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An introduction

By Arshad Masood ACMA, MCS, FCIS
Aug 28 - Sep 03, 2000

Today is the era of Globalized business; rapid changes sweeping through the world's economy are demanding more skilled and professional Accountants. Rapid improvement in communication and information technology is one of important factor of Globalized business.

Information Technology is pervasive in the world of business. Competence with this technology is an imperative for the professional accountants. IT helps organizations and individuals cope with change in various ways. IT plays a vital role in supporting the activities of profit-oriented and not-for-profit organizations. The growth of management accounting is linked with IT and the need for faster access to information and more integrated systems.

What is information technology?

Information Technology is the combination of computing and telecommunications to obtain, process, store, transmit and output information in the form of voice, pictures, words and numbers. In order words, Computer and telecommunication technology combined together known as Information Technology.

Information is meaningful data, which is relevant, accurate and up-to-date and can be used to take action or make decisions whereas technology is the application of science to the solution of practical problems.

Why information technology?

A simple description of why information technology is essential to business is that it provides a means of gaining competitive advantage. Competitiveness is what helps companies create unique strategic positions from which superior value can be delivered; it is the sustained ability to generate more value for customers than the cost of creating that value. Computer technology has revolutionized the Management Accounting System and its applications are covering all areas of management accounting such as preparing budgets, analysing services, comparing results, and standardizing costing systems. It uses less time than manual to process the data and simultaneously improves the presentation.

Management accountants are required to be well-versed with the development in information technology. Management Accountants will need to increase their IT skills. If they are to play a major role in the development of modern management control systems, then they need enough expertise to realize the potential of new information technology. Most information system professionals and their organizations have become aware of the year 2000 computer date problem facing the world community. Information will be a lifeblood for corporate survival in 2000s. Ability to communicate quickly with physically remote locations around the world will become increasingly important in order to maintain market share.

Activities of information technology?

The body of knowledge and skill required of professional accountants includes a variety of important areas. The following activities and areas specially important to management accountants.

  • Computer

  • Hardware

  • Computer software

  • Computerised data for access through both locally and remote access facility via Internet etc.

  • Multimedia (Managing, presenting and communicating information)

  • Networking including LAN, WAN, Internet, Intranet, E-mail, World Wide Web etc.

  • Internet usage for Electronic Commerce such Electronic Data Interchange (EDI) and Electronic Fund Transfer System (EFTS)

  • Mass marketing such as on line data retrieval services, electronic mail and financial services.

  • Other areas such as Computer-assisted design and manufacturing (CAD/CAM), Executive Information System (EIS) and Electronic Meeting System (EMS)

  • Further areas such as Computer-assisted software engineering (CASK), Object-oriented programming and workflow technologies.

  • Continuing development of intelligent support systems using artificial intelligence such as expert systems, neural networks etc.

  • New business re-engineering approaches based on effective integration of information technologies and business processes.

  • Information technologies are affecting the way in which organizations are structured, managed and operated as well as ITs are changing the nature and economics of accounting activity. Further it is changing the competitive environment in which professional accountants participate such as

  • Accounting and accounting system development

  • Tax planning and tax return preparation

  • Internal and external auditing

  • IT has made a visible input on the audit procedures. The audit profession has fully met the challenges presented by IT by taking the financial statements processed by electronic computers.

  • IT is one of the core competencies of professional accountants and requires special attention due to its explosive growth and its rapid rate of change, therefore, a management accountant must be able to understand following:

  • Ability to use a word processing package

  • Ability to use a spreadsheet package

  • Ability to use e-mail software ad a web browser

  • Ability to use a database package

  • Ability to use at least one basic accounting package

Application of IT:

What the modern accountant need today is EDI (Electronic Data Interchange). With EDI, information can be transferred as it is produced from one computer to another electronically and without human intervention. EDI is the computer to computer exchange of inter-and intra-company business and technical data based on the use of agreed standards. EDI is becoming a low cost, high volume activity. The documents used in EDI are Invoices, Purchase Orders, Shipping requests, acknowledgments and payments — documents of special interest to the accountants.

EDI is a key to enabling organizations to reduce stock levels, to restrict stock lines to saleable products and to respond more quickly to customer demand and improve cash flow management. EDI is fast becoming a reality of life. Electronic Fund Transfer (EFT) is the most mature area of EDI and probably the most familiar application of EFT is the use of Automatic Teller Machine (ATM) for cash dispensing used by the banks.

Internet is known as the International Information Highway, it is a network, which links computer with each other worldwide. Internet carries tremendous amounts of information relating to various subjects and fields specially in science and technology, stock markets, international business, etc.