Information Systems in Accounting
Information systems play a critical role in harnessing modern accounting practices. Information systems refer to all formal processes that are involved in the collection, processing, and distribution of data. In accounting, information systems are used to “collect, store, and process financial and accounting data and produce informational reports that managers or other interested parties can use to make business decisions” (Hall 12). In the past, accounting information systems (AIS) have been mostly manual structures. However, in the current digital age most AIS are in the form of computer-based applications (Hamdan 32). Basically, an AIS is the overall tool for supplying an organization with information that is in the right size, format, time, and within the appropriate budget.
Information systems are important to accountants and the accounting profession in general because they serve various functions. First, the information systems are important because they support day-to-day operations in an organization including transaction processing (Sori 40). Transaction processing involves adequate collection and storage of transaction-data through various day-to-day activities such as filling-in journals, and transferring various bits of information between different categories of ledgers. AIS also act as support mechanisms in an organization’s internal decision-making process. For instance, AIS assist accountants when they are organizing trends. In addition, decisions in any organization are mostly made using the information that is collected through qualitative and quantitative data. AIS are also important to decision-making in regards to accounting because they assist organizations in collecting data from non-transactional sources. AIS are also relevant to the process through which organizations institute controls that govern the smooth operations of any business.
Accounting information systems are made up of various components that determine how the entire structure works (Moscove and Bagranoff 38). The first component is the people who are in charge of operating the AIS. These people include the accountants who feed and analyze the system, the managers who oversee the entire operation, and the business analysts who use data from the systems to make predictions. Another critical component of the AIS is the procedure and methodologies that govern these structures. The AIS is not a random process but it is an organized structure of data collection, storage, processing, and retrieval modalities (Simkin 21). Data is also a relevant component of the AIS because it is the connection between people and systems. On the other hand, software provides a platform for the entire AIS operation. There are also internal controls that include the security measures that are used throughout the process of manipulating data.
AIS can be operated in virtually every aspect of the accounting profession. For example, AIS is essential to the auditing process of the accounting process. Auditors mainly play their part in accounting by evaluating controls and attesting the credibility of all financial statements. Consequently, AIS is essential to an auditor because it ensures that the due process is followed in accounting (Ghosh and Moon 586). This provision is only made possible by the fact that AIS leave a traceable track in the course of their operations. Consequently, an auditor’s work is made easier by the fact that he/she can use the information system to clarify compliance.
References
Ghosh, Aloke, and Doocheol Moon. “Auditor tenure and perceptions of audit quality.” The Accounting Review 80.2 (2005): 585-612. Print.
Hall, James. Accounting information systems, New York: Cengage Learning, 2012. Print.
Hamdan, Mohammad W. “The Impact of Accounting Information Systems (AIS) Development Life Cycle on its Effectiveness and Critical Success Factors.” European Scientific Journal 8.6 (2012): 32-40. Print.
Moscove, Stephen A., and Nancy Bagranoff. Core concepts of accounting information Systems, New York: John Wiley & Sons, 2008. Print.
Simkin, Mark. Core concepts of accounting information systems, New York: John Wiley & Sons, 2014. Print.
Sori, Zulkarnain. “Accounting information systems (AIS) and knowledge management: a case study.” American Journal of Scientific Research 4.4 (2009): 36-44. Print.