Impact Of Technology Changes In Accounting Profession

Impact Of Technology Changes In Accounting Profession

Preface:

Introduction

Accounting is the process of gathering, organizing, and analyzing financial information. The first financial statement is the income statement, which indicates how much money was earned or lost during a specific period. Next is the statement of retained earnings, which indicates how much of the company’s profits were reinvested. The balance chart is the third statement. The balance sheet is the financial statement that details the company’s assets, liabilities, and equity. It is essential to observe that the accounting equation is also referred to as the balance sheet equation. The final financial statement is the statement of cash flows, which details the inflow and outflow of cash over a specific time period.

Accounting is the measurement, processing, and communication of financial information about economic entities like enterprises and corporations. In 1494, the modern discipline was founded by the Italian mathematician Luca Pacioli. Accounting, which has been referred to as the “language of business,” analyzes the outcomes of an organization’s economic activities and communicates this data to a variety of users, including investors, creditors, management, and regulators. Accounting professionals are known as accountants. “accounting” and “financial reporting” are frequently used interchangeably.

Financial accounting, management accounting, external auditing, and tax accounting are all distinct subfields of accounting. Accounting information systems are intended to facilitate accounting functions and activities related to them. Financial accounting is concerned with 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, whereas management accounting is concerned with the measurement, analysis, and reporting of information for internal use by management. Bookkeeping is the process of recording financial transactions so that they can be summarized in financial reports. The most common bookkeeping system is double-entry bookkeeping.

Accounting organizations such as standard-setters, accounting firms, and professional bodies facilitate accounting. Generally, accounting firms audit financial statements and prepare them in accordance with generally accepted accounting principles (GAAP). The Financial Accounting Standards Board (FASB) in the United States and the Financial Reporting Council in the United Kingdom establish GAAP. As of 2012, “all major economies” intend to adopt the International Financial Reporting Standards (IFRS) or converge towards them.

Technology is advantageous to all businesses because it has improved communication skills. There are a variety of technological tools that enhance the efficiency of any business, including accounting. Computer-integrated manufacturing, image processing, the Internet, and expert systems are examples of these technological instruments (Journal of Accountancy, 1996). This increased efficiency within enterprises enables accounting information to become dynamic and reflect the present state (Journal of Accountancy, 1994b). This helps management accountants achieve their goal of providing the most precise and timely information.

Inadvertently, a technological asset to a company may become a liability for the company’s accountant. The greater timeliness and precision of information provided by technological tools frequently come at the expense of business accountability and confidentiality. Due to the solely electronic audit trail accountants are frequently required to manage, there are many more opportunities for fraudulent activities. These audit trails prevent the accountant from tracing the origin of many transactions. Internet transactions, along with other methods, raise issues of confidentiality. With the Year 2000 Problem, accountants’ dependence on computers has proved to be a disadvantage. These are only a few of the negative effects that technology has had on the accountant of today.

In general, technology has impacted the accounting profession. Technology has impacted the accounting profession in a variety of ways, including hiring patterns, education requirements, and the emergence of the consulting aspect of the field. These cannot be categorized as either advantages or disadvantages. Nonetheless, it is evident that these impacts, as well as the benefits and drawbacks, are forcing a change in the accounting profession. In response, the accounting profession must adapt to these changes, or it risks being supplanted by a rising cohort of rivals. According to one Journal of Accountancy author, the accounting profession ‘needs to enhance its practices and skills to reflect where the world is going, not where it has been’ (Journal of Accountancy, 1994b).

1.1 Context of the Study

Prior to 1980, the majority of financial accounting was performed manually, resulting in voluminous documentation. The majority of accounting data is currently stored on computers and wide area networks (The new finance. Journal of Accountancy. August (1994b) 73–76.Journal of Accountancy, 1994a). Throughout the years, technology has unquestionably altered the character of accounting. Although it is unclear whether the impact of technology on accounting has been positive or detrimental, it is undeniable that technology has had a profound effect on the accounting profession. Often, a technological advancement is an asset for a business but a liability for the accountant. For instance, information can be provided in a more timely and accurate manner at the expense of privacy. Some technological impacts are neither positive nor negative; they are merely alterations. In essence, the impacts of technology on accounting have been positive, negative, and neutral; however, each impact has required the profession to adapt to the changes. The numerous tools that technology has created are its most apparent benefit. Computer-integrated manufacturing, communications technology, image processing, the Internet, and expert systems are examples of these instruments. These are a few examples of the numerous technological instruments whose purpose is to provide more precise and timely information. The purpose of this study is to investigate the effect of technological advancements on the accounting profession.

1.2 Description of the Problem

Recent technological advances within the accounting industry have unquestionably impacted the accounting profession. Some ‘business thinkers’ believe that the accountancy profession should be completely overhauled. It is true that technological advancements have rendered many current accounting practices obsolete. Journal (1994b) provides the ledger account as an example. Historically, this account was utilized to expedite the compilation of financial statements as a historical record of transactions (Knapp, 1996, p. 82). With the timely information available today, the ledger account becomes less significant. Computers have replaced humans as the record-keepers for this type of data. According to a contributor to the Journal of Accountancy, if the accounting profession does not reinvent itself, it could be easily supplanted by a profession with an entirely different vision of how information, analysis, and attest services should be delivered. Consequently, the objective of this study is to ascertain the impact of technological advancements on the accounting profession.

1.3 Aim of the Research

Determine the nature of Technology shifts

2 Determine the characteristics of the accounting profession

Determine the impact of technological advancements on the accounting profession

1.4 Research Concerns

What makes the accounting profession unique?

How do technological changes affect the accounting profession?

What is the nature of the repercussions of technological advancements on the accounting profession?

1.5 Importance of the Research

The study presents the new face of the accounting profession so as to foster and develop new entrants in accordance with the quality and new standards set by the profession in response to global technology changes.

1.6 Proposition of Hypothesis

1 Ho Low quality and standard characterize the Accounting Profession.

Hi High quality and standard characterize the Accounting Profession.

2 Ho The rate of technological advancement is minimal.

Hi The rate of technological change is rapid.

3 Ho Changes in Technology have minimal effect on the Accounting Profession.

Hi Changes in Technology have a significant impact on the Accounting Profession.

1.7 The Range of the Study

This study evaluates the impact of technological advancements on the Accounting Profession.

1.8 Determination of Terms

Assets equal liabilities plus owner’s equity; this is the fundamental accounting equation.

Assets are items that are possessed, have monetary value, and can be converted to cash. Bank accounts, certificates of deposit, vehicles, real estate, and machinery are examples of assets.

Liabilities are obligations. A loan to acquire an asset constitutes a liability.

Owner’s equity is the quantity of money an individual has invested in a business. The investment may take the form of a purchase of stocks or a capital investment in a company. Both aspects of an accounting equation must equal one another. There is a problem if they do not balance.

Financial accounting

Financial accounting emphasizes the communication of a company’s financial information to external consumers, such as investors, regulators, and suppliers. It computes and documents business transactions and prepares financial statements in conformance with generally accepted accounting principles (GAAP) for external users. In turn, GAAP derives from the consensus between accounting theory and practice and evolves to satisfy the needs of decision-makers over time.

Annually or quarterly, financial accounting generates reports with a focus on the past — for instance, the financial statements prepared in 2006 report on performance in 2005 — generally about the entire organization.

This area of accounting is also studied as part of the actuary certification examinations. It is interesting to observe that accountants and actuaries have created a culture of being fierce competitors.

Administration accounts

Management accounting focuses on the measurement, analysis, and reporting of information that can assist managers in reaching the organization’s objectives. Internal measures and reports in management accounting are founded on a cost-benefit analysis and are not required to adhere to generally accepted accounting principles (GAAP). CIMA established the Global Management Accounting Principles (GMAPs) in 2014. The principles, which are the result of research conducted in twenty countries across five continents, are intended to guide best practices in the field.

Management accounting generates reports with a focus on the future; for instance, the budget for 2006 is produced in 2005. The time span of these reports varies greatly. Such reports may contain both financial and nonfinancial data, and may, for instance, focus on particular products and departments.