Examining Accounting Information Systems
Spreadsheets have been a cardinal facet of concern for many old ages. This started back in the 1970s which allowed a individual to organize informations, analyze it and as a consequence make an informed determination as to what to make next. The thought behind the spreadsheet was to organize informations which allowed the user to analyze informations more expeditiously. Presently, many houses still use spreadsheets to help their work, and the same premiss is ‘carried out utilizing the basic construct of the manual worksheet ‘ ( Ballantine, 1991 ) . Spreadsheet modeling is non merely used as an index for a house, but is besides utile to organize big sums of informations so that a manageable system is determined. Furthermore, it allows easiness of usage and to boot helps with sensitiveness analysis or what-if analysis which can non be performed manually.
Modeling is considered to hold more benefits but disadvantages are besides involved. The benefits include efficiency, cost and flexibleness. However, disadvantages include relevancy, incumbent mistakes and critical analysis. This is important because spreadsheet modeling is merely relevant for certain facets of coverage, and hence non suited for certain patterns. As a consequence non all houses are able to run appropriately. For illustration, ‘two-thirds of companies continue to depend on spreadsheets despite the handiness of more sophisticated fiscal systems ‘ ( Falck and Lynn, 2004 ) , this is surprising due to operational hazard involved. However, this concerns merely certain parts of finance and accounting including exchequer direction and auditing.
‘Spreadsheets have been applied successfully in many different Fieldss to assist work out a broad scope of jobs ‘ ( Ballantine, 1991 ) . This suggests that spreadsheets are comparatively easy to utilize but this does non convey the whole narrative. Generally, modeling is applied to ‘profit and loss histories [ and ] balance sheet readying ‘ ( Ballantine, 1991 ) which to many is seen as the majority of accounting. Furthermore, it is considered to be a cardinal tool of day-to-day maps but this depends upon how “ sophisticated ” the package is ; but by and large, spreadsheets provide ‘higher productiveness and better use of clip ‘ ( Ballantine, 1991 ) . Despite spreadsheets being easy to understand and therefore to easy to utilize, there has ever been one common job which can potentially ‘waste the whole spreadsheet ‘ ( Callahan, 2002 ) . Spreadsheet mistakes are highly frequent in patterning proposing use is non so advantageous. Surveies such as the fiscal intelligence CODA study ‘that 95 % of U.S. houses use spreadsheets for fiscal coverage ‘ ( Morrison 2006 ) , which implies that mistakes are more than probably to happen in each instance. As a consequence, this is can do informations to be misused and hence waste valuable clip and create unneeded costs for houses. On the most portion they are created through human mistake, but yet, this can still be difficult to rectify. For illustration, ‘Freeman cites informations from the experience of a confer withing house, Coopers and Lybrand in England, which found that 90 % of all spreadsheets with more than 150 rows that it audited, contained mistakes ‘ ( Panko, 2008 ) . As a consequence, this proves that heavy use does come at a monetary value, non merely to the person but to the house at the terminal. This may be a ground why houses search for options.
Despite the spreadsheet ‘s methodological analysis and it being commonplace within houses, Enterprise Resource Planning ( ERP ) has started to impact companies and particularly impacting the function of direction accounting. ERP ‘are package faculties for different concern maps linked for a common database to bring forth an integrated enterprise-wide system ‘ ( Perpetrators ) . This is peculiarly of import for fiscal houses as it allows accurate prediction and hence AIDSs net income by maintaining efficiency at a upper limit. For companies, ERP allows certain merger between sections and helps maintain informations centralised. This is important because ‘prior to ERP, package was developed to suit single procedures of an single concern ‘ ( Monk and Wagner, 2009 ) . Albeit, this is non ever good for fiscal patterns and hence spreadsheet patterning becomes advantageous. ERP can go expensive, and compared to spreadsheets is non that easy to utilize. ERP involves direction comptrollers altering their functions and requires extended cognition, therefore why clerking rules are considered utile. Continued use of ERP means greater demands of efficiency and can add force per unit area to employees within the house. Furthermore, a common database is non ever required doing spreadsheet patterning more practical. However, this depends on the existent house and the demand for specific coverage.
Security is an of import characteristic for many houses particularly for those who compete, and hence do non desire their information shared. Microsoft Excel has certain security characteristics nevertheless ; the consciousness to users is minimum which can do increased hazard and finally excess costs for houses. Another position on this is that it is merely there for easiness of usage and non strictly for security grounds. Second, the Sarbanes-Oxley Act has farther hampered the invention of more intelligent spreadsheet versions. This is due to an increasing dependence on the Act ensuing in slower betterments for the ‘compliance procedure and hazard direction capablenesss ‘ ( Leech, 2005 ) . Consequently, any alterations made to a spreadsheet are hard to track and makes patterning redundant to a certain extent. Therefore, it is indispensable for spreadsheets to hold security, but this is non presently the instance which makes houses exchange to other informations plans like ERP. Third, ‘many companies are non measuring IT general controls ‘ ( Leech, 2005 ) , connoting that houses are non concerned about the security behind spreadsheets every bit good as few houses sing ‘spreadsheet-based control coverage to be accurate adequate ‘ ( Leech, 2005 ) despite the actions of the Sarbanes-Oxley Act. Furthermore, it is up to the house to update their package and hence provide security for spreadsheets, but houses do non capable spreadsheets ‘to the same controls and subjects as decently managed IT undertakings ‘ ( Condon, 2010 ) . This falls short with houses because spreadsheet security is ‘not recognised as an endeavor security job ‘ ( Condon, 2010 ) .
New conformity with Sarbanes-Oxley means that houses and more significantly accounting officers are made responsible for mistakes. Therefore, it is hard to see why a spreadsheet would be used to convey such of import figures. ‘The Act specifies new fiscal coverage duties, including attachment to new internal controls and processs designed to guarantee the cogency of their fiscal records. ‘ ( Author Unknown, 2003 ) As a consequence, spreadsheets, as argued earlier, turn out hard to be accurate and are susceptible to mistakes. The Act ‘has forced companies to analyze the function spreadsheets play in their fiscal coverage processes every bit good as fiscal determinations based on the usage of spreadsheets ‘ ( Author Unknown, 2006 ) . To a greater extent, it implies that spreadsheet modeling is no longer allow as a tool to show fiscal informations ; and great emphasis is made on more sophisticated and dependable package. Despite this concern, spreadsheets are still commonplace within houses, where accent is upon on truth. Consequently big sum of costs are spent on the examination of every sheet. In the instance of Enron, whom misstated their histories, they ‘ve caused much reform within the accounting universe ensuing in histories being 100 % accurate and free from mistake. This is where spreadsheet modeling struggles. It makes it more hard for houses to utilize spreadsheets despite their trust. The effects are excessively high for spreadsheets to be used in describing, such as the instance of Cendant and Sunbeam.
Overall, spreadsheets are still considered to be critical within a house with advantages of clip and cost. This is of import for houses because it helps them see both internal and external factors, and allows companies to pattern their concern determinations. Furthermore, constructing a theoretical account helps the user to the full understand the causes and effects of a job, every bit good as sing any options. More significantly it gives the flexibleness to the user nevertheless it does non dig deep into more complicated jobs as mistakes are more susceptible and common. Furthermore, it does non give houses the information that it ever requires ; to many, spreadsheets are deemed to be “ large, complex reckoners ” and hence non allow for houses who have significant grosss and huge sum of informations. The disadvantages outweigh the positives as many houses become frustrated with the inaccuracy compared to other accounting package. Mistakes can stay undetected which at the terminal can turn out to be debatable. ’40 % to 80 % spreadsheets contains mistakes at their origin ‘ ( Randles, 2005 ) which so can blow valuable clip and lose indispensable efficiency, moreover, it ‘omits context ‘ ( Randles, 2005 ) where it could be analysed by houses. Additionally, ‘most companies apply good pattern within their ERP environment with individuality and entree direction and segregation of functions, that subject is lost one time informations is exported to a spreadsheet ‘ ( Condon, 2010 ) ; therefore it can be said that spreadsheets are no longer required in modern twenty-four hours concern. A ground is that they are inactive and no existent promotions have been made since the 1970s.
Finally, spreadsheets are a cause for concern as they are non needed any longer but houses are volatile to follow modern options and as a consequence ‘these mistakes can hold annihilating effects for the organisation ‘ , but still excessively many houses ‘recognizes that spreadsheets will go on to be the foundation of fiscal coverage ( Author Unknown, 2006 ) .