Introduction
The current report summarizes the information related to technological advancements in financial and managerial accounting. These technological advances prove to be beneficial for improving various processes involved in these two types of accounting. However, the challenges associated with these advances cannot be ignored. The purpose of this report is to highlight and discuss critically the technological advancements that resulted in transforming all processes involved in accounting. The executive summary of the overall analysis in this report is presented in the conclusion section. Three main recommendations are included at the end of this report to bring specific improvements in the use of technological advances in managerial and financial accounting.
Research on Technological Advances in Accounting Data Security
Technology plays a vital role in bookkeeping and other accounting processes. Accountants require comprehensive data to record and report business transactions (Huber, 2015). The three key processes of accounting are record keeping, analysis, and finalizing transactions to present them to the users of accounting and financial reports. Due to globalization, many transformational changes have influenced businesses requiring them to generate comprehensive information. The use of accounting software has also become standard for all types of businesses due to their accuracy. Therefore, researchers have signified many advanced technologies that could ensure continuous development in managerial and financial accounting methods and procedures.
Cloud Computing
Cloud computing refers to storing, processing, and sorting data by using the internet network rather than a personal computer (Chou, 2015). The technology provides a large space for storing large data that is difficult to maintain on a personal computer. Aliac, Khan, and Vasilakos (2015) state that cloud computing is beneficial for reducing the cost of storage for businesses as the storage of data requires many hardware devices. Large institutions, including hospitals, hotels, educational institutes, and multinational companies, etc., have adopted this technology to ensure the availability and accessibility of their data over the internet.
Díaz, Martín, and Rubio (2016) argue regarding outsourcing of cloud services that could be a threat for businesses. The data stored on a cloud network contains private and confidential information of users that is the big corporate responsibility for businesses. Companies outsource their clouding services to minimize their cost and address issues that are not within their control. However, its use can compromise data, which raises the security risk that could prevent accountants from using this technology.
Tax Software
Taxation is also a significant part of financial accounting. Businesses are required to prepare strategies for managing their taxation requirements and issues. Taxation includes direct and indirect taxes such as income tax and Value Added Tax (VAT). Technological advancements have enabled users to calculate taxes according to the taxation rules in a specific country. Brandas, Megan, and Didraga (2015) highlight the importance of tax software in financial accounting by explaining the application of taxes on business transactions. The preparation of payroll is also a critical task that involves tax calculations. Large companies have more than 10,000 employees working at different levels. Therefore, the primary benefit of this technology is to reduce the cost and time for payroll management to prepare employees’ accounts.
Brauner and Moreno (2015) criticize the use of the software by claiming that numerous factors could discontinue tax software in the digital economy. The main reason is the input of taxation rates for different transactions. Taxation rates are different in each country, and there are many types of taxes, such as withholding tax, that apply to a single transaction, which makes it all complex. Therefore, the calculation of the tax liability and income tax is complicated by using the software. The complicated and time-consuming practices of this technology prohibit companies from adopting it for financial accounting.
Mobile Accounting
The use of mobile is prevalent in today’s modern environment. Businesspersons also utilize this technology to record and view business transactions (Mougayar, 2016). A few common uses of smartphones are checking bank balances, online transfers, and reviewing product rates in the online market. Kavoura (2016) highlights the importance of mobile accounting by claiming that it keeps users informed about the business environment. The increasing trend of remaining online all the time suggests more significant benefits for small and large organizations as they can take advantage of the opportunities in their industries. Businesses require upgraded and complete information of the business world to make quick decisions. Furthermore, taxpayers can easily determine their income by using various mobile applications. The use of mobile accounting is also useful in assessing the feasibility of a new project, which relates to managerial accounting.
Yang et al. (2016) highlight that the use of internet devices, including mobile accounting, is risky in a critical situation. Mobile accounting is preferable only when it ensures quick results at any time without a security breach. However, there could be internet connectivity issues and hardware problems that could undermine its use for business purposes. The uninterrupted presence of users on the platform is necessary, which, in some cases, becomes difficult due to the lack of gradation in the technological products or services.
OCR Technology
OCR technology is a new technology that enables users to transform printed data, including images, scanned documents, and PDF files, into editable formats (Knight, Rowe, McCarthy, Tilley, & Walker, 2017). The technology is commonly used in managerial accounting, especially for analyzing the printed data generated by different functions to determine the feasibility of a new project. Wang and Wang (2016) also highlight the benefit of this technology by stating that the information available in the form of documents require editing. PDF files and images need editing for presentation purposes, and OCR helps to do that. If an accountant receives a report showing the loan amount provided in a foreign currency, then OCR can be used for extracting this information and converting the amount into the local currency for decision-makers.
Gross, Neely, and Sidgman (2015) state that there is a threat of theft or malfunctioning of the accounting system or information due to OCR technology. It is not possible to detect incorrect editing in the document. The risk of wrong details was lower in olden times due to the use of paper, but now it had become easier to change the information falsely. The OCR technology is risky that increases the chances of fraud in the recordkeeping process of accounting.
Social Media
Social media is also beneficial for accounting purposes as businesses require to engage people in achieving their financial objectives (Livingston, 2016). The information of customers, suppliers, and peers is also important for accountants. Chung and Koo (2015) also signify that businesses such as tourism companies require comprehensive data of consumers to engage with them. Therefore, this technology is beneficial for collecting large data sets and communicating with people to improve the business and its financial performance. The use of social media is increasing, which also allows firms to increase the number of their customers.
Vasarhelyi, Kogan, and Tuttle (2015) criticize the use of this technology due to the lack of security of data. The information on social media is not safe that may hinder the financial objectives of a business. Therefore, the risk of a privacy breach is present in the adoption of this technology, which prohibits accountants from using it.
Analysis and Discussion
The research shows that the use of technology is common in small and large businesses. Technology has enabled organizations to achieve their short-term and long-term financial objectives. The significant impact of the rapid adoption of technology is noticed in large companies that require extensive data or information to improve their businesses. There is intense competition in different industries that force small businesses to adopt the rapid change in technology.
Businesses now operate in the global competitive environment. Companies cannot survive without adopting rapid changes in technology. The accounting function has a crucial place in all businesses, which enables accountants to show an accurate and fair view of the firm’s position to all types of users. Financial and managerial accounting are two different types, but they require technology to ensure the fulfillment of all principles, including completeness and integrity of financial and managerial information. Financial accounting refers to the processes from recordkeeping to the presentation of business transactions. On the other hand, the managerial accounting involves budgeting with estimations and predictions. However, both types of accounting require the use of technology, which is vital for managing data generated by various business processes.
The research also indicates that many challenges and issues are obstacles to the adoption of technology. However, the nature of these risks is different, and, in some cases, their effects are less. Technological experts are continuously working on finding better ways to minimize these risks. They have already received a lot of success in reducing the threats of loss or theft of information. Although there are privacy concerns when using technology, the critical step is to estimate the benefit of its use and then implement it efficiently and effectively.
The research also shows that the efficiency of accountants is also significant to achieve the financial objectives. The main obstacle to doing so is the lack of control that could become a significant big issue for any business. The control and management of large data are also crucial for protecting all stakeholders of a company. The primary objectives of any business include increasing sales, but there is a need to ensure control over business operations, which is essential for revenue growth.
The adoption of technology saves both cost and time through efficient management of data that is generated on a daily basis. However, data security may require additional cost to ensure that such information systems remain intact. Accountants cannot merely adopt new technology and extensively use it without knowing its consequences. Therefore, it could be stated that the adoption of technological advances is slow in financial and management accounting. Accountants require complete knowledge of the necessary technological changes that can resolve the issues faced by a business. Therefore, they need to remain up to date with the current trends and adopt technological advances that are beneficial for their companies.
Conclusion
The analysis of the current research indicates that the use of technology is important for financial and managerial accounting as it helps in data management and analysis. The benefits of technology adoption outweigh its risks. However, the continuous adoption to bring improvement in accounting practices by using technological advances can mitigate other risks. Therefore, it cannot be denied that technology has importance for bringing improvement in the accounting function of all businesses.
Recommendations
The comprehensive research highlights that there are few critical challenges faced by accountants to adopt and use technological advances. Therefore, it is necessary to focus mainly on those challenges and ensure more significant use of technology in accounting. Three main recommendations based on the analysis of the report are given as follows.
- There is a need to focus on securing the data on clouding and social media technologies.
- The availability of high-speed internet with low resistance and disruption should be ensured.
- Mobile accounting requires the rapid adoption of new changes by accountants.
Regular changes are also important in using different technologies. Accountants should be aware of the available technology and ensure that the most appropriate solutions are adopted in their work. A well-informed accountant should be able to analyze the benefits and risks of all technologies to bring improvement in their work.
Executive Summary
The comprehensive research presented in this report highlights the specific benefits and challenges of using technological advances in both financial and managerial accounting. The technological advancements have enabled accountants to benefits from quicker data collection and analysis for better decision-making. However, some challenges or threats prohibit them from using some of these technologies.
Five main technologies for accountants are cloud computing, tax software, mobile accounting, OCR technology, and social media. The main benefit of cloud computing is a large data storage capacity, but it has a risk of privacy loss. The advantage of tax software is that it makes the calculation of the tax amount easier, but there could be an issue of correct data input. The primary advantage of mobile accounting is easy to access accounts and statements, but there is an issue with internet connectivity. The ability to edit printed documents and images is the primary benefit of OCR technology. However, there is a chance of data manipulation that is often untraceable. The use of social media is beneficial for increasing sales, but there could issue related to customer data security.
There is a need to bring improvement in business functions, including accounting, while operating in a globally competitive environment. Accountants may adopt a technology to improve the effectiveness of their roles. However, there is a need to consider all the risks and challenges of utilizing the new technology. Although the intensity of adoption risk is lower than its benefits, continuous improvement is essential for fulfilling financial objectives. The role of accountants is also crucial in this change within organizations. Accountants must collect relevant and specific information about changes in technology as businesses rely heavily on the data generated by their various business functions to make decisions efficiently and quickly.
The use of technology is beneficial for the accounting function in small and large businesses. However, their ability to use a specific technology differs due to their access to resource pools required for technological adoption. The three main recommendations given in this report for accountants are related to data security, high-speed internet connectivity, and new technological changes such as mobile accounting applications.
References
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