Accounting Information Systems and Controls - Study Material with Solved Assignments

This study material on Accounting Information Systems and Controls includes solved assignments and essays on topics such as the accountant's role in computer acquisition process, risks of offshore outsourcing, and organisational issues in project management. It also provides recommendations to ensure consulting service quality. Course code and college/university not mentioned.

ACCOUNTING INFORMATION SYSTEMS AND CONTROLS
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Table of Contents
Contents
Question 1 (a)........................................................................................................................................3
Answer 1 (a)..........................................................................................................................................3
Question 1 (b)........................................................................................................................................3
Answer 1 (b)..........................................................................................................................................3
Question 2.............................................................................................................................................4
Answer 2................................................................................................................................................4
Question 3 (a)........................................................................................................................................5
Answer 3................................................................................................................................................6
Question 3 (b)........................................................................................................................................6
Answer 3 (b)..........................................................................................................................................7
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Question 1 (a)
What is the accountant’s role in the computer acquisition process? In what aspects of computer
acquisition might an accountant provide a useful contribution?
Identify the accountant’s role in the computer acquisition process
Answer 1 (a)
The role of an accountant in the acquisition process of computer has been detailed here-in-below:
(a) Accountant are users of computers and of accounting information system and they are the first
person to lead the show. Further, under many an organisation accounting function is the
largest user of information technology. In the end user, accountant provides a clear picture of
requirement in the system to be met while designing the software and computer. (Academy for
Environment and Life Sciences, India, 2015)
(b) Accountant are responsible for maintain internal controls over processing of data in the
organisation. Thus, they shall play a key role in identifying the key accounting packages, designs
etc;
(c) Accountant plays a crucial role in determining the cost of the computer and other allied
products and plays a crucial role in comparing different product available in market and help in
deciding the cheapest and effective system available; (Anon., 2016)
(d) In addition to above, an accountant plays a crucial role in aligning the utility of computer with
other software available in the organisation;
(e) The accountant generally function in team with other experts like system analyst, manager,
production personnel etc;
(f) Further accountant are major designer of the system which supply data to the computer unit;
Thus, on the basis of above it may be concluded that the accountant play a very significant role in
the acquisition of computer as majority of computer task are financial in nature which shall be in
ease with its user i.e an accountant. Further, an accountant ensures that the payment made for such
acquisition is within the limit and in terms of utility of the project.
Question 1 (b)
Describe the useful contribution an accountant might make the computer acquisition process.
Answer 1 (b)
The useful contribution that an accountant can make in the acquisition process is in alignment with
its role and has been detailed here-in-below:
(a) The account can provide valuable input while purchasing the computer in terms of defining the
utility of the computer, type and required benefits;
(b) The accountant being the major user can define the role and objective of the computer and
help in the designing of the system accordingly; (Anon., 2014)
(c) Helps in the analysis of prices and comparing the same from different competitors;
(d) Aligning of other ancillary system with the computer;
(e) Detailing the needs of computer and required process and functions; (B.V., 2018)
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(f) Establishing of internal controls over data processing in the organisation.
Question 2
What risks, if any, does offshore outsourcing of various information systems functions pose to
satisfying the principles of confidentiality and privacy?
Describe at least TWO possible risks offshore outsourcing of various information systems functions,
Answer 2
Outsourcing of various Accounting Information System function shall pose the following threat to an
organisation:
(a) Hoarding of Knowledge;
(b) Intellectual Property (IP) losses;
(c) Internal Know-How losses;
(d) Loss of Core Capability;
(e) Loss of Competitive Edge;
(f) Difference in negotiated and actually delivery;
(g) Increase of cost;
(h) Breach of confidentiality; (Isosceles Finance Limited, 2018)
(i) Providing of legacy technology by vendors;
(j) Risk in operations on account of location of vendor;
(k) Risk that is on account of environmental, culture and legal differences;
(l) Incompatible Development tools;
(m) Standards conflict;
(n) Outdated communication infrastructure;
(o) Improper communication of requirements;
(p) Complexity in codes.
One of the risk that shall be prominent to discuss is data hacking/ confidentiality/ security protection
which have become much more prominent now-a days. The example described here-in-below shall
highlight the same:
In terms of magnitude, about 10 million cards accounts were hacked held in disposal of an
independent sales organisation and further worst ever hit under financial service was the breach of
data of more than 3.7 million accounts in 2000 from egghead.com.
Thus, increase use of internet globally has called to question the practice of using third party
outsourcing that has been prevalent for years.
Further, the outsourced data puts a high level of pressure on outsourcing information system as it
requires a huge amount of encryption. This encoding and decoding of data generally prevents the
outsourcer or results in insertion of virus introduced by outsourcer as commented by Holland of
charlotte.
In addition to above, the confidential data of the company may get leaked on account of negligence
of vendor or lack of adequate safety measures at the end of the vendor resulting in breach of
confidentiality. It may also happen that the secret formula or recipe of the company may get leaked
making today’s vendor tomorrow’s competitor. Also, the company shall always be held accountable
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for maintaining the privacy of data and has to pay penalty to government and third parties on
account of breach of confidentiality and privacy.
Cost Saving Risk: Outsourcing of Accounting Information System to lower wages country does not
guarantee overall reduction in cost or increase in savings as poor estimation, in capacity of provider,
wrong selection of provider are some of the factors that may result in increase of over all cost
instead of reduction. Further other ancillary cost like distance, communication, travel, training
expenses must also be factored for cost computation. (AccountingDepartment.com, 2018)
Geopolitical Risk: If the outsourcing of Accounting Information System is undertaken to a country
which is politically unstable, experience labour unrest, shortage of power, weak infrastructure, the
same shall result in failure/ logjam of accounting information system.
Risk of Intellectual Property Loss: If the company outsource its activity, its Intellectual Property might
get stolen on account of contracting and subcontracting and shall result in service provider
becoming competitor. Further, some countries have strong tax laws relating to IP Protection while in
some countries laws are stringent for data and software piracy but are not easily enforceable.
Management Complexity: It is extremely difficult for management to manage activities with
multiple centres operating in different countries with different time zone. Hence outsourcing of work
impacts the functioning of management.
International data sharing: In case of outsourcing of activities data are shared globally and are used
and accessed from different locations. Therefore, the same requires a well-defined and highly
standard global data standard which is generally missing and disputes are arising on account of lax
and primitive data sharing policies in many countries. (Anon., 2011)
Global Cultural Environment: Cultural differences exist with basic difference in communication style,
language, customs, habitual activities etc. Language problems in international collaboration, cultural
differences in employer-employee relationships, seniority and personal relationship with authority
and socialist/capitalist principles cannot be ignored.
Contractual Conflicts: It is one of the most significant risk in outsourcing which generally occurs on
account of conflict of interest of vendor and the client. The same generally arise on account of
difference in objectives, incomplete or poor designed contracts which does not make provision for
future contingencies ambiguous terms and different interpretation of the contract, technological
changes, change in the business need, change in requirement of client etc shall generally leads to
contractual conflict and termination of contracts creating issues to clients. (Anon., n.d.)
This are some of the risks posed by outsourcing of accounting information systems and other have
not been detailed.
Question 3 (a)
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Queensland’s Bedrooms Furniture QBF has experienced tremendous growth which has given the
company a serious problem. Customers would often wait months for QBF to fill orders and process
invoices. Repeated attempts by QBF’s understaffed IS department to solve these problems met with
failure. Finally, QBF hired a consulting firm to solve its revenue tracking problems and expedite
prompt receipt of payments. The 18-month project turned into a doubly long nightmare. After three
years and $10 million, the consultants were dismissed from the unfinished project.
The project failed for many reasons. The systems development process was so dynamic that the
failure to complete the project quickly became self-defeating as modifications took over the original
design. Second, management did not have a clear vision of the new AIS and lacked a strong support
staff. As a result, a number of incompatible tracking systems sprang from the company’s distributed
computer system. Third, the project was too large and complex for the consulting firm, who had little
experience with the complex database at the heart of the new system. Finally, the project had too
many applications. Interdependencies among subprograms left consultants with few completed
programs. Every program was linked to several subprograms, which in turn were linked to several
other programs. Programmers eventually found themselves lost in a morass of subroutines with no
completed program.
Identify the organisational issues that management must address in the future.
Answer 3
The organisational issues that must be addressed by the management in the nearby future has been
detailed here-in-below:
(a) Improper selection of Vendor for allocation of Job : As given in the excerpt above that the
company in itself was not competent to solve the issue of revenue tracking and expedite
payment and has outsource to an entity which was equally not capable to do the same as even
after 36 months the problem was not solved and has resulted in additional burden on the
company by $ 10 Million;
(b) Understaffing of Information System department: The second step that company can take is to
solve the issue of understaffing which shall lead to proper management of account of debtor
and quick receipt of payment. Further, the same shall also result in marinating of confidential
data of the company with in organisation and may not be breached on account of outsourcing;
(c) No proper planning for future: The Company has witnessed tremendous growth in the recent
years but it did not manage its resources accordingly leading to bottleneck in customers
tracking and receipts. Thus, management shall be agile to respond to business needs;
(d) Dynamic System development process: The information system that was outsourced to be
developed was very flexible without any boundation and restriction. Thus excessive flexibility
became the pacman for the company project and took over the original design. Thus, a clear
consultation as to the needs and planning should be done. Post such design shall be made and
achieved. (Anon., 2011)
(e) Lack of vison: Lack of clear vision on the part of the management has curtailed the program
and has delayed it. Further, no concrete solution has been achieved as various wires have been
entwined with each wire leading nowhere; (Anon., n.d.)
(f) Complex System: The system that was proposed to be developed is complex instead of simple
and easy to operate. Further, the company entrusted to do the same was equally non competent
and has never handled such project resulting in total failure of Accounting Information System.
(g) The last issue identified is in linking of every program and subprogram together in one go. It
should have been beneficial for the management to have linked the same slowly with
completion of programs one by one.
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Question 3 (b)
Queensland’s Bedrooms Furniture QBF has experienced tremendous growth which has given the
company a serious problem. Customers would often wait months for QBF to fill orders and process
invoices. Repeated attempts by QBF’s understaffed IS department to solve these problems met with
failure. Finally, QBF hired a consulting firm to solve its revenue tracking problems and expedite
prompt receipt of payments. The 18-month project turned into a doubly long nightmare. After three
years and $10 million, the consultants were dismissed from the unfinished project.
The project failed for many reasons. The systems development process was so dynamic that the
failure to complete the project quickly became self-defeating as modifications took over the original
design. Second, management did not have a clear vision of the new AIS and lacked a strong support
staff. As a result, a number of incompatible tracking systems sprang from the company’s distributed
computer system. Third, the project was too large and complex for the consulting firm, who had little
experience with the complex database at the heart of the new system. Finally, the project had too
many applications. Interdependencies among subprograms left consultants with few completed
programs. Every program was linked to several subprograms, which in turn were linked to several
other programs. Programmers eventually found themselves lost in a morass of subroutines with no
completed program.
Recommend steps the company could take to guarantee consulting service quality.
Answer 3 (b)
The steps that can be taken by the company to ensure the consulting service quality has been
detailed here-in-below:
(a) Creating a clear vision as to what is required from the Accounting Information System;
(b) Involving Accountants, experts and other professionals to advise on the issue;
(c) Hiring a trained consulting service who can handle large and complex matters;
(d) Staffing the Information System department of the company;
(e) Going for step by step linking of programs and subprograms instead of making the same
haphazard;
(f) Hiring equipped professional to deal with the said matter;
(g) Making the project simple and removing unnecessary steps to make it simple and small;
(h) Reducing the extent of dynamism in the project.
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References:
Academy for Environment and Life Sciences, India, 2015. COMPONENTS OF Accounting Information
system. [Online]
Available at: http://bepls.com/beplsoctober2015/19.pdf
[Accessed 06 October 2018].
AccountingDepartment.com, 2018. Security Concerns in Outsourcing Accounting Information.
[Online]
Available at: https://www.accountingdepartment.com/blog/security-concerns-in-outsourcing-
accounting-information
[Accessed 6 October 2018].
Anon., 2011. Managing Relational Risks in Accounting Outsourcing: Experiences of Small Firm.
[Online]
Available at: https://pdfs.semanticscholar.org/c964/bc99330afa9a95b5e352c74703f3ad86e043.pdf
[Accessed 6 October 2018].
Anon., 2014. The Role of Accountants in E-accounting Information Systems’ Lifecycle at the Jordanian
Banking Sector. [Online]
Available at:
https://www.researchgate.net/publication/306092653_The_Role_of_Accountants_in_E-
accounting_Information_Systems%27_Lifecycle_at_the_Jordanian_Banking_Sector
[Accessed 6 October 2018].
Anon., 2016. Accountant Role in Accounting Information System. [Online]
Available at: https://www.accountantnextdoor.com/accountants%E2%80%99-role-in-the-
accounting-information-system/
[Accessed 06 October 2018].
Anon., n.d. Risks of Outsourcing. [Online]
Available at: https://cdn.ttgtmedia.com/searchSecurity/downloads/Axelrod.pdf
[Accessed 6 October 2018].
B.V., E., 2018. The roles of accounting information systems in an organization experiencing financial
crisis. [Online]
Available at: https://www.sciencedirect.com/science/article/pii/036136829090025P
[Accessed 6 October 2018].
Isosceles Finance Limited, 2018. Advantages (and risks) of Outsourcing Your Accounting. [Online]
Available at: https://www.isoscelesfinance.co.uk/advantages-and-risks-of-outsource-accounting/
[Accessed 6 October 2018].
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