Introduction
The starting point of any corporate financial decision or that relating to a business model stems from the primary objectives that the company it caters to represents. Furthermore, management pertaining to any corporation is embedded in the fact that rational decisions be made on the basis of information drawn up via different sources such as accounting information, ERP models and sales figures which assist in establishing the economic health of the corporation itself. The latter available information can be specifically categorized into two groups; quantitative and non-quantitative information while the subject of our attention in this particular study would most definitely be quantitative information. Quantitative information can further be broken down into financial (accounting) and non-financial data as well, while the identification of this data is most definitely seen crucial, as major long term and short term strategic goals are drawn up based on this information. Presently, the handling and use of accounting information can definitely act as an indispensable function in determining how a company is performing. This feat is accomplished by having certain comparable metrics be defined via an Accounting Information System (AIS) which in turn provides a progression on all the variables related to the financial data (Bodnar & Hopwood, 2012).
Components of Accounting Information Systems
Accounting information systems have many sub systems that incorporate itself in making an entire suite of application which assist a company in managing its data and providing real time strategic and intermediate decisions. The following sub sections are the key components in any functioning AIS:
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Management Information System – Management information system are a set of tools embedded in the AIS which categorically generate management level reports and other necessary trends. These help the senior decision making personnel in the company keep up to date with data that assist in determining the course of action needed, that might be necessary in certain situations. Management Information Systems functions very closely with other tools such as ERP and data handling and security applications and is one of the main functioning part of any AIS suite. With a deployed MIS, real time data is processed and necessary trends are established, giving the corporation in question a favourable competitive edge (O'Brien and Marakas, 2006).
Accounting Information System – AIS (as it is pronounced via the acronym) primarily deals with the core accounting and data entry aspect of a SME. Every business whether it is established privately or as a government agency, for profit or as a non-profit will always have transactions which occur due goods or services provided or from the fact that expenses are incurred (Johnson et al, 1981). To record these transactions most companies employ a double entry book keeping feature at hand which provide credit and debit on the accounts that might incur expenses or provide revenue for the corporation. The AIS suite helps in automating these tasks by generating electronic accounts and double entry bookkeeping via a single input feature. The results are much more accurate than having a manual entry system which might be prone to human error. The transactions recorded in the AIS help a company keep accounting records in large quantities by means of an extremely cost effective and efficient system known as the AIS.
Market Information System – Market information systems provide a window in determining on how the market might be behaving for a given product listing or for an industry trend that may or may not cause, upstream/downstream in overall revenue for the corporation. Market information systems heavily rely on AIS in providing the bulk of the information needed to assess these necessary trends as transactions on various goods and services show consumer trends and help a budding SME in determining what course of action might be needed in capitalizing on the market forces in play. Market information system are a snapshot in what the future might hold for the company in question based on the first hand information available currently. The core perception that market information systems make in every one of their assessment is the key factor of ‘if all things remain constant’ then the current trend would take the SME to a given market position.
HR Information Systems – Human resources are effectively what drives a company forward. The difference between a fortune 500 company against a one that is struggling to cover and meet its ends, are the employees and support staff that work in both these organizations. HR information systems enable a company in providing a user friendly working environment, an interactive platform for its workforce to compartmentalize their working needs and to ideally give them a sense of loyalty with a core branding aspect. Many research studies have found that skilled employees do not necessarily like interacting with other personnel who are representing an HR department or any similar department of such kind and therefore it is entirely more efficient if all the employed personnel go through automated HR procedures rather than reporting to a senior administrator and or other management level employee. HRIS provides massive flexibility to staffers in recording down daily attendance, clocking overtime and additional billing, sending in leave and sick applications, applying for vacations so on and so forth and all of this can be automatically integrated with a functioning AIS giving the company an easy migration and transfer of data from one platform to another (Romney et al, 2000).
Decision Making with Accounting Information Systems
As stated earlier decision making for any corporation becomes momentously easier when their senior management is provided with real time data to base their long term and strategic decisions. These decisions are employed with the sole purpose of forwarding the agenda or the objectives of the company in question. On most occasions Accounting Information Systems, record transactions such as successful sales carried out, quotations sent to potential clients, invoices printed, delivery orders sanctioned and so on and so forth. Similarly the AIS would also record debit side transactions such as purchases obtained from creditors, quotations received from suppliers, and incoming transactions from service providers. When these transactions are carried out, various accounts are credited and debited based on the transaction that might take place so as to potentially culminate into a large bundle different transactions incurred daily or even every few hours. This can further lead to a lot of data being generated in a short amount of time while the Accounting Information System (AIS), in conjunction with MIS and ERP modules can be used to mark trends in these transactions, and showcase to the management in question on where they might need to divert their focus and attention towards (Bodnar & Hopwood, 2012).
A very simplistic example of the AIS helping in decision making is in the use of inventory and stock. Let’s say ‘product A’ was procured from a given supplier and the creditor, once the purchase was completed shipped, the item to a rented warehouse, employed by the company. In the preceding three months or so, ‘product A’ received bad consumer reviews and the sales incurred could not cover the incoming overhead during the purchase of ‘product A’. In such circumstances it is evident that Product A has been a misplaced investment giving the senior management a few limited options as stated below:
In the coming quarter the company invests into upselling and pushing its marketing team to meet the necessary sales targets for product A
The company decides to package product A as a bundle with a running item from their current stock of goods.
To pull product A from the market and save further overhead losses
To return product A (at a loss) to the creditor who might’ve provided it in the first place and then invest and try to recover the revenue lost in procuring product A for an item that could be high in demand.
All these decision s enable a top tier management in deciding which course of action they would want to employ in this particular situation. The decision making also depends on the amount of capital that is required to pull or push product A back into the market and how much monetary leeway and or clout does the company have to forgo revenue in order to try and upsell a particular product (Johnson et al, 1981).
Effects of Accounting Information Systems during Audit
One of the major benefits of having an Accounting Information System is its assistance in ascertaining many positive feats during a company audit. Electronic records that are filed in a proper manner and have the ability to be procured via a database, make it a whole lot easier for auditing companies to successfully audit any given business. Furthermore, an AIS suite of application provides a reliable money trail so discrepancies are extremely easy to catch and isolate, in an implemented system. Audits are necessarily expensive and time consuming however with AIS a company’s auditing fees would nearly be halved, as auditors do not have to go over redundant data in their work papers, knowing the fact that a computer generated figure would be one hundred percent accurate, and at the same time being time efficient as well ( Summers & Sweeny, 1998).
In any given audit documentation work papers are constantly being reviewed and updated by the senior partners as most of the data provided would have lack of documentation to support a given transactions, in such cases auditors need to manually cater to a journal entry that might help them adjust accounts aging and provide a balancing of accounts (Andiola et al, 2018). In an AIS these features are automatically taken of as journal entries made via a back dated transaction is automatically filed into the correct period without manually going over through each transaction and updating individual accounts (Romney et al, 2000).
Conclusion
In the end this paper would like to point out that even though AIS systems require the staffers to be trained in the preceding application prerequisites, the benefits that follow in implementing such a system and costs reduced by automating all the necessary task using AIS and MIS far outweigh the negative implications and the operating costs of training the staff up front. AIS systems are getting better and better with each passing day and these automated functionalities would most probably become an integrated aspect of every for profit industry.
References
Romney, M. B., Steinbart, P. J., & Cushing, B. E. (2000). Accounting information systems (Vol. 2). Upper Saddle River, NJ: Prentice Hall.
O'Brien, J. A., & Marakas, G. M. (2006). Management information systems (Vol. 6). McGraw-Hill Irwin.
Bodnar, G. H., & Hopwood, W. S. (2012). Accounting information systems. Pearson Higher Ed.
Johnson, J. R., Leitch, R. A., & Neter, J. (1981). Characteristics of errors in accounts receivable and inventory audits. Accounting Review, 270-293.
Summers, S. L., & Sweeney, J. T. (1998). Fraudulently misstated financial statements and insider trading: An empirical analysis. Accounting Review, 131-146.
Andiola, L., Lambert, T. and Lynch, E. (2018) Sprandel, Inc.: Electronic Workpapers, Audit Documentation, and Closing Review Notes in the Audit of Accounts Receivable. Issues in Accounting Education: May, Vol. 33, No. 2, pp. 43-55.
