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.

Reliable Technology

For this week's blog I read an article in Accounting today, from September of this year, entitled "Reliable Technology- don't settle for less." This article discusses the importance of information technology within accounting firms. The author mentions how many firms know they need a strong infrastructure, but are not willing to put forth the capital investment to have it. In general, most firms will understand the need for a strong technological infrastructure, but they've underestimated the cost involved with achieving that and therefore don't have a system from which they can profit. The author goes on to list some aspects of a strong technological infrastructure, which include: a knowledgeable leader, a strategic plan, secure servers, reliable hardware, secure remote access, a quality training program, and more. The author goes on to argue that possessing these qualities in your infrastructure will ensure competitive advantages, as technology is what firms can use to advance themselves above and beyond competitors.

I agree with the author on this topic. With sufficient capital investment and knowledge base in an information technology system, a firm can benefit immensely. Technology is continuing to advance every day and firms need to realize this and take advantage in order to keep themselves competitive. There can also be financial benefits involved if a firm uses there infrastructure correctly.

Email Security

In doing research for strategic uses of technology in accounting, I came across an interesting article entitled "Email Security for Small Businesses: Protecting Digital Information." It was an article in the CPA Journal from July of 2006. The article discusses how protecting information used to involve locking drawers and cabinets, but now with the use of email and the Internet, keeping information secure has changed immensely. The article discusses the danger of sending important information through email, due to the lack of security involved. Once that information is sent, it could be forwarded to anyone, including competitors. There is also the possibility of information being stolen off computers that are misplaced, or left unattended.

Fortunately, there are options businesses can take in order to try to prevent this from happening. The article mentions how accounting firms have used encryption and digital rights management (DRM) to safeguard such information from leaving the organization. According to the article, these options are now available to smaller businesses, as oppose to just the large accounting firms. This sort of security technology can delete old emails at a certain date, and apply pass codes for accessing the information so it is only available to certain users. Of course there is no absolute guarantee to these types of security, but it is a step in the right direction to protect client data.

Having had experience at a local accounting firm, I can relate to some of these security issues. We were constantly reminded never to leave our laptop unattended for more than a few minutes at a time, and are never to leave our laptop at a client overnight. The firm I worked for takes very cautious steps toward making sure no information is accessible to anyone outside the company.

Information technology is highly important in accounting. Today, more than ever, tax returns are being prepared electronically with the use of information systems. During my experience as an intern at a local public accounting firm, I used the system known as GoTax in order to prepare corporate and individual tax returns.

This system allows the user to locate each return by entering a specific I.D. number. Each year the returns are rolled forward and the system is updated for changes in tax law. Once a return is opened, the user can drop in the numbers needed to complete the return. GoTax will automatically configure the tax payment or refund needed. This has dramatically cut down on preparation and review hours for returns. GoTax also allows users to preview the final return and does a diagnostic check for errors.

Such a system is strategically important for several reasons. Primarily, it allows for uniform access to accounting returns over a large geographical area. At the place I interned, reports and research we conducted could be available almost immediately to managers for review. This is also important for on-site work at a client's home office. Additionally, there is the ability for management oversight during return preparation. Returns completed by many different employees can be checked and reviewed by a single user in a different location.

Further, IT in accounting has helped in its ability to create a consistent quality of accounting throughout a company. Information systems used in the areas of audit and tax ensure an identical work product through the use of corporate policy and education. Corporate policy, both static and constantly updated, can be distributed immediately to all employees in all departments.

Strategic Use of IT in Auditing

Having worked two internships at a public accounting firm, specifically in the area of auditing, there are a couple strategic uses of information technology that I have had experience with. As technology advances, so does the use of technology in the auditing world.

Auditing a client involves gathering a large amount of information including prior year financials, bank statements, backup support for new asset additions, loan documents, and much more. Traditionally, auditors received hard copies of all these documents and filed them in folders. Today, more and more information is received in the form of electronic files. The firm I worked for has a database known as Accounting Information Management (AIM), which is used to store and organize any work papers or documents received electronically from clients during the audit process. AIM allows auditors to organize multiple years of client's information by area audited. These areas include Cash, Liabilities, Equity, Income Statement, and many others. With in these areas there is a work program set up in AIM, which the auditor fills out during the audit process. These work programs contain questions and processes to be answered and performed while auditing a client's financial statements.

AIM is a strategic use of information technology in auditing. Its a very easy program to navigate through, and allows all information to be stored in a safe, reliable way.

Next week's blog will cover strategic uses of information technology in the area of tax.

Updated information on blogs used in accounting

To expand upon blogging used in the accounting industry, I did further research and found some additional information. One website I found, located at http://quickbooks_online_blog.typepad.com/blogmain/for_accounting_professionals/index.html, is created for accounting professionals to discuss the Quickbooks Online Edition software. This blog site is mainly geared towards accountants and bookkeepers in the private accounting industry. Quickbooks is a software used for bookkeeping, and this website allows users to comment on its usefulness and compare it to other software. I found this website to be fairly reliable. It is posted by users of the software who appear to have plenty of experience using it.

Another interesting website I discovered is located at http://www.sequence-inc.com/fraudfiles/. This site focuses around fraud in the accounting industry. Most of the blogs posted are reports of various fraudulent acts committed by accounting professionals. I found this site to be fairly reliable, but in reading through the blogs I discovered that a few posts dealt with other acts of fraud outside of the accounting industry. This site did appear to be objective, simply stating the facts of the particular cases and avoiding too many personal opinions. I found this site useful for keeping up with daily news stories involving accounting frauds, as that is still a hot topic in this industry.

Blogging in Accounting

I researched about blogs used in accounting, and thus far not many blogs exist in the accounting industry. Most that do exist deal with tax issues, but there are more on the rise dealing with niche topics such as Sarbanes-Oxley, business valuation, and estate planning. I read through a few blogs posted by CPAs and smaller firms around the country. One blog in particular deals with posting updates of tax rules and regulations. Other topics included accounting software, auditing, GAAP accounting, internal control, and fraud. While reading them, I kept in mind the virtues we discussed in class, including reliability, objectivity, and accuracy. In my opinion, the blogs didn't have much substance. One blog dealing with auditing, simply offered a link to new standards released for internal financial reporting for smaller companies. It offered no insight or opinions on the topic. One blog I read, on the subject of Sarbanes-Oxley was simply announcing the death of Ken Lay, the former Enron executive. I didn't see any reliable information on the actual topic of Sarbanes-Oxley. The only blogs that seemed to have any depth and accuracy to them dealt with various tax issues. These blogs appeared reliable and accurate, based on my prior learning experience on tax issues in the past.

Thus far, I don't feel that blogs have had a very big impact on the accounting industry. They are still on the rise, but have not yet had significant impact. I think in the future the industry could benefit from these blogs dealing with views on GAAP standards and tax issues. If significant players in the industry were involved in the blogs as well, offering their opinions, the impact would increase even more. But as it is today, there are not enough blogs to impact the industry.