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An accounting information system (AIS) is the structure through which businesses maintain financial records for review by management. These accounting systems do plenty to meet the requirements for an accounting information systems professional, including the collection, storage, processing, analysis, and management of a company’s finances and really just about all real records and info on the operations of a specific enterprise and its resources. With the right accounting systems, any firm is on track for success.
An AIS is a key part in streamlining the distribution and reporting of financial information to shareholders and executives without compromising security. These systems heighten fraud detection and can help businesses make sure their finances are running smoothly. It’s a vital tool in guiding an organization's leaders to make the best decisions in terms of the overall health of their business.
Since technology drives today's economy, most accounting is computer-based and offers either a specific service or a whole suite of services for the consultant professional or entire national or international businesses. However a few very small businesses still use pencils and ledgers for their accounting process. The AIS saves time for larger companies, and doesn't always require a college graduate or expert experience to run. You can learn how to work one of these systems with a single course of study or by earning a certificate with focused set of courses and skip going to a university altogether.
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Every accounting information system has three basic functions that it must be able to perform.
- An AIS program must be able to collect and store financial data about a company’s business transactions. This should include capturing financial data content from source information, recording transactional activities, and converting financial data into records, ledgers, and the occasional report.
- An AIS should be able to provide accurate and useful financial information and knowledge to employees, executive, and stakeholders for the purpose of making prudent business decisions and future planning.
- An AIS should make sure to have a system in place to effectively collect and convert financial data into actionable information and allow easy access for general analytics purposes.
These systems provide a framework for businesses to make sure their monetary gains, marketing, and each department is up to par. An AIS that doesn’t work effectively can be an even larger threat to the overall security of a company and its customers than having no accounting information system at all.
Parts of an Accounting Information System
Accounting systems are generally made up of six parts that keep them running fluidly and efficiently.
This refers to anyone who uses the information system. These systems must be designed to allow easy access for all those who need to create reports, read a statement, or gain access to special information. In a typical business, this may include positions like accountants, managers, financial analysts, C-suite executives, and auditors.
A well designed AIS helps each member of the system work together to make sure every financial matter is handled efficiently. There should be no discrepancies in the information accessed by individuals who are permitted to see it. Consistency in data is key when it comes to understanding the larger picture and making the best decisions for a business.
Procedure and Instructions
This aspect covers how the Systems Accounting actually works. This can be made up of both automated and manual components, compiling data from internal sources (like information directly entered by employees) and external sources (like data from customer billing records). Some employees might have full access to accounting systems, while others can only get to certain areas. Often the accounting team will set a policy that determines each employees permissions.
This part of the system refers to the way financial information is collected, stored, processed, and distributed. It also has to do with direction and instruction given to the people who use it by means of employee training and development of skills, interface design, and system function.
This refers to all of the information that is compiled and processed by an AIS.
In order to store information, an accounting information system must employ a reliable database structure. Every business needs reliable input and output methods to make sure no relevant data slips through the cracks. Most companies have very strong policies surrounding their private data, and this is no exception.
An AIS should capture all of the data needed for the board or CEO of a business to make informed business decisions.
This may include information such as:
Keeping all of a company’s transactional data in one place allows for a full and accurate picture of financial health.
An accounting information system’s software refers to the computer programs used to keep and access data.
These programs can range from simple and user-friendly systems like QuickBooks to huge corporate databases. Some systems may soon be capable of learning based on human events and input. AIS software must, above all else, be reliable, efficient, and secure. Managers and executives rely on the information generated by their AIS to make pertinent financial choices for their businesses.
Publicly traded companies will find some additional regulations concerning their AIS software depending on the law in the state or country where they are located. The Sarbanes-Oxley Act of 2002 requires certain levels of transparency and accountability in the software systems of corporations owned by shareholders. This act was passed in the wake of corporate scandals around the turn of the century involving companies like Enron, WorldCom, and dozens more.
- Information Technology Infrastructure
This term refers to the hardware resources used to run an accounting information system.
This typically consists of normal office equipment like computers, printers, monitors, routers, servers, surge protection, and storage software. It must be fully compatible with the software used to compile and store financial information. An accounting IT infrastructure should be efficiently run and optimized for all of the required software.
An IT infrastructure should also cover contingency plans for problems like hardware failure, power outages, or anything else that could cause a kink in the process.
- Internal Controls
Internal controls are the security measures used to protect any and all data stored within the system. They protect sensitive information from hackers, viruses, and anything else that could compromise the integrity of the AIS.
These controls can take the form of anything from passwords to encryption to biometric verification methods. It needs to make information accessible to those who are permitted to see it, while weeding out sensitive data for lower level employees who aren’t qualified to access it.
This is an especially important part of any accounting information system, because any given AIS may contain more than just company financial information. It can also hold identification details for both employees and customers, like an application, social security numbers, credit cards, house title, and other sensitive data that could be used to facilitate fraud or identity theft.
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Because of the incredibly sensitive nature of the information handled by an AIS, reliability is of the utmost importance in maintaining an effective system. The American Institute of Certified Public Accountants (AICPA) has identified the five main factors that make an information system reliable.
An AIS should only be accessible to and controlled by those who have permission to view the information. There should be no wiggle room and it should be 100 percent protected against online hackers, viruses, and malware.
Accounting information systems can hold incredibly sensitive, human information. This determines whether a system passes muster in preventing any and all unwanted information from leaking out.
Hand in hand with confidentiality, privacy refers to the way personal and financial information is handled within the system. Data must be collected and used in a legal, ethical, and appropriate manner.
- Processing Integrity
A system should make sure all T’s are crossed and I’s dotted in the way it processes information. In order to be truly reliable, businesses should be confident that no information is being left out or misidentified.
The system should be available to those who have permission to access the information it holds. It should be able to meet its functional and legal obligations and should be able to seamlessly provide information when needed.
Any student who is interested in pursuing a career related to accounting information systems can start with an academic degree such as an undergraduate degree in accounting, economics, or a similar field. They should consult an academic adviser to determine which courses are best to start with. Sometimes a few introductory courses in accounting or technology systems are enough to help a student determine if AIS is field for them.
Students who choose AIS technology as a career usually focus on degree programs that cover the implementation and maintenance of these systems. These programs have faculty that are devoted to systems accounting in whichever school they choose. No matter what industry or business they choose, accounting systems majors are go-to employees when things within the AIS requires implementation, updates, or repairs. Students who focus on a degree in AIS go on to work in accounting firms, private businesses, consulting groups, non-profits, or academia.