Technology and ICT - Report Example

Introduction With the rapid changes in Information and Communication technology (ICT) changes in the accounting system of an organization also has totake place. Recent corporate scandals warrant improved corporate governance and enhanced effectiveness of internal control system (Sutton, 2006). Global competition necessitates cost cuts in every sector. New accounting models transform the way businesses are transacted. Transactions take place through the internet and technologies like electronic data interchange (EDI), image processing and electronic file transfer have increased (Bierstaker, Burnaby & Thibodeau, 2001). These will impact the accounting information system requirements at Smartmove Motors and in order to remain competitive it has to adopt new technologies. This report proposes adoption of new technologies to allow unhampered accounting system within the company. Today information technology is capable of handling many aspects of the accountants work. With this advancement, accounting literacy can be transferred to non-accountants like the managers and the IT people where It contributes to the increase of accounting knowledge (Sayed, 2006). The techniques that would help in efficient accounting are just-in-time manufacturing (JIT), total quality management (TQM) and ABC which has gained popularity and created competition for accounting controls. With advanced technology, managers can now access information very easily at all levels of the organization. Enterprise Resource Planning (ERP) has a de-skilling effect, in which the knowledge and control, previously in the hands of the employees are now objective properties of machinery. Technology and ICT According to Spathis (2006) enterprise resource planning (ERP) is the beginning of a new era in the business environment. This will help companies to integrate business applications and respond to real-time information. Research evidences accounting benefits in adoption of ERP. Accounting Information System (AIS) integrates transaction processing, reporting and decision support and it provides accounting information to both internal and external users. The accounting module in ERP incorporates applications involving the general ledger, accounts receivable/payable, the fixed asset register, cash management, cost control and budgeting. ERP integrates all business functions and provides financial and non-financial data to facilitate decision making. With the help of ERP newer accounting process can be adopted like activity-based budgeting, product life-cycle costing and scorecard balancing. ERP helps in generating improved quality of reports, reduction of time in generating reports and improved decision based on accurate and timely accounting information. With ERP, accounting and manufacturing systems can mobilize a single database and a single point-of-entry for information (Sayed). This implies they need to be integrated using the same transactions and the same measurement data. Research evidences that production and logistics modules are not being operated by most companies which imply companies have not yet integrated the business processes. In the years to come this has to be introduced to get the maximum benefit out of the ERP. Auditing is also becoming paperless. Auditors are keeping pace electronically with their clients. Remote access software and client server technology helps accountants to connect their laptop computers to their offices (Bierstaker, Burnaby & Thibodeau). They can download files, or discuss issues with another accountant at a remote computer. The audit software can test the entire population of the client’s data. Audit will shift from manual detection to technology based prevention. Internal checks can caution management and help prevent errors. To gain advantage of paperless audit and auditing software, Smartmove Motors needs to upgrade the accounting system requirements. P-card technology helps organizations to reduce costs and perform operations more efficiently. It helps keep internal check and is useful tool for managerial auditing. This is an electronic transaction card meant for small value transaction, non-inventory/stock and non-capital purchases (Boulianne, 2006). It is a low-risk, low-cost instrument. This helps avoid the paper-trail authorization procedure. P-card has great potential as a payment method for B2B transactions. The software allows the integration of all P-card information directly into the accounting system. This is applied only by a small percentage of companies but Smartmove should consider this seriously. It may be noted that this would deliver efficiency when all the key players like the management, banks, suppliers and auditors are involved in the project. Balanced Scorecard (BSC) is an innovative approach to measure a firm’s performance. This does not just measure the financial results of the firm but helps identify the important and logical causal factors for financial outcomes (Voelpel, Leibold & Eckhoff, 2006). This provides a multi-dimensional view of the firm linking the financial and the non-financial measures, which enables understanding the organizational dynamics. This technique has limitations and Voelpel et al., suggest the systemic scorecard (SSC). This extends the four dimensions of the BSC (financial, customer, business processes and learning and development) towards an embedded systemic approach to measuring. SSC takes into account customer value, systemic change and renewal, networked extended business processes, and stakeholder value. Creating new values for customers leads to creation of new market and harnessing untapped potential. Conclusion An evaluation of all the techniques indicates that ERP is what the companies in the next five years will have to work with. While different authors and experts define ERP in different ways the core theme in all remains the same – enterprise-wise integration of data/information and business processes (Weider et al., 2006). ERP forces organizations to think in terms of an integrated process and to change the way they do accounting, production planning and control. SAP AG, Oracle and Peoplesoft are the three main ERP vendors but Weider et al., caution because small vendors use the ERP label inappropriately. The new accounting techniques provide increased flexibility in information generation, integration of applications, improved quality of accounting reports, reports can be produced in much lesser time, decision making is faster and more reliable. To remain competitive in the market and to cope with the challenges of the innovation economy, Smartmove Motors has to adopt the ERP which will help the company to re-engineer its activities and revamp the accounting information system and accounting practices. Adoption of modern techniques may require a re-organization of the business processes, organizational structure, change in the management style and culture. It takes between three to five years to change the accounting procedures and adjust to new method. Hence, it is strongly recommended that Smartmove Motors take immediate steps in this direction. References: Bierstaker, J L Burnaby, P & Thibodeau, J (2001), The impact of information technology on the audit process: an assessment of the state of the art and implications for the future, Managerial Auditing Journal 16/3 [2001] 159-164 Boulianne, E (2006), The impact of procurement card usage on cost reduction, management control, and the managerial audit function, Managerial Auditing Journal Vol. 20 No. 6, 2005 pp. 592-604 Sayed, H E (2006), ERPs and accountants’ expertise: the construction of relevance, Journal of Enterprise Information Management Vol. 19 No. 1, 2006 pp. 83-96 Spathis, C (2006), Enterprise systems implementation and accounting benefits, Journal of Enterprise Information Management Vol. 19 No. 1, 2006 pp. 67-82 Sutton, S G (2006), Extended-enterprise systems’ impact on enterprise risk management, Journal of Enterprise Information Management Vol. 19 No. 1, 2006 pp. 97-114 Voelpel, S C Leibold, M & Eckhoff, R A (2006), The tyranny of the Balanced Scorecard in the innovation economy, Journal of Intellectual Capital Vol. 7 No. 1, 2006 pp. 43-60 Weider et al., (2006), The impact of ERP systems on firm and business process performance, Journal of Enterprise Information Management Vol. 19 No. 1, 2006 pp. 13-29 Read More