Impact of Technology Changes in Accounting Profession

Introduction

Accounting is the act of collecting, organizing. and interpreting financial data. The first financial statement is the income statement, which tells how much money was made or lost in a given time period. Next is the statement of retained earnings, which tells how much money that was made was reinvested into the company. The third statement is the balance sheet. The balance sheet is the financial statement that lists all the assets, liabilities, and owner’s equity of the company. It’s important to note here that the accounting equation is also known as the balance sheet equation. The last financial statement is the statement of cash flows, which tells how much money came in and was paid out in a specific time period.’

Accounting or accountancy is the measurement, processing and communication of financial information about economic entities such as businesses and corporations. The modern field was established by the Italian mathematician Luca Pacioli in 1494. Accounting, which has been called the “language of business” ,measures the results of an organization’s economic activities and conveys this information to a variety of users, including investors, creditors, management and regulators. Practitioners of accounting are known as acountants. The terms “accounting” and “financial reporting” are often used as synonyms.

Accounting can be divided into several fields including financial accounting, management accounting, external auditing and tax accounting. Accounting infortation systems are designed to support accounting functions and related activities. Financial accounting focuses on the reporting of an organization’s financial information, including the preparation of financial statements to external users of the information such as investors, regulators and suppliers and management accounting focuses on the measurement, analysis and reporting of information for internal use by management. The recording of financial transactions, so that summaries of the financials may be presented in financial reports, is known as book keeping of which double-entry book keeping is the most common system.

Accounting is facilitated by accounting organizations such as standard-setters, accounting firms and professional bodies. Financial statements are usually audited by accounting firms and are prepared in accordance with generally accepted accounting principles (GAAP). GAAP is set by various standard-setting organizations such as the Financial Accounting Standards Board (FASB) in the United Statesand the Financial Reporting Council in the United Kingdom. As of 2012, “all major economies” have plans to converge towards or adopt the International Financial Reporting Standards (IFRS).

Technology is an asset to all businesses because of the enhanced communications skills it has provided. Technology has provided many tools that increase efficiency in any business, including accounting. Examples of these technological tools include computer-integrated manufacturing, image processing, the Internet, and expert systems (Journal of Accountancy, 1996). This enhanced efficiency within businesses allows accounting information to become dynamic, reflecting the current state (Journal of Accountancy, 1994b). This helps to fulfill management accountants’ objective of providing the most accurate and timely information.

Unfortunately, a technological asset to a business may result in a liability for the business’s accountant. The more timely and accurate information that is provided by the technological tools often costs the business accountability and confidentiality. There are many more opportunities for fraudulent activities due to the purely electronic audit trail accountants are often forced to deal with. These audit trails do not allow the accountant to trace many transactions to their origin. Internet transactions, as well as other methods, lead to confidentiality issues. Accountants’ dependency on computers has proven to be a disadvantage with the Year 2000 Problem. These are just some of the negative impacts that technology has had for today’s accountant.

Overall, technology has caused change in the accounting profession. Hiring trends, education needs, and the rise of the consulting side of accounting are just some of the impacts that technology has had on the accounting profession. These cannot necessarily be labeled as benefits or disadvantages. It is clear, however, that these impacts, as well as the advantages and disadvantages, are forcing a change in the accounting profession. In response, the accounting profession needs to conform to these changes, or the profession could be replaced by a rising generation of competitors. As one author for the Journal of Accountancy says, it is clear that the accounting profession ‘needs to upgrade its practices and skills to reflect where the world is going, not where it has been’ (Journal of Accountancy, 1994b).

1.1 Background of the Study

Thirty years ago, most financial accounting was done manually, leading to a great deal of paperwork. Currently, most accounting information is recorded via computers and wide area networks (The new finance. Journal of Accountancy. August (1994b) 73–76.Journal of Accountancy, 1994a). Technology has certainly changed the face of accounting over the years. While it is unclear whether technology’s impact on accounting has been positive or negative, it is clear that technology has drastically changed the accounting profession. Often a technological advance may be an asset to a business, but a liability to the firm’s accountant. For example, information can be provided in a timely and more accurate manner, but at the price of confidentiality. Some of the impacts of technology are neither positive nor negative; they are simply changes. So in essence, the impacts of technology on accounting have been positive, negative, and neutral, but each impact results in a demand on the profession to conform to the changes. The obvious advantage of technology is in the various tools that it has provided. Examples of these tools include computer-integrated manufacturing, communications technology, image processing, the Internet, and expert systems. These are a few examples of the many tools of technology whose purpose is to provide more detailed and accurate information in a timely manner. The research therefore seek to investigate the impact of Technology changes on the accounting profession.

1.2 Statement of the Problem

The accounting profession has definitely been influenced by the recent bombardment of technology within the industry. Some ‘business thinkers’ believe the accounting profession should be entirely revamped. It is true that some technological changes have made many of the current accounting practices no longer relevant. An example is the ledger account (Journal, 1994b). Previously, this account was very important as a historical record of transactions and was used to expedite the preparation of financial statements (Knapp, 1996, p. 82). With today’s timely information, the ledger account becomes less important. Computers have taken over as the record keeper for this type of information. According to a contributor to the Journal of Accountancy: ‘if the accounting profession doesn’t reinvent itself, it easily could … be replaced by a profession that has yet to emerge with an entirely different vision of how information, analysis and attest services should be provided’ Therefore the problem confronting this research is to determine the impact of technology changes on the accounting profession

1.3 Objective of the Study

1. To determine the nature of Technology changes
2. To determine the nature of the accounting profession
3. To determine the impact of Technology changes on the accounting profession

1.4 Research Questions

1. What is the nature of the accounting profession?
2. What is the nature of Technology changes in the Accounting Profession?
3. What is the nature of the impact of Technology changes in accounting profession?

1.5 Significance of the Study

The study proffers the new face of the accounting profession so as nurture and builds new entrants in the Accounting profession according to quality and new standard set by the profession in the face of global technology changes

1.6 Statement of Hypothesis

1. Ho The quality and standard of the Accounting Profession is low
   Hi The quality and standard of the Accounting Profession is high
2. Ho The level of Technology changes is low
   Hi The level of Technology changes is high
3. Ho The impact of Technology changes in the Accounting Profession is low
   Hi The impact of Technology changes in the Accounting Profession is high

1.7 Scope of the Study

The study focuses on the appraisal of the impact of technology changes in the Accounting Profession

1.8 Definition of Terms

Basic accounting equation: assets = liabilities + owner’s equity.’

‘Assets are items that are owned, have value, and can be turned into cash. Bank accounts, CDs, cars, property, and machinery are all examples of assets.

Liabilities are what is owed. A loan to purchase an asset is a liability.

Owner’s equity is the amount of money that a person has invested into an organization. The investment may be in the form of a stock purchase or a capital investment made by buying into a company. The most important thing to remember is that both sides of the accounting equation must be equal. If they don’t balance, then there is a problem.’

Financial accounting

Financial accounting focuses on the reporting of an organization’s financial information to external users of the information, such as investors, regulators and suppliers. It calculates and records business transactions and prepares financial statements for the external users in accordance with generally accepted accounting principles (GAAP). GAAP, in turn, arises from the wide agreement between acconting theory and practice, and change over time to meet the needs of decision-makers.

Financial accounting produces past-oriented reports—for example the financial statements prepared in 2006 reports on performance in 2005—on an annual or quarterly basis, generally about the organization as a whole.

This branch of accounting is also studied as part of the board exams for qualifying as an actuary. It is interesting to note that these two professionals, accountants and actuaries, have created a culture of being archrivals.

Management accounting

Management accounting focuses on the measurement, analysis and reporting of information that can help managers in making decisions to fulfil the goals of an organization. In management accounting, internal measures and reports are based on cost-benefit analysis and are not required to follow the generally accepted accounting principle (GAAP). In 2014 CIMA created the Gloal Management Accounting Principles (GMAPs). The result of research from across 20 countries in five continents, the principles aim to guide best practice in the discipline.

Management accounting produces future-oriented reports—for example the budget for 2006 is prepared in 2005—and the time span of reports varies widely. Such reports may include both financial and non-financial information, and may, for example, focus on specific products and departments.