Accounting Information Systems

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Question:

You work in an accounting firm as a business advisor. The partners of the firm are conservative and advise their clients to use traditional server based accounting information systems (AIS). The firm’s clients are small to medium sized businesses, in a variety of industries including retail and service. Recently a number of your clients have approached you about moving from a traditional accounting system (in-house server based or computer based) to a cloud based accounting system. You mention this trend to the senior partner. The senior partner has now asked you to provide more information on cloud accounting systemsDefine and explain the differences between a cloud based accounting system and a traditional accounting system
Identify potential risks or limitations in adopting a cloud based accounting system
Based on your findings make a recommendation outlining which size and type of businesses would benefit from moving to a cloud based AIS.

Answer:

Introduction:

As per the requirement of this report, I have to concentrate on the goal to decide upon the choice of accounting information system with the comparison of traditional and cloud based accounting information system. To conclude about this decision, I have to consider upon the basic differences of both the Accounting Information System with the applicability of cloud based accounting information system in perspective of different level of business so far its size and nature is concerned. I have to focus on the potential risk of cloud based AIS to make the probable users aware of them to safeguard their own interest while using the same to make their business more effective and profitable with mitigation of the risk factors related to accounting application of their business establishment (Peavler, 2017).

Traditional And Cloud-Based AIS- Definition And Short Discussion:

Traditional AIS is that type of accounting information system which is run through dedicated and customized accounting system enhanced by computer professionals. The main objective of using these AIS is to ensure confinement of data with security and not allowing the same to float in the global web world. Traditional AIS is mainly provided with tailor-made provision to enable the enterprise use its accounting system as per their own demand and priority. It is not generalized as the application of traditional AIS is mainly made with customized features of application which are relevant to the use of the enterprise (Alexandra, 2010). Traditional AIS is focused on the need of the enterprise for which it is assigned for with the provision regular mode of review with necessary amendments of the existing system as per the changed needs of the enterprise. The use of traditional AIS is mainly for the big business establishments with maximum level of transactions takes place and this situation demands ultimate accuracy and appropriateness as per the need or demand of the organization (Techtarget, 2016).  

Cloud based accounting information system is the latest form of accounting information system which is depending upon the web world through internet. It is not tailor made instead this is mainly depending upon the basic principle of the accounting as per accounting standards prevail in the region. Cloud based accounting is having different latest features which makes the business accounting of the enterprises easy and smooth though different latest applications incorporated in the system. The applicability of cloud based AIS are extended in different type of business establishment consisting of small, medium and large business houses. Main objective of this application is that it is providing latest innovation of tech savvy environment and thus people of latest trend can be affluent with the use of it through different computerized application which can be available through internet with the common platform of smart phones or tabs or computers (Ionescu, Ionescu, Bendovschi, & Tudoran, 2013).

Significant Difference Between Traditional AIS And Cloud Based AIS:

Traditional AISCloud-Based AIS
Data storage is done through own storage device called serverDate storage is done through the use of cloud based server available through internet
Proves costly for the enterprise due to its nature of customized applicationFound cost effective for different size and nature of business enterprises
Tailor made options for the applicatorsGeneralized form of application for the applicators
Use of this AIS is confined within the organization (Erpsoftware, 2010).Use of this AIS is open to indefinite number of users of the same organization
The only applicable medium is through personal computer in the forms of desktop or laptopVaried level of medium of use starting from PC, tabs or smart phones with the facility of internet
The use of this AIS is restricted within the organization connected through intranetThis AIS is open for the global users with the facility of internet
This form of AIS is tailor madeThis form of AIS is with easy option to operate
This offer of AIS is not connected with the size of the businessThis offer of AIS is customized with the size of the business
Exclusive offer for the user with no competitionEnhanced option of competitors to compare and consume (Aisn, 2016).
This AIS is not providing facilities of operation through Point of Sales and receipt of payment through credit cardThis AIS is providing option for the user to connect with POS and subsequent payment through credit or other mode of cloud based payment

Potential risks of Cloud based AIS:

Potential risks are found in the case of cloud based AIS:

  • Environmental security – The application of cloud based AIS is trending with maximum risk to business environment in the field of security. This is happening due to huge level of data gathered in the cloud based AIS and subsequent attempt by the infiltrators to find financial unauthorized facilities in the forms of malwares, hackers and introduction of viruses.
  • Security of data with confined privacy- Basic requirement of opting for any AIS by business entities is to ensure the security and privacy of their data and subsequent financial information. This area can be affected for the web based application of cloud based AIS. Main threat is observed in the domain of POS management and subsequent online payments through different instruments(Edt, 2014).  
  • Data availability- Due to its sole dependency of internet for accessing and performing operation through internet, unavailability of internet facilities harm the continuity of accounting operation through cloud-based accounting.  
  • Disaster recovery- In case of any abnormal situation, the data stored in the cloud based server in web world can get affected and restoration of data is proving bit difficult(V3, 2014).
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Recommendation 

The recommendations made for the business units who want to opt for cloud based accounting are the business entities with the legal status of small, medium or large business enterprises that looks for following features:

  • Recovery post disaster
  • Software updating on automatic system
  • Absence of capita expenditure for introduction and subsequent use
  • Provision of enhancement of collaboration level amongst the users
  • Work from any place- no specific office concept
  • Cost conscious impact 

References:  

Aisn. (2016, February 20). Traditional method Vs Cloud. Retrieved March 16, 2017, from Aisn: https://www.aisn.net/traditional-backup-methods-vs-cloud/

Alexandra. (2010, September 30). Cloud Computing: What Accountants Need to Know. Retrieved March 16, 2017, from Journalofaccountancy: https://www.journalofaccountancy.com/issues/2010/oct/20102519.html

Edt. (2014, January 16). How to manage risks associated with accounting in the cloud. Retrieved March 16, 2017, from Sbnonline: https://www.sbnonline.com/article/how-to-manage-risks-associated-with-accounting-in-the-cloud/

Erpsoftware. (2010, October 10). What Is The Difference Between ERP and Accounting Software? Retrieved March 16, 2017, from Erpsoftware: https://www.erpsoftware.com/2010/10/what-is-the-difference-between-erp-and-accounting-software/

Ionescu, B., Ionescu, I., Bendovschi, A., & Tudoran, L. (2013, June). Traditional Accounting Vs Cloud Accounting. Retrieved March 16, 2017, from Researchgate: https://www.researchgate.net/publication/267751382_TRADITIONAL_ACCOUNTING_VS_CLOUD_ACCOUNTING

Peavler, R. (2017, June 01). The Business Owner’s Guide to Accounting Information Systems. Retrieved March 16, 2017, from Thebalance: https://www.thebalance.com/accounting-information-systems-392953

Techtarget. (2016, May 11). Software as a services. Retrieved March 16, 2017, from Techtarget: https://searchcloudcomputing.techtarget.com/definition/Software-as-a-Service

V3. (2014, May 09). Top 10 cloud computing risks and concerns. Retrieved March 16, 2017, from V3: https://www.v3.co.uk/v3-uk/news/2343547/top-10-cloud-computing-risks-and-concerns.

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