Accounting Information Systems for Decision Making

Frontmatter

Trends in Accounting Information Systems

Abstract

Most of the contents of this book is based on a selection of the research works presented at the track entitled ‘Accounting Information Systems’ of the 2012 Annual Conference of the Italian Chapter of AIS (ItAIS), which was held in Rome, Italy, in September 2012. The aim of the track was to sketch a clear picture of the current state of Accounting Information Systems (AIS) research in a broad sense, including design, acceptance and reliance, value added, decision making, interorganizational links, and process improvements. In particular, despite the fact that accounting information systems are often considered the instrument by default for accounting automation the track starts from a wide definition of the accounting information system, as a complex system composed of a mix of strictly interrelated elements (such as data, information, human resources, IT tools, accounting models and procedures), and basically involved in collecting, classifying, elaborating, recording, storing accounting data.

Daniela Mancini, Eddy H. J. Vaassen, Renata Paola Dameri

Are Auditors Interested in XBRL? A Qualitative Survey of Big Auditing Firms in Italy

Abstract

Although academics and scholars have called attention to the opportunities and challenges of eXtensive Business Reporting Language (XBRL), new empirical evidence undermines academic assumptions about XBRL’s easy acceptance and widespread use by auditing professionals working in the field. This study examines whether independent auditors in Italy are really convinced about the utility and practicality of XBRL in their work. What is proposed here is a preliminary theoretical framework for surveying auditors’ interest in XBRL. Electronic questionnaires and semi-structured interviews were used to survey Italian auditors’ interest and test the proposed framework. Data analysis was structured by adopting a multiple case approach. Despite the mandatory requirement for Italian unlisted companies to report financial statements in XBRL, the independent auditors’ knowledge about XBRL remains quite low. As a result of the survey, a set of unexpected but clear-cut attitudes emerged to explain auditors’ limited interest in XBRL.

Fabio La Rosa, Carlo Caserio

Internal Control Over Financial Reporting Quality and Information Technology Control Frameworks

Abstract

The objective of this research is to investigate the relation between the Internal Control over Financial Reporting (ICFR) Quality and Information Technology Control (ITC) frameworks compliance. We selected a sample of listed companies in the manufacturing, service and finance industries in Italy. The data were collected with interviews and questionnaires for ITC information and through financial reporting for ICFR Quality. The research methodology included univariate, multivariate and simple linear regressions. The Dechow et al. model, the Kothari et al. model and the Healy model adapted to the finance industry are engaged to measure ICFR Quality. The results show that compliance with COSO report in the manufacturing and services industries and with COBIT and COBIT for SOX frameworks in the finance industry is positively related to ICFR Quality: companies that follow these frameworks’ processes, objectives and test frequency requirements decrease Discretionary Accruals.

Stefano Azzali, Tatiana Mazza

Determinants of Internet-Based Performance Reporting Released by Italian Local Government Authorities

Abstract

Internet has become the main channel for communication between government and its stakeholders. The study examines the determinants of municipalities Internet-based performance reporting (IPR) using the agency theory framework. The analysis was conducted on a sample of Italian cities in 2010. Our findings show that both voluntary disclosure provided via traditional channels and voluntary performance data released the previous year, as well as media interest, are significantly associated to IPR.

Luigi Lepore, Sabrina Pisano

Mandatory Compliance in Transparency of Public Administration

Abstract

The Italian legislator has acted as a promoter to develop a new culture in the public sector oriented to transparency and to stakeholder engagement. Public institutions (PA) have been stirred to publish a wide range of institutional data on their website to allow citizens to be aware of the activity carried out by these institutions and to monitor how public funds are used (accountability). The aim of this research is verify if PA are comply with the law on transparency. The research shows that a better level of transparency is achieved when it is required by law, but the requirements not directly connected with law, such as suggestions to promote usability and interactivity of website, have a low level of accomplishment.

Massimo De Angelis, Maria Guerra

The Current Environmental Strategy Reporting Model: What can be Learned from Corporate Reports?

Abstract

This paper explores the information on environmental strategy. Our interest is to understand whether corporate reports are useful to assess a firm’s environmental performance. We developed an empirical investigation of annual reports and social reports of large public firms. Using content analysis, our findings show major differences among companies in sensitive, manufacturing/service and financial sectors in terms of: integration of environmental issues into corporate reporting model; disclosure of environmental information. We offer some relevant insights on the overlooked relation between environmental disclosure and environmental performance and on the predominant use of environmental qualitative and/or non financial measures. The study shows that there is: a lack of consideration paid to the relationship between environmental strategies and environmental performance; high variability and limited standardization in environmental practices. Consequently the comparability of environmental performance is very low. Furthermore, integrating theoretical and empirical findings, we suggest some implications to improve environmental disclosure practices.

Stefano Garzella, Raffaele Fiorentino

The Role of Continuous Monitoring of Internal Controls over Financial Reporting: A Case Study of an Italian Medium-Sized Company

Abstract

This chapter aims to analyze the academic and professional utilization of continuous monitoring (CM) with subsequent tentative implementation in a medium-sized Italian company. The study focuses on the possible role of CM techniques in the system of internal controls over financial reporting. The primary research questions are as follows: (1) Are recent regulatory changes related to corporate governance creating opportunities to implement the CM approach? (2) What are the obstacles to applying the CM techniques in the Italian corporate governance model and the market for audits of accounts? and (3) What is unique about applying CM to small and medium-sized organization in the current IT environment? Using a case study method can provide initial answers to those questions and indicate possible firm-level benefits of CM (i.e., efficiency, better decision making, and cost savings) as well as benefits for stakeholders (i.e., more reliable financial reporting).

Giuseppe Ianniello, Marco Mainardi, Fabrizio Rossi, Miklos Vasarhelyi

Accounting Information Systems and Knowledge Management Systems: An Integrated Approach for Strategic Control

Abstract

The aim of this chapter is to highlight the potential role of integration of Accounting Information System (AIS) and Knowledge Management Systems (KMS) for strategic control. The benefits of this integration can be expressed in terms of better support to knowledge conversions and enhanced access to knowledge embedded in tacit models by applying knowledge discovery techniques for model externalization. We propose a modified version of PROFSET model as a tool for realizing the integration: combining elements from AIS (to calculate product profitability) and KMS (to discover regularities in the purchase behaviour of customer), the PROFSET model can enhance the quality of support provided to decision makers and produce benefits that cannot be realized with any one system.

Roberto Del Gobbo

Current Changes in Executive Work and How to Handle Them by Redesigning Executive Information Systems

Abstract

Executives in Europe have significantly expanded their role in operations—in parallel to their strategic leadership. At the same time, they need to make decisions faster than in the past. Redesigned executive information systems (EIS) should support top managers in their new roles. This article examines how corporate management is evolving, and what issues a redesigned EIS should address. Embracing a “new normal” environment, we arrive at four prescriptive statements for an EIS architecture that is more business-driven than the state of the art. This architecture differs by applying a business-to-IT approach, designed in four layers: strategy, organization, alignment, and IT support. With such a structure, it is possible to “drill-through” to information needed to executives’ more operational decisions. Furthermore the proposed architecture balances key performance indicators from five information clusters for accelerating executives’ decision making: financial accounting, management accounting, compliance management, program management, and cash flow and liquidity management.

Jörg H. Mayer

Strategic Enterprise Management in the Taps and Fittings Sector: Application of the Balanced Scorecard Methodology to Business Intelligence Systems

Abstract

Global competition is intensifying and so companies need to optimize their operational business processes. But this is no longer enough because they must also be able to react quickly on a strategic level to new developments, considering alternatives and taking the correct decisions. In the latest few years, it has become obvious that only efficient enterprise management processes ensure the consistent realization of strategy and its continuing translation into the day-to-day activities, one of the most important success factors in enterprise management today. In the light of the above said considerations, and through the analysis of the taps and fittings sector of north-eastern Piedmont, with this work we want to display: the main perspectives of analysis companies should adopt for their business performance; the main key performance indicators (KPI) for each perspective; the organization of KPI in a business intelligence (BI) system to optimize strategic management.

Roberto Candiotto, Silvia Gandini

Defining Accounting Information Systems Boundaries

Abstract

It is clear that organizations today expect much more than simple double-entry bookkeeping from their Accounting Information System (AIS): ERPs not only support all transaction-related activities, but also provide comprehensive tools that are useful to analyze data and make decisions. However, the definition of an AIS, or what it should be, is highly dependant on the definition of accounting itself. An initial objective of this chapter is therefore to not only analyze the various kinds of accounting which are adopted in companies and any related computer-based subsystems, but also to determine if the contents of our accounting courses, particularly Management Accounting (MA) courses, are effectively aligned with the current needs of organizations. Secondly—this work will try to assess if the current definition and contents of MA are still valid or rather new perspectives suggest to broad its focus, to include new and promising fields of interest.

Iacopo Ennio Inghirami

Break-Up Analysis: A Method to Regain Trust in Business Transactions

Abstract

The financial crisis resulted in a loss of trust; not only within the investment or banking sector, but in general between creditors and debtors, because many organizations faced insolvency. Such a financial situation can even result in a company’s bankruptcy. Therefore it is necessary to get a realistic understanding of the solvency or the possible insolvency of a company. The support of a decision on a debtor’s creditability is not yet sufficiently provided by the most prominent method (Altman’s Z’’-score). The paper presents a procedure called Break-Up Analysis (BUA). It helps to decide on the solvency of a company. The comparison of the BUA to Altman’s Z’’-score shows an improvement of the identification of solvent and insolvent companies by 22 %. The BUA enables herewith to regain trust in business transaction by not identifying only the insolvent companies but the solvent ones as well.

Bruno Maria Franceschetti, Claudia Koschtial, Carsten Felden

Hierarchical and Relational Database Accounting Systems: Critical Aspects and Trade-Offs

Abstract

Although the transition from hierarchical to relational databases marked a crucial turning point in the development of accounting systems, the concept of hierarchy has not entirely been abandoned. The aim of this research is to highlight the critical aspects and trade-offs between the hierarchical and relational structures of a database accounting system (DAS). First, we address the relationships between database accounting structure and accounting data coding: hierarchical coding, as distinct from sequential encoding schemes, may have different implications on the selectivity/accuracy/efficiency of the DAS. Next, we investigate the impact that both structure and data encoding schemes have on select queries and update queries: hierarchical models allow for higher efficiency in performing select queries, but higher rigidity in executing update queries; conversely, relational models allow for higher flexibility of update queries, but higher complexity in performing select queries. Finally, we offer suggestions for managing the trade-offs between both types of DAS.

Carlo Caserio, Luciano Marchi, Gabriele Pulcini

Interactive Data: Technology and Cost of Capital

Abstract

We examine the introduction of the voluntary filing program (VFP) by the Securities and Exchange Commission (SEC) for the introduction of XBRL (eXtensible Business Reporting Language), or Interactive Data as called in the US. XBRL is a machine-readable standardized format for financial reports. The VFP allowed firms to file annual and quarterly reports using XBRL. This program represents a quasi-natural experiment to isolate the effects of an improvement in the information environment of program participants. We study two documented effects of voluntary disclosure, reduced cost of capital and increased information intermediation. Our results show a decrease in the cost of capital, especially for financial and IT firms, and an increase in information intermediation. These effects support existing literature on the adoption of IT in firms and voluntary corporate disclosure and sheds light on the decision to be an early adopter of XBRL reporting technologies.

S. Sarah Zhang, Ryan Riordan, Christof Weinhardt

Integrated-Multi-Layered Information Systems in Engineer-to-Order Multinational Business Processes: Managerial, Accounting and Organizational Aspects

Abstract

This chapter analyzes the contribution of an integrated Information System (IS) to manage processes in an electromechanical multinational company operating in engineer-to-order businesses (ETO-MC). According to literature, ETO business is characterized by dynamic, uncertainty and complexity with special managerial and informational requirements, mainly linked to specific features that distinguish ETO businesses from repetitive manufacturers. The IT integrated application could be an appropriate solution to satisfy the special needs in this context, but in literature there are few contributions about it. The aim of this work is, through a case study, to highlight the possibility of integrated IT solution to better address uncertainty and complexity of an ETO-MC, by providing increased reliability of data, availability on demand and real-time of information, and facilitating creation and development of global knowledge database. Finally this chapter attempts to propose a general model to optimize the implementation of integrated IT solution, and to highlight its managerial, organizational and accounting impacts.

Katia Corsi, Daniele Rizzo, Sara Trucco

IS to Support Project Management: Implications for Managerial Accounting

Abstract

Information technology (IT) is used as a tool to reduce some of the problems generated by fragmentation typical of project management (PM). The use of IT improves coordination and collaboration leading to better communication practices. Nowadays PM, due to the high level of complexity which characterizes the context in which firms operate, requires a concrete information system and suitable managerial accounting. Such tools are basic to support project-managers in the decision making process and aiding performance evaluation. The aim of this chapter is to analyze the relationship between PM, information systems and managerial accounting from a theoretical and pragmatic perspective. An input–output model will be used to clarify and analyze the correlation between managerial activities and firm performance. The managerial implications of a set of methods and techniques suitable to manage a project in its different aspects and phases will be emphasized.

Giuseppina Iacoviello, Arianna Lazzini

Putting IS and Organizational Change into Context: The Pros and Cons in Kibernetes

Abstract

Based upon the framework of integrated information systems, this chapter aims to investigate the linkage between organizational evolution and the development of the infrastructure for management accounting in a specific context. The chapter analyses how the management accounting system is implemented, and the main strengths and weaknesses of the adopted solution, within Kibernetes RC, a software house belonging to a leading Italian group focused on public agencies. The software house has been committed in the last 2 years to the internal development of a specific management accounting system to drive the change from a small entity based on a centralized decision making model toward a medium-sized organization based on empowerment and delegation. Though findings deriving from the case study cannot be generalized, they provide insights in relation to the suitability of IS to achieve desirable effects of economic performance and social change within the organization.

Daniela Rupo

Analysing Flexibility and Integration Needs in Budgeting IS Technologies

Abstract

The duality characteristics of budgeting between the flexibility driven decision-making and the integration focused management control inspire the author to investigate how the flexibility and integration domains influence controllers’ choices of IS technologies used in budgeting. This includes the enterprise resource planning (ERP) system, business intelligent (BI) and spreadsheets. Guided by the human agency concept, twenty-one controllers in eleven companies in Thailand are interviewed. The analysis shows that flexibility and integration in budgeting IS technologies can be viewed from four domains: organisation-in-focus, personal requirement, business requirement and reporting requirement. The analysis shows that there are conflicts between these four domains. It is found that spreadsheets are used when flexibility is needed. However, the ERP system and BI are employed to support integration. The major implication is that controllers apply several IS technologies to support budgeting because each IS technology is designed for its own respective purposes and intentions.

Wipawee Uppatumwichian

Port Authorities and Water Concessionaires: The Role of Reporting in Management Control and Information Systems

Abstract

Since 1994 the seaport services have been deeply reformed in order to improve service quality and to reduce public expenditure. These changes brought to the establishment of new public-private partnerships between Port Authorities (PAs) and private operators. In this context, the aim of the chapter is to investigate the reporting tools implemented by private operators (concessionaires) in order to support the PAs’ decision system. Besides, we propose a new approach to the control of the relationship between the Port Authority (PA) and his concessionaire. In particular, through case study methodology, we analyze the management of water services in the Naples seaport system focusing on the way the information are exchanged between the PA and Idra Porto s.r.l. The findings show that, despite the positive performances achieved by the concessionaire, the systems implemented do not provide enough information on the activities outsourced by PA.

Assunta Di Vaio, Gabriella D’Amore

The Impact of e-Invoicing on Businesses Eco-Systems: Evidences from Italian Supply Chains and Suggestions for a Research Agenda

Abstract

In 2007 the European Commission presented the Action Programme for Reducing Administrative Burdens in the European Union, with the aim to work with Member States in order to cut 25 % of administrative burdens on businesses by 2012. In this framework, a set of interesting actions can be summarised into the so-called dematerialization, intended as the substitution of the physical business documentation with digital files and archives that are able to provide better performances in terms of efficiency, as well as the same legal requisites of the documents in the paper format. The aim of this chapter is to introduce the approaches adopted from some Italian Supply Chains and provide some hints for further research developments.

Francesco Bellini, Fabrizio D’Ascenzo, Alessandra Ghi, Francesca Spagnoli, Valeria Traversi

The Didactic Challenge of Accounting Information Systems and ERPs for Business Schools: A Proposal for the Italian Universities

Abstract

The strong integration triggered by the adoption of Enterprise Resource Planning Systems (ERPs) impacts many processes and tasks; the way accounting data are collected, elaborated, communicated and used often changes even dramatically when an ERP system is adopted. This design-oriented paper stems from multi-year didactic experiences in the Italian context, where the Business Economics courses still poorly take into account the emerging educational needs stemming from this scenario: in most Italian universities, in fact, subjects such as accounting, administration, controlling and auditing are taught according to traditional approaches, which tend to see these activities as scarcely integrated with both the operations and the strategic management processes. This paper proposes a framework for innovating the educational strategies for basic and advanced courses related to accounting, administration, controlling and auditing, in order to fill the identified gap between real-world demand and higher education supply in this context.

Renata Paola Dameri, Roberto Garelli, Francesca Ricciardi

Backmatter