CLOUD-BASED ACCOUNTING INTELLIGENCE APPLICATION: OPPORTUNITIES AND CHALLENGES TO INFORMATION SYSTEM

 

By Fa’izah binti Ghazi & Norizam binti Ahmad @ Muhammad, Faculty of Accountancy, Universiti Teknologi MARA, Cawangan Perlis

 

Introduction

The accounting profession has experienced difficulties due to the growing complexity of corporate environments, as well as increased global competition and a flattening out of business cycles. The digitization of business, the serious potential of the Web, the implications of big data, and the growing significance of information mining have impacted businesses, including the accounting offices (Moudud-Ul-Huq et al., 2020).

The effect of globalization, the fast advances in innovation and science, the rise of big data, the extensive use of Web-based applications, and even institutionalization have made the best possible setting for developing another IT idea, which is cloud accounting (Moudud-Ul-Huq et al., 2020). The technology of the cloud is one of the greatest technological developments in the present time. The cloud database makes the software and information available online, which can be accessed by the users from any computer device with an internet connection from anywhere and at any time. One industry heavily impacted by the trend toward virtual work and digitization is accounting (Lawler et al., 2012).

Cloud accounting is the process of managing and storing financial data in the cloud and simultaneously carrying out accounting tasks. In cloud computing, through cloud software assistance providers, the consumer can open the software apps from far away by using internet technology (Amar, 2023). Cloud‐based accounting information systems (AIS) complemented by, for example, electronic invoicing systems and interconnectivity with electronic banking and government infrastructures serve as a vehicle to conduct accounting processes in virtual mode (Asatiani et al., 2019; Bhimani & Willcocks, 2014).

Thus, in theory, an accounting firm equipped with such AIS could manage its work virtually completely. Cloud technology has blurred the line between employees and offices, as cloud technology, tools, and services pervade almost every aspect of business (Gangwar et. al., 2015; Shetty & Panda, 2021). The impact of cloud computing is undeniable and will serve as a foundation for the financial market's future evolution.

Cloud Accounting and Information Systems

Research has shown that cloud-based AIS can provide companies with multiple benefits over the more traditional information systems, including easy access to affordable information systems that feature enhanced data processing capabilities, improved accessibility, and real-time collaboration functionalities (Armbrust et al., 2010; Asatiani et al., 2019).

Deployment of cloud-based AIS also influences accounting configurations by providing a platform where the client company and the accounting firm can simultaneously work on the data and the process, thus allowing new ways of organizing the work in an outsourcing relationship. The flexibility and potential affordability of cloud-based outsourcing services make these specifically attractive to small and medium-sized enterprises (SMEs) that have limited resources and expertise (Asatiani et al., 2019) and, therefore, cannot afford to build these services on their own.

Benefits and Challenges of Cloud Accounting

Cloud accounting makes company accounts and financial data accessible anywhere, anytime (Dimitriu & Matei, 2014). One of the key benefits of cloud accounting is cost savings. By using cloud-based software, organizations can avoid the upfront costs of purchasing and maintaining hardware and software. They can also benefit from economies of scale, as cloud service providers can spread their costs across multiple clients, resulting in lower costs for each individual organization (Popivniak, 2019). Additionally, cloud accounting allows for greater convenience and mobility, as users can access their financial data and perform accounting tasks from anywhere with an internet connection (Popivniak, 2019). Cloud accounting reduces the annual burden of managing IT infrastructure. It reduces IT operations costs. Cloud accounting customizes services to meet businesses' needs (Dimitriu & Matei, 2014).

Cloud accounting can also improve organizational performance. A study conducted in Bangladesh found that cloud accounting has a positive impact on organizational performance. Regression analysis of the study showed that implementing cloud accounting can lead to improved performance, although there may be some negative impacts as well (Taha et al., 2021). A study conducted in Australia identified various risks associated with cloud accounting, such as data breaches and insecure interfaces, but also provided mitigation strategies to address these risks (Yau-Yeung et al., 2020). However, there are also challenges associated with cloud accounting. One of the main challenges is ensuring the security of financial data stored in the cloud. Organizations need to implement robust security measures and protocols to protect their financial data and ensure compliance with data protection regulations (Taha et al., 2021).

Another challenge is the need for organizations to adapt to the technological changes brought about by cloud accounting. Accountants who are not familiar with cloud-based accounting software may face difficulties in their roles (Christauskas & Miseviciene, 2012). Training and upskilling programs may be necessary to ensure that accountants have the necessary skills to effectively use cloud accounting software (Rîndașu, 2017).

Furthermore, there may be challenges related to the implementation and integration of cloud accounting systems. Organizations need to carefully choose the right cloud-based accounting software that meets their specific needs and requirements (Popivniak, 2019). They also need to consider factors such as data migration, system integration, and user adoption when implementing cloud accounting (Mauricette et al., 2022).

In the case of cloud-based AIS this often includes access to both transactional and analytical data, as well as various applications, such as dashboards. Typically, cloud-based AIS can integrate all critical information required for accounting processes within the same system (Asatiani et al., 2019) and scale the system according to the needs of the client company (Chen et al., 2012; Schneider & Sunyaev, 2016), ensuring continuity of the service. Thus, different parties accessing the cloud-based AIS (such as client company, accountant, and auditor) have an opportunity to work simultaneously on the accounting process in real-time, in a transparent fashion.

Second, cloud-based AIS offers flexibility through easier implementation, and scalability of systems according to the requirements of the service (Leavitt, 2009). Furthermore, in terms of integration of applications and data, cloud-based AIS allows users to gather all the needed functionality and information to perform business processes within one shared platform, thus impacting the way the accounting process is organized (Leavitt, 2009; Marston et al., 2011).

Furthermore, the use of cloud-based accounting information systems (AIS) can have a significant impact on accounting outsourcing decisions. Cloud-based AISs are often hosted by third-party vendors, providing simultaneous and ubiquitous access to multiple parties involved in the accounting process (Al-Okaily et al., 2022). This includes access to transactional and analytical data, as well as various applications The flexibility and accessibility of cloud-based AIS make it an attractive option for outsourcing accounting processes (Al-Okaily et al., 2022)

Conclusion

In conclusion, the integration of cloud computing and Accounting Information Systems has revolutionized the field of accounting to date. Cloud accounting provides flexible access to accounting services hosted remotely on the cloud, while technologies can enhance the efficiency and accuracy of accounting processes. The combination of these technologies can lead to major changes in tasks and skills in the accounting profession, with some roles being performed by technology and others requiring collaboration between humans and technology. Additionally, cloud-based AIS offers benefits for accounting outsourcing decisions, providing simultaneous access to multiple parties involved in the accounting process. Additionally, cloud accounting offers benefits for accounting outsourcing decisions, providing simultaneous access to multiple parties involved in the accounting process.   

 

REFERENCES

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IMPLEMENTATION OF E-ACCOUNTING APPLICATIONS IN CLOUD TECHNOLOGY: AN ACCOUNTING PROCESS

 

 

By Fa’izah Ghazi and Nor Hashimah Abdul Wahid, Faculty of Accountancy, Universiti Teknologi MARA, Cawangan Perlis.

 

Introduction

Significant advancements in computer sciences have been observed since the creation of the first mechanical computer by Charles Babbage in the first half of the 19th century and the invention of the first programmable, electronic, general-purpose digital computer in 1945 (Öztürk & Kula, 2021). Business functions across various industries have increasingly integrated advanced hardware and software systems, with the accounting sector being no exception. Brabetea and Goagără (2022) suggest that a continuous evolutionary process, characterized by the consistent adoption of new information technologies, has contributed to the development and modernization of the accounting profession.

Current business models have been significantly influenced by globalization, dynamic digitalization, information and knowledge competition, and dissemination (Lutfi, 2021). In addition, the present technological era has led to great investment in data processing computerization in different activities, industries, and sectors. In essence, technological progressions are linked with the use of technological methods and applications, and eventually, these have led to several changes in business processes (Lutfi, 2022). Information technology (IT) plays a significant role in the field of E-accounting, which refers to the use of electronic methods and technologies to manage financial information and accounting processes.

In the past years, the COVID-19 era has seen rapid development in information systems due to the limitation of physical contact. Modern accounting procedures have evolved to include e-accounting as a necessary component, allowing businesses to automate their financial operations and better manage their financial resources.

 

What is E-Accounting?

In the era of globalization, it requires all aspects of work to continue to innovate to create conditions that are effective and efficient. E-accounting has gained prominence due to its efficiency, accuracy, and cost-effectiveness. "Electronic accounting," often known as "e-accounting," is the practice of recording, managing, processing, and analyzing financial data and transactions using digital technology, software, and electronic systems. It includes a range of technological solutions intended to speed up accounting procedures, increase accuracy, and boost the effectiveness of financial record-keeping and reporting.

E-accounting involves making use of accounting software and computers to record, store and analyze financial data (Esmeray & Esmeray, 2020), and it makes sure that the information of critical financial is controlled, accurate and safe from corruption of data (Uzrail & Bardai, 2019). E-accounting (or online accounting) is the application of online and Internet technologies to the business accounting function. Similar to email being an electronic version of traditional mail, e-accounting is the "electronic enablement" of lawful accounting and traceable accounting processes which were traditionally manual and paper-based.

E-accounting involves performing regular accounting functions, accounting research, and accounting training and education through various internet-based or computer-based accounting tools, such as digital tool kits, various internet resources, international web-based materials, institute and company databases which are internet-based, web links, internet-based accounting software and electronic financial spreadsheet tools to provide efficient decision making (Adewale, 2022).

E-accounting accuracy facilitates speed and lowers the cost of handling business operations (Cong et al., 2019); it eliminates some of the tedious and time-consuming tasks associated with manual accounting (Jędrzejka, 2019), and it facilitates all the procedures (calculations), including additions and deduction, is done automatically by software (Uzrail & Bardai, 2019). E-accounting helps to prepare financial statements and ensures high reliability (Abualoush et al., 2018) and it helps to record, keep, and move data by using a software system easier than sifting through a bunch of documents (Teru et al., 2019). The entire operation of preparing accounts becomes quicker while using E-accounting and the statements or reports can be generated instantly at the click of a button. E-accounting is sometimes stored and saved in off-site locations to be safe from natural disasters, fires, earthquakes, arson, and floods (Thottoli & Ahmed, 2021). It is also more efficient than paper-based accounting, thus work will be completed faster, and time saved (Paul & Sadath, 2019). Viewing accounts using E-accounting allows taking advantage of the option to view data in different charts, tables, and formats (Akandinda, 2019; Gofwan, 2022).

 

E-Accounting in Cloud Environment

The term "e-accounting in a cloud environment" describes the application of cloud computing technologies to the formalization of accounting. It involves the provision of on-demand accounting services through internet-based applications, allowing multiple users to access accounting software from anywhere and at any time (Sastararuji et al., 2022). E-accounting (or online accounting) is the application of online and Internet technologies to the business accounting function. As email is an electronic version of traditional mail, e-accounting is the "electronic enablement" of lawful accounting and traceable accounting processes which were traditionally manual and paper-based (Akintunde, 2022). The transition from traditional manual accounting to computerized accounting and digitalization has facilitated the work of accounting professionals, initially simplifying primary recording, classifying, and summarizing functions. Sabuncu (2022) states that digital transformation features the use of web-based accounting programs operating with cloud technology, enabling automatic data transfer to all official accounting programs and the automatic creation of documents.

Cloud accounting offers several advantages over traditional accounting information systems. It reduces the cost of construction and maintenance of accounting systems for enterprises and provides high-quality services such as seamless integration with external information systems and efficient processing of financial transactions (Chen et al., 2022). A large number of accounting software vendors have already shifted their products to the cloud and provide various forms of cloud accounting solutions (Dimitriu & Matei, 2015). Major accounting firms such as KPMG, PricewaterhouseCoopers, Ernst & Young, Deloitte, Sage or SAP own and present their own cloud offerings (Marsintauli et al., 2021).

The dynamic nature of the cloud accounting environment presents new challenges and risks for enterprises. The accounting cloud service operates in a dynamic and changing environment, with cloud storage located away from enterprise entities. This introduces new situations such as the reconstruction of accounting information processing processes and the need for seamless dynamic configuration. These changes increase the information risk for enterprises, making it crucial to assess the credibility of the accounting cloud service, propose a credibility analysis framework based on complex network analysis to evaluate the credibility of accounting cloud services (Chen et al., 2022).

Online accounting solutions make it easier for different individuals to access accounting information outside of the workplace in a secure manner (Teru et al., 2019). Cloud accounting adoption has become increasingly important, especially in the context of the COVID-19 pandemic. Small and medium-sized enterprises (SMEs) can benefit from cloud-based accounting by becoming more efficient, financially organized, and flexible (Sastararuji et al., 2022).

Overall, e-accounting in a cloud environment offers numerous advantages for enterprises, including cost reduction, seamless integration with external systems, and efficient financial processing. However, the dynamic nature of the cloud environment and the need for credibility assessment pose challenges that need to be addressed. The sophistication of this online accounting-based technology offers convenience but also raises an important question, Does the data stored on third-party servers offer security, free from leakage of company information or is it a threat? This crucial consideration of knowing the benefits felt by companies and users and the risks that arise in its application needs further investigation. Understanding the factors influencing cloud accounting adoption can help organizations make informed decisions regarding the implementation of cloud-based accounting systems.

 

Conclusion

In conclusion, IT plays a crucial role in e-accounting by enabling automation, providing software solutions, facilitating cloud computing, ensuring data security, enabling data analysis, supporting electronic transactions, ensuring compliance and reporting, providing audit trails, offering cost savings, and enabling data integration.  The enhanced real-time data capabilities of cloud accounting make it ideal with proper preparation and monitoring. Accounting information deals with handling sensitive financial information and confidential data such as employee details. This data is valuable to cyber criminals and can be used for identity theft, financial fraud, and other malicious activities.   Organizations need to invest in proper security infrastructure, such as encryption, and multi-factor authentication, to prevent any type of data breach. It is also crucial for firms to constantly monitor the security protocol and provide training programs to help all tasks conducted in line with the data security landscape. 

E-accounting has become increasingly important, allowing businesses to efficiently manage their financial operations and resources while ensuring accuracy, reliability, and accessibility of financial information.

 

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