Overview of Smith Brothers Auto Solutions
Task 1:
Traditional accounting mainly refers to the accrual or accrual based accounting system which generally requires the user to record the income along with the expenses that have been invoiced or were billed. This is to be done regardless of the payments that have been made or not. The traditional accounting system generally requires to keep all the income as well as the expenditure that includes the records of the assets that has been purchased, the value that the stocks are having when the accounting period is over, payments made to the employees, cost of the business vehicles along with the travel cost, interest in building of the society and last any other type of incomes are also to be declared (Ionescu et al., 2013). Mostly the traditional accounting system is more suited for large organizations but can act as an important option when there is a need of quick prediction regarding the growth of any organization.
The Traditional accounting is mainly used when an overhead of the company is lowered as compared to the direct costs related to production. This system is associated with providing a accurate figure of the cost required whenever the an organization starts to operate with high level of production. Besides there does not exists any type of changes in the overhead costs and are also not associated with creating of any kind of substantial difference while calculating the cost that is required for the various business processes (Singh & Mehta, 2012). This type of systems are costly and is very hard to implement.
The main reason lying behind the usage of tradition accounting is for the purpose of producing external reports as they are simple and can be easily understood by any outsider. Buy this traditional accounting system is not associated with providing the mangers with an accurate picture of the cost that the products are having (Akintoye, 2012). Besides this the overhead costs are also not allocated to the products which are actually associated with the consuming of the overhead activities.
The various options that are available to the Smith bothers if they want to move from the current system is cloud based accounting. The major reason that would be lying behind the adaptation of this technology is because of the fact that the cloud based accounting system is very much cost effective along with being efficient. As this organization is having a tight budget so it could be very good choice to select the cloud accounting strategies. This type of accounting system are generally associated with the usage of the clouds in order to store all the financial as well as the accounting data (Gupta & Sikarwar, 2016). This in turn would be helping further access of the data to several authorized users from anywhere by making use of the Internet. In traditional accounting various type of errors might occur like human errors and many more but the usage of the cloud accounting software and solutions can greatly help in the decreasing of the errors and this is done by automating the various processes of the business. Along with this by taking help from the cloud the employees of the company would become capable of working on the same file at the same time and this greatly helps in the maintenance and monitoring of the accounting data which is free of errors.
Issues faced by Smith Brothers Auto Solutions
Other options which are available to Smith Brothers Auto Solution includes the Database accounting software and the installed accounting software.
The two probable software’s that can be used by Smith Brothers Auto Solutions in order to tackle all the problems that are currently being faced by them have been listed below:
Database accounting software:
This is the type of system that can be used by the company in order to secure their data and due to the fact that there is a large database of Smith Brothers Auto Solutions so this is appropriate type of software that can be used. One of the software which falls in this category is the Oracle accounting software (Nakhaei, 2016). There is just a need of hiring a system engineer and system consultant for the purpose of installing this kind of software and by installing this software and make it work in accordance to the need of the company. This software would be associated with handling the financial management along the complex tasks, large network and various complications that is related to the accounting functions (Hall, 2012). The various advantages mainly includes the flexibility, security, and the ability of handling various type of complex accounting tasks. But the major disadvantages of this software are it is very expensive and requires a high maintenance cost.
Cloud accounting software:
This is the type of accounting software that is generally available online and this would be making the data available online which can be accessed by authorized users anytime and from anywhere. Few of the cloud based accounting software includes the Freshbooks, Quickbooks, Sage 50 Premium accounting 2015 and Zero. This type of accounting software has very type of advantage and the major advantage is that it is less expensive and the data are also available online. This eventually helps the accountants to keep a track of the account very easily (Dimitriu & Matei, 2014). Along with this the company Smith Brothers Auto Solutions can also connect the cloud accounting software with the online bank account of the company.
The spreadsheet solution can be included in the accounting system of the company Smith Brothers Auto Solutions. This would be helping a lot in the process of bookkeeping. The spreadsheet can be adopted in order to meet the basic needs of Smith Brothers Auto Solutions. This can be better understood by using of an example that is the spreadsheet programs would be associated with the listing of the expenses that are made by the company, along with listing of the sales and other relevant financial data. This would also be helping in the handling of various advance accounting functions as well (Zhang & Gu, 2013). Smith Brothers Auto Solutions is a very simple business so it can use the spreadsheet in order to handle the accounts. One of the major benefit of the accounting software is that it would be linking all the data related to accounts. This would be very useful in things like cash flow and many more.
Requirements for Task 2 and Task 3
Task 2:
The directors and managers of Bank of Queensland has been associated with making a commitment regarding the incorporation of governance and providing support to the corporate governance principles and recommendations as developed by the Australian Security Exchanges Corporate Governance Council. This is mainly for the purpose of enhancing the credibility along with the transparency of the capital market they are having. The corporate governance policy of Bank of Queensland has been categorised into eight major principles which includes the following:
Principle 1: Lay solid foundations for management and oversight
Principle 2: Structure the board to add value
Principle 3: Act ethically and responsibly
Principle 4: Safeguard integrity in corporate reporting
Principle 5: Making of timely and balanced disclosure
Principle 6: giving respects to the rights that the Security Holders are having
Principle 7: Recognizing and managing of the risks
Principle 8: Remunerate Fairly and Responsibly
The IT governance are not associated with functioning in the isolation but can be considered as a subset present in the Enterprise or the Corporate Governance present in the organization (Biegelman & Bartow, 2012). Despite of different stakeholders the principle of meeting the needs of the stakeholders and the governance objectives to create values is also same for both of this. In case when the needs of an IT governance stakeholders are considered and satisfied followed by the completion of the creation of values in order to deliver benefits associated with the minimization of the risks along with the optimization of the resource usage (Ali & Green, 2012). Then it is notices that the IT goals that the organization is having are being met up. When the It goals are met then it can be considered that it is making a direct contribution for the achievement of the goals that the organization is having and while doing this the needs or the Enterprise Governance Stakeholders are also satisfied. From that, it’s crystal clear to see why and how valuable to and for the organization Stakeholders are, and how essential they are in the Governance of Enterprise IT.
IT governance acts as an integral part of any enterprise and mainly consists of the leadership and organizational structure as well as the processes. This is associated with making sure of the fact that the IT of any organization is sustained along with extending the strategies and objectives of an organization. The main objective of the IT governance is associated with directing the IT endeavours in order to ensure the make sure following objectives are met (Györy et al., 2012). The objectives include the alignment of the IT with the enterprise along with realizing the benefits that have been promised, using of the IT for enabling the enterprise to exploit the opportunities along with maximizing the benefits, use of the IT resources in a responsible way and lastly come the appropriate management of the IT-related risks. IT Governance is to be included with the corporate governance because business is totally dependent on the IT. This means that the issues related to the corporate governance cannot be resolved without making use of the information technology. The relationship that exists between both this governance can be better understood by understanding the fact that translation of the corporate governance questions is done into specific IT governance questions which are initially responsible for the disclosure of the corporate governance issues which cannot be addressed by making use of the information technology (Tallon, Ramirez, & Short, 2013). Corporate governance is associated with driving a set of IT governance. The IT is associated with having an influence over the strategic opportunities which are outlined by the enterprise and initially provides a critical input to the strategic plan. It governance can be considered as a driver of the corporate governance. So the IT governance and Corporate governance cannot be considered as pure distinct disciplines and along with this the there is an essential need of integrating this into the overall governance structure.
Traditional Accounting System
Task 3:
The Department of Justice or DOJ and Securities and Exchange Commission were associated with taking of enforcement actions mainly involve the PTC Inc (Parametric Technology (Shanghai) Software Co. Ltd. and Parametric Technology (Hong Kong) Limited). In earlier days the PTC was known as the Parametric technology Corporation and the other two companies were wholly owned subsidiaries of this organization along with the fines and the penalties that were made was also quite subsidiary.
It was agreed by the Chinese subsidiaries to pay a penalty of around $1454000 to the DOJ. Along with this the PTC also agreed to have a profit disgorgement of around $11,858,000 and prejudgment interest of around $1764000 which was paid to the SEC. sustaining of the books and the records along with internal control violation was done by PTC (Sareen, 2013). The main reason lying behind the books and record violation was because of the improper recording of the bribes done by the Chinese subsidiaries on the books and the records which were disguised as the legitimate commissions and the business expenses (Rice, Weber & Wu, 2014). For this reason all things were rolled up into the corporate parent’s books and the records.
Besides the PTC also did not have any kind of the appropriate internal control. It is to be expected by the CCO that there exists internal control at locations outside US are havening the same efficiency like that of the internal control inside the US but unfortunately this doesnot happens every time. In many cases it is seen that the corporate level of internal control are much stronger than those which exists inside the foreign business units. The same thing happened in case of PTC (Debreceny 2013). Each of the bribery scheme consisted of internal control failures. There existed least control but still the control was not much effective and this mainly happened due to the failure of the PTC oversights. This also indicates a weakness that existed in the internal control. This is associated with allowing of one of the corporate employee to gain an oversight of the process related to approval. So it can be concluded that this is not a sufficient internal control.
Most necessarily there should exist different kind of control levels regarding the commissioning of the third party representatives. This is to be done because of the fact that they are considered as the highest risk in accordance to the Foreign Corrupt Practices Act or the FCPA. This is to be followed by compounding of this with the known high risks related to doing of business in China. By this way it would become very easy to spot the various kind of internal failure (Chong & Tan, 2012). In order to avoid the enforcement actions there is an essential need of eliminating the errors and examining the internal controls. The examination is to be done for the purpose of identifying the weaknesses and the failure especially for those which involves the foreign transactions. Besides this the control environment is to be maintained which would be mainly including the style of operating, ethics, delegation of the authority system and lastly the management processes that were missed or were ignored. The risk assessment is to be done in a proper way by skilled and experiences personnel’s. Activities which mainly includes the approvals, verification and reviews of assets are to be performed in the business process for the purpose of hiding the fraud (Iden & Eikebrokk, 2014). Effective communication with regulators is to be done along with making sure that the the information system plays an significant role in the business, proper insights are to be provided to other authorities about the organization, along with providing of direct options of what are to be done (Hammersley, Myers & Zhou, 2012). Monitoring of the activities are to be done along with separate evaluation and taking certain actions which would be helping a lot in correcting the mistakes that are conducted regarding the Internal control.
Alternatives for Improving Accounting System
References:
Akintoye, I. R. (2012). The Relevance of Human Resource Accounting to Effective Financial Reporting. International Journal of Business Management & Economic Research, 3(4).
Ali, S., & Green, P. (2012). Effective information technology (IT) governance mechanisms: An IT outsourcing perspective. Information Systems Frontiers, 14(2), 179-193.
Biegelman, M. T., & Bartow, J. T. (2012). Executive roadmap to fraud prevention and internal control: Creating a culture of compliance. John Wiley & Sons.
Chong, J. L., & Tan, F. B. (2012). IT governance in collaborative networks: A socio-technical perspective. Pacific Asia Journal of the Association for Information Systems, 4(2).
Debreceny, R. S. (2013). Research on IT governance, risk, and value: Challenges and opportunities. Journal of Information Systems, 27(1), 129-135.
Dimitriu, O., & Matei, M. (2014). A new paradigm for accounting through cloud computing. Procedia economics and finance, 15, 840-846.
Gupta, V. K., & Sikarwar, E. (2016). Value creation of EVA and traditional accounting measures: Indian evidence. International Journal of Productivity and Performance Management, 65(4), 436-459.
Györy, A. A. B., Cleven, A., Uebernickel, F., & Brenner, W. (2012, June). Exploring the shadows: IT governance approaches to user-driven innovation. Association for Information Systems.
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Hammersley, J. S., Myers, L. A., & Zhou, J. (2012). The failure to remediate previously disclosed material weaknesses in internal controls. Auditing: A Journal of Practice & Theory, 31(2), 73-111.
Iden, J., & Eikebrokk, T. R. (2014). Using the ITIL process reference model for realizing IT governance: An empirical investigation. Information Systems Management, 31(1), 37-58.
Ionescu, B., Ionescu, I., Tudoran, L., & Bendovschi, A. (2013, June). Traditional accounting vs. Cloud accounting. In Proceedings of the 8th International Conference: Accounting and Management Information Systems, Bucharest, Romania(pp. 106-125).
Nakhaei, H. (2016). Market value added and traditional accounting criteria: Which measure is a best predictor of stock return in Malaysian companies. Iranian Journal of Management Studies, 9(2), 433.
Rice, S. C., Weber, D. P., & Wu, B. (2014). Does SOX 404 have teeth? Consequences of the failure to report existing internal control weaknesses. The Accounting Review, 90(3), 1169-1200.
Sareen, P. (2013). Cloud computing: types, architecture, applications, concerns, virtualization and role of it governance in cloud. International Journal of Advanced Research in Computer Science and Software Engineering, 3(3).
Singh, T., & Mehta, S. (2012). EVA vs Traditional accounting measures: A pre recession case study of selected IT companies. International Journal of Marketing and Technology, 2(6), 95.
Soin, K., & Collier, P. (2013). Risk and risk management in management accounting and control.
Tallon, P. P., Ramirez, R. V., & Short, J. E. (2013). The information artifact in IT governance: toward a theory of information governance. Journal of Management Information Systems, 30(3), 141-178.
Zhang, L., & Gu, W. (2013). The simple analysis of impact on financial outsourcing because of the rising of cloud accounting. Asian Journal of Business Management, 5(1), 140-143.
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