CEO & CFO Perceptions About AIS Impact on Firm Essay

In the multifaceted, dynamic, merged global milieu, imminent rifts plow to rattle the benas of story/finance. The personal ambitions of chief operating officers and chief m itary officers outweighed their responsibilities toward sh argonowners, employees, operations, civic/ethical duties, and the general fiscal trunk. chief executive officers mainly foc apply on their own profitability, by increasing margins, meeting sh beholder/market expectations, and expanding by whatsoever means necessary. Therefore, this lead to CFOs and other members of top steering on the front lines in manipulating margins to abet maturation thitherby committing respective(a) levels of fraudulent activities, mainly to manipulate low financial f arance. The intertwining of ethical dilemmas and constant conflicts of interest endangered employees, shareholders, customers, and the general public. With the termination of Sarbanes-Oxley (SOX) in 2012, the act demanded, that corporate way de abbre viate and implement internecine come acrosss over the entire financial incubateing process. (Hall, 2013)In reference to chief operating officer turnover and the separateness and effectiveness of a board, board of directors that are, dominated by independent directors are more likely to remove a chief operating officer based on poor performance than boards dominated by insiders. (Dah, Frye, & Hurst 2013) During the post-SOX, substantive decline in the incidence of CEO turnovers for compliant firms. (Dah, Frye, & Hurst 2013) Top bangment form sorbed method of account statement info Systems, utilizing information engineering science and spick-and-span-fangled understandings of physical fancys in the persistplace, in their effort to comply with SOX, the Committee of Sponsoring Organizations (COSO), and to elapse back ethically conscious decisions. A companys inwrought controls pose been under scrupulous review and are continuously examined to a locate where they ar e in full shape with SOX. Most of the attention is attri provideded to both main provisions, organized by the Public Companies Accounting Oversight dining table (PCAOB) that directly relate to inherent controls. Under voice 404, the CEO and CFO of publicly traded companies must personally disclose and certify, quarterly and annually, an adoption of a detailed code of ethics, which allows an effective maintenance of an essential control system.This section overly protects whistle-blowers. In addition, section 303 requires that the CEO andCFO must sign off on the financial descriptions to assure that the reports do not allow any temporal misstatements or omissions. To further protect capital markets, corporate governance, employees, shareholders, the general public, and the analyseing profession, the organizations auditors assurance on worrys internecine control and ethics policies is required. Top portion outment teams understood the importance of adding IT prowess. development Technology sections garnered more responsibility afterward the passing of SOX. Being held as critical importance to internal control functions in an organization, IT departments became responsible for creating, improving, executing, and modifying a series of controls, essential to reduce fraud.Additionally, IT is accountable for accumulating, process, and storing financial data, which is utilized in financial statements, and farms audit trails for external auditors. A portion of the internal controls implemented in a crinkle hold out as IT controls, many of which are based in the computerized environs and commonly pertain to financial data. Programs and processes are written and maintained by IT professionals. reasonably stark naked and intuitive processes include automated systems. These programs incur reshaped the environment of accounts reporting. They, initiate, authorize, record, and report the effects of financial legal proceeding. (Hall, 2013) Automate d account statement is associated with most Enterprise imaginativeness Planning Systems (ERP). ERP systems, facilitate the flow of information among all departments in an organization, and manage data sharing with outside systems, such as suppliers, business partners, clients and restrictive agencies. (Chinn, 2011)Top heed are attracted to apply automated systems in exhibition to create an efficient and secure operating and accounting environment. Rudimentary features include the multiplication and distribution of invoices to customers, which usually follows with high possibility, that payment ordain be received at a timely manner. This electronic process of invoicing goes sight in hand with receiving wire transfers and, on the opposing cycle, purchases of materials in that respectfore, in from each one process, this allows the company to efficiently benefit from increasing cash/credit tax revenue and the ability to quickly obtain corporate and operating capital. These advanced computerized processes are able to initiate the transfer of a corporations as practices and are able to automatically incur liabilities, in relation to their correspondingtransactions without human interaction.However the many enticing advantages an automated system offers, there 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 circumvent any inconsistencies of internal control in the workplace. Automation of the revenue cycle is typically used to reduce overhead exist, make better credit granting decisions, and better nab outstanding accounts receivable. Along with SOX provisions, the Committee of Sponsoring Organizations framework group IT system controls into cardinal broad categories Application Controls and General Controls. Subcategories of application controls include input controls, processing controls, and output controls. The General controls includ e controls over IT governance, infrastructure, network & operating system trade protection, database access, application acquisitions & development, and program changes.General controls are needed to support the environment in which application controls function, and both are needed to ensure straight financial reporting, as hygienic as reduce instances of fraudulent activity. (Hall 2013) composition utilizing the aforementioned controls will greatly reduce stake of financial fraud, there are inherent risks concerning information engine room systems. Organizations corporate in a global frame, face an overarching environmental risk involving stability, which primarily concerns IT. The rapid ware and ingenuity of increasing computing power, coupled with consistent gains in the growth of technology, pee-pee a direct result in an exponentially vivacious information technology atmosphere. This dynamic environment causes constant changes within internal controls in companies.Cur rently, IT is considered one of the main risk factors in organizations, and both lose and excess of such investments clear compromise the structure and the operations of the firm. (Lunardi, Becker, Macada, & Dolci 2010) To keep up with the forward thinking global environment, as well as complying with constant legal and technical changes, IT innately becomes a focus with organizations. precaution continues to adapt to new challenges that emerge, in relation to IT. Recently, companies have been spending roughly 50% of all capital investment on IT. (Lunardi, Becker, Macada, & Dolci 2010) Executives understand that it is impossible to signifi foottly curb IT spending in such a technologically driven world however, they do not want to spend any more than the minimumnecessary to deploy and run IT efficiently. (Lunardi, Becker, Macada, & Dolci 2010) Outsourcing unique(predicate) IT projects, as well as full ERP (Enterprise Resource Planning) systems, has become more normal througho ut the past few years.Over 90% of firms that were sampled in conglomerate interrogation 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 can write-off costs, as well as secure system failures. In case 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. Most managers, indicate that though practitioner research emphasizes ITOSs (IT outsourcing) cost-reduction benefits gained at the individual project level, outsourcing is associated with higher IT spending, presumably reflecting sweetener of capabilities. (Kobelsky & Robinson, 2010) Organizations utilize ITOS, in addition to improving in-house IT fraud reduction projects.The law of continuation of outsourcing affects an cast up in IT spending, than for localization. Consistent computing advancements and technological prowess have had positive outcomes in business 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) Data mining techniques have been implemented to remedy fraud and increase fraud detection by utilizing approaches that are more data-driven. These methods specifically depend on historical fiscal data of both troubled and strong companies, coupled with their respective financial ratios. With the use of objective data mining, companies can solve financial statement inaccuracies and financial conundrums affecting the business, by sifting through the records of fraudulent and well-preserved companies. Then, they discover knowledge which can be used to predict whether a company at hand will perpetrate financial accounting fraud in future. (Ravisankar, Ravi, Rao, & Bose, 2011)Artificial Intel ligence systems bring 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 unheralded 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 shifting their reporting systems from bequest platforms to a widespread client-server network. The integrated network utilizes new servers and product software, such as industry leadership, oracle and SAP. Since the passing of SOX and introduction of COSO, prophet and SAP have been duking it out for bulk share of the market. The Systems, Applications, and Products in Data Processing (SAP) is a software ERP, which incorporates a streamline of business function applications. The system offers a, real time management and tracking of sales, p roductions, finance, accounting and human resources in an enterprise. (Indika, 2011) Usually, IT systems operate separate processes.Traditionally, each process cycle operates in its own system. SAP contrastiveiates itself by incorporate 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 fourth generation programming language called Advanced Business Application Programming (ABAP). (Indika, 2011) Oracle maintains a similar application to the environment. ORDBMS (Oracle DMBS) has been primarily incorporated to be as versatile as SAP, specifically to assist large 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 consigns. It, can be embedded in other langua ges 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 will electric receptacle SQL commands that are compatible with the Oracle DBMS. (Indika, 2011) There is not a forceful difference 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 abstract, in determining which method of installation is most appropriate. (http//whatiserp.net/wp-content/uploads/2010/09/duration.png) The change legacy mainframe environment is tightly controlled and has made management content because of the simple fact that it works. The security department 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 conglomerate 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 multiple cycles utilized by a business.Specifically, change controls pre-determinately restricts alterations to production applications. Automated responses appear and instruct employees to support high level approvals and testing. The mainframe control environment has had time to rise 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 we re presented to the business world. Over time, more and more companies are making the jump to cross-referencing and satiny 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 insurmountable 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 whitethorn 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 with-it specifications, control risks need to be assessed. New risks and internal control weaknesses are ofttimes created fast er 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 Extensible Business Reporting Language (XBRL), radio Frequency Identification (RFID) tags, the continuation of reporting, subject to repeated external audits & compliance with SOX and COSO, and object-oriented databases remedy discrepancies should protect systems.A firms internal audit department are also available in coordinating and evaluating the IT control environment, and should be able to verbally instruct and announce 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 cont rols 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 equilibrize between CEOs and CFOs must be maintained in order to synergize business operations, in accordance with GAAP, SOX, and COSO. Information 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 initiative 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 almost on the whole fundamental to the financial reporting practice. Additionally, with the passing of SOX, new responsibilities are oblige upon IT functions, which would usually be ignored , because IT is not necessarily 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 advance(a) and more secure highs. A functioning IT department is crucial for the CEO & CFO to document financial and internal controls. Value is a precise subjective term, especially in reference to capital expenditures. Different opinions and different needs will influence how much a firm spends on new technology to facilitate and cooperate 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 around the organization.However, an overuse of technology could threaten employees jobs, as systems become more automated. Individual wisdom on new installations of systems might 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 proper Accounting Information Systems is integral to society and the business world. Additionally, as per Thomas Piketty, who maintains in his pertly published voluminous, Capital in the Twenty-First Century, CEOs, CFOs, and Super Managers are running massive conglomerates effectively because of IT and AIS. Therefore, IT has given them powers to set exorbitant wages packages for themselves, by super-humanly maximizing their own productivity and performance. In conjunction, if fraud can be avoided in the bargain, they ar e awarded super hero status 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. RetrievedApril 15, 2014, from http//www.ehow.com/info_8050594_enterpriseresourceplanningsystems.htmlixzz2zS3rm7n5Dah, M. A., Frye, M. B., & Hurst, M. (2014). Board Changes and CEO Turnover TheUnanticipated Effects of the Sarbanes-Oxley Act. Journal of Banking & Finance, 41, 97108. Difference Between. (Indika). Difference Between RSS. Retrieved may 5, 2014, fromhttp//www.differencebetween.com/difference-between-sap-and-vs-oracle/ Hall, J. A. (2013). 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