Offshoring

Offshoring is the process of relocating certain business procedures to another country. It is similar to outsourcing other than the relocation outside the country. Offshoring is increasing in popularity each day. When researching how this has affected the accounting industry, I did not find much information. I believe this is due to the newness of the idea for areas other than information technology. In McKinsey Quarterly I found an article, dated back to 2005, entitled "Ensuring India's Offshoring Future", which mentioned how India's supply of talented workers is growing outside the areas of IT, into research and development, finance, and accounting. This leads me to believe that offshoring is going to be increasingly affecting the accounting industry in the future, but has not done so as of yet.

From the articles I read through, there didn't seem to be any relevant data as to how many companies have tried offshoring their accounting divisions or processes. This leads me to believe that this idea is still being researched in terms of the accounting industry. I personally find it hard to believe that many accounting processes could be successfully and efficiently be completed through the use of offshoring, but there are indications of this being a growing trend. In an article from 2005 in the Journal of Accountancy, various authors report on the use of offshoring for tax purposes. Some companies have found it cost efficient to offshore their tax preparation processes during the busy tax season due to under staffing issues. It is still too early to examine the effects on a large scale, but the article did report that some companies had reported high cost savings due to offshoring tax preparation processes. As I am getting ready to being working full time at a local public accounting firm, the idea of our work being sent offshore is a bit scary, but with the overload of work during tax season this may prove to be a trend that will help lighten the load.

Accounting and ERPs

In an article in the September 2006 issue of CA magazine, author Michael Burns reviews several new software products for the accounting industry. The article is entitled "Accounting and ERP Survey 2006." Michael discusses the trend of consolidation of vendors within the industry and mentions the importance of taking the smaller vendors into consideration as much as the larger ones, such as PeopleSoft. Another trend is the merging of customer relationship management (CRM) with ERP. Also, many of the software providers are offering an application service provider (ASP), with NetSuite taking the lead in this area.

The accounting industry can greatly benefit from the use of effective ERP systems. These can be particularly effective in integrating many information systems within the firm, and appears to be improving with the addition of CRMs and ASPs. The accounting industry has been using these systems and continues to see the benefits. This may not be beneficial for public accounting firms as much as it is for their clients. Clients can use these systems to integrate their information and easily access data. Accounting departments of these businesses will benefit from the use of these ERPs. Companies will be able to integrate their existing software with customer data and create links between the different divisions. This will make analyses and final financial computations easier and more efficient. The accounting department collects and reports the data on how the firm is performing, and the use of ERPs can definitely improve a company's performance. It allows different divisions, for example, purchasing and manufacturing, to communicate and work together to improve service to the customer. The accounting department can be the backbone of the company, and in some cases accountants will use ERPs in the business to determine how successful the business is or can be with the integration of information systems.

Technological Risks

For this week's blog, I came across an article entitled "Technology: Risky Business", written by Riccardo A. Davis, in the March 2006 issue of Accounting Technology. This was an interesting article, which discussed how risk management is becoming a popular job for accounting firms across the nation. This includes disaster planning, information technology audits, and security management. Some of the reasons for the increase of concern and workload related to disaster planning are the recent hurricanes, including Katrina. Auditors of information technology have been on high demand recently due to these natural disasters and legislation such as SOX. Auditors are being called in to do risk management assessments for many businesses.

This article brings up some interesting points. With the advancements in technology and the recent natural disasters, there is a need for businesses to be assured that their information security is properly safeguarded. Even with technology positively affecting the accounting industry in so many ways, this is an example of one downfall. The more accessible the information through computer and information systems, the more likely that the information could be stolen. Its extremely important for companies to put all possible security measures in place to prevent this from happening. Auditors of information security are employed to help companies be aware of this.

As technology continues to advance, the accounting industry will reap benefits from information systems used in their areas of service. After reading this article, I have realized that these public accounting firms will also benefit by a larger workload in the area of risk management. Companies will continue to need assessments of risk in order to ensure that their information is properly stored and safeguarded from the public eye. This will continue to provide work for auditors of information technology.

Top Technology Issues

I found a great article in CA magazine, from the September 2006 Issue, entitled "Top TECH Issues". It was written by Gerald Trites and Andree Lavigne. It listed the authors' top ten technological issues facing many businesses today. Some of these included the need for improved IT systems expertise, the need for tools to help with Sarbanes-Oxely, e-mail management, user authentication methods, IT outsourcing, and information privacy/identity theft. The article discusses each issue in depth and gives reasons for its importance. The authors also touched upon a topic we discussed in class, phishing, with regard for the issue of information privacy and identity theft. The article reported that instances of phishing occurring have been rising, and it is becoming an increasing threat to consumers and businesses.

Although these issues may apply to many industries, it applies to the accounting industry as well. SOX was created out of poor business practices by one of the top accounting firms at the time, as well as many other businesses. Now, four years after the legislation was passed, businesses and accounting firms are still seeing the aftermath, especially in relation to information technology. It seems to be clear that many businesses, due to the issuance of Sarbanes-Oxely, are having trouble with compliance issues and information technology controls. The law seems to be unclear in some areas, causing trouble for many businesses. This can in turn affect the accounting industry, because these businesses are all clients of public accounting firms. Information technology plays an important part in the accounting industry today, and many details will still need to be worked out regarding Sarbanes-Oxely legislation.

Data Warehousing

A data warehouse is a computer system used to collect and store data and information regarding customers or clients of a business organization. Data warehousing is a tool used in the accounting industry. While doing research, I came across an article entitled "At Your Fingertips: The Next Generation of Usage in Data Warehousing". This article was written by Gail Perry, in the Spring 2005 Issue of The Accounting today Marketplace. The article discussed the various uses of data warehouses, including the ability to use Online Analytical Protocol (OLAP) to collect certain information needed from multiple places. Data warehouses allows users to perform queries to collect relationships between data that may not be stored in exactly the same place. The system collects information from different databases to form new relationships between the data. There is also a feature known as a dashboard, which can tell a company where they are in relation to measurable goals they have set for themselves. The article also discusses costs involved with implementing the system, which can be expensive, but varies depending upon the quantity and complexity of the data. Finally, the author discusses the importance of understanding the reasons for the need of a data warehouse. Companies should be aware of why they need the system and how they can benefit before implementing it.

These types of data warehouses are used at the organizations of the accounting firm's clients. Accountants need to know how to access information from client's data warehouses in order to retrieve necessary data for services performed, such as audits. From personal experience, I have had the opportunity to do just this. While auditing a client in the automobile industry, I was able to access information regarding the company's tire inventory to obtain information needed for our audit. When clients have successfully implemented data warehouse systems, information is easily available to auditors which allows the audit process to run smoothly. Auditors realize the potential in these systems, and attempt to portray that to their clients. Accounting firms typically have clients in all industries, including automotive, manufacturing and distribution industries. Clients in these industries will typically have numerous amounts of data to be stored and evaluated, and can benefit from a data warehouse system.

SOX Compliance Issues

This week's topic relates to Sarbanes-Oxley and compliance issues surrounding information technology in the field of accounting. I found an article written by Scott Gordon in the October 2006 edition of Financial Executive, entitled "Where IT Accounting Raises Compliance Issues".

The author points out how Sarbanes-Oxley has raised compliance issues regarding IT in accounting, along with the financial reporting standards it created. Among the new standards set by the law surrounding the information technology systems that support financial reporting, there are compliance issues with the company's reporting of the transactions surrounding the acquisition of these IT systems. The author lists examples of these transactions, including: 1) the treatment of hardware used in outsourcing, 2) the treatment of entity providing outsourcing services, and 3) the treatment of service contracts with software development or maintenance firms. The author goes on to argue that the recording of these transactions is not to be overlooked, and emphasizes the importance of the CFO of a company understanding the IT systems used.

I believe this article defends my previous blog on how IT is extremely important in the field of accounting. This article brings up how important these systems are in the accounting field, and how financial reporting is highly effected by the used of such systems. While reading this article, it was obvious to me that information technology has a great effect on the way public accounting firms operate today. These systems are used daily by firms worldwide in order to efficiently store client data and prepare financial reports. Clients being audited also benefit from these systems through effective and efficient audits of their firm.

Discussion of Carr's Theory on Information Technology

Professor Nicholas Carr has made the argument that information technology is not a source of competitive advantage, in his articles "IT Doesn't Matter" and "IT Still Doesn't Matter". Carr argues that information technology is following the pattern of similar previous technologies which eventually, over time, lose their significance and no longer produce a competitive advantage.

In my previous blogs, I have given many examples of strategic uses of information technology in the field of accounting. Based on the information I have previously reported, I strongly disagree with Carr's theory. I believe that information has a significant effect on the field of accounting. Developments are still currently taking place, and over the past 5 years significant changes have been made in the public accounting industry regarding technology. Accounting professionals, including auditors and tax accountants have come to depend upon technology in order to successfully serve their clients. This technology allows for more efficient servicing of these clients through the use of information systems such as GoTax and Accounting Information Management (AIM). These programs allow accountants to store and process client information effectively and efficiently. I strongly believe that these systems give accountants a competitive advantage. A small start up firm would not be able to compete without implementing a strong information system such as AIM to store client data. Technology has advanced the field in terms of competition and efficiency. To say that information technology doesn't matter is overlooking the importance of technology in our world today, including the various uses in the field of accounting.