Accounting Information System - Advantages and Implications of AIS

Advantages and Implications of AIS

A big advantage of computer-based accounting information systems is that they automate and streamline reporting. Reporting is major tool for organizations to accurately see summarized, timely information used for decision-making and financial reporting. The accounting information system pulls data from the centralized database, processes and transforms it and ultimately generates a summary of that data as information that can now be easily consumed and analyzed by business analysts, managers or other decision makers. These systems must ensure that the reports are timely so that decision-makers are not acting on old, irrelevant information and, rather, able to act quickly and effectively based on report results. Consolidation is one of the hallmarks of reporting as people do not have to look through an enormous number of transactions. For instance, at the end of the month, a financial accountant consolidates all the paid vouchers by running a report on the system. The system’s application layer provides a report with the total amount paid to its vendors for that particular month. With large corporations that generate large volumes of transactional data, running reports with even an AIS can take days or even weeks.

After the wave of corporate scandals from large companies such as Tyco International, Enron and WorldCom, major emphasis was put on enforcing public companies to implement strong internal controls into their transaction-based systems. This was made into law with the passage of the Sarbanes Oxley Act of 2002 which stipulated that companies must generate an internal control report stating who is responsible for an organization’s internal control structure and outlines the overall effectiveness of these controls. Since most of these scandals were rooted in the companies' accounting practices, much of the emphasis of Sarbanes Oxley was put on computer-based accounting information systems. Today, AIS vendors tout their governance, risk management, and compliance features to ensure business processes are robust and protected and the organization's assets (including data) are secured.