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ACCT6001 Introduction to Accounting Information System
IS or information system is the organized system to collect, organize, store as well as communicate with the information (Laudon and Laudon 2015). This IS is the significant combination of business procedures, functionalities, software, hardware and data that could be utilized for incrementing the management as well as efficiency of that particular company. It is a completely automated system that even helps in disseminating the data. Since, this system allows easy data distribution; a major emphasis is given on it to have a specific boundary, processors, users, communication networks, inputs and outputs. Decision making is easily done with the implementation of information system (Venkatesh, Brown and Bala 2013). The following report outlines a brief discussion on the case study of KMC or Kowal Manufacturing Company. This report provides a detailed research on the types of information systems for this organization and the impact of these information systems on the business.
1. Identification of Weaknesses in the Current Procedures and Explanation of Probable Threats
Kowal Manufacturing Company or KMC is a small company that has employed about 50 production workers and also has few payroll procedures. The first and the most important procedure is that any new employee can prepare a W-4 form or Employee’s Withholding Exemption Certificate and then provides this to his supervisor. This supervisor then advises the department of payroll of all the pay raises. The second payroll procedure of this organization of Kowal Manufacturing Company is the supply of the blank time cards are kept near the factory entrance. The names are filled with these time cards. The workers have to punch these cards during the entry and exit in the organization. This helps in maintaining a proper balance of the attendance of these workers. At the end of the week, all the workers drop their time cards within a box near their organization exit. A specific payroll clerk is responsible for retrieving the time cards from their boxes on Monday morning. The third payroll procedure of this KMC organization is that the payroll check is being signed by their chief accountant and the final procedure is that the payroll bank account is eventually reconciled by their chief accountant.
There are various weaknesses within the current payroll procedures of KMC. The weaknesses of these existing payroll procedures are as follows:
i) Security Concerns: The first and the foremost weakness of these payroll procedures in KMC is the security concern (Stair and Reynolds 2013). As the online payroll service majorly relies on the third party for processing as well as storing their payroll information or sensitive information regarding their employees and the hours these employees are working on.
ii) Compliance Issues: The second weakness of this payroll procedure within Kowal Manufacturing Company is the compliance issues. The W-4 form or Employee’s Withholding Exemption Certificate of this organization can has major issues related to compliance (Davies, Dean and Ball 2013). These compliance issues are eventually found out whenever the reports are being reviewed and the taxes are filed.
iii) Time Card Issues: The next significant weakness that is common in this organization of Kowal Manufacturing Company for the payroll procedure is the issue related to the time cards. The time cards could show wrong data and the employees can face major complexities related to these (Pearlson, Saunders and Galletta 2016). Moreover, while dropping the time cards at the exit, there is a major risk of getting the time cards stolen by the unauthenticated users.
iv) Manual Signature of Chief Accountant: The fourth weakness in the payroll procedure is manual signature of the chief accountant. The chief accountant manually signs the payroll checks and this could be forged easily.
The threats that they could allow to occur are given below:
i) Manual Retrieval of Time Cards: This particular threat could be allowed by KMC organization since the payroll clerk is a trustworthy person (Rainer et al. 2013). This would not bring out several problems within the organization.
ii) Verbal Advisory of Payroll Department: The respective supervisor of the new employees verbally advises the entire department of payroll for proper pay raises.
2. Methods for Improving the Internal Controls of KMC
The internal controls over hiring and payroll processing in KMC organization could be improved by some of the most significant methods (Petter, DeLone and McLean 2013). These methods are as follows:
i) Automating the HR Processes: The various HR processes like recruitments, performance management, payroll management or resource on boarding and many more. With this type of automation, the manual processing or adjustments are eradicated and hence there is minimal requirement of the human intervention (Galliers and Leidner 2014).
ii) Providing Employee Self Services and Remote Access: The next important method to improve the respective internal controls over hiring and payroll processing in KMC organization is by providing the employee self services and remote access. The personnel of human resources need to support the employees with the major services like process clarification, certificate or documents generation and various others (Polkowski 2013).
iii) Managing the Regulations: The third significant method for improving the internal controls over hiring and payroll processing within KMC organization is by the proper management of the regulations (Panetto and Cecil 2013). The creation of the compliance checks are being allowed by this system and hence KMC could eventually schedule the alerts as needed for ensuring they are eventually following the regulation requirements.
iv) Elimination of Human Errors: This particular method will be helpful for them as the human errors would be subsequently eliminated or avoided by them. This is mainly because the tasks are automated and are eventually related to the payroll filing and management (Whittington 2014). The common errors like the double credits or incorrect salary calculations and the missed deductions are avoided.
v) Protection against the Frauds: This method is helpful for improving the internal controls over hiring and payroll processing within KMC organization since it would protect against all types of frauds within the business.
3. Types of Information Systems for Supporting KMC Payroll and HRM
The information systems are responsible for providing all types of data operations easily and without any type of complexity (Mason 2017). This is extremely efficient and effective for all organizations and hence it is being utilized by them to reduce the major problems that are often caused due to confidential data management. Moreover, confidential information is also lost if an information system is not being involved. The payroll systems as well as human resource management of this organization of Kowal Manufacturing Company could be supported by the utilization of few types of information systems (Weaver et al. 2016). These are as follows:
i) Transaction Processing System: The first and the foremost type of information system is the transaction processing system (Hirschheim, Heinzl and Dibbern 2013). It is the type of information system for the several transactions of the business, which majorly involve collection, retrieval as well as modification of the transaction data. The various characteristics of this transaction processing system eventually include the total performance, reliability or consistence. The real time transactional data are being processed (Polites and Karahanna 2013). Since, the organization of Kowal Manufacturing Company has various payroll procedures and human resource management within their business, a specific transaction processing system would be extremely effective for them.
ii) Decision Support System: The second important and significant type of information system for this organization of KMC is the decision support system (Ostapenko et al. 2013). It is the typical computer program application, which could analyze the business data for presenting it to the users with the core purpose of helping the users in taking relevant business decisions more effectively. The decision support system is the informational application that collects the confidential data within any business operation. The payroll services of KMC would be extremely benefitted since the information is based on the projected revenue figure within the new products sale assumption as well as the various alternatives to take the appropriate decision (Feng, Wang and Li 2014).
iii) Management Information System: The third or the final information type that would be effective for the payroll services and the human resource management within this organization of Kowal Manufacturing Company is MIS or management information system (Geiger and Schader 2014). This is the computer based database of the financial information that is organized or programmed in such a manner that it could produce the regular reports on the operations for each and every management level within the organization.
4. Explanation of the Information Systems for helping KMC and Decision Making
These above mentioned three types of information systems would be quite helpful for KMC to manage their business (Worrell, Di Gangi and Bush 2013). The description of each and every information type is provided below:
i) Transaction Processing System: The TPS has some of the major advantages, which could help this organization of KMC to manage their business. The first and the foremost advantage of the transaction processing system is that it helps in handling the operations and solves security or hardware problems. The other important advantages include access to the untapped markets and excess consolidation (Järveläinen 2013). As KMC is a small organization, they should have a better access to the untapped markets. Moreover, with the help of transaction processing system, the financial transactions would be extremely easier since a database is present within it.
ii) Decision Support System: DSS or decision support system is extremely effective and efficient for all business (Galliers and Leidner 2014). In KMC, decision support system could eventually provide some of the major advantages such as increasing the overall productivity as well as understanding. This even increments the total speed and even the capability of analyzing the various kind of information that would minimize the complexities and even the ability for reaching to the old data for better comparison. Since, the management of KMC could take up better decisions; this DSS would be perfect information system for them (Pearlson, Saunders and Galletta 2016).
iii) Management Information System: The MIS or management information system also comprises of various advantages like integrated system and helping in undertaking better decisions. As it is an integrated system, the specific complexity of the extra hardware is solely eradicated with this particular information system (Stair and Reynolds 2013). Moreover, they would also get major protection of their data quality or data security. They could also facilitate the overall planning of the company.
The introduction of the information systems would subsequently affect the overall management decision making. The accurate and the time based information from an IS help them to make the correct decisions even in various organizational threats (Venkatesh, Brown and Bala 2013). Moreover, the structured and the unstructured data issues are resolved.
5. Collaboration and Communication between Key Stakeholders and Use of Networks
The stakeholders are responsible for maintaining the economic growth and development of KMC (Laudon and Laudon 2015). These stakeholders thus could easily collaborate as well as communicate amongst each other with the help of an information system. The first and the most important information system type is the decision support system. Each and every stakeholder could eventually give their respective ideas within this information system and after proper analysis; the best decision could be undertaken by them (Galliers and Leidner 2014). Moreover, with the implementation of management information systems, the stakeholders could also communicate amongst each other and thus the communication issue would be resolved.
The utilization of intranets and extranets networks and Internet connection is extremely effective for them to serve the needs of stakeholders in KMC. The most significant use is that it helps to reduce the complexity of communication (Mason 2017). The stakeholders can easily communicate within each other through video conferences, audio conferences, electronic mails instant messaging and many more.
6. Management Challenges Affecting Organizational Change
The major management challenges that affect the organizational changes for IS implementation is as follows:
i) Problem in Gathering Data: The most significant challenge that could affect the decision making process of KMC is the difficulty in gathering the most confidential data (Polites and Karahanna 2013). If this accurate data will not be collected properly, there could be a major issue to take relevant decisions.
ii) Lack of Standardization: The next management challenge that could affect the organizational changes in KMC is the lack of standardization (Weaver et al. 2016). These controls are extremely important to maintain the balance in the company; however, with the information system implementation, this standardization is lost due to the various changes within the company.
7. Security and Ethical Issues with Introduction of Information Systems
The various security issues with IS introduction in KMC are as follows:
i) Computer Viruses: It is a malicious program that replicates itself for spreading vulnerabilities in the system and then affecting all other programs within that specific system (Pearlson, Saunders and Galletta 2016).
ii) Unauthorized Access: Another issue is the unauthorized access of data within this information system.
iii) Loss of data: The data loss is the third security issue within an information system.
iv) Identity Theft: The hackers often pretend to be as the authorized user and the identity is stolen by that hacker (Polites and Karahanna 2013).
The various ethical issues with IS introduction in KMC are as follows:
i) Violating Policy of ICT: The policy of ICT is often violated by the employees of the organization and this is an ethical issue.
ii) Wrong Use of Data: The confidential data in an IS is used with wrong intentions by the organizational personnel and thus is extremely unethical (Feng, Wang and Li 2014).
Therefore, from the above discussion, it can be concluded that information system is the significant combination of telecommunication networks, hardware and software that is required for the proper collection, filtering, processing, creation as well as distribution of data. Various types of information systems are present for each and every business or organization like accounting information system, transaction processing system, management information system, decision support systems, expert systems and few others. The above report has clearly demonstrated the importance as well as impact of an information system within the organization of Kowal Manufacturing Company or KMC for their payroll procedures. This report has properly described the weaknesses within the current processes and methods for improving the internal controls of KMC. The decision making process is also improvised in this organization with the involvement of an information system. The utilization of computer networks is also explained here. Moreover, several security or ethical issues are also identified in the report for IS involvement.
The three distinct recommendations for this organization of Kowal Manufacturing Company are as follows:
i) Using Transaction Processing System: The first and the foremost recommendation for this organization is to use transaction processing system within their business. The transaction data could be easily managed by them.
ii) Using Decision Support System: The second important recommendation for this organization of Kowal Manufacturing Company is to utilize decision support system for proper decision making process. This is extremely effective and efficient since the process of decision making is often difficult for them.
iii) Using Management Information System: Another important and significant recommendation for this particular organization of Kowal Manufacturing Company or KMC is to use MIS or management information system. The data related operations are easily executed with the help of this particular information system.
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