CEO & CFO Perceptions About AIS Impact on Firm Essay

In the multifaceted, driving, in bodied global milieu, imminent rifts strain to rattle the arnas of chronicle/finance. The personal ambitions of chief executive officers and chief pecuniary officers outweighed their responsibilities toward sh arholders, employees, operations, civil/ ethical duties, and the ecumenical pecuniary organization. chief executive officers earlier foc recitationd on their accept profitability, by increasing margins, impact sh argonholder/market expectations, and expanding by both means necessary. thitherfore, this lead to chief financial officers and separatewise members of blow over circumspection on the front lines in manipulating margins to promote growth thitherby committing various levels of impostorulent activities, chiefly to manipulate worthless fiscal performance. The intertwining of ethical dilemmas and constant conflicts of interest endangered employees, officeholders, customers, and the ecumenic public. With the passing of Sarbanes-Oxley (SOX) in 2012, the act demanded, that corporate management design and implement interior gibes everyplace the entire monetary inform process. (H all told, 2013)In reference to chief executive officer turnover and the permitness and effectiveness of a tabular array, board of directors that ar, dominated by independent directors argon much worryly to remove a CEO establish on poor performance than boards dominated by insiders. (Dah, Frye, & Hurst 2013) During the post-SOX, of import decline in the incidence of CEO turnovers for compliant firms. (Dah, Frye, & Hurst 2013) swipe management boast adopted Accounting nurture Systems, utilizing knowledge technology and raw interpretings of somatic asserts in the workplace, in their effort to accord with SOX, the de legacy of Sponsoring Organizations (COSO), and to maintain ethically conscious decisions. A comp whatevers intragroup controls founder been under scrupulous review and ar continuously exam ined to a point where they are in full compliance with SOX. to the highest degree of the attention is attri provideded to two main provisions, unionized by the Public Companies Accounting vigilance Board (PCAOB) that this instant relate to privileged controls. Under section 404, the CEO and CFO of publicly traded companies must personally attain and certify, quarterly and annually, an adoption of a elaborate enroll of ethics, which holds an effective maintenance of an inhering control corpse.This section also cling tos whistle-blowers. In addition, section 303 requires that the CEO andCFO must sign off on the financial didacticss to assure that the reports do non involve any material misstatements or omissions. To hike protect capital markets, corporate governance, employees, shareholders, the general public, and the analyseing profession, the organizations auditors assurance on managements cozy control and ethics policies is required. unclutter management teams u nderstood the splendour of adding IT artistic merchandiseion. information Technology discussion sections garnered to a greater extent(prenominal) responsibility subsequently the passing of SOX. Being held as vital importance to native control serve wells in an organization, IT departments became responsible for creating, improving, executing, and modifying a series of controls, all important(p) to compact contrivance.Additionally, IT is account commensurate for accumulating, processing, and storing financial info, which is utilise in financial statements, and creates audit trails for extraneous auditors. A portion of the internal controls use in a line of credit experience as IT controls, some of which are based in the computerized surround and usually consult to financial entropy. Programs and processes are written and kept up(p) by IT professionals. Fairly naked as a jaybird and self-generated processes accommodate automated trunks. These programs affirm reshaped the milieu of accounts report. They, initiate, authorize, record, and report the effects of financial transactions. (Hall, 2013) alter account is associated with most Enterprise imagery Planning Systems (ERP). ERP systems, facilitate the flow of culture among all departments in an organization, and manage data sharing with outside systems, such as suppliers, assembly line partners, clients and regulatory agencies. (Chinn, 2011)Top management are attracted to apply automated systems in order to create an efficient and steady-going pass and accounting environment. Rudimentary features accommodate the generation and distribution of invoices to customers, which usually follows with extravagantly possibility, that payment volition be au thuslytic at a clock timely manner. This electronic process of invoicing goes yield in hand with receiving wire transfers and, on the opposing cycle, purchases of materials at that placefore, in either process, this allows the company to efficiently hit from increasing cash/credit pass on and the ability to quickly obtain corporate and operating capital. These advanced computerized processes are able to initiate the transfer of a jackpots as compulsives and are able to automatically incur liabilities, in relative to their gibetransactions without merciful interaction.However the many enticing advantages an automated system offers, in that location is no doubt the, inextricable elements of the financial reporting process that SOX considers, and they must be controlled. (Hall, 2013) Section 302 is in place to palisade any inconsistencies of internal control in the workplace. Automation of the revenue cycle is typically used to reduce overhead apostrophizes, deal better credit granting decisions, and better gather up outstanding accounts receivable. A retentive with SOX provisions, the Committee of Sponsoring Organizations good example group IT system controls into two kind categories Applicatio n Controls and frequent Controls. Subcategories of application controls include input controls, processing controls, and output controls. The everyday controls include controls over IT governance, infra complex body part, network & operating system security, database access, application acquisitions & development, and program forms.General controls are needed to support the environment in which application controls function, and both are needed to ensure accurate financial reporting, as substantially as reduce instances of fallacious activity. (Hall 2013) While utilizing the aforementioned controls volition greatly reduce fortune of financial fraud, there are inherent gambles concerning schooling technology systems. Organizations unified in a global frame, face an overarching environmental risk involving stability, which primarily concerns IT. The rapid production and tact of increasing computer science power, coupled with consonant gains in the growth of technology, p ossess a direct result in an exponentially vibrant breeding technology atmosphere. This dynamic environment causes constant changes within internal controls in companies.Currently, IT is considered one of the main risk accompanimentors in organizations, and both lack and tautologic of such investments underside compromise the structure and the operations of the firm. (Lunardi, Becker, Macada, & Dolci 2010) To keep up with the in advance thinking global environment, as intumesce as complying with constant legal and technical foul changes, IT innately sires a focus with organizations. circumspection continues to adapt to new challenges that emerge, in relation to IT. Recently, companies have been spending about 50% of all capital investment on IT. (Lunardi, Becker, Macada, & Dolci 2010) Executives understand that it is impossible to signifi dopetly turn back IT spending in such a technologically driven world however, they do non want to spend any more than the minimumnecessa ry to deploy and run IT efficiently. (Lunardi, Becker, Macada, & Dolci 2010) Outsourcing particular(prenominal) IT get offs, as well as full ERP (Enterprise election Planning) systems, has become more normal throughout the then(prenominal) few years.Over 90% of firms that were sampled in various enquiry projects engage in IT outsourcing. Given the pervasiveness of IT outsourcing and the magnitude of IT spending in the economy (Kobelsky & Robinson, 2010) top management stinker write-off costs, as well as secure system failures. In slipperiness of an unforeseen disturbance, firms can still operate ERP systems in their headquartered location, by creating an off-site ERP system. However, most IT outsourcing does not connect with cost reduction. nearly managers, indicate that though practitioner research emphasizes ITOSs (IT outsourcing) cost-reduction benefits gained at the indivithreefold project level, outsourcing is associated with higher IT spending, presumably reflecting enh ancement of capabilities. (Kobelsky & Robinson, 2010) Organizations put on ITOS, in addition to improving in-house IT fraud reduction projects.The continuation of outsourcing affects an enlarge in IT spending, than for localization. Consistent computing advancements and technological prowess have had positive outcomes in moving in processes, as well as added new computer support systems. There have been recent instances that cite, fraud costs U.S. business more than $400 billion annually. (Ravisankar, Ravi, Rao, & Bose, 2011) selective information mining techniques have been implemented to revive fraud and increase fraud signal detection by utilizing approaches that are more data-driven. These orders specifically depend on historical monetary data of both troubled and unassailable companies, coupled with their respective financial ratios. With the use of objective data mining, companies can gain financial statement inaccuracies and financial problems affect the business, by sifting through the records of fraudulent and healthy companies. Then, they discover knowledge which can be used to predict whether a company at hand result perpetrate financial accounting fraud in future. (Ravisankar, Ravi, Rao, & Bose, 2011)Artificial Intelligence systems lead forth a theoretical advantage. They understand when and when not to extract specific statistical facts on the input variables. Nevertheless, new computing power and automated systems could contain unforeseen risks that could alter and affect reliability on financial statements. Because of newfound internal control spending, coupled with anincrease of information technology in the workplace, companies have been progressively fault their reporting systems from legacy platforms to a far-flung client-server network. The integrated network utilizes new servers and product software, such as industry leaders, prophesier and beat. Since the passing of SOX and trigger of COSO, vaticinator and SAP have been d uking it out for majority share of the market. The Systems, Applications, and Products in Data Processing (SAP) is a software ERP, which represents a streamline of business function applications. The system offers a, certain time management and tracking of sales, productions, finance, accounting and human resources in an enterprise. (Indika, 2011) Usually, IT systems operate separate processes.Traditionally, individually process cycle operates in its own system. SAP antitheticiates itself by integrating into all business practices and operations. Updates are presented in real time, and pass along through different cycles and departments. The complexity of SAP, runs on a tail generation programming language called forward-looking Business Application Programming (ABAP). (Indika, 2011) seer maintains a similar application to the environment. ORdatabase management system ( oracle DMBS) has been primarily incorporated to be as versatile as SAP, specifically to assist full-size enterprise settings and manage data in the enterprise. Additionally, it can be useful on a personal level. Oracle DBMS is comprised of data and retrieved by applying SQL (Structured Query Language). The commands set entrance boundaries and protect the users data institutionalizes. It, can be embedded in other languages or could be executed directly as scripts. (Indika, 2011) During the initial SAP installation, Oracle can be defined as the database that is going to be used and then the SAP system get out income tax return SQL commands that are compatible with the Oracle DBMS. (Indika, 2011) There is not a drastic dissimilarity in installation time for Oracle or SAP. It also depends on whether the system is slowly introduced to the organization, or if it is launched all at one time.Top management will review an in depth cost and risk psychoanalysis, in determining which method of installation is most appropriate. (http//whatiserp.net/wp-content/uploads/2010/09/duration.png) The centralized legacy central processing unit environment is tightly controlled and has do management complacent because of the simple fact that it works. The security structures and internal controls found on legacy systems have developed over the past four decades. Program and file access is easily traced andorganized. The operating system of mainframe programs deliberately create audit trails and logs, which offer conveniences to external auditors, as well as making it more difficult to commit fraud. Legacy systems incorporate intricate scheduling software, which operate as safeguards. For example, plans are input into the system when appropriate authorization is in effect and in the precise sequence. Additionally, these systems adopt specific controls, which protect the integrity of financial reports and stages in the doubled cycles utilized by a business.Specifically, change controls pre-determinately restricts alterations to production applications. Automated responses appear a nd get a line employees to provide high level approvals and testing. The mainframe control environment has had time to develop in decently stable times. However, upon the introduction of SOX and the realization that there were material internal control weaknesses in the workplace, standardization and integrated programming systems were presented to the business world. Over time, more and more companies are making the lead off to cross-referencing and streamlined technologies. Because of a limited time lapse regarding the application of new ERP systems, there has not been reliable risk analyses on internal control processing, as there are with legacy systems. Unfortunately, there is an unclimbable need for risk awareness, when incorporating new systems in this day & age. Over-crowded client-server networks can become a problem to configure and monitor appropriately.To cushion the negative associations of risk, physical and internal controls are put into place to monitor systems. Companies may want to place security cameras and physical guards of the servers and related systems during off-hours. When deciding to implement new technology in a firm, or replacing an entire system with more up-to-date specifications, control risks need to be assessed. New risks and internal control weaknesses are often created faster than they can be discovered and regulated. Integrity and security of a firms data should be at a top priority. Threats, like viruses and worms are to be kept at bay, with various walls and algorithms. Emerging technologies like protrusible Business Reporting Language (XBRL), radio Frequency Identification (RFID) tags, the continuation of reporting, subject field to repeated external audits & compliance with SOX and COSO, and object-oriented databases right discrepancies should protect systems.A firms internal audit department are also available in set up and evaluating the IT control environment, and should be able to verbally instruct and an nounce employee centric workshops to increase employee control awareness. Because of issues concerning independence and segregation of duties, the internal audit department will not be able to design code and functionality specifications in the internal control mainframe. However, they are the cheapest and central consultants on how the controls affect operations, and if the specific controls work in detecting fraud. Top management considers the internal audit department an under-utilized resource in perfecting internal controls and information technology controls.Constant balance amidst CEOs and CFOs must be maintained in order to synergize business operations, in congruity with GAAP, SOX, and COSO. instruction technology, serves as a facilitator, catalyst, motivator, or even an enabler for the convergence of management accounting and financial accounting. (Taipaleenmaki & Ikaheimo 2012) In order for the SOX hatchway to be effective, the information technology function must be in conjuncture with aiding the control environment of a business. Financial reporting has changed over the years, to favor IT processes, which are most entirely fundamental to the financial reporting practice. Additionally, with the passing of SOX, new responsibilities are impose upon IT functions, which would usually be ignored, because IT is not inescapably responsible for monitoring internal controls. IT & finance professionals, as well as top management, have had to adopt and learn a whole new set of functions, reporting, and monitoring.The information technology culture is of dire importance to adhering to new standards and progresses the business environment to modern and more secure highs. A public presentation IT department is crucial for the CEO & CFO to document financial and internal controls. nourish is a very subjective term, oddly in reference to capital expenditures. diametrical opinions and different needs will fascinate how much a firm spends on new technol ogy to facilitate and support with changing standards. Usually, implementing a new system in a business have positive and financial benefits, in the long run. However, a new system will often find resistance at the individual level because the users do notperceive any value to them from it. (Barua, Brooks, Gillon, Hodgkinson, & Kohli, 2010) Positives could include additional time to perform other tasks, and create more efficiency close to the organization.However, an overuse of technology could threaten employees jobs, as systems become more automated. individual(a) perception on new installations of systems expertness be shaky at first, but in the end, whatever is needed to comply with changing standards, is exactly what leaders of organizations will flock toward. CEOs and CFOs understand that integrating meet Accounting Information Systems is integral to ships company and the business world. Additionally, as per Thomas Piketty, who maintains in his freshly published volumino us, Capital in the Twenty-First Century, CEOs, CFOs, and Super Managers are running massive conglomerates effectively because of IT and AIS. Therefore, IT has habituated them powers to set exorbitant compensation packages for themselves, by super-humanly maximizing their own productivity and performance. In conjunction, if fraud can be avoided in the bargain, they are awarded super hero position and remuneration, which may summarize their perceptions about AIS, IT, and the dual benefits of SOX and COSO.BibliographyBarua, A., Brooks, L., Gillon, K., Hodgkinson, R., & Kohli, R. (2010). Creating, Capturing andMeasuring Value From IT Investments Could We Do Better? . communication theory of theAssociation for Information Systems, 27, 13-26. Chinn, D. (2011, March 11). What Is Enterprise Resource Planning Systems?. eHow. 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