Custom «Changing the Accounting Information System» Sample Essay
Table of Contents
- The Factors Contributing to AIS Failure
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- Assessment of the Senior Management’s Responsibility for the Failure
- The Place of the Most Significant Failure Occurred and Its Avoidance
- The Evaluation of the Best Practices that Would Reduce the Chances of Failure
- The List of Best Practices that Organization Should Use Today to Reduce the Chances for Failure
- The Principles for Bringing Insight into Efficient and Effective Strategies for Best Deployment of Financial Management Systems
- Related Free Management Essays
The accounting information system (AIS) of a business is a particular functional subsystem of the entire general management system of a company. This component supplements financial health of a business and assists management in financial decisions making. The failure of AIS affects corporate sustainability and leads to huge losses or bankruptcy. Nevertheless, changes carried out by replacing or changing the previous AIS to a new one may cause economic complexities and time waste. Therefore, the study of AIS failure and possible forthcoming changes it may cause is important to determine the role of such information system with its peculiarities of implementation and probable failures within the corporate environment. Additional consideration of the best practices contributes to the successful implementation of the efficient and rapid accounting information system.
The Factors Contributing to AIS Failure
Among the recent accounting scandals, there is a failure of the Post Office and consequent court hardship faced by the company, when it was accused of embezzlement of funds by the sub-postmasters. Many of these sub-postmasters lost their job places and were jailed. The first-class delivery delays and cash shortfalls had occurred due to AIS failures of the Post Office. The investigation of the Post Office issue revealed the theft and false accounting of wrongly claimed sub-postmasters caused the defects in the common AIS performance of the Post Office.
The influencing factors that contributed to the failure of the Post Office’s AIS led to the willful fraud and failure of the accounting workflow, its validity, and accuracy of accounting information. Poor estimation and insufficient management of the AIS risks, weak controlling system or mistakes in audit issues, failures to provide valid and accurate accounting data, unintentional errors of subsidiaries, and ageing software should be considered among the main and significant contributors to the occurrence of failures in the company’s AIS.
The low quality of accounting data estimation and its verification affects the efforts and time required to exclude the internal errors of the company’s AIS, determine budgeting abilities, etc. (Nelson, 2007). The dropped cost of carrying out of these procedures caused the fragility of AIS, especially the duration of its performance.
It was particularly evident that long functioning of the Post Office and its AIS servicing, which was implemented since the company’s establishment, required appropriate management of risks of failure. The Post Office was weak in risks identification and their resolution as it rarely monitored the system. The investigation, launched after prosecutions, has discovered some software defects. For a long time, they have been an object of dispute and allegedly a cover for accounting fraud committed by the supervising stuff. Even though, the failure of AIS was an obvious fact that followed the irresponsible and slipshod disregard of risk assessment of a large scope of the company’s activities.
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The team working with AIS of the Post Office faced with the lack of the application of special control measures. A low level of ongoing controlling or outsourced audit wreaked the foreseen determination of inaccurate accounting spreadsheets and accounts. Along with a weak monitoring of the accounting legality, it gave a double negative effect and allowed the loopholes in the information system. Besides, the immediate intervention of the qualified personnel would be paralyzed by the poor quality of the AIS servicing.
The interconnection of the Post Office and its subsidiaries took place on the basis of key accounting information failure. The provision of activities with the spread-out of incorrect information caused the failure of dozens post-masters that were accused by the fault of the centralized AIS. The lack of accurate accounting data has significantly affected sustainability and creditability of financial flows and caused the strikes of clients that were dissatisfied with delaying of first- and second-class letters.
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Unintentional errors of subsidiaries were caused by acceptance of daily figures that already contained errors and holes before logging into the system. Moreover, the post-masters could record already closed loss. While the Post Office stated about the completely reliable procedures, showing the accurate calculations, the evident failure of AIS was in the center of the robust investigation.
Ageing software represents potential threats of manifesting incorrect balances and inability to fit unique business requirements. The software caused accounting shortfalls and payments mismatches.
The defects that were doubted by the investigation, owing to their allegedly covering of accounting fraud, concern the necessity to upgrade and supplement the system with modern modifications. Like any other information system, the AIS of the Post Office created the volume of functional obligations during the particular period, required some re-equipment and renovation for the following decades.
Assessment of the Senior Management’s Responsibility for the Failure
The senior management of the company is responsible for the AIS failure in the case under discussion. They did not create the proper conditions for the efficient functioning of the system, nor offered adequate managerial decisions. As AIS did not meet the organizational goals and led the business to failure, the work of management team on the accounting system exploitation was insufficient and incorrect. Moreover, the complaints of the subdivisions confirmed the fault of the central governance of the company.
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The AIS failure lies in the framework of both executive and project managers. They did not allocate the needed resources such as time, finance, and technical facilities to maintain the excellent condition of the information system that is responsible for one of the vital aspects of the successful business performance. The investigation attests that the responsible staff was either aware of the system failure and covered it willfully or was incompetent and not skilled enough to determine the problem. According to the emerging failure investigation, senior management violated the code of ethics towards the business stakeholders and admitted the wrong claims of its subsidiaries.
To reduce the risk of such behavior, the company may appoint the controller or auditor and facilitate the monitoring over the AIS exploitation. In addition, the seminars dedicated to the corporate responsibility of a company may belong to the preventive measures aimed at encouraging the employees to reveal and control situations discussed above. The cooperation within the staff should contribute to and the creation of trust and an open atmosphere at the workplace.
The senior management should establish efficient feedback for employees to make them more trained and knowledgeable about the usage of AIS (Sori, 2009). Another issue refers to the limitation of the access to the company’s AIS by the company’s staff. . This limitation is aimed at eliminating potential threats of fraud and embezzlement. Tight communication between the staff and the management will be instrumental in assessing changes in the AIS and avoiding risky social pressure. The open policy of management will accelerate the struggling efforts of personnel to remove criminal motives of AIS exploitation.
The Place of the Most Significant Failure Occurred and Its Avoidance
The most significant error in the AIS functioning has occurred in the operational phase of the system. System failure was happening during a long period, after a decade of the information system usage. The accounting shortcomings and its failure have occurred during the company's operating performance and were characterized by the involvement of senior management. The scandals had arisen due to the accusations of the service provider that aimed at concealing accounting fraud, concerning both the design of the system and its usage for a long period of the company’s performance.
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To avoid the failed outcome of the AIS performance, the company could have done the following:
- upgrade current AIS and supplement it with a security module;
- renew AIS to make it satisfy the increased volume of diverse orders;
- implement the efficient monitoring module on the daily basis;
- perform control over the daily and weekly transactions;
- improve HR management in order to strength the personnel qualities of the employees;
- limit the access to AIS;
- re-establish the principles of access and upgrade the data with new incoming files.
The additional aspect that can be used to prevent failures refers to the designing phase of the system as the above case highlighted the primary errors of the system design and the mistakes of the service provider and its assumed statements that, in contrast, were accurate and reliable. Therefore, a company has to check the capacity of AIS to avoid the complaints and failures.
The Evaluation of the Best Practices that Would Reduce the Chances of Failure
The implementation of the best practices would be offered by the senior management of the company or outsourced auditors after the assessment of the organizational and business goals and needs, proper analysis and examination of AIS capacity and sustainability, practical surveying of the staff, assessment of AIS requirements, and control of the AIS’ assessors (Abdipour, 2011). These measures would contribute to AIS’s strengthening and reduce the chances of failure.
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The best practices also include the development of IT infrastructure or its quantitative outsourcing to a reliable provider, technical and information support of human resources, deadlines and changes coordination, overcoming of barriers connected with new implementations, technologies’ organization, and improvement of behaviors and organizational structure of the company. Participation in AIS creation constitutes a particular place within the applied practices of AIS performance.
The efforts of the management of all levels should be directed toward the provision of effective and timely decisions of continuous development. To reach best practices easily, these decisions should have concerned all working flows of accounting and all transactions. The control system developed and implemented earlier would be intended to minimize the operations of the staff participating in the crime. The productivity of AIS should have been estimated through independent controlling. Any deviations are supposed to be discovered, authorized, and examined to find out their causes.
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The involvement of a specialized team would aim at decreasing the uncontrolled parts of informational inputs and outputs. The quality of information would prevent the holes and errors of accounting reports. The introduction of the controlling module into AIS would check the performance of accounting changes in compliance with the system requirements, accounting standards, and factual changes in departments or/and subsidiaries.
Modeling and tabling of accounting outcomes would help to visually determine the deviations and changes for the recent periods. The causes of these shifts should be displayed through the links to the appropriate records of the registering module. In this way, the origin of each change could be successfully determined and controlled.
The advances of AIS acquiring the best practices include the following:
- reduction of setup and exploitation time;
- saving of efforts and HR;
- maximization of programming productivity;
- wide carrying capacity of the channels for working accounting flows;
- tracking the destination and authors of the stream and implemented changes;
- decreasing the operational costs;
- simplification of the operational processes;
- improvement of the quality of decisions and accounting data.
Receiving these advances is possible with the correct and systematic implementation of the best practices of AIS improvement. Therefore, the preparation should include the availability and quality of the accounting information and its open flows on unique channels; instant and limited access to AIS by privileged and specialized working team; authorized and automatized system of entrance; staff training for efficient job performance; improved working motivation; promotion of ethical behavior and whistleblowing protection; developed customer service, and timely feedback provided to customers’ request with up-to-date information.
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The List of Best Practices that Organization Should Use Today to Reduce the Chances for Failure
The improvement of AIS could be performed through the implementation of all five measures intending to convert the existing AIS to a new one, working according to the developed principles of functions. Also, the implementation of the most demanded measurements connected with the losses of the old AIS could be helpful in improving the work of the system. Carrying out these processes is possible by the participation of the outsource aid or by own efforts.
- Information verification. All organizations strive to raise their profitability and sustainability through the exploitation of available and potential resources, including human and information resources. To assure the display of the accurate information and make efficient decisions, the organizations should introduce the module or subsystem of information verification. AIS as the sub-system of the general information system should rely on qualitative and quantitative peculiarities of the accounting database. Its ability to influence corporate finances requires thoughtful management of this component of informational supply (Abdallah, 2014). Accordingly, the accounting information should possess such basic peculiarities as credibility, accuracy, timing, relevance, comprehension, and fulfillment. The security of the accounting information should be promoted and ensured by the appropriate tools and promoting an ethical approach of the employees.
- Introduction of the efficient management by business stakeholders. Consistent participation and involvement of stakeholders into the AIS management lead to the reduction of the chances of failure. The expectations and their evaluation should be based on the preceded analysis of the corporate alternatives coming from the estimation of previous accounting spreadsheets. Therefore, the distribution of the accounting data among interested entities prevents unsanctioned interventions and changes in closed records. Stakeholders’ management can be implemented through the development of interactive plans and establishment of projects.
- Provision of planning. This function of AIS management is devoted to evoking the initiatives and innovations that would encourage AIS improvement. To best implement these practices, the organization should clearly state the organizational goals, determine the roles of the responsible individuals, establish required resource base and schedule, develop favorable and unfavorable alternatives, and launch the plans (Jawabreh & Alrabei, 2012).
- Improvement of documentation system. As AIS deals with the accounting data, it should be reflected in documentation form. This system should include vendor documentation of ongoing processes and detailed precepts that may assist in handling of all specific transactions of the organization. Online form of documentation fits the organizational needs to supplement it with additional data. Documentation system should be tested in advance to show the outcome of its utilization within the working environment of the organization. Its launch should be accompanied by the appropriately trained and skilled servicing staff.
- Training of servicing staff. AIS assessors and users should be properly trained by the special outsourced team or by own qualified employees. The composition of privileged and limited AIS team may include CEOs, executive directors, accouters, economists, and other qualified and reliable authorities, which have accounting handling among job duties. Their trainers should perform practical training for them to demonstrate the correct treatment of AIS and corporate database and emphasize on its quite important roles for employees’ welfare and business future.
The Principles for Bringing Insight into Efficient and Effective Strategies for Best Deployment of Financial Management Systems
The principle of process simplification includes the following actions:
- identification and alignment of organizational processes in order to optimize the utilization and achieve the efficiency of the system software;
- guidance by functional features of the system software to access and display the current organizational processes that are directed toward changing of working information flows;
- education of a special expert team to develop business procedures and requirements allowing changes in the software to adapt it to current business and cost optimization;
- following by established configuration of the access to the requests’ system;
- guidance by the best practices and standards;
- agreement of the modifications of procedures and processes with the leadership and experts before the performance of design and changes (Hines & Carrington, 2010).
Involvement of stakeholders implicates the following actions:
- identification, development, and direction of projected goals according to senior management and business stakeholders to clearly outline the advances of system upgrading;
- highlighting of the planned vision of changes, stakeholders’ success, and motivation of the performers;
- adaptation of leadership and corporate culture to forthcoming changes and involvement of the sponsorship in any possible and rationale way;
- analysis of stakeholders’ reaction and responding to changes to the degree of their interconnection and influence on changes; bringing insight to the role of stakeholder management and its integration with training programs and change management (Hines & Carrington, 2010).
The principle of proactive management includes the following actions:
- incorporation of the management of performance and risk that would integrate business concepts, proactive control and communication, and risky areas;
- control the compliance of the project management with the governmental programs on the necessary level of staff experience during the whole cycle of functioning;
- control that all functional and technical instructions and standards are met and all required conditions are established;
- carrying out some dry flows of data against stated success rate;
- performing of the close-to-life testing of downstream operations to minimize after-conversion issues;
- involving stakeholders in system testing to verify its ability to support standard transactional issues (Hines & Carrington, 2010).
Exploitation and improvement of AIS is a significant corporate issue that is considered and approved by experienced and interested entities. Its failure may affect the profitability and interests of the stakeholders. To ensure the reduction of failure chances, management should take special measurements to upgrade and secure the information system as an essential component of the entire business system. The application of the best practices should be carried out systematically and organically to prevent consequent failures and business losses. Following the best practices and principles of improvement, an organization will be able to facilitate and strengthen own AIS as a competitive advancement in modern progressive economic and technological conditions.
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