1/3/2014

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1. Based on your research, assess how corporate leaders may make improper assumptions related to accounting information systems and the related information. Indicate the most negative potential impacts on business operations related to these assumptions. Provide support for your rationale.

An accounting information system (AIS) is a system that collects, records, stores, and processes data to produce information for decision makers (Romney & Steinbart, 2012).  Accounting information systems has become one of the most popular tools in the business world.  They have the potential of being inexpensive to slightly costly.  However the benefits greatly outnumber the cost.  Accounting information systems provide timely and very useful information to management.  AIS are utilized to govern the functions of account payables and receivables, cash transactions and any other pertinent accounting functions. Due to the fact that the accounting departments deal with a numerous volume of transactions, it is of great importance to have an effective information system to handle the tasks.

Nowadays it is automatically assumed that AIS is strictly a computerized system. However, AIS components include:  people, procedures and instructions, data, software, information technology infrastructure, and internal controls and security measures (Romney & Steinbart, 2012).  With all these components combined it is evident that unwarranted situations could arise starting with the head of the operation, corporate leaders.  Corporate leaders may make improper assumptions related to accounting information systems and the related information. There are several key incorrect assumptions that management makes about its accounting information systems.

According to the classic article entitled “Management Information Systems” written by Russell L. Ackoff, he presented five common assumptions about information systems.  Ackoff’s five common assumptions included:  (1) management needs more information, (2) managers need the information they want, (3) giving managers the information they need improves their decision making, (4) more communication means better performance, and (5) managers need only to understand how to use an information system (Ackoff, 2012).  Although these are assumptions are from December 1967, some are still prevalent today.

The improper assumptions related to accounting information systems that corporate leaders make can all be avoided with proper knowledge.  One improper assumption is giving employees the information that they need and they will be fine.  Also, I feel that two of Ackoff’s assumptions apply to corporate leaders today; more communication means better performance and managers need only to understand how to use an information system.  All three of these are improper.  An individual can have all the information, as well as, communication in the world and not benefit from. There is more to accounting information systems than just having the manual.  In order for the system to be efficient and effective proper training is needed.  The more training and refresher courses one receives on AIS the better the decision making process would be for corporate leaders. 

Many negative potential impacts on business operations elated to these assumptions may arise.  However, some are of greater importance than others.  These negative impacts include a decrease in the financial reporting process integrity, a decrease in the financial reports quality, a loss of time and money for shareholders, and an improper reflection of the company’s true assets.  Corporate leaders should remember that an organization’s AIS plays an important role in helping it adopt and maintain a strategic position.  Therefore, training and refresher courses are of great importance.

2. Suggest three to four (3-4) ways in which organizational performance may be improved when information is properly managed within a business system. Provide support for your rationale.

According to BusinessDictionary.com, organizational performance is an analysis of a company’s performance as compared to goals and objectives (Business Dictionary, 2013).  Although, in the business world many companies main goal and objective is to maximize profits.  With this in mind, it is essential to understand a company’s organizational performance as it relates to business systems. 

There are several ways in which organizational performance may be improved when information is properly managed within a business system.  With the business world being so competitive, organizational improvement is a requirement.  There are five guided principles being used to make outstanding improvements in organizational performance:  benchmarks/measurements, leadership, employee involvement, process improvement, and customer focus (Potocki & Brocato, 1995).  Although the article was written in 1995, these principles still hold value today.

However, out of the five principles, three are the most essential to the improvement of organizational performance.  They are benchmarks/measurements, employee involvement, and customer focus.  All three of these principles should blend as one.  Benchmarks/measurements are used to find the best of the best within a company.  By pushing employees to produce their best increases the company morale.  If an employee know where they should be, maybe they will push hard to get there and maintain that status.  Next is employee involvement.  Employee involvement is critical all companies.  Most individuals feel that the face of the company is the corporate leaders.  However, it is the individual employees.  Encouraging employees to make suggestions, plan, and make decisions concerning their work.  Encouragement to employee involvement is based on the thinking that people involved in a process know it best, and on the observation that involved employees are more motivated to improve their performance (Business Dictionary, 2013). Finally, customer focus is the main key.  They are the ones that keep your business floating. Employees should pay more attention to customers and genuinely want to aid them.  Employees must remember that customers make the final decision on what business they decide.  By the employers and employees being customer focused the companies have the potential to gain lifelong customers.

3. Evaluate the level of system security (i.e., high, medium, low) needed to ensure information integrity within automated business systems. Provide support for your evaluation.

Automated business systems refer to measures and controls that ensure confidentiality, integrity, and availability of the information processed and stored by automated information systems.  In today’s time, many have become relaxed with the information of individuals.  We have reached an age where companies sale an individual’s information (without consent) for profit.  That’s why it is important that automated business systems have a certain level of system security.  When dealing with personal and non-personal information a high level of security should be set into place.  This will ensure that a person’s rights are not violated and laws aren’t broken.

A high level of security minimizes a company’s exposure to many elements that pose a threat.  A low level security allows the company to be vulnerable.  This graciously opens the door to potential hackers who lie on the outside of the company.  However, minimal security leaves the door inside the company open for risks and threats.  Last, having a low level of security will leave the company completely exposed.  Exposure brings about losses and damages that will definitely be harmful to company.  That’s why it is important for a company to maintain a high level of security.  Following is a list of principles that can aid.

There are thirteen principles developed to ensure security systems.  These principles include:  (1) secure the weakest link, (2) defend in depth, (3) fail securely, (4) grant least privilege, (5) separate privileges, (6) economize mechanism, (7) do not share mechanisms, (8) be reluctant to trust, (9) assume your secrets are not safe, (10) mediate completely, (11) make security usable, (12) promote privacy, and (13) use your resources (McGraw, 2013).  An implementation of these thirteen principles would definitely benefit the automated business systems, plus the company as a whole too.

An alternative to the level of system security listed above is to implement a multi-level security system. A multi-level security (MLS) has been a holy grail ever since the early days of applying computer systems to meet the automation needs of military and intelligence systems (Boettcher, Kung, Lebowitz, & Cariker, 2007).  As stated in the article, a single-level security over classifies date and creates redundancies and inefficiencies within the system.  Having a MLS will eliminate the need for multiple domains. 

Therefore either option will provide great benefits.  Management must decide on what they are looking for within a security system, research potential systems, and make an informed decision that will prove effective for the company.  Companies must remember that information integrity is a critical responsibility to a company’s finance.

References:

Business Dictionary, (2013),“Organizational Performance”, Retrieved from:

http://www.businessdictionary.com/definition/organizational-performance.html

Ackoff, R. l, (2012),“Ackoff’s Management Misinformation System”. Retrieved from:

http://wps.prenhall.com/wps/media/objects/152/155841/cs1.2.pdf

Boettcher, C., Kung, K., Lebowitz, J., & Cariker, K, (2007),“Raytheon Technology Today”.

Retrieved from:

http://www.raytheon.com/newsroom/rtnwcm/groups/public/documents/content/rtn08_tech_infoops_pdf4.pdf

McGraw, G, (2013),“Thirteen principles to ensure enterprise system security”. Retrieved from:

http://searchsecurity.techtarget.com/opinion/Thirteen-principles-to-ensure-enterprise-system-security

Potocki, K. A., & Brocato, R. C. (1995), “A System of Management for Organizational

Improvement”. Retrieved from: http://techdigest.jhuapl.edu/td/td1604/Potocki.pdf

Romney, M. B., & Steinbart, P. J. (2012), “Accounting Information Systems”. Upper Saddle

River, NJ: Prentice Hall.