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Issues And Problems: Accounting Information Systems

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Question:

Discuss about the Issues and Problems for Accounting Information Systems.
 
 

Answer:

Introduction

Today’s scenario deals with the age of informatics and many organization come across various systematic issues. Information systems provides a key source to many economies as well as organizations. Although, the base of information has changed from tangible to intangible because critical systems have changed the way of evaluating, seizing and storing the information. However, when analysed, the critical factors that are responsible for data quality issues will be evaluated based on the different arguments (Hall 2012). However, failure of accounting information leads to negative impacts on the organizations such that the factors affecting data quality issues are the same factor that affect the functioning of the accounting information system in Australia.

Moreover, the analysed information on accounting information system will be dealt with the financial concept that summons to be in association with the issues.

Data Quality Issues

Data Quality issues play an important role in defining Accounting Information System implementation. Although data quality has been an emerging problem in the business set up which is resulting in decision making operations of the business (Soudani 2012). It has been seen that modern businesses heavily rely on accounting information systems and the basic motive is to ensure data quality. The primary data quality issues that can be highlighted are:

Product Issues in Data Quality Management – There have been quality issues that exists both in manufacturing as well as information manufacturing. Although, the issues have been common but a different name has been given under each head on input, process or output.

ata Quality Issues in Product and Information Manufacturing

Figure: Data Quality Issues in Product and Information Manufacturing

Source: (Barha 2013)

On the other hand, when we compare on semantics, the data of poor quality may lead to erroneous decisions. Moreover, the issues of input, prices or output are not detected in the early stage then it creates to be a critical issue for both database researchers as well as practitioners.

1. Product as well as Service Quality – The issues in product quality will lead to tangible issues whereas in service quality it will lead to issues in delivery process (Oakland and Morris 2013).

2. Data Quality in Database Systems – The functions like recovery, integrity and security control do not ensure the quality of data in the database management systems. Although, the data quality established in DBMS is through integrity constrains and validity checks but that also does not sufficient to ensure the yardsticks to measure the quality. The data can lead to inconsistency and incompleteness that can lead to data corruption which results in issue of flawed data in the real world (Barha 2013).

3. Data Quality in E-Business – In e-business, the data quality issues are different from the traditional environment because the interactions with the environment leads to more complexities such that the context is impacted and ultimately results in data quality issues (Zhu et al. 2014).

 

Accounting Information Systems (AIS)

Accounting Information System is the subsystem management information system that possess the function of financial as well as non-financial transaction that directly influences the processes of business operations. The different systems under AIS can be given as

1. The “fixed asset” system not only disposes of the fixed assets but also practices the transaction relating to maintenance and acquisitions (Domeika 2015).

2. The “transaction processing system” records the daily operations of the organization through various documents as well as memos from the users.

3. The traditional financial system processes through different income statement, cash flows, balance sheet, tax returns as well as other reports which are reported under the financial reporting system/ general ledger.

4. The other reporting system is management reporting system which provides financial reports for decision making, variance reports, budgets, etc. through internal management (Mancini, Vaassen and Dameri 2013).

5. The data quality in the internal control system provides with reliability and minimum cost with timeliness as desirable attributes that studies the accounting information identified through the accuracy regarding size, frequency or distribution of errors (Romney and Steinbart F2015).

Factors Influencing Data Quality

This mode represents the model for critical success factors according to accounting information management characteristics- External factors, related factors, Organizational Factors and Stakeholders (Kalu and Campus 2011).

Factors influencing data quality in AIS

Figure: Factors influencing data quality in AIS

Source: (Kalu and Campus 2011)

Problem Statement

The problem persists in the modern technology of financial information in accounting. The large-scale as well as multinational organizations have been automated in processes and informatics but the problem persists with accounting information system when it need to deal with different people as well as processes. In Australia, different stakeholders holds to play different roles through the role of information collection which is often operated by the custodian stakeholder. The data quality management is the issue that the managers needs to face on a daily basis (Ndlovu 2015).

Moreover, the accountants serve to provide two lines of processes that is internal as well as external line. The internal line deals with the internal audit in finance. As per say, the financial issues are penetrating and critical which becomes more challenging for data quality to achieve 100% accuracy. On the other hand, the other process that deals with the 100% accuracy is external audit in the financial informatics and accounting information system. The external audits have to meet various criteria that becomes difficult to keep pace with managerial focus, customers focus, accountants focus and others (Ahmad, Ayasra and Zaideh 2013).

However, data quality has to go through various administrative permissions on a given information so that the overall records are not only bounded by audits but as well as organizations.

Arguments

Although, as seen that data quality internal focus lies on the internal control as well as audits. However, the challenges of data quality have been critical and has become indispensable with general management decisions (Mancini, Vaassen and Dameri 2013). Nonetheless, the earlier attempt of accounting information system was a statistical approach but recently, mathematical concept like reliability, cost has provided a cushion. Moreover, some concepts have been extended to trade-offs for information system that are evaluated on cost/ quality control as well as spreadsheet models (Collier 2015).

There are various issues that have been presented as that some researchers applied the data quality in accounting information system to only be applied to accounting and auditing in Australia. While, other develops a methodology with a quantitative measure data quality determination. On the other hand, some support the decision support systems through model procedures based on human judgment. However, based on these arguments the accountants have been establishing thresholds for the data quality issues. Three factors that affect the quality are underlined as.

  • Compliance – Design and operations of system è External Regulations
  • Control – Support and Resource Management è Cost and Variance Analysis

Competitive Support – Provision of financial services è Organization’s Competitiveness (Ahmad, Ayasra and Zaideh 2013).

Financial Theory Related to Data Quality Issues in Accounting Systems

The data quality and AIS as examined through the influence of management that deals to give adequate effect on the accounting information system. The contribution of management commitment needs to be improved based on the reliability and cost of the AIS so that it only lead to administrative planning but also helps the data quality issues to take a setback with administrative feedback and flexibility in internal control (Hla and Teru 2015).

Data quality issues have been based on quality characteristics for the accounting information system which recognizes its accuracy and other characteristics as well. However, this topic gives insight to the financial reporting standards where useful financial information faithfully represents its relevance. Moreover, in that particular context, IASB (International Accounting Standards Board) stresses on the financial information that is not only verifiable and comparable but also understandable as well as timely. Nevertheless, it represent the quality information which generates reliable and relevant information according to FASB reliability of accounting standards as well. However, today, IT supports AIS through wide range but the reliable information keeps confidence in AIS to depict that how important the business decisions are. When accounting for secondary qualitative activities then neutral information leads to business decisions whereas comparable as well as critical information lets accounting information users to detect the connections and differences in the business performance among the different companies (Mamić Sačer and Oluić 2013).

Hierarchy of Accounting Qualities

Figure: Hierarchy of Accounting Qualities

Source: (Mamić Sačer and Oluić 2013)

The mathematical and financial model that measures accounting information is based on data quality measurement that considers both costs as well as benefits of accounting information.

Mathematically, Quality of AIS = Benefits of Accounting Information/ Costs of Accounting Information. The basic criteria for analysis is based on the criteria’s listed below.

Criteria for Analysis of AIS quality

Figure: Criteria for Analysis of AIS quality

Source: (Mamić Sačer and Oluić 2013)

Although, accounting information system with other financial boards determines its system as well as internal control procedures but without the normative procedures, principles as well as system procedures the data quality of AIS cannot be recognized (Mamić Sačer and Oluić 2013).

Conclusion

To conclude, it can be reviewed that data quality issues can be minimized if the data information evaluated and controlled on an accurate time basis. Moreover, data quality issues can be persistent in any area whether its product, services, databases or e –business. However, accounting information can be financially reported on general management decisions so that the trade-offs can be made to face the challenges. The FASB and IASB decides the decision usefulness based on relevance, comparability and reliability that determines the faithful representation of the data.

 

References

Ahmad, M., Ayasra, A. and Zaideh, F., 2013. Issues and problems related to data quality in AIS implementation. International Journal of Latest Research in Science and Technology, 2(2), pp.17-20.

Braha, D. ed., 2013. Data mining for design and manufacturing: methods and applications (Vol. 3). Springer Science & Business Media.

Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.

Domeika, P., 2015. Creation of the Information System of Enterprise Fixed Asset Accounting. Engineering Economics, 60(5).

Hall, J.A., 2012. Accounting information systems. Cengage Learning.

Hla, D. and Teru, S.P., 2015. Efficiency of Accounting Information System and Performance Measures–. Int. J. of Multidisciplinary and Current research, 3.

Kalu, U.C. and Campus, E., 2011. Critical Success Factors for Accounting Information Systems Data Quality.

Mamić Sačer, I. and Oluić, A., 2013. Information Technology and Accounting Information Systems’ Quality in Croatian Middle and Large Companies.Journal of Information and Organizational Sciences, 37(2), pp.117-126.

Mancini, D., Vaassen, E.H. and Dameri, R.P., 2013. Accounting information systems for decision making.

Ndlovu, N.P., 2015. The role of management information systems in measuring organisational performance in the KwaZulu-Natal Department of Art and Culture (Doctoral dissertation, Stellenbosch: Stellenbosch University).

Oakland, J.S. and Morris, P., 2013. Total quality management: a pictorial guide for managers. Routledge.

Romney, M.B. and Steinbart, P.J., 2015. Accounting Information System Thirteen Edition.

Soudani, S.N., 2012. The usefulness of an accounting information system for effective organizational performance. International Journal of Economics and Finance, 4(5), p.136.

Zhu, H., Madnick, S.E., Lee, Y.W. and Wang, R.Y., 2014. Data and Information Quality Research: Its Evolution and Future.

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