to customers. Conclusion Throughout the 20th century, most business activities performed well through adjusting their production methods in an effective manner and aligning the whole process with the needs of the customers. However, several methods of enhancing efficient in performance have changed with most organizations shifting from production techniques. It is important to note that the success of the 21st century lies within information management, which includes having the right thing, the right quantity, and at the right time. Currently, information has become one of the greatest assets that every business protects against any form of infiltration and mismanagement. Organizational performance depends on the manner in which it manages the information. Improvement in technology associated with information and communication is a factor that has been contributing various tools required for effective management of information. Through information and communication technologies, several challenges have been able to emerge contributing to huge reliance on the information system to store, analyze, and manage data. To work effectively, information system involves integration of different subsystems that coordinate with one another to perform different functions collectively. These functions include information gathering, storing, management, retrieval, distribution, and transferring. Moreover, information systems assist organizations in enhancing their productivity through increasing the efficiency and value of the business processes. The factors determining the effectiveness of an AIS software include quality, security, and reliability. The management relies on the information it outputs to make organizational decisions. Therefore, it is of significant value to ensure that the information of high quality for sound decision-making process. However, it is possible to customize AIS software programmes to meet the needs of different types of businesses. If an organization realizes that the implemented programme does not meet organizational needs, then the company might consider developing an in-house programme with substantial input from the end users specifically for the business. Moreover, the company might as well consider outsourcing the system to another specialized company. Reference Mancini, D., Vaassen, E. H., & Dameri, R. P. (2013). Accounting information systems for decision making. Berlin: Springer. Read More