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.