Introduction
The accounting information system involves the collection, storage, and processing of data concerning financial accounting that is applied by the decision makers (Hall, 2012). Therefore, an accounting information system is computerized to track the accounting operations in conjunction with the resources of the computer. Consequently, the statistical report is used by the management internally and externally by the interested people such as the investors, tax authorities, and creditors. It combines the traditional accounting practices like the Generally Accepted Accounting Principles and the resources of the current information technology.
The AIS is composed of six elements as follows: people who are the users of the AIS, procedure and instructions that involves approaches of recovering and processing data, data that is pertinent to information to the business practices of the company (Fontinelle, 2011). Other components are software- the programs of the computer that are used during data processing, the infrastructure of information technology- the provider of hardware that is used to operate the AIS, and the internal controls that provide security measures to protect the sensitive data. The AIS can be manual but today, most accounting information systems are computer based (Wiley, 2013). Therefore this paper seeks to analyze the advantages and disadvantages of the AIS, and at the same time, it evaluates the solutions for the weaknesses of the AIS in the modern world.
The existing strengths of the accounting information systems will continue to serve the companies with the expansion of technology because the design of the AIS permits an enterprise to operate smoothly on a daily basis. However, if the system is designed poorly, the AIS will obstruct the activities of the business. Moreover, the third users of the AIS exist when a firm is in financial crisis and the information in its AIS can be applied to uncover the malpractices, and the case of WorldCom and the Lehman Brothers serves as a good example. That is in 2002, the internal auditors of WorldCom applied the AIS of the corporation to uncover about $ 4 billion in fraudulent activities in the accounting entries. Consequently, the investigation of the World Com auditors led to the termination of the Chief Finance Officer as well as the enactment of new laws such as the Section 404 of the Sarbanes-Oxley Act that regulated the internal financial procedures and controls of corporations.
The components of the AIS are working together in assisting major employees to collect, manage, store, process, retrieve, and make reports on their financial information. Therefore, when a company has a well-developed and maintained AIS that is efficient and accurate, it will be a crucial component of successful enterprises. However, the accounting information system has undergone a vast changes in many years. That is it has improved from paperwork, and ledgers to become completely automated paperless systems. On the other hand, this migration is sometimes risky to the corporations. The AIS has transformed the manner in which accounting tasks are being processed in the sense that the days of green paperwork is no mere. Instead, most companies have designed a centralized place where all transactions involving their accounts are entered and saved. It implies that most businesses are no longer looking for journals that can sum up the long columns of their ledgers- the computer software summarizes everything free of error.
Strengths of the AIS
Speed
The key strength of information system in accounting is the speed of processing the work (Shanker, 2016). Once data is entered, it can be used and reused during the compilation of the reports by accurately pressing a button. However, if any transactions require an adjustment, it can be performed easily, and the reports are generated afterwards at a speed that is impossible with manual systems of accounting.
Classification
Once data is entered into the system of accounting, the accountant needs to classify the records in a detailed fashion (Shanker, 2016). For instance, a business transaction could be a sales revenue or interest income. By applying the information system, the process of classification is easily accomplished with a drop out the menu to enable the accountant to select the proper category of the accounting records. Therefore, one can quickly generate reports regarding classification, and with the manual systems, it takes much more time.
Safety
Once the accounting records are entered into the computer, they are safe. That is the possibilities of losing the accounting statistics are rare particularly during the performance of regular backups of the systems (Shanker, 2016). However, in manual systems, papers can be easily damaged or get lost. Therefore, AIS allows accountants of the companies to save data on the internet where it does not only need to be accessed anytime but also secure the computer from the lost records.
Weaknesses of AIS
The AIS is designed to be used by the business entities for the recording of financial transactions. Therefore, relevant information is entered, processed, stored and distributed via the AIS (VanBaren, 2016). Consequently, this system has weaknesses, and some of them are discussed below:
Learning the System
Learning the AIS sometimes can be difficult and consumes a lot of time. People have to be trained on this system, and this may be expensive to some business entities concerning the manpower. The AIS is composed of different components where all systems are computerized. Due to its complexity, it may hard to apply this system to some people. Therefore, it may take several weeks for an individual to learn more about the accounting information system, and always they may not understand it.
Loss of Information
Since the accounting information system is ever computerized, there will be a risk of losing relevant information especially through power outages, and system crash. When this takes place, there will be the likelihood that all information in the system may be lost. The AIS acts as the store to the financial data for the company. Therefore, if there is a system crash, it will lead to a major weakness because some part of the information will be lost, and there may be a chance that they might not be recovered.
Re-evaluation
Most corporations do alternate their way of conducting business to keep up with the current industry trends. Due to the demand of the business around the globe, these changes may affect the AIS. Moreover, the accounting information system may be confusing regarding the set up because every enterprise is unique in its way. Therefore, to keep up with the changes, the AIS should always be re-evaluated to process information efficiently. This may appear to be disadvantageous to companies since it takes a lot of time for the re-evaluation process, and it is costly regarding funds.
Solution to the weaknesses
Backup
The companies should adopt the standard security procedure particularly by backing up their accounting files and performing standard maintenance on all systems of the computer. They should also place the backed files outside the company's premises so that in the event of fire and floods outbreak, the data is safe and can be restored. Additionally, corporations should perform an overnight backup as well as restoring the backups once a while to ensure that accounting data are safe and usable.
Virus Protection
The computers are subject to viruses and other malware that affect their efficient operations. For instance, some viruses allow for system intrusion. That is a hacker may get into the system and create some issues. Consequently, the attack by viruses may bring the whole accounting system down. Thus, making it useless and ineffective. Some viruses may also disrupt the system in that it may need to be wiped out completely. Therefore, companies need to install anti-virus software to take the preventive measures of protecting the accounting information system upfront (Shanker, 2016).
Internal Controls
The AIS must possess internal controls to limit any unauthorized users to access the computers inside the company. Therefore, the internal controls are the security measures of the AIS since it contains sensitive data. These controls may be a simple password and other complex biometric identification. It has to offer protection to unauthorized access to the files by individuals who are not allowed to access the documents in the system.
Conclusion
When there is a well-designed AIS, every person within the organization that is authorized can access the system to obtain the same information. The AIS simplifies the information to people outside the company when needed. For instance, a consultant may use the information in an AIS for analysis of the effectiveness of the pricing strategy of the organization by looking at the cost data, and sales and revenue data. Additionally, the external auditors may also use the same data to access the internal controls, the financial condition of the organization as well as checking if such companies are in compliance with the Sarbanes-Oxley Act. Lastly, the AIS should be designed to fulfil the needs of the people who are applying it. Therefore, the system needs to be simple, easy to use, and should improve but not limiting the accounting efficiency.
References
Fontinelle, A. (2011). Introduction to Accounting Information Systems | Investopedia. Investopedia. Retrieved 23 June 2016, from http://www.investopedia.com/articles/professionaleducation/11/accounting-information-systems.asp
Hall, J. (2012). Accounting Information Systems (8th ed.). United Sates: South-Western Cengage Learning.
Shanker, S. (2016). Accounting Information Systems & Security. Smallbusiness.chron.com. Retrieved 23 June 2016, from http://smallbusiness.chron.com/accounting-information-systems-security-3955.html
VanBaren, J. (2016). The Disadvantages of Accounting Information Systems | eHow. eHow. Retrieved 23 June 2016, from http://www.ehow.com/list_6767205_disadvantages-accounting-information-systems.html
Wiley, C. (2013). Accounting Information Systems - Functions and Parts of the System. Accountingedu.org. Retrieved 28 June 2016, from http://www.accountingedu.org/accounting-information-systems.html
