Research Project
Research Project
Research Project
ACCT 110
11/28/2013
Research Project
What is AIS?
Investopedia.com, a respected and trusted website that provides up to date investing
education defines AIS as the following:
An accounting information system (AIS) is a structure that a business uses
to collect, store, manage, process, retrieve and report its financial data so
that it can be used by accountants, consultants, business analysts,
managers, chief financial officers (CFOs), auditors and regulatory and tax
agencies. In particular, specially trained accountants work with AIS to
ensure the highest level of accuracy in a company's financial transactions
and recordkeeping and to make financial data easily available to those
who legitimately need access to it, all while keeping data intact and secure
(Fontinelle 2011)
In general, financial accounting data has been commonly defined as information prepared for
external users such as creditors, investors and suppliers. An AIS system is designed to meet the
needs of any person who can make use of it such as managers, accountants, consultants, business
analysts, chief financial officers, and auditors (Kharuddin, Zariyawati and Annuar 2010, 30).
The main objectives of many businesses that adopt this system of acquiring financial accounting
are to improve their organizational efficiency and increase competitiveness ability. Prior research
has shown that AIS adoption does increases firms performance and operations efficiency.
(Kharuddin, Zariyawati and Annuar 2010, 30).
Some of the research done includes showing how AIS helps the different departments within a
company work together. For example, management can establish sales goals for which staff can
then order the appropriate amount of inventory. The inventory order notifies the accounting
department of a new payable. When sales are made, sales people can enter customer orders,
accounting can invoice customers, the warehouse can assemble the order, the shipping
department can send it off, and the accounting department gets notified of a new receivable. The
customer service department can then track customer shipments and the system can create sales
reports for management. A well-designed AIS, allows everyone within an organization who is
authorized to access the same system and get the same information such as inventory costs,
shipping costs, manufacturing costs and so on (Fontinelle 2011).
The procedures and instructions for the implementation of AIS are the methods it uses for
collecting, storing, retrieving and processing data, which will be coded into the AIS software.
Employees need necessary training and documentation of these procedures; consistency is the
only way to achieve effectiveness.
The software component of AIS would be the computer programs used to store, retrieve, process,
and analyze the company's financial data. The data contained in AIS is all the financial
information that is necessary for the business practices. Business data that impacts the company's
finances should be included in AIS such as: sales orders, customer billing statements, sales
analysis reports, purchase requisitions, vendor invoices, check registers, general ledger,
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inventory data, payroll information, timekeeping, and tax information. The hardware necessities
are items a business would typically need to have anyway - they include personal computers,
servers, printers, surge protectors, routers, storage media, and possibly a backup power supply.
The hardware selected for AIS must also be compatible with the software they intend to use.
Types of Software are used by small businesses for AIS systems
The main software component of AIS is the computer Software used to save, backup,
handle and analyze the companys financial data. So basically it is core part of any business.
Before computers even existed, AIS were manual; basically everything had to be done by hand.
But today computers do everything. Most Small businesses use Intuits QuickBooks, Quicken,
excel and many other AIS software. But these three are the most popular. For Every type of
business there are different types of Software and for different levels. Basically for small
business the software package doesnt need to be as advanced as a large business accounting
system.
The most important things when choosing accounting Software for a business is to look for,
quality, reliability and security. These are the main components any software must offer. For any
person managing a business, information has to be of high quality in order to make all the good
business decisions.
Most AIS programs can be customized by the user for easier use and better understanding of how
business data is handled by the AIS software. This type of software can also be built from
scratch for specific purposes; everything depends on the needs of a business. The only problem
here is that this software is limited to certain things because of the Sabanes-Oxely regulations.
These regulations indicate the structure of the AIS. The SOX is a United States federal act that
set new rules, and standards for public companies to prevent fraudulent actions. (Fontinelle
2011)
The other most important thing other than the Software is the Hardware, basically the type of
computers that are going to be used such as servers, printers, surges protectors, routers, storage
media, and maybe a backup power supply. These things are the most important physical parts for
any accounting System. Additionally the AIS must have a plan for maintaining, replacing and
upgrading components of the hardware system, and also a plan in case the business owners ever
need to get rid of any data, so sensitive information is not leaked.
As mentioned before the programs that are most used in small business are QuickBooks,
PeachTree Accounting, and Microsofts Small Business Accounting, and other such as Wave
Accounting, Sage 50/100 US edition, Xero, and FreshBooks. There are so many programs
available in the market, so how do business owners know what to choose? Well first of all, based
on research made by Linda Bressler and Martin Bressler (Bressler and Bressler 2006), people
were asked what type and how many AIS software packages they were using. They selected 175
Small businesses, which 75 business owners responded to the survey. Out of the 75, 41
responded that they used QuickBooks, 16 users
reported to use Microsoft Excel. When asked how
many AIS systems they used? 25% answer they used
more than one. One of the answers were I use
4
Bressler, Martin S.Strategic
Finance87.12(Jun 2006):
56-60.
commodities and price. AIS allows for the collection and comparison of data in one place. It is
also provides an easier way to check for and identify any errors that may occur during the
accounting process (Bressler and Bressler 2006)
AIS can be a good reference tool. Users are able to quickly look up the account, tariffs list,
portfolio fess, fixed assets, as well as any data used during the accounting process by using the
AIS. This is not only helpful to new accountants in learning new skills but its useful for an
experienced accountant because it is faster and saves (Bressler and Bressler 2006)
Fraud and theft are issues every company has to deal with. AIS can help the business prevent
fraud, and theft of cash or property from the business. With the data and information from the
system, the forensic accountants can check and monitor the supplies, goods, scrap or the
efficiency performance of labor from different parts (Fontinelle 2011). AIS can perform
scheduled maintenance and random checks to reduce the fraud or prevent further fraud or theft
from happening. In many cases fraud happens because of the lack of management skill. The AIS
helps improve management skills and abilities to make decision by providing them with easy
access to necessary data.
Time is one of the most important parts of managing a business. The AIS will help management
spend less time fixing problems from a manual system. The manager will have more time for
analysis, forecasting, building strategy or business plan. Creating solutions to improve
management efficiency will bring the business benefits such as profit for themselves and society.
(Lohrey).
There are the benefit of using this system is that the AIS software program can be customized for
the different requirements of a different company. If existing software doesnt meet the
requirement and satisfy the businesss need, they can develop and further the program to meet
the specific needs of the company (Fontinelle 2011).
Negative effects of AIS on small businesses
In computerized accounting systems, system security is the most important that thing has
to be set up before anything is done with the system. If the system is setup correctly but has poor
security anyone can get access to sensitive information and jeopardize business productivity by
leaking information to other rivals. Password authentication is a good way to keep every
employee in check and also make sure that they have limited access to certain things. Unlike
manual accounting information is not kept in a file cabinet locker with a key, but instead in
computers with passwords, which can be easily hacked or stolen.
One of the most important decisions a business owner makes is choosing AIS, once this decision
is made, the business will have to pay for its cost. Cost is really important when choosing an
accounting system. Even though for small business the programs may not be too expensive, in
the case of QuickBooks, which has numerous software packages ranging from $12 a month for
the online version, up to $600 for the enterprise version. When it comes to cost, for a small
business the cost of the software is just a small fraction of the total amount of buying an AIS.
The things to worry most about are the hardware parts of the System. Depending on how big a
small business is; the hardware part can be very costly because any business that has at least 15
employees must have at least 15 computers, one for each user. Aside from computer, you need a
database to backup all your data, and also you need devices such printers, scanners, fax
machines, Routers, and more. Another problem also surfaces when you buy hardware and it is
not compatible with your system, you may also have connectivity issues resulting in a decline in
productivity of a business. In case some of these things get damaged the business will have to
spend more money in repairing or replacing equipment. A business has to pay for an annual
subscription for a Antivirus program, it also has to pay for network maintenance, staff training,
and maybe a monthly fees that some companies charge for using their accounting systems on the
cloud or web-based. On top of everything else you also need to spend money in energy to power
up your AIS, and also to buy supplies like ink and paper that is used to present reports, or just to
keep a physical copy of important documents. (Deborah Beard 2007)
An additional downside of AIS in small business is that in the hand of the wrong person, bad
things can happen like fraud for example. Because all the business data is digitized, it can be
easily tampered with. Meaning that the information a file hold can be altered, this can cause
business big losses. In case AIS is not set up correctly errors made can be made repeatedly and it
will take a long time to figure that out. This can also cause accounts to be unbalanced. (Deborah
Beard 2007)
C. What I Learn From The Project
Nowadays, small businesses have a hard time striving to succeed in this economy, in
order to succeed changes and implementations have to be made, in order to maintain a business
in good shape. AS we saw in this research, AIS one of the most useful tools a small business
can use in order to keep all the financial history of the business in a safe place and organized.
When choosing for a AIS software package a business owner has to make sure that the program
he ends up choosing fits his/her business needs. AIS as any other accounting tools, has its
benefits and risks. However, as long as you have a good system setup and trust worthy people
working for the organization, AIS can help the business become successful and more productive.
REFERENCES:
1.Kneevi, Sneana, Aleksandra Stankovi, and Rajko Tepavac. "Accounting Information
System As A Platform For Businesses and Financial Decision-Making In The Company." Edited
by Business Source Complete. Management 1820-0222, no. 54: 63-69.
2.Bressler, L. A., and M. S. Bressler. "HOW ENTREPRENEURS CHOOSE AND USE
accounting information systems." Strategic Finance (Strategic Finance) 87, no. 12 (2006): 56-60.
3.Deborah Beard, H. Joseph Wen. "Reducing The Threats Levels of Accounting Information
Systems." The CPA Journal, May 2007.
4.Fontinelle, Amy. Introduction To Accounting Information Systems. Edited by Amy Fontinelly.
Investopedia. July 2011, 2011.
http://www.investopedia.com/articles/professionaleducation/11/accounting-informationsystems.asp (accessed December 2, 2013).
5.Intuit. QuickBooks Enterprise. Edited by Intuit. QuickBooks. 2013. (accessed 12 02, 2013).
6.Kharuddin, Saira, Mohd Ashhari Zariyawati , and Nassir Annuar. ". "Information System And
Firms' Performance: The Case Of Malaysian Small Medium Enterprises." "International
Business Research (International Business Research) 3.4 (2010): 28-35.
7.Lohrey, Jackie. "What Are the Negative & Positive Impacts of Computerizing an Accounting
Department?."Chron. . http://smallbusiness.chron.com/negative-positive-impacts-computerizingaccounting-department-31404.html (accessed December 2, 2013).