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The Impact of Technological Advancements to Accountants I.

Introduction Accounting has evolved, as in the case of medicine and law, in response to the social and economic needs of society. As business and society become more complex, accounting develops new concepts and techniques to meet the ever-increasing needs for financial information. Without such information, many complex economic developments and social programs may never have been undertaken. The first treatise on the art of systematic bookkeeping appeared in 1494, in Venice. Everything about Arithmetic, Geometry, Proportions and Proportionality (Summa de Arithmetica, Geometria, Proportioni et Proportionalita) was written by the Franciscan monk, Fra Luca Pacioli, one of the most celebrated mathematician of his day. The work was intended to summarize the existing knowledge of mathematics. Included in the arithmetical part of the work was a section that explained in detail the double-entry system of bookkeeping. Although Pacioli made no claim to developing the art of bookkeeping, he has been regarded as the father of double-entry accounting. Accounting practice really dates from antiquity but the formation of an accounting profession was closely tied to the rise of a modern industrial society in Britain during the late 18th century. The need for accounting services emerged slowly, but by the early decades of the 19th century a flurry of textbooks and handbooks on accounting had appeared, reflecting the impact of the Industrial Revolution. Tremendous advances in information technology have revolutionized accounting in recent years. Tasks those [sic] are time-consuming when done manually can now be done with speed, consistency, precision and reliability by computers. There is an abundance of accounting applications and modules to suite [sic] the businesses various needs. The advent of Internet along with its promising prospects of doing business online or E-commerce will surely bring about another metamorphosis in the field of accounting. Accounting was the early driver of information technology in business. The first business computer, the Lyons Electronic Office (LEO), was built by Lyons, a British catering company. In 1951, the computer ran a program to evaluate the costs, prices and margins for that weeks output of bread, cakes and pies. In 1954, it took on the weekly calculation of the companys payroll. LEO was primitive by todays standards, taking 5,000 sq uare feet of floor space! Since then, information technology has diverged significantly from its initial primary role of processing accounting transactions and supporting financial reporting. Despite this, the accountancy profession has a critical role to play in the evolution of IT in business and yet there are a number of concerns about how this will play out, particularly from the standpoint of tomorrows accountants currently in higher education.

Emerging issues affecting the accounting profession

Sevilla, Arvin E.

II. Discussion Current IT Trends Technology in business is moving at what seems to be an ever-accelerating rate. A mobile phone today now has more computing power than a 1970s-era mainframe had. It is also sobering to consider that over 17 years ago, business use of the Internet was non-existent. In order to ensure tomorrows accountants dont enter the workforce with dated knowledge of the impact of technology, academia is going to have to be agile in the way it keeps content current and relevant. Tomorrows accountants are part of the so-called millennial generation who only know a world in which apps think Facebook, Twitter and YouTube are omnipresent. These accountants tend to take being connected for granted. For them, texting has replaced phone calls and even email can seem antiquated as a communication mechanism. They seem to have little appreciation for the importance of privacy and security and dont realize the consequences of everything they put up on the World Wide Web. So while tomorrows accountants are comfortable being immersed in the world of consumer technology, they must be educated and have an appreciation for the latest advances in business IT if they expect to play a role in ITs business evolution. The use of IT in business creates significant business risks that tomorrows accountants must be able to recognize and manage. Consider current developments and trends in business IT: In 2010, Gartner estimated that 80 percent of business data was now unstructured (e.g., documents, images, spreadsheets, presentations). That figure was estimated to grow at a compound rate of 50 percent each year. Unstructured data presents significant business risk from several angles not the least of which are regulatory, intellectual property, confidentiality and privacy. Mobile computing is starting to have a significant impact on how business is conducted. The world of mobile computing is still very immature from a business perspective. Businesses are trying to figuring [sic] out how it impacts both operations and customers (which is about to get even more complex by the introduction of the third major mobile platform in the form of Windows 8). Security, privacy and manageability are big issues regardless of the mobile platform used. The cloud is starting to have a major impact on business. It is enabling businesses to scale their IT infrastructure, turning what has been traditionally a fixed cost into a variable cost. But with the cloud comes major security and privacy concerns (which is why health and financial services in particular are slow to adopt it), as well as availability risk (what happens when the connection to your IT resources fails for a critical system?) all issues that need to be managed. Diversified Opportunities

Emerging issues affecting the accounting profession

Sevilla, Arvin E.

Information became available to an accountant with the click of a mouse. This changed the nature of an accountants work. More doors were opening with the use of information technology. Business owners started looking to professional accountants for technology advice. Accountants became more knowledgeable about which financial systems worked best. Accountants were becoming the IT staff and trusted advisors. An accountants role was to help these businesses become more productive. Integrating the clients technologies properly with the accountants systems made the practice more efficient when it came time for write -ups and reconciliation processes (Searching for Technology, 2009). Input, Processing and Output Not only does the client need to have proficient financial processes but the accountants themselves need software programs that keep track of clients accounting information with improved efficiency. Accountants work with systems programmers to develop a digital process that will organize their clients history and all their documents. When the clients data is input into the computer program the processing cycle gives the computer instructions on how to process the clients data. This enables it to change the data into useful information. Output, transfers the processed information to the accountant (Laudon, et al, 2006, p.16). Cloud Computing To go a step further, cloud computing is becoming popular today. It is called cloud computing because the name represents the cloud symbol used in flow charts, representing the Internet. It is a service that is being provided over the internet to permanently store data and use business applications over a remote server. Software-as-a-service (SaaS) is a web based service. The data is permanently stored in huge data centers shared by many other users. The accountant would not have to purchase anything. He/she would pay a monthly subscription so he/she would only pay for what is needed (What is Cloud, n.d.). It would free up space on the accounting firms hard drive while the firm rents space from giant computer center s (Laudon, et al, 2006, p.180). Advancements of Information Technology Accountants were pushed towards acquiring new skills due to the advancements that information technology has made on the accounting industry. Accountants now have to have a high level of computer and technical skills. These skills have become part of the knowledge, and abilities of the accounting professionals. In its report the American Institute of Certified Public Accounts (AICPA) cities that, The knowledge, skills and abilities necessary for the entry level accountant now include the application and integration of information technology into the accounting process, as well as financial and managerial accounting principles (Dillon, Kruck, 2004). Enterprise Resource Planning (ERP) Systems The twenty first century accountants have strategic software applications in place to prepare for the future; such as Enterprise resource planning (ERP) systems. This is a software program that integrates different departments in the organization onto the same system. This makes data available diversely and supports activities between the different departments. The

Emerging issues affecting the accounting profession

Sevilla, Arvin E.

information is made available through a common central database and shared through functional areas such as; finance and accounting, sales and marketing, human resources, and manufacturing and production (Laudon, et al, 2006, p.339-340). III. Conclusion The accounting industry is now speaking a brand new language of business. It is the language of future generations of accounting professionals. The evolution of accounting technology has been tremendous with strong growth potential for the future. The advancements have taken the industry to many new levels of opportunities that I have discussed throughout this article. In comparing and contrasting the changes that have occurred with the use of technology in accounting throughout the ages, enterprise productivity has created career stability and many diverse opportunities in this successful industry of professional accountants. Accountants need to understand the implications of internal controls on the development and operation of business technology. Although there is a place for specialists who understand this area more deeply, accountants still need to have an appreciation of the issue so they know when they need to call for help. A look at some recent news stories seems to confirm the impact of what internal control failures are over software development. A software bug resulted in Knight Capital having to raise $440M to stay afloat. Southwest Airlines is sending refunds to customers who were billed multiple times after a half-price online ticket promotion backfired. NatWest/RBS (the British Bank) is facing compensation claims from a debacle in June when a software issue caused a multi-day problem that in turn caused customers to be unable to access their accounts online and prevented direct debits and standing orders from being processed.

Accountants need to treat all information that is produced by computers and upon which business decisions are based and finances reported with a healthy scepticism. How do we know the information is accurate? That applies whether its contained in a spreadsheet, produced by an accounting system or available on the Internet. Finally, accountants need to understand how technology impacts business and how it can be used to improve operational efficiency, achieve regulatory compliance, support financial reporting and management and even increase revenues. They must also have an appreciation for how to capture and communicate technology needs for their business.

Emerging issues affecting the accounting profession

Sevilla, Arvin E.

IV. Bibliography

Freeman, D. (2012, October 23). Technologys Impact on Accounting and Business [Web log post]. Retrieved November 12, 2013, from http://www.rdacorp.com/2012/10/technologys-impact-on-accounting-and-business/ Ballada, W., Ballada, S. (2010). Basic Accounting (pp. 1-3 1-7). DomDane Publishers. Sampaloc, Manila:

Pepe, A. (2011, April 19). The Evolution of Technology for the Accounting Profession. CPAPracticeAdvisor.com. Retrieved November 12, 2013, from http://www.cpapractice advisor.com/article/10263076/the-evolution-of-technology-for-the-accounting-profession

Emerging issues affecting the accounting profession

Sevilla, Arvin E.