Business and Economics

ACW2851 Accounting Information Systems and Financial Modelling

Lecture 9

Accounting and Enterprise Software;

Accounting on the Internet

Adapted from:
Simkin, Rose, & Norman (2012) Core Concepts of Accounting Information Systems (12th ed.) and
Gelinas & Dull (2008) Accounting Information Systems (7th ed.)
 Important
 International student attendance
 Link to textbook
 Simkin (13th edition) AIS. Chp 2 and 12.

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 Learning Objectives
 Understand the differences among various types of
accounting and enterprise software
 Appreciate the various functions in enterprise systems and
the typical costs/benefits of these systems
 Recognise when an organisation should consider acquiring
a new AIS and how to go about selecting appropriate
accounting and enterprise software
 Understand some of the basic concepts of the Internet and
e-business
 Appreciate the importance of XBRL to accounting
 Recognise the key security issues of e-business
Link to other topics.
What are the current trends in
accounting software?

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 Accounting Software

Advances in Accounting Software

 Initially processed bookkeeping transactions
 Developed into powerful and complex data collection
programs. Now INTEGRATED with other various info
systems
Enterprise Resource Planning Systems (ERP)
 Provide all accounting functions
 Interfaced with multiple functional areas of business
including manufacturing, sales and distribution, HR and
other applications
 Features of Integrated
Accounting Software Programs
What are the different types of
accounting software?

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Small Business Accounting Software
 Small business:
– Typically 1-10 users and/or <$5 million in revenue
– Owners usually most concerned with cash flows, and
figuring out if they have been profitable.
 Features of Software
– Bookeeping and can generate numerous reports
including financial statements and budgets (including in
XBRL format)
– Scalability
– Internet connectivity
 Examples include Quickbooks by Intuit, Peachtree
Accounting, UBS and Mind Your Own Business (MYOB)
 Midrange & Large-Scale
Accounting Software
Are useful when transaction processing needs
 grow in volume, and
 increase in complexity
Range in price from $2,000 to >$300,000
Examples are Microsoft’s Dynamics GP, SAP Business One
 Epicor, Everest, & Made2Manage, Accpac
Midrange Accounting Software
Integration
 Midrange & Large-Scale
Accounting Software
These software packages offer many features, including:
 handle more than just accounting functions
 process transactions in multiple currencies
 split commissions among multiple salespersons
 be deployed from an array of options including desktop
computers, a web browser, or a hosted solution by a cloud
service provider
Enterprise-Wide Accounting Software
Enterprise resource planning (ERP) systems
 are integrated programs with a central data base
 do much more than process financial data (typically
integrated with CRM, business services, HR & SCM)
 expand with the price and complexity of software
 help coordinate the operation of business functions and
provide a central repository for information
ERP systems include
 SAP All-in-One
 Oracle
 Microsoft Dynamics AX
 NetSuite Enterprise Solution
 ERP Functions
Traditional functions are concerned with back-office
functions which primarily deal with internal systems, such as
Order processing and fulfillment Manufacturing
Purchasing Human resources

Today’s ERP systems are extended with e-business and

other front office capabilities, including:
Supplier management (SCM)
Customer management (CRM)
Business intelligence (BI) tools
Partner relationship management (PRM)
ERP System Integration
Architecture of Enterprise Systems (1)

1. Systems configuration
 client-server based configuration
 could use hosted solutions to alleviate risks
2. Centralised database
3. Application interfaces
 enterprise application interfaces (EAI) to “legacy” systems
The Architecture of
Enterprise Systems
 Business Process
Reengineering and ERPs
ERP Integration
 entails reengineering an organisation (to best practice).
Require BPR and BPM (see previous lecture on
business process)
 encourages the separate units to conform to standard
(best) practices
 Benefits and costs of ERP
 Benefits of ERP
– Real-time info
– More accurate info and also more info
– Systems are integrated – easier to maintain
– Best practice
 Costs of ERP
– Need to re-engineer business processes to conform to
business process specified by ERP otherwise ERP
won’t work
• Very costly, adversely affect employee
– Benefits gained in 2-4 years time
– Very costly (not in terms of s/w but the cost of re-
engineering)
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Summary of Software Packages
How is coding relevant to accounting
software?

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 Coding Systems

 AISs depend on coding to

record, store, classify, and retrieve financial data.
 Computers use numeric or alphanumeric codes for
processing accounting transactions
 Codes are necessary to
– uniquely identify transactions and accounts
– aid in the classification of accounts or transactions
– communicate special meaning
 Design Considerations in Coding

Codes should
 serve some useful purpose (e.g. identification of
transactions, assets etc)
 be consistent
 plan for future expansion
e.g. Y2K problem
 Types of Codes
 Mnemonic codes
give visible clues concerning the objects they represent
(eg ACW = ACcounting + sunWay)
 Sequence codes
assign numbers or letters in consecutive order
 Block codes
are sequential codes in which specific blocks
of numbers are reserved for particular uses
(eg 1000-1999 1st year subject, 2000-2999 2nd year)
 Group codes
combining of two or more subcodes
Block Code Example
When to buy accounting software?

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When is a new or upgraded AIS needed?
 late payment of vendor invoices (extra fees & lost discounts)
 late deliveries to customers
 growth in inventories, accompanied by an increase in stockouts
 slowdown in inventory turnover
 increased time in collecting on receivables
 late periodic reports
 an increase in the length of time to close books at end of period
 managers concerned about cash flows and the financial picture
 manager complaints about a lack of information needed for
decision making
 worries about cash flows, taxes and profitability
 Buying Accounting Software (1)

The approach to buying accounting s/w varies with the

 complexity of the business and
 features of the software.
At the low end, for small businesses, the approach is much
quicker and less expensive, often utilising a “packaged” piece
of software
Mid-range or high-end accounting software packages are
usually purchased from a value-added reseller (VAR), who
provide buyers with services such as installation,
customisation, and training, and typically offers a broader
array of services than a qualified installer
 Buying Accounting Software (2)

Large organisations with specialised needs

 may require a custom AIS which
– is easier to develop with advances in technology
– is, however, likely to be costly, but
– may prove to be a good choice in the long run
 may initially manage with a packaged software which meets
80% of their needs, then modify it, or purchase “bolt-ons”, to
meet the other 20%. ERP consultants will often be hired to
help with these tasks (industry experience is important!)
 Specialised AISs
 specially designed software for specific industries
e.g. for accounting practices, medical and dental practice
management, schools, pet shops, hotel industry (incl.
property management; reservations, including dining,
rooms, and online reservations; marketing and event
management; housekeeping management; and in-room
movie billing)
 offer add-on modules that can process special information
(e.g. job costing for construction companies, point-of-sale
features for retailers)
 may sell source code with their programs to customise the
software to fit specialised information needs
What is internet and WWW?

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 The Internet and World Wide Web
 The Internet is a collection of local and wide-area
networks that are now connection together via the Internet
backbone.
 To transmit data over the Internet, a computer uses an
Internet address and a forwarding system.
 The Internet address begins as a domain address, which
is also called a universal resource locator (URL)
 Internet computers translate text-based domain addresses
into numeric Internet Protocol (IP) addresses such as
207.142.131.248.
 Intranets and Extranets
Intranets (within orgnaisation)
 are internal company networks that use the same software
as the Internet
 outsiders are unable to access internal information
 information is typically held in one or more databases,
allowing a convenient way to gather and disseminate useful
information to internal users.
Extranets (within orgnaisation + selected external parties)
 some businesses create Extranets that enable selected
outside users to access corporate Intranets.
 utilise passwords or private communication channels to gain
access
 The World Wide Web
 The multimedia portion of the Internet is called the
World Wide Web (www) or just “the web.”
 A web browser enables users to view the graphics
files of the Internet.
 Web pages are created in an editing language such as
hypertext markup language (html)
 The Internet transfers web pages from one computer
to another using a communications protocol such as
hypertext transfer protocol (http).
 A home page is the first page a user sees when
they supply a web browser with a domain address.
Home pages act as a table of contents with
hyperlinks to other web pages.
HTML Code
Display of HTML Code
How does internet affect
accounting?

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 Accounting on the Internet

1) XBRL – Financial Reporting on the Internet

2) Electronic Business
3) Social network
4) Privacy and Security on the Internet
How does XBRL affect accounting?

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1) XBRL - Financial Reporting on the
Internet
XML (eXtensible Markup Language) is similar to HTML,
and yet different because:
 its tags are extensible <……>
 the tags describe the data rather than just indicating their
display (standard tags and application rules apply)
The eXtensible Business Reporting Language (XBRL) is
a subset of XML and is a specialised software language,
with standardised tags, for business reporting purposes
XBRL is a global effort by the XBRL International
Consortium (www.xbrl.org) who create the XBRL standards
1) XBRL Code
 1) The Benefits of XBRL
 Transmit financial data in standard format
 No need to rekey. Avoids errors/inefficiencies of having to
enter data multiple times from multiple sources
 Automatic and reliable exchange of financial information
 Searching for tags is easier
 1) The Drawbacks of XBRL
 Requires new users to learn, and conform to, the standards
of the language (achieved by buying software that can
output data in XBRL format)
 Evolving standards require conformity to changing
specifications (which means that businesses may need to
update their accounting software more often)
 No requirement for auditors to provide assurance on the
XBRL filings
 Costs of transition (survey of initial costs around $30-40K)
How does eBusiness affect
accounting impact?

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 2) Electronic Business

 refers to conducting business with computers and

electronic data communications
 can be performed over the Internet or using proprietary
data transmission lines
 general categories of electronic business (e-business)
include:
– retail sales using online stores
– electronic data interchange (EDI)
– cloud-computing services
– Social commerce
 2) eCommerce with B2C
 Internet technologies offer the option for companies to sell
online.
 There are many advantages: 24/7, convenience for
customer and global market of products.
 This affects accounting because
– Data needs to be captured during registration,
browsing, pre-purchasing and post purchasing
– Inventory system to be real-time
– Security (covered later in the lecture)

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 2) Business-to-Business E-
Commerce
 B2B e-commerce defn:
Businesses buying and selling goods and services to
each other over the Internet
 Most e-commerce is business-to-business (B2B), and a
major part of B2B e-commerce concerns purchases of
supplies and equipment electronically or electronic
procurement
 Companies may manage their supply chain by linking e-
commerce to internal ERP systems.
2) Advantages of B2B E-Commerce

From the point of view of purchasing process and the affects

accounting because
 Shortens time from purchase to delivery (supply chain)
 Expanded variety of vendors (all over the world)
 Corporate purchasers can use online catalogs, confirm
purchases, track shipments and pay invoices electronically
 Reduces processing costs (electronic forwarding of “e-
documents” for approval, placing orders etc.)
 Wider availability of real-time data
2a) Electronic Data Interchange (EDI)
EDI allows organisations to transmit standard business
documents over high-speed data communications channels
(including the Internet)
Examples of these business documents exchanged include
requests for quotes (RFQ), purchase orders, bills of lading,
sales invoices, customs documents, payment remittance
forms, and debit/credit memos.
EDI affects accounting because
1. business partners exchange documents quickly and easily
2. there are no postal delays, and
3. EDI eliminates most of the paperwork
 2b) Cloud Computing
Use business applications over the internet. The servers tend to
be outside the location of the organisation.
Processing Services
 Software as a Service (SaaS) – purchase access to specialised
software (such as access to tax-preparation or payroll software
from Intuit)
 Platform as a Service (PaaS) – purchase a “web-hosting”
service, such as a publisher purchasing web hosting services
from Amazon.com
Backup Services
 Maintain copies of critical data
 Vendors include Amazon, Backblaze, Dropbox, JungleDisk
 2b) Cloud Computing
 Cloud computing affects accounting:
– Certain functions which accounting relies on to
get data or accounting gives data to could be
hosted in the cloud. Could data be easily
shared? Could financial data be hosted?

– Accounting software itself could be hosted. Is

this reliable?

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2b) Advantages of Cloud
Computing
 3) Social Networking
Commercial Utilisation
– Public reaction to launch of new product
– Developing an online presence
– AIS at the background (eg providing & collecting info)
 4) Privacy and Identity Theft

An Internet presence for companies introduces unique privacy

and security concerns that call for specialised controls that
limit data and information access to authorised users
Definition – identity theft
Using another person’s personal data that involves fraud or
deception
Company Prevention
 Use strong preventive controls to protect customer
information
 Customers also must exercise reasonable caution to
protect personal information (use professional scepticism)
 4) Security
 Security policies and procedures are required to safeguard
electronic resources and limit access to authorised users to
your accounting system!!!
 Access Security – “Access Authentication” by verifying
that a user is who they say they are
– What you have – plastic card
– What you know – unique information (password)
– Who you are – fingerprints & retina scan (biometrics)
 Systems often require combinations of these security
measures
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What type of security (internet) could
protect accounting system?

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 Firewalls
 A firewall guards against unauthorised access to
sensitive file information from external Internet users
 This is security software (and hardware) that a
company installs on Internet computers and that limits
file accesses to authorised users.
 Firewall software examines packets of
incoming messages using Inclusion
(Access Control List) or Exclusion
 Firewalls cannot prevent Denial-of-Service (DOS)
attacks, or spoofing (or masquerading as an
authorised user with a recognisable IP address)
Firewall Example
 Proxy Servers
A Proxy Server is a computer and related software that
creates a transparent gateway to and from the Internet,
and can be used to control Web accesses
Five advantages of proxy servers:
1. Funnel all incoming and outgoing Internet requests through
a single server.
2. Examine all incoming requests for information and test
them for authenticity.
3. Limit employee Internet access to approved Web sites.
4. Limit information to only Internet-related materials.
5. Ability to store frequently accessed web pages on the
server’s own hard disk (cache)
 Intrusion Detection Systems
 Protect accounting system from unauthorised access
once the intruder bypass the firewall
Passive IDSs
– Create logs of potential intrusions
– Alert network administrators

Reactive IDSs
– Detect potential intrusions dynamically
– Log off potentially malicious users
– Program firewalls to block messages from suspected
source
Security when transmitting accounting
data

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 Virtual Private Networks (VPN)

 VPNs are allows secure data transmission using existing

Internet connections
 Security facility that runs behind an organisation’s firewall,
mimics many of the security features of a private point-to-
point network, and allows (secure) remote access to entity
resources using wireless devices
 A VPN creates secure data transmissions by:
– Encrypting all transmitted data
– Authenticating remote computers and/or senders,
before permitting further transmission
 Data Encryption
 Data Encryption transforms plaintext messages into
unintelligible “cyphertext” ones using an encryption
key
 Data encryption standard (DES) is an encryption
scheme used by the U.S. government.
Presentation title 28th February 2011 66
 Digital Signatures
 A digital signature is used to authenticate business
documents transmitted or received over the Internet.
 Only the sender has that unique signer’s private key.
The sender cannot deny not sending the document if
the digital signature matches that of the sender.
 Part of the document, or some other standard text, is
encrypted, and included with the business document,
to form a digital signature.
 The receiver will use the signer’s public key to
decrypt the signed message.
 Digital Certificate

 Another authentication technique is the digital certificate

 Digital certificates are verification of identity provided

by an independent third party called a certificate authority
(such as Thawte or VeriSign)

 These certificates are signed documents with sender

names and public key information and are generally
encoded (often in a certificate standard such as X.509)

 Customers often use digital certificates to assure

themselves that a Web site is real
 Digital Time Stamping
 Many important documents transmitted over the Internet
are time sensitive (e.g. tender/bid documents, buy/sell
orders on secuities, legal documents)
 Digital time-stamping services (DTSSs) attach digital time
stamps to documents
 Time stamps enable businesses to overcome problems if
downed file serves or power failures delay transmission
 Further Reading
Markus, M. Lynne and Tanis, Cornelis (2000) “The
Enterprise System Experience—From Adoption to
Success”.
http://www.mehralborz.ac.ir/newSite_file/91/MITM/E
RP/Sec01/Sec01/resources/global/Complementary
%20Docs/The%20Enterprise%20System%20Experi
ence-%20From%20Adoption%20to%20Success.pdf
Note: An interesting info about ERP and what are
the factors that lead to success and how to avoid
disasters. Search google to download.
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 Further reading
 Causes of Fox Meyers bankruptcy – ERP?
www.uta.edu/faculty/weltman/OPMA5364TW/FoxMe
yer.pdf

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 Conclusion
 Different types of accounting systems

 How different internet technology that impact AIS

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