LECTURE NOTES ON RELEVANT TOPICS ON
ACQUIRING AND IMPLEMENTING AN ACCOUNTING INFORMATION SYSTEM
OBJECTIVES:
1. Describe the systems acquisition/ development process and its major
phases and steps.
2. Understand the differences in the process for purchased versus internally
developed systems.
3. Understand the nature and importance of the accountant’s involvement in
systems development and acquisition projects.
I.
Acquiring and Implementing Accounting Information System
Acquiring an Information system including an Accounting Information
System is expensive, therefore, management needs to decide which
method suits the entity. In general, there are two methods to acquire
AIS
1. Acquisition by building an in-house customized system
An entity can build its own information system. Here the entity will
employ the service of a system designer and software developers as
well as a system security specialist and administrator.
Building an in-house system is for an organization with unique and
frequently changing data needs. Small businesses cannot build an inhouse system. The reasons are the huge cost of building it, the
maintenance cost, and employee cost.
2. Purchased Programmed commercial system from vendors
An entity either small or large may decide to buy a commercial
system. Most commercial systems are universal. That is, it can be
used by any entity both service and product firms. While others are
industry base systems.
Entities go for commercial systems especially if their processes and
activities are standardized. Or if the IT can be standardized to suit
the entity’s needs.
Three types of commercial systems
1. Turnkey system
Here, the commercial system is a general or multipurpose system that
can fit into any entity. It can also be a system for a specific industry. In
any case, it is a standardized system that cannot be adjusted by the
user to suit the entity’s concern.
A good turnkey system will allow the user to customize its inputs,
outputs and processes. But cannot configure it to suit the particular
organization. The business will, therefore, adjust its needs to suite that
of the system. QuickBooks and Sage 50 are good examples of the
Turnkey system.
2. Backbone system
This commercial system allows the user to add flesh to the system’s
structure. This means that the system is already programmed in a way
that allows the vendor to adjust the interface to meet unique user needs.
It is seen as a compromise between a turnkey and customized systems.
However, it is more expensive.
3. Customized system
In a customized commercial system, the vendor built a unique system
and sells it to the user. A customized system is similar to a built inhouse system. The difference is that in an in-house system, the user will
employ information technology staff to handle the maintenance of the
Information system.
However, in a customized system, the user purchases the system while
the vendor does the maintenance of the system. The user does not need
to employ system development staff.
II.
The Role of the Accountant
Accountants are primarily involved in three ways: as system users,
designers, and auditors.
A. Accountants as Users
In most organizations, the accounting function is the single largest
user of IT. All systems that process financial transactions impact the
accounting function in some way. As end users, accountants must
provide a clear picture of their needs to the professionals who design
their systems. For example, the accountant must specify accounting
rules and techniques to be used, internal control requirements, and
special algorithms such as depreciation models. The accountant’s
participation in systems development should be active rather than
passive. The principal cause of design errors that result in system
failure is the absence of user involvement.
B. Accountants as System Designers
Accountants are major catalysts in the design of accounting information
system. They are the most suitable and most equipped information
measurement professionals to design the information system. It is
generally believed that insiders in every area of life make better
developmental instrument. This function of designing AIS includes the
design of managerial accounting information system to aid management
in decision making processes.
An appreciation of the accountant’s responsibility for system design
requires a historic perspective that predates the computer as a business
information tool. Traditionally, accountants have been responsible for
key aspects of the information system, including assessing the
information needs of users, defining the content and format of output
reports, specifying sources of data, selecting the appropriate accounting
rules, and determining the controls necessary to preserve the integrity
and efficiency of the information system.
These traditional systems were physical, observable, and unambiguous.
The procedures for processing information were manual, and the
medium for transmitting and storing data was paper. With the arrival of
the computer, computer programs replaced manual procedures, and
paper records were stored digitally. The role accountants would play in
this new era became the subject of much controversy.
Lacking computer skills, accountants were generally uncertain about
their status and unwilling to explore this emerging technology. Many
accountants relinquished their traditional responsibilities to the new
generation of computer professionals who were emerging in their
organizations. Computer programmers, often with no accounting or
business training, assumed full responsibility for the design of
accounting information systems. As a result, many systems violated
accounting principles and lacked necessary controls. Large system
failures and computer frauds marked this period in accounting history.
By the mid-1970s, in response to these problems, the accounting
profession began to reassess the accountant’s professional and legal
responsibilities for computer-based systems.
Today, we recognize that the responsibility for systems design is divided
between accountants and IT professionals as follows: the accounting
function is responsible for the conceptual system- what does the system
does, and the IT function is responsible for the physical system – how
will the system do it.
C. Accountants as System Auditors
Accountants audit the already ‘acclaimed’ AIS to ensure that what is
claimed to have been implemented is actually followed. Note that the
role of auditors is not to fetch thieves in a system, but to ensure that
rules claimed to be followed are backed up by documentation, and
where it is not possible for it to be documented, the auditors should
observe the process take place.
D. Accountants also can be Implementers & Owners;
AS IMPLEMENTERS, It’s the role of accountants to ensure that AIS
designs are actually implemented. It is not enough to just have
procedures in place, implementation and enforcement are very
important. The accountant while being involved in the implementation
process of the AIS may discover an implementation problem that nonaccountants may find difficulty communicating back to the systems
designers.
AS OWNERS, as accountants get more involved in the overall decision
making in the business angle, a lot of accountants are now being
classified as users of accounting information systems. They use the AIS
to process and produce accounting information such as financial
statement. Also, accountants rely on their knowledge of AIS to make
quality fundamental analysis of financial information, this they do while
acting as financial planner or investment accountants.