All accounting systems are subject to the risk of error or misstatement.
Describe the components parts of an accounting system and with reference to an accounting software package or your choice, for each part identify one control that helps to ensure that the accounting records are complete or that the organizations assets are safeguarded.
Accounting system refers to the collection, storage and processing of both the accounting and financial data vital for making decisions in any given business activity. In the current world, the introduction of the accounting information system in most cases involves a computer-based system essential in the tracking of accounting activities in the business. In obtaining the resulting statistics reports, as a result of the tracking, the information is vital and usable by internal management. However, in other cases, the resulting statistics is used externally by other interested parties such as tax authorities, investors and creditors. The components parts of an accounting system entail of the accounts receivable, accounts payable, order entry, cost accounting and payroll.
Accounts receivable refers to the legally enforceable claims that any business activity might represent to the customer for supply of a given amount of commodity/service. In most cases, the accounts receivable exists in the forms of invoices raised by the business and forwarded to the customers for payment in a distinct time frame. Since the accounts receivable represent the cash that the organization own, they usually appear in the balance sheet as assets. In the accounting system transaction, the accounts receivable shows the billing that the customer needs to pay for the services and commodities ordered (Collier and Sam 52). However, it is essential to differentiate the notes receivable from the accounts payable. The notes receivable gives an indication of the debts created through formal legal instruments referred to as promissory notes.
In trying to minimize the risk exposed to the accounts receivable, the most appropriate tool to utilize in this case is the acumatica which is proprietary software. In utilizing the acumatica tool, the risk of invoice errors also known as incorrect charges become minimal. The invoice error always results into excess/loss of revenue hence contributing to inaccurate accounting. However, in utilizing the acumatica the control that will assist in ensuring the accounts receivable give accurate data is the proper segregation of duties. The proper segregation of duties in most accounting system becomes a challenge since all the personnel want to have access to the cash (Collier and Sam 71). However, the acumatica tool will assist in proper segregation of duties hence ensuring that individual that have access to cash in the firm do not play any given role in updating accounts receivable records.
Accounts payable refers to the money owned by businesses to the various suppliers of commodities. In an effort to record the accounts payable, the accountants of any given businesses activity will always record it as a liability on the balance sheet. The accounts payable have a distinct difference with the notes payable liabilities which refer to the debts that occur in the business through the legal instrument documents. One of the risks that face organizations when it comes to the accounts payable is aspect of additional amounts of cash of the actual amount of debt needed by any organization.
In most of the cases, the accountants responsible for the accounts payable will always have difficult to record the appropriate debt of the firm. In other cases, firms also face difficult in depicting the actual debt of the firm since the cash receipts go missing. The high risks of theft involvement in the business organizations require high and strong control to safeguard the cash receipts. In using the acumatica software, the firm will always safeguard the receipts and have a computerized based system to store the debts of the firm. The access to the stored debts and accounts payable becomes only known to some restricted members of the organization hence reducing levels of theft.
The order entry refers to the process through which an order becomes recorded into the business organization entry system. Immediately an order becomes part of the business information, the management becomes capable of viewing information concerning the order. Necessary adjustments concerning the order can take place once the information becomes part of the system (Collier and Sam 92). In an effort to ensures that the order entry records are complete hence the organization assets becomes safeguarded, the acumatica accounting package makes it possible for the computerized system to store the original order entry. Regardless of the several changes made on the order entry, the original entry is the most vital when it comes to balancing of accounts.
Cost accounting refers to the complex process of collecting, summarizing analyzing and evaluating various alternative decisions made by the management of the organization. The chief goal of the cost accounting is to advise the management on the course actions in relationship with the cost capability and efficiency. Through the cost accounting, the management of the business activity learns to utilize the cost information that manages current and future plans of the firm. In utilizing the acumatica accounting tool, it assists in ensuring that accounting records in relationship to cost accounting records given are safeguarded. The acumatica accounting package assists in segregating the responsibility for initiating, evaluation and approving of investment from those of detailed accounting and recording functions (Collier and Sam 105).
In any given business organization, payroll gives the actual sum of all the financial records related to the salaries, bonuses, wages and deductions of the employees. The payroll in most accounting firms gives an overall amount of cash offered to the employees for the services provided during a certain time frame. The risks exposed to several organizations concerning payroll entail of the fictitious employees, excessive leaves uses and overpayment (Collier and Sam 117). The acumatica accounting emphasizes on the segregation of payroll preparations and payroll register approval. The acumatica accounting tool enforces the printing of the quarterly and monthly payment together will all the advancement payment given to the employees. Through having a backup of the printed payment documents, the organization will ensure that appropriate payment adjustments take place.
What are the implementation issues associated with a change of IT system within an organization? What actions can a corporation undertake to mitigate against operational risks associated with the implementation of a new IT system?
In the current world, diverse implementation issues face the organization especially when it comes to the change of Information Technology systems. Some of the implementation issues currently facing organizations encompass of overemphasis on the aspect of technology in some organizations. The aspect of technology becomes essential in the already developed organizations that undertake complex procedures in a single process. However, overemphasis on technology in the small business and still developing business activity has become a recent implementation challenge (Collier and Sam 121). The rigid work partners in most organizations also make it almost difficult for management to instill change of the information technology systems within any given organization.
Most of the employees after working several years in a given department under certain conditions will become rigid in adapting into new technological changes. In other organization, the inflexibility of the organizational department gives the planning team a difficult time in enacting changes related to the IT systems. Some of the departments offer resistance to change through lack of appropriate interactions and exchange of data. The level of decision making process in the organization also affect the implementation of IT system in business organizations (Collier and Sam 136). Before enacting any given change related to the IT system, it is vital that all the decision making bodies in the organization agree to a common IT system routine. The level of integration of information between the management and the employees also impact the implementation of IT system change in the organization.
However, through the research and findings, there exist diverse actions vital for corporations to undertake in an effort to mitigate the operational risks associated with implementations of the information technology system. One of the actions that the corporation needs to undertake is ensuring that the management fully gets involved in the process of facilitating IT system change in the organization. The management needs to take more active roles in implementing change rather than just providing money and other resources.
The involvement of the management in the organization can become through actively supporting interagency agreements in the organization. The management needs to learn the most appropriate means of assisting the processes of sharing and acquisition of information in the entire organization. The spread of information from one party to the next in the organization will depend with management (Collier and Sam 144). To achieve a better understanding of the changes in the IT system, the management needs to share information concerning the system throughout all the levels. The management also needs to develop organizational strategies essential for crossing internal and political boundaries within employees.
An additional measure that the organization needs to undertake to mitigate operational risks associated with implementation of IT systems entails of the training and educating the employees to become knowledgeable concerning IT. Most of the employees face problems when it comes to implementation of the change in IT systems because of lack of knowledge concerning IT. The level of education and skills in the organization will always vary. For this reason, the management of the firm needs to enact an appropriate measure to educate all the employees concerning the new IT system (Collier and Sam 168). All the employees having same level of education will definitely respond appropriately when it comes to the actual change.
An additional initiative that the corporation ought to undertake to mitigate operational risks associated with change in IT system entail of continued promotion of the new system. The staff heading the change in the IT system needs to continue promoting the IT system even after implementation. The continued promotion of the IT system change will entail of both financial and informational support. The staff also needs to ensure that the promotion of the project is of high profile hence gaining enough public support from employees in the firm.
Collier, Paul M, and Sam Agyei-Ampomah. Management Accounting-Risk and Control Strategy. Oxford: CIMA, 2008. Print.