Successful AIS Implementation
Identify three to five (3-4) factors that contributed to the accounting information system failure within the business that you have identified. Indicate the impact to the business. Provide support for your rationale.
Avon is an outstanding international beauty company that was founded over 100 years ago and has over 6 million sales representatives. The organizations require a system that fits well with the evolving changes in the beauty world. The accounting information system doesn’t include much utilization of the machines; the machines are just devices in the system. They are not the key drivers during the whole process (Bucker & International Business Machines Cooperation, 2009).
The accounting system may be traditional or not genuinely agreeable with the administration system, which may cause system disappointments, as these administrative plans are concentrated around the total disappointments of different firms. Example is Enron and other organizations. The mechanized accounting systems are more valued than the manual accounting systems and the organization may embrace the change to modern accounting systems due to expanding profits.
The electronic information system was derived from the internet as the machines system was associated with the web. Lack of harmonization by different organizations in regard with the accounting system is the main reason of system change. Organizations that have been in operations for long need to face changes accordingly, and these results to system change (Hall, 2010). Mechanized systems add harmonization differently and the information might be compared with the modernized information controls. Harmonization is however not achieved by operating the machines as part of business setting, but harmony is realized by operating same measures for the accounting systems. This makes information to be alike with different organizations in the market.
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Poor human resource involvement during system implementation process caused accounting errors during operations and this also contributed to the failure in Avon’s accounting system. The human resource used during the whole accounting systems implementation must be well involved from the being. The system will require skills and competent workers, quality data feeds to ensure wrong financial figures. Garbage in garbage out rule will always apply either in the modern or manual accounting (Hall, 2010).
Avon is popular for their innovation and development strategies; along their great policies the organization has acquired change with intentions to change their accounting systems. The accounting systems implemented must be in line with their company use.
Assess senior management responsibility for the failure in question. Specify what the senior management could have done differently to avoid the failure. Provide support for your rationale.
According to Sylan (2014), change in the accounting information systems is not modest; a lot of techniques and alterations will be done. Moving from manual to modern accounting system is complex, administration works will reduce and huge change will be experienced in the control methods. This can bring about danger in the business leading to disappointments in the whole organizations.
The management should have developed new control methods that fit in with the new accounting systems. Modern accounting systems require very different internal control methods from those used during the manual system. It was the management responsibility to have noted the required changes and implemented them to reduce the occurrence of accounting errors (Hell, 2010).
It was the management responsibility to ensure that the accounting department is well trained regarding the new system operations. Machines don’t understand the accounting standards thus critical learning levels and skills to enter information are required. Accounting standards must be observed and practiced both in manual and modern systems. The management failed to adequately train them and this facilitated the occurrence of human errors in the company.
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The management should have disclosed the kind of dangers that the accounting department is exposed to and also educate the employees on possible solutions to cumber them. Example, The usage of machines for the accounting systems is confounding, whereby it able to build the expertise and sustainability of the organization, however the company is not supposed to over depend on them. Employees should be able to control the machines not vice versa (Sylan, 2014).
All members of the company who were directly involved with the new systems were supposed to be fully involved from the beginning of the project. These employees were supposed to feel as part of the team and participate with ideas during implementation. According to Hell, (2010), long time involvement with the system would have enhanced their operations with the system. The management was responsible in ensuring those employees are fully involved and this would have improved their performances.
It is the obligation of the administration in the organizations to avoid danger and system disappointments, they must remain in charge and get ways to cumber the situations. They must involve the employees and let the system implementation to be achieved through teamwork.
Evaluate whether the most significant failure occurred within the system design, implementation or operational phase of the process. Indicate what the company could have done to avoid the failed outcome. Provide support for your rationale.
Massive failure occurred during implementation of the modern system. So much has changed with time affecting the accounting regulations; the reasons for change are advancements in knowledge and total change in the business environments. Stricter measures must be put in place as a result of change to reduce frauds and accounting misstatements. The books of accounting are expected to give fair and true information that can be highly relied both internally and externally without misleading (Ulrich & Newcomb, 2010). The company should have ensured accounting standards are followed as per the accounting guidelines. These guidelines would have restricted the accountants and prevented frauds and accounting misstatements.
According to Bucker & International Business Machines Cooperation (2009), the company would have implemented an audit department who keep watch of the accountants. The internal auditor ensures that accounting standards are practiced without any compromises and this reduces frauds. Accounting regulations put in place are the key drivers; example a company had chosen an incorrect depreciation policy, and for this reason there is need for the company to check international standards and the accounting standards. If there is no need to make any changes then the company is free to implement their chosen policy. Guidelines need to be followed in assets valuation of the company as per accepted principles and any accounting compliance necessary. Lack of compliance with the set standards may lead to under or overvaluation of the company assets, affecting the company balance sheets. In this condition, the nature of information is no longer true and fair as per the standards and may be manipulative and true value of the company hidden. (Sylan, 2014). The company should also involve external auditors whose work is to ensure that accounting and audit departments are operating as per the set standards.
The company should have implemented controls methods that are designed to control the modern systems. Different control methods are required when dealing with the computerized systems. Example, old internal controls methods like documentations, invoices, or applications forms can no longer be signed traditionally. The use of computers in the company doesn’t completely out do paper work; the company is still in a position to use them. The computerized information may be printed and properly signed by the right people, in cases of the invoices and requisition forms to reduce on errors (Ulrich & Newcomb, 2010).
The company should have implemented prevention measures on the computers. Computerized data require massive prevention both physical and remote right of entry. Prevention to physical access in the company may be achieved by single entry to the system restricted to authorized personnel only. Restricting on computer access reduces chances of unauthorized person from accessing unauthorized information. This reduces occurrence of intentional errors in the company. Implementation of data safety is necessary; to prevent intentional data access and two is maintenance of the computerized data. (Hall, 2010).
Different conditions can interrupt on the computer storage, example, floods, fire even weather conditions that may affect the computers. These conditions may result to total damage of the systems leading to permanent data loss in the company (Sylan, 2014). The company should ensure that there are safety control measures implemented to reduce such losses and ensure data safety. The unintentional damages are more severe and may cause entire data damages; this may be a tragic loss to the company.
Evaluate how implementing best practices would have reduced the chances for failure. Provide support for your rationale.
Implementing regular system checks will reduce on their level of fails, and this will prevent risks. Internal controls are used to prevent the company from any risks, including the risks associated with the accounting systems. Most companies adopt the modern accounting systems due to competition from their competitors in the same market. Competitive market environment and company harmonization are the main reason for adaptation. During company accounting migrations, the company may transfer the accounting ledgers, customer database and company details to their computerized systems. The computer is able to use the available data and use it in different tasks of the company transactions (Ulrich & Newcomb, 2010).
Computerized systems will make data retrieval to be fast and easy but there are risks associated. Data migration to new system will not increase any new opportunities but it will speed the retrievals and enhance operations. Internal control methods will be different from the old methods used. Data that is intended to remain confidential to an individual will not be accessed by others and will reduce unauthorized use in the company.
Different users will be able to access information from different sources easing operations. Standardization is necessary and will allow information exchange and this may prevent decrease or increase load of information. The computerized systems can fail just like the manuals, but the controls methods required are different from those used in the manuals. Companies should learn to adopt ethics and professional regulations together with quality internal control methods. Control methods will prevent risks, while practicing accounting regulations will reduce legal risk. There are also different practices that companies should practice to reduce risks indirectly (Bucker & International Business Machines Cooperation, 2009).
Based on your research, develop a list of between four (4) and six (6) best practices that organizations should use today to reduce the chances for failure. Provide support for your rationale.
Best practices that companies should practice in order to reduce failures includes:
- Quality internal controls should be implemented
- An independent audit department should be set
- Implementing compliance guidelines
- Implementing policies in accounts as per the accounting regulations.
Internal controls are the main methods in the companies and they prevent mismanagements which may include frauds, natural risks or criminal acts. Unintentional actions such as human errors and accidents occur often and in large volumes compared to the intentional actions like frauds. Implementation of quality control methods should be used to reduce on both intentional and unintentional acts in the business (Hall, 2010).
Internal audit department will set rules and regulations to be practiced in the company and also ensures that they are followed to the letter. This department will be responsible in assessing the accounting systems, monitor the control systems and also stop any chance of future frauds. Companies should also have external audits that ensure that the accounting and internal audit departments have fully complied with the regulations and every accounting rules are followed as expected.
Implementing regulations in both accounting and technology areas is basically important. It takes time for an accounts obsolescence to occur, but occurs due to lack of the necessary control measures.Accounting policies must be adopted as per GAAP which ensures accounting harmony and reduces on the legal, accountancy and audit risks (Sylan, 2014).
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Using the information provided by IBM and others, indicate which of the principles designed to provide insight into effective and efficient strategies on how to best deploy financial management systems, which were outlined within the related article, should serve as an example of what not to do when establishing the foundation for a firm to follow. Provide support for your rationale.
Weaknesses in computerized systems security holds a capable effect to the applications controls that are related to financial management, compliance rules and regulations should be practiced accordingly and internal controls adopted (Hall, 2010). Difference between modern and manual accounting systems should be understood and computerized accounting rules implemented. Internal controls should be used to reduce the associated risks either intentional or unintentional risks.
Companies are deemed to understand the nature of their business, increased business knowledge reduces the associated risks as assessment of risks is highly effective. Internal control implementation is a key factor but the controls must be effectively working.
Companies should implement policies regarding risks in the business in order to reduce them. It is the company’s responsibility to prevent risks occurrence no matter what, they will be held to blame if such occurrence happens. Companies should always be very careful as they transact with their suppliers or the company outsourcing their computer systems. They cannot transfer risk to them, so should always be ready to handle the situations in their business.
Bücker, A., & International Business Machines Corporation. (2009). Identity management design guide with IBM Tivoli identity manager. Poughkeepsie, N.Y: IBM, International Technical Support Organization.
Hall, J. (2010). Accounting Information Systems. Boston: Cengage Learning
Sylan, R. (2014). How to Replace Mannual Accounting Information System with Electronic
System. Retrieved from: http://smallbusiness.chron.com/replace-manual-accounting-information- systems-electronic-systems-44735.htm
Ulrich, W. M., & Newcomb, P. (2010). Information Systems Transformation: Architecture- Driven Modernization Case Studies. Burlington: Elsevier.