HI5019 Paradise Industries Case Study Sample

• Subject Code : HI5019
• University : Holmes Institute My Assignment Services is not sponsored or endorsed by this college or university.
• Subject Name : Accounting and Finance

Strategic Information System for Business and Enterprises

Introduction to Accounting Information System

The main focus of this report is to identify the necessity of the Accounting Information System (AIS) for tremendous improvement in the success of the organization. Collection of data, storing the collected data, recording all financial documents, and create a report for assisting managerial levels in decision making is the main aim of the Accounting Information System. A good accounting system helps to save money and time, also increases the security of the stored data and can be accessed whenever required. This report shows the impact of AIS. Although AIS is a necessity for enterprises like Paradise Industries, which provide a centralized computer system with distributed terminals in the departments, there is no relationship between AIS and the performance of the organization.

There is a vital role of Information systems in the competitive market to stand out from the crowd. The array of activities in Information System includes business process automation, reengineering to create a new business model if there is any paradigm shift. Paradise industries include automation of the production of computer machinery tools. The efficiency of the business process can be improved by the advancement in the technologies. But the company recently have several operational problems, and the managing director of the company has engaged you to assess its systems and processes. This report proposes a strategic Information System taking into consideration the business requirements and the objective of the enterprise (Kitsios, 2016).

Role of Accounting Information System in Business

Having AIS in any business or enterprise is an advantage for that company, as it can help to survive in the competitive environment by adapting to the changes prevailing in the existing business market. It was very initially stated in 1966 that Accounting is a type of information system, and it should be adopted by all the organizations to obtain success in the production of the services. Several studies have been carried out and reported to be best for an organization to stand in the market. A combination of Accounting information systems and business processes leads to the success of the organization (Irianto, 2018).

The role of AIS in Finance is important as all the data are stored and retrieved easily with the help of the automated system. The finance managers can easily look into the past reports and generate appropriate rules and policies for better production services and prices. It increases the financial performance, which in turn elevates the organization towards success.

Besides, the role of AIS is also useful in the management of the performance of the organization. It helps in comparing all the current performance reports with the past once i.e. budget, operational costs, etc. to find out the flaws and increase the current performance of the company.

The crisis can happen at any time any external factor can result in the crisis of the enterprise, especially if it is a small business. Therefore, if it has a good AIS system, the crisis can be managed easily with a strategic information system.

The main role of AIS is in Risk management, which can occur at any time. Always be prepared with a prior alternative plan to adapt to all changes.

Strategic Information System

In this competitive market that we have today, it is very important to give your hundred percent to achieve profit. Strategic information system tactics help to include new advanced technology in the business process to be recognized as the number one provider of the product or services with discounted price or innovativeness. For the development and growth of a small enterprise into a globally known powerhouse, a strategic Information system is a key point to success.

The strategic Information system should be applied to the overall business process to achieve the desired result.

Operational Support System:

The data execution which is carried out at the user end, all its reports are stored in the AIS. This is the function of a strategic, operational support system.

Management Support System:

Every organization needs a perfect flow of the operations carried out in the organization to find out the managerial flow of each person or stakeholders. AIS helps in this, by accessing the data from the AIS, this information can be taken and easily things can be carried out. A decision support system helps in solving all the problems related to organizational conflicts.

Uses of Strategic Information System:

Creating Barriers for The Competitors

Hereby creating barriers, we mean that the product or services designed should be manufactured with the help of highly advanced technologies, such that no one can replicate the same product with the same functionality. This makes the business different from other enterprises and can stand out from the crowd with high profit.

Policies to improve Marketing

Sales and marketing can be improved by creating a strong database, and this is possible by integrating AIS in the operations of the business. It consists of the existing data, which can be further used as a resource in the future.

Locking target end-users and suppliers

The most important step in enterprise success is the identification of the target audience. If we get the correct customers and builds the end product according to their requirement, then it will be a great success. The suppliers should also be locked so that they don’t move on to your competitors and disclose your ideas.

Discount in the price of products

Lowering the cost of the products than your competitor price can help in the expansion of your product sale and hence leading to profit. This helps in the performance of the organization.

Applying strategies where needed

By applying a strategic plan to the advanced technology using the department helps to save training time and other operational costs.

Findings and Evaluation of Accounting Information System

According to the evaluation carried out by the interaction with the employees of Paradise industries, there was no proper communication between the colleagues, and the flow of each process and data storage of essential documents were insufficient. Therefore, it is identified to need an Automated Information system (Syahputra, 2017).

Expenditure Cycle of Paradise Industries

The expenditure cycle elucidates the overall purchasing flow with the proper flow for clear understanding.

a) Purchasing Department

Upon receiving the inventory, it is recorded, and purchase acquisition is automatically generated. A copy is printed and kept in the purchasing department, and one copy is sent to the receiving department. One copy is sent to the supplier for their records

b) Receiving department

The clerk on receiving the purchase document, record it as a new or closed purchase order and pass it on for processing. On receiving the order from the supplier, the receiving clerk adds the data into the system, the date of the recipe, and all other slips of transaction. He also creates a hard copy of the quality and quantity of the received item. Then two copies are made, one for the receiving department's record and the other is sent to the warehouse. The system on receiving the purchase number adds the inventory to the closed purchase orders.

c) Account Payable Department

On receiving the item at the warehouse, the warehouse clerk enters the inventory subsidiary. On receiving the supplier invoice, the warehouse clerk prepares the account payable cheque against the invoice and sends it to the higher authority for signature.

d) Cash Disbursement Department

The system then scans and prints the cheque to be paid for the received invoices. The supplier receives the cheque, and one copy is forwarded to the disbursement department to be filled. The final step is automatic updating of the ledger account.

Conversion Cycle of Paradise Industries 

The transformation of raw materials into the resultant product is the main aim of the conversion cycle.

Interaction Between the Transaction Cycle and Conversion Cycle

Control and Ais

Every enterprise has to control the Accounting information system to keep their data safe and secure. The threat can happen at any time in any technology-related systems. Therefore, regular control is required, whether it is a big or small scale business. The primary objective of AIS is to lead the business towards success by controlling its business activities. Accountants are responsible for taking a proactive plan to avoid threats (Li, 2019).

Internal Control

The internal control system is very much essential to be regularly carried out as it helps in the avoidance of any event that can cause a threat to the organization. Internal controls or audits are carried out for safeguarding the following (Krishnan, 2020):

• Secure the assets of the enterprise.
• Maintain records to provide an accurate report of the assets when required.
• Preparation of financial reports.
• Distribution of accurate information in the form of reports.
• Improve operational performance.
• To strategies the managerial policies if any flaw found.
• Stick to existing laws and policies of the system.

Functions of internal control are:

Preventive: Determine the problems that can occur in the future and keep a solution to rectify it.

Detective: Find out the problem and adapt to it with suitable plans.

Corrective: If any problem occurs because of the external factors, then it has to be corrected.

Risk Assessment

• Identify Risk by drawing the clear flow of the process carried out currently in the business process.
• Identify the possibility of the risk, in what condition the risk may occur.
• Identify the impact of the risk on the flow of the business model whether the positive or negative impact (Badoo, 2020)

The Perspective of Risk Assessment

Risk can be either inherent risk that is identified before the enterprise build up or it can be a residual risk that occurs after the setup of the enterprise to reduce the risk that may occur in the future because of the threats.

Weakness Related to Flow Chart Related to Internal Control in The Expenditure Cycle

The expenditure of the enterprise, which occurs because of the payment for different activities, is shown in the Expenditure cycle. The expenditure flow chart is the diagrammatical representation of the expenditure carried out in that particular inventory.

There is various risk in the expenditure flow chart given above:

• There needs to be a regular risk assessment in the expenditure cycle by conducting audits.
• One should identify the entity and the enterprise.
• There should be the proper authorization of all the purchase of inventory documents until the accounts payable balance document.
• Digital Signature of authority over a process needs to be authorized.
• Every stakeholder needs to have an independent check for better performance.
• Secure all data related to assets.
• There should be control in each phase of project development and acquisition.
• Segregation of the duty is an important point as when one person performs many activities, there is a chance for the occurrence of error.

Changes required to reduce the risks found in the conversion cycle:

The risks identified in the Conversion cycle are related to authorization, no security of records, and, most importantly, no separate record for accounts, which makes it confusing.

Therefore, risk can be avoided by the following activities:

Segregation of Accounting Duties

A Single employee should not be given too many activities. Segregate authorization, recording, and custody.

• The authorization includes decision making and sanctioning the transactions.
• The recording includes preparing documents, entering the prepared data into the system of AIS, and maintenance of the data.
• The custody includes all process handling related to assets, inventory, and writing and receiving cheques.

Periodic monitoring of the System for:

• Identify fraud detection software.
• For effective improvement of enterprise functions.

Segregation of System duties such as programmer, developer, network administrators, system analyst, and computer operators.

Conclusion on Accounting Information System

Therefore, it is analyzed that a strategic Information system is required for the proper functioning of the business process, leading to success in achieving the enterprise objectives.

References for Accounting Information System

Badoo, D.O., Hammond, H. and Oppong, F., 2020. Assessment of Internal Control Systems of Technical Universities in Ghana. Journal of Finance and Accounting, 8(2), p.64.

Irianto, A.B.P. and Pamosoaji, A.K., 2018. Automation of Accounting Sysytem in Non Profit Organizations Based On PSAK 45 Standards. In Proceeding of International Conference and Exhibition on Sciences and Technology (ICEST) (pp. 1-8).

Kitsios, F. and Kamariotou, M., 2016, September. Decision support systems and business strategy: a conceptual framework for strategic information systems planning. In 2016 6th International Conference on IT Convergence and Security (ICITCS) (pp. 1-5). IEEE.

Krishnan, J., Krishnan, J. and Liang, S., 2020. Internal control and financial reporting quality of small firms. Review of Accounting and Finance.

Li, Y., 2019. Design a management information system for financial risk control. Cluster Computing, 22(4), pp.8783-8791.

Syahputra, F. and Suardi, I., 2017. CONTROL AND ACCOUNTING INFORMATION SYSTEM USING COSO ERM IN PT. EMII. Emerging Markets: Business and Management Studies Journal, 5(1), pp.49-63.

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