Question

information related to improper assumptions concerning accounting information systems.

Answer 1

Accounting Information Systems have been developed as part of attempts to revolutionize the processes of the accounting department and functions. Since these systems involve the use of computerized processes, they tend to provide accurate and timely information. This is mainly enhanced by the separation of the systems into various sub-systems like General Ledger module, Accounts Payable module, Accounts Receivable module, and Inventory module. Each of these modules has a different purpose and functionality that are integrated to provide organizations with an extremely efficient accounting information system.

While the systems help to provide helpful and timely accounting information, there are some related incorrect assumptions made by management.

The first incorrect assumption related to accounting information systems is the fact that management tends to consider the security of accounting information as a responsibility of the IT department. The security of accounting information contained in the systems has usually been left or delegated to the Information Technology department who are responsible for the design of these systems. This assumption has led to the establishment of regulations stipulating that the security of accounting information is a top management responsibility. Section 404 of the Sarbanes-Oxley Act made it compulsory for organization’s management to preserve internal controls over financial reporting. This regulation incorporates accounting information systems because it generates numbers for the financial reports.

Secondly, management assumes that accounting information systems generate accurate accounting information. While this is true when compared to manual systems, the reality is that accounting information systems can contain mistakes. These mistakes are likely to occur because the accounting department handles a huge volume of transactions. Some of the most common errors include mistyped numbers, wrong accounts of journal entries, and misclassification of transactions.  

Third, the costs of purchasing, implementing, and maintaining these systems are major assumptions attributed to the substantial decrease in their costs. Management may be required to spend additional costs in maintaining the systems and training new employees when implementing the systems. There are other additional costs related to accounting information systems including the costs for customizing reports.

Similar to Management Information Systems, the assumption that a manager needs the information he wants is an assumption related to accounting information systems. In this case, management assumes that they can generate the financial information that they need to accomplish specific goals.

Accounting information evaluates business activities and communicates the information to investors and creditors.

The final assumption is that accounting information systems should provide positive financial information in order to be effective. Since these systems only help managers to manage, they show the actual financial position of the organization.

The most negative potential impacts on business operations related to these assumptions is that they could result in ineffective business practices that lead to poor productivity of the organization. The likelihood of ineffective and inefficient business practices is attributed to the incorrect financial information, unauthorized use of private and confidential financial information, theft of important information, huge costs, and reduced accuracy and efficiency of accounting operations.