Research Proposal For Accounting And Technology In IT: A Literature Review

Literature Review

Discuss about the case study Research Proposal for Accounting and Technology in IT.

Accounting practices have been running for decades across companies of different sizes and nature in order to measure and manager its financial performance. It ensures that all the financial transactions in context of sales, assets, liabilities and much more follow a standard set of rules and regulations. Conn (1978) stated that accounting is similar to an information system which collects, processes and shares financial data in context of any economic entity. Though growth in information technology (IT) has ushered in many changes across industries, the impact felt across the accounting industry was much noticed. Once considered a monotonous and slow moving industry, accounting practices have undergone some dramatic changes, partially due to the sudden changes in the business ecosystem (Elliott, 1998). Exponential growth in information technology has made palpable impact on the accounting systems, therefore changing the way accounting was performed.  It be noted that computers and other digital technologies have arguable improved the organizational productivity resulting in effective collaboration of financial information to generate authentic results.  Information technology has provided various tools and techniques to identify and pursue economic and business opportunities across industries. (Ballada and Ballada, 2011). As IT has become such an integral part of organizational structure, decisions in context of the IT structure ought to be taken with due recognition to its strategic relevance. Henceforth, IT could be seen emerging as a central component of the transformed economic trade system given the progress in accounting performance (Efendi, Mulig and Smith, 2006).  In a simpler form, IT has changed the concept of conventional practices of business and accounting (Hunton, 2002). The most prominent reason of easy adoption of the link between accounting and IT is the popular assumption that IT has become a foundation for accounting data and information to draw conclusions (Granlund, 2007). Even though a lot of research has gone into traditional accounting practices, the focus now has shifted to the relation between IT and accounting systems.  Though it’s a general observation that technology has changed the accounting processes and management decision making, there has been limited research conducted so far. It is hoped that this research would provide the much desired fodder to stimulate extensive studies to define the association between IT and accounting systems.

This paper has been divided into different sections in order to attempt sequential steps to arrive at an appropriate conclusion. The first chapter would discuss the extensive academic literature in context of IT and its role in accounting or financial industry around the world. The second chapter would discuss the research methodology adopted to achieve the research objectives set. The third chapter would involve the discussion over the results found after the analysis of collected research data. The fourth chapter includes conclusion for the research conducted to establish the relation between accounting and IT.  The fifth and last chapter elaborates on some recommendations made in order to improve the results of the research.

Every organization, irrespective of its nature and size, rely on accounting systems to perform its basic financial activities. Accounting in its basic form can be described as a process which involves measuring, categorizing, summarizing data in a specific manner and interpreting results to make important decisions (ICPA, 1953). With the progress made in information system, many transformations could be seen across the accounting and economic structure. Information can be defined as data which has been processed into something conclusive and usable form which has the capacity to eliminate complexity in a specific situation (Senn, 1999). However, information technology (IT) can be defined as the process which involves leveraging electronic technology to achieve the needs for vital information sought by businesses across different organizational levels. It is a lot like a computerized system which stores, processes and disseminate information (Primchard and Cole, 2006).

 In the early years, all basic financial calculations were done manually but it had many drawbacks with lot of time and energy consumed in complex methods. However, technology introduced some major changes in the traditional accounting systems, thereby simplifying things and improving accessibility to quality information for the organizations. It be noted that financial sector has been most radically affected by the exceptional growth witnessed in IT (Hassan, 2010). Using technology in accounting operations help organizations adopts and executes advanced technological format and assists management to make better decisions on day to day operations (Mancini, Dameri and Bonollo, 2016). There are many accounting information systems developed in order to dig out the actual relevance of the collected and stored financial data. An Accounting Information System (AIS) can be defined as information subsystem operating within an organization, and which collects information from different subsystems and mutually shares it with other processing subsystems in the organization (Moscove et al., 1999). It be noted that the primary function of accounting information system (AIS) involves amassing, processing, and exchanging financial data and other relevant information to the stakeholders of an organization as well as internal parties to make effective business decisions.

All this perpetual growth in information technology and its impact in the accounting has allowed accountants to make use of new tools based on IT. The aspects that are possibly causing more ripples are the emergence of Enterprise Resources Planning (ERP), IT Governance, Forensic Auditing,  logic management systems, cloud computing and much more. Given the complications and challenges of the advanced accounting practices, accountants ought to have technical skills apart from the accounting know how in order to understand their job.  As per the the American Institute of Certified Public Accounts (AICPA),  requisite knowledge, skills and competencies for an entry-level accountant job now includes wide knowledge of application and integration of IT into accounting systems and financial and managerial practices (Dillon and Kruck, 2004). The ERPs ensure that all the information is centrally located and is disseminated across different departments as and when required to make effective decisions for the departments. ERP stimulates positive performance as management gets a complete picture of how information is utilized for effective decision making for business to grow.  As technology progresses, it has become more or less imperative that IT has become a detachable part of the accounting industry and in the years to come it is likely to introduce lot many changes.

Over the years, Accounting information systems have provided the much desired assistance to businesses in order to help managers resolve problems in the financial department.   The major functions of accounting information systems involve the collection, processing and utilization of the same to report on financial matters with the sole intent to take strategic decisions including price, cost and much more. The information extracted from the AIS gives regular updates about the financial events on hourly, daily and weekly basis. It in fact gives a comprehensive picture of the financial events happening during a specific time range and henceforth makes decision making lot easier. There have been many studies conducted in order to determine the impact of the AIS on organizations. The benefits include improved quality of the financial results, enhanced flexibility, effective problem solving, increased productivity, reduced cost and much more. Davis (1989) stated that technology acceptance model (TAM) has contributed to the vast volume of academic literature to improve the understanding  about the extensive applications of the AIS. The author formed the TAM framework as part of the contract with IBM Canada in order to ascertain the influence of the computer-based applications in different areas such as image processing, multimedia and pen-based computer so as to draw the attention of the potential investors. The core intent of the model was to explain the behaviour expressed towards the use of computer in order to use it as accounting information systems. Though there has been initial hesitance to accept accounting information systems, eventually they came to realize the real potential and henceforth embraced the new model to extract the most out of the new technology. Also Bergeron (1995) argued over the range of factors such as individual, organizational, cultural and social which shape the behaviour of humans towards the emergence of technology in improving the fundamental accounting practices across organizations.  Ever since the origin of the model, it has drawn the attention of academic researchers and other practitioners (Venkatesh, 2003).  Johnston et al (2003) argued that the TAM has been elaborated on different aspects as shared by many researchers in order to grow the understanding about it and its extended opportunities for businesses to adopt.  Johnson (2003) suggested that from a comprehensive look of the various studies conducted, TAM is coming out to a coveted model in this field and has come in the league of many impactful models such as ecommerce. TAM with its focus on the system design characteristics has come out with wide understanding about the usage of concepts to grasp applications of information systems and its accepted behaviour by users. Nevertheless, this model has provided the much desired motivation to dig this study further to determine legit conclusions and results about the changes observed in the behaviour of people towards the integration of technology in accounting practices. 

Research report has been formulated in order to determine the following objectives:

1. To determine the competency of technology in improving the current knowledge of accounting practices followed by companies.

2. To determine the advantages and disadvantages of technology in accounting and finance.

Research in a basic terminology is a systematically defined process to find relevant information on a specific subject. The research methodology henceforth defines the process or method used in order to identify the hidden information. For this research, interpretive approach would be used to derive relevant conclusions. Interpretive research is different in its form that it creates distinct research design, concept, data analysis and standards of assessment (Bevir and Kedar 2008).

Secondary source of information: For the research, vast pool of academic literature would be filtered in order to identify the relevant material to draw legit conclusions for the set research objectives. The secondary material includes academic journals, articles, books, websites and many other authentic source of information to study the role of information technology in accounting practices

Based on the comprehensive secondary research, it was found that there is insufficient information in context of the influence some of the latest IT developments in the financial accounting field have made. There is arguably no doubt over the importance of IT in accounting practices but this linked has not been thoroughly researched.  There are many empirical studies investigating the connection between companies performance and the inclusion of information technology and have found mixed results (Dedrick et al., 2003; Melville et al., 2004). Even there has been no direct relationship established between the amount of investment made and financial performance of an organization (Yongmei et al., 2008). Nevertheless, information technology has improved accounting practices to a great level and there has been ample evidence suggesting the same. Effective utilization of IT resources has ensured that companies manage to gain and manage competitive advantage against the rising competition from other companies.  In fact, companies are leveraging their financial resources to upgrade to the latest technologies in order to surpass other competing firms. As many remotely performed tasks can be centralized through information technology resources, there can be lot saved in terms of accounting costs (Hurt, 1990). Nickels (2002) stated that a major proportion of companies has reported that computers have made their work easy, thereby allowing managers and other employees to generate financial results and hence make effective decisions. Information technology has introduced flexibility in accounting systems in order to ensure that variations in quantum of financial transactions will not affect the regular operations of companies, and in fact, automatic adjustments would happen. King et al. (1991) stated that IT changed book-into a more comprehensive, authentic, and well-timed process. However, IT failed to provide a more focused and tailored form of system. Carr (1987) argued that there are challenges when it comes to defining the requirements of systems when accounting issues grow. Also, there is lack of trained staff available to provide legit training to the staff members in many organizations. As much as it sounds feasible, integrating technology in large organizations, in specific, can be quite taxing. There are times when paid training has to be conducted to gain advance knowledge about specific accounting operations. However, it requires time and money to bridge the gap so that requisite knowledge and skills are learned to get the desired results from the accounting operations through IT software. There are reasonable challenges in terms of security in accounting operations. For instance, installing accounting software necessitates high level of security in order to eliminate any fickle possibility of fraud and embezzlement. However, virtual boundaries make it susceptible to external threat from miscreant sources. As cyber frauds are on rise, there is always a risk attached if the confidential and highly sensitive financial information is unethically accessed.  Thus it has become imperative to establish trust and security across the accounting ecosystem to keep the financial system accurate. Most accounting software needs extra software to view reports in other formats such as PDF. In such case, additional cost would have to be borne out to accommodate for the inadequacies or enhanced functionalities. This creates the need to integrate internal auditors in the accounting and financial department to identify and pin down any financial data inaccuracies. In order to prevent the same, high level of accounting software have to be designed and installed to keep a close check of all the financial transactions to make wise decisions in the favor of the organization.

Conclusions

The impact of advanced information technologies on accounting practices in companies can be felt across all the industries. Before the emergence of this dynamic IT oriented environment, all the accounting and financial calculation was done manually. However, with the introduction of integrated systems including ERP systems and the widespread availability of Internet technology, accounting operations have transformed to a huge extent in most of the organizations around the world. Information technology is crucial in modern business practices, especially in the accounting function. There are many advantages to improve the efficiency and effectiveness of accounting systems as information technology reduces the complexities in accounting and saves lot of time in conducting normal accounting operations and  increases the processing and accuracy of financial data for the organizations. It be noted that use of IT applications for accounting purpose has given a huge opportunity to organizations to transform into paperless or virtual office in the years to come. Unfortunately, technology instead of becoming a an asset for accounting practices may become a liability for the organization as there are many risks involved.  The more accurate and timely accounting information is provided through software can in fact put the accountability and confidentiality into jeopardy. As most of the accounting data would be stored within software, there are chances of fraudulent activities to be conducted to compromise on the sensitivity of the accounting data.  As internet has become ubiquitous, financial transactions have come under scanner of unauthorized access from external sources. Despite the audit trails conducted, its very hard to determine the inappropriate financial transactions.  This stimulates risk attached with leakage of accounting data and financial information in the sensitive zone.  In other words, over dependency on computers and other accounting software can actually result in confidentiality and other fraudulent activities. Also, it would require extra funds to integrate highly secured system in the accounting practices. On the other hand, there are insufficient resources found in most of the organizations to train the staff to operating and integrate information technology systems. With complex accounting software integrated in organizations, extra investment would have to be made to deal with the rising challenges without compromising on the actual accounting functions. As technology is growing at rampant pace, it has become essential that accounting information systems are developed in order to match the rising demand for effective data and information for reaching out at tangible results to be used in business applications.

The research has given thorough review of the influence information technology has made on accounting practices across industries around the world. Though there are different sides to the inclusion of technology in accounting operations, its important to weigh the long term repercussions. However, there was decent scope to improve the results of the research as there was less time provided to conduct the research. Due to insufficient time to plan and conduct the research, many important aspects of information technology in accounting could not be thoroughly studied. Given the rate at which technology is expanding in different industrial domains, its important that extensive research is conducted in order to get an in-depth insight of the potential of IT in improving the accounting practices.

References

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