What is an Accounting Information System (AIS)?
An accounting information system (AIS) refers to tools and systems designed for the collection and display of accounting information so accountants and executives can make informed decisions. It is considered a pivotal component of finance offices throughout the world. The systems are largely software-based and can be deployed as a part of a company’s IT solutions.
Accounting information systems help with the flow of information regarding all the aspects of a company’s financials, including taxes, reporting, or, if need be, an audit. The software-based solutions allow large and small businesses greater control of their finances and provide a competitive method for in-house accounting for small businesses where resources are scarce.
Deploying an Accounting Information System
Deploying an accounting information system shares many similarities with other styles of IT deployment. The software must be created, tested, and onboarded in a way to ensure minimal disruption to existing operations, as well as simultaneously ensuring that there are no catastrophic errors that can disrupt productivity or cause an outage.
Software deployment of any kind comes with a high likelihood of failure, and special care should be taken by large corporations when they deploy such a system that involves its critical components. There is a continual feedback loop after the software is deployed to ensure that it is continually tested so that bugs, errors, and vulnerabilities are quickly found and rooted out.
Below, we see a visual representation of a simplistic deployment and feedback loop:
When to Use
Information systems of all types are lowering the barriers to entry for many businesses with regard to utilizing software as a tool to streamline operations and remain competitive. Accounting information systems are no different.
For example, if you are someone who is starting a small business or growing an existing one, a software-based solution that displays your accounting data to help you make managerial-level decisions is an incredibly useful tool to gather, analyze, and display information.
In the hands of the informed user, the accounting information system can help to provide insights into business deficiencies or areas for improvement. It can also aid in reconciliation and in keeping track of capital. For larger companies, it can help boost investor confidence and make it easier to practice regulatory compliance.
Sarbanes-Oxley and Accounting Information Systems
The Sarbanes-Oxley Act was a regulation passed after the financial scandals at WorldCom and Enron. The scandals involved largely accounting-based fraud and loss of confidence, resulting in the creation and passage of the law on July 30, 2002.
The legislation requires that public companies implement strong audit and regulatory controls that can be provided partially by deploying effective compliance and accounting information systems. It helps create market and investor confidence, reassuring the public that the financials are transparent and accurate.
Financial reporting is a critical part of accounting information systems, helping to ensure the ethical allocation and discussion of capital in the investment community and the public. Financial regulations globally make the effective deployment of an accounting information system a near necessity for any small, medium, or large-sized business.
CFI is the official provider of the global Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful: