Pcaob Pronouncement Impact on Accounting Information Systems

Group Opinion Paper: PCAOB Pronouncement Impact on Accounting Information Systems

Yolanda Jackson, James Jones, Leah Kozicki, Brandy Martinez, and Mark Nye

Liberty University Online

ACCT 531-B04

Professor McDanel

8 September 2011

Abstract

This Opinion Paper creates an understanding of the group vision concerning the future of the PCAOB's pronouncements as they impact Accounting Information Systems. This paper takes a close look at the pronouncements in regards to the direction the amount of control and impact imparted by these pronouncements. Views will be discussed pertaining to the opinions of the group in regards to determinations of whether these pronouncements will tighten, relax, or maintain status quo in directing and impacting Accounting Information Systems (AIS). This paper includes a synopsis of all Pronouncements of the PCAOB to date and a sampling of articles which call for the SEC to relax the Sarbanes-Oxley Rule 404 requirements for smaller companies. The PCAOB pronouncements will be carefully researched and evaluated and selections of scholarly journals and articles will be utilized in order to establish a baseline for determining the direction of impact in order for the group to fully evaluate and determine a consolidated opinion to present in the paper.

Keywords: AIS, accounting, information systems, PCAOB, PCAOB Pronouncements

Group Opinion Paper: PCAOB Pronouncement Impact on Accounting Information Systems

In order to understand just how PCAOB pronouncements impact Accounting Information Systems (AIS) it is necessary to understand the role of AIS in business.

Accounting information system (AIS) is a system of records, usually computer based, which combines accounting principles and concepts with the benefits of an information system and which is used to analyze and record business transactions for the purpose to prepare financial statements and provide accounting data to its users. (Orwel, 2009, para. 1)

Accounting information systems have changed how tasks are directed and fulfilled. "The days of green paper pads are gone, and instead businesses have a centralized place where all accounting transactions are entered and saved" (Shanker, 2011, para. 1). "Accounting information systems are considered important organizational mechanisms that are critical for effective decision management and control in organizations" (Nicolaou, 2000, p. 92). "Accounting information systems cover all business functions from backbone accounting transaction processing systems to sophisticated financial management planning and processing systems" (Henson, 2006, para. 7).

The biggest benefit of AIS is speed and efficiency in streamlining the collecting, processing, and retention of data. "Reporting is driving force behind an Accounting information systems development. If the system analysis and design are successful, the reporting process provides the information that helps drive management decision making" (Henson, 2006, para. 15). After the data is entered the system, the data can be used and reused to generated reports and retrieved entries by couple clicks of the button. When correction to entries are required, it is easily accomplished due the relational properties of AIS in that it results in a global change in the system and subsequent reporting is accurate, due to this factor. With large corporations, such Lowes and Home Depot, AIS makes generating financial data faster and more error free by just a couple of clicks of the button. They can filter out certain data that they want to find at a given time.

Reports are three basic types: A filter report that separates select data from a database, such as a monthly check register; a responsibility report to meet the needs of a specific user, such as a weekly sales report for a report for a regional sales manager; a comparative report to show period difference, percentage breakdowns and variances between actual and budgeted expenditures. (Henson, 2006, para. 16)

With the "old school" accounting it was much more difficult, and time intensive, to enact these changes, and reports could not be generated, with accuracy, until every aspect was updated. Other benefits, besides the upgrade in speed and efficiency over older legacy systems, include the lower rates of errors in automated processes, such as invoicing, payroll, and disbursements. This is not to say that current AIS are error-free, however, well-planned and implemented AIS can eliminate the vast majority of errors seen in older legacy systems.

AIS require large investments of time and expense at the beginning to get everything up and running. Only after the systems are past the implementation stage, with care given to initial bugs and inconsistencies, can the return on investment begin to outweigh the initial outlay of cash, time and energy, as the benefits of the system speed and efficiency become measurable. "Also to consider whether business needs accounting information system and what kind of system is required thorough analysis of business and accounting processes has to be made to determine precise requirements" (Orwel, 2009, para. 4).

To discuss the Public Company Accounting Oversight Board (PCAOB) pronouncements and the role they are given in accounting, the basics of the PCAOB must first be understood. "The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, accurate and independent audit reports" (PCAOB, 2011, para. 1). The board is five members of the board that are appointed to five years terms by Securities and Exchange Commission. "The PCAOB also oversees the audits of broker-dealers, including compliance reports filed pursuant to federal securities laws, to promote investor protection" (PCAOB, 2011, para. 1). The PCAOB has power to investigate and rule registered public accounting firms and persons associated with those firms for noncompliance with the Sarbanes-Oxley Act of 2002, the rules of the PCAOB and the Securities Exchange Commission, and rules that are governing the audits of companies (PCAOB, 2011). The PCAOB does investigations of accounting firms that are register and people that are associated with that firm. If they violate the laws then they will have hearings regarding to alleged violations and then imposed

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