Classification Of Accounting Discipline Accounting Essay

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The accounting discipline is classified into two classifications: financial and management accounting. These two classifications have their own activities undertaken in ensuring that effective corporate governance of companies is being practiced. With the advent of technology, the SAP ERP software was created in order to address the concerns of corporate governance especially the streamlining of the finance aspects of management. This software has several features and functions that help the company achieve its goals. An ERP solution is designed in improving the financial system as well as streamlining the business process and to upgrade the technology infrastructure of an organization. Thus, it helps adding value to the employees as well as stakeholders of an organization.

The Sarbane Oxley Act reformed the financial regulations of many countries worldwide by providing implications that are necessary for effective and transparent financial reporting. The makers of SAP ERP are confident that with their software's features and functions, these implications are met for the satisfaction of the company's shareholders. However, there are various case studies, both successful and failure that were conducted in order to gauge the effectiveness of such. This report shall discuss all of these and further researches and reports are encouraged.

Introduction

This paper shall discuss four questions. The first question is the classification of Financial and Management Accounting. These two classifications will be explained and how the current SAP software meets the requirements of these two classifications. The second question deals with the research of the various features of the SAP software such as credit management, catering of subsidiaries, currency translation, carrying out of intercompany transactions as well as report generation using different languages. The third question shall discuss the changes brought about by the Sarbane-Oxley Act which include activities such as archiving, authorization, tolerance levels, and fiscal transparency among others. Finally, the last question shall discuss success and failure stories from companies that have used the SAP ERP.

Classification of Accounting

The first classification of accounting is financial accounting. The focus of this classification is the financial statement being distributed to the company's stockholders, financial analysts, and lenders. The general accounting principles are the activities of this classification which are needed to be reported as a result of the company's past transactions in its balance sheet, statement of income, cash slow statement, and statement regarding the stockholders' change in equity (Averkamp 2010).

The second classification of accounting is managerial accounting. This classification has its focus in providing the company with information so that the management can have its operation effectively. This classifications as well as cost accounting provide necessary instructions on how to compute the cost of products on firms like manufacturing. The costs computed will then be used in statements generated for the external usage of the company. Other activities involve in this classification are behavior of costs, break-even point, planning of profit, operational budgeting, capital budgeting, costs that are relevant in decision making, costing that is activity based, and standard costing (Averkamp 2010).

An ERP solution is designed in improving the financial system as well as streamlining the business process and to upgrade the technology infrastructure of an organization. Thus, it helps adding value to the employees as well as stakeholders of an organization.

The implementation of an ERP package shall help an organization in achieving its goals and objectives. Among the main features of the package is the improvement of the Financial System which is done though greatly enhancing the ability in reporting accurate expenditures and on time Financial Statements (FS).

Another great feature of an ERP solution is the streamlining of the business process. This is done through the elimination of activities that add no value such as keying and data reconciliation. It also makes information readily available as deem appropriate.

Finally, the ERP package simplifies and integrates an organization's core system infrastructure. This is done through capturing and making the needed information available. This is very important to effectively manage programs so that success can be measured afterwards. Information that is often hard to access, out of date, inaccurate or unavailable, can now be easily retrieved.

SAP Features

Features and functions that are being offered by SAP ERP on financial and management accounting vary. On the financial accounting side, SAP ERP is offering companies the control and integration of financial information that is available for the entire company. These are very essential to the company's decision making. The software enables the company in centrally tracking data within an international framework of various companies, currencies, languages as well as charts of accounts. The key features and functions that are included are: accrual, bank, fixes assets, inventory, journal, tax accounting, accounts payable and receivables; financial statements; fast close functions; parallel valuations and master data governance.

On the managerial side of accounting, SAP ERP enables the company in the recording and valuation of financial data. This is not only for financial reporting but also for the basis of all reporting that are cost and revenue related. The result of this main feature is that the company's financial analysts and managers can work with the identical basic data as that being used of the company's accountant. The key features and functions that are included are: profit center; project; profitability; cost and revenue planning; product cost; governance of master data and transfer pricing.

The software also supports various languages and currencies, as well as the international standards of financial reporting and other regulatory requirements.

Another great feature of an ERP solution is the streamlining of the business process. This is done through the elimination of activities that add no value such as keying and data reconciliation. It also makes information readily available as deem appropriate.

Finally, the ERP package simplifies and integrates an organization's core system infrastructure. This is done through capturing and making the needed information available. This is very important to effectively manage programs so that success can be measured afterwards. Information that is often hard to access, out of date, inaccurate or unavailable, can now be easily retrieved.

Various characteristics define the ERP database. The data base is often centralized and as it goes with multiple users, the software allows flexibility, customization as well as configuration. The processes are often in real time through online transactions while the databases are being input through minimal entry of data; however, it is still simultaneous. The controls in input are often dependent on the validation and acceptance of pre data entries and is relying on the balancing of transaction, whereas controls that are times tested are no longer relevant on this feature. Transactions are often stored in common databases therefore the different modules are accessible to everyone.

ERP implementation involves broader organizational transformation processes involving business processes, with significant implications to the organization's management model, organization structure, management style and culture, particular to people (Wood & Caldas, 2001.)

Sarbanes-Oxley Act

The act came into legislation in the year 2002. It introduced major changes to the financial practice regulation of financial practice as well as corporate governance. It was named after its major authors, Representative Michael Oxley and Senator Paul Sarbanes. This was enacted for legislation on the said year in response to major financial scandals.

The most important implication of the act, especially for developing countries is that because of the act's increased regulations, the shareholder value also increases. Also, these regulations are thoroughly enforced; therefore, corporate governance is effective. These outcomes are achieved because of the imposition of monetary and criminal sanctions for financial statements that are misleading as well as fraudulently influencing the external auditors. Significant deficiencies in financial reporting, material weakness in internal control as well as fraud were minimized, if not eradicated due to the responsibility of the management in fully disclosing all information with the audit committee and external auditors (Bautista 2004).

SAP ERP is confident that these implications are met because of its comprehensive features that cater the needs of both the company's management as well as the auditors. It also adheres to all international standards of reporting and accounting regulations.

Success and Failure of ERP Implementation

Lo, Tsai and Li (2005) conducted a case study regarding the implementation of the ERP system in T-Opto Electronics Company in Taiwan. The case study focused in assessing following three aspects: (1) how to assess appropriate ERP software and the applicability of ERP software to enterprises in Taiwan; (2) ERP system implementation strategy and methodology; and (3) problems that may be encountered during implementation process and the solutions.

Based on this case study, Enterprise resource integration involves a wide range of activities including selection of ERP provider, communication equipment, resource management planning, system implementation, senior management's vision, human resource coordination, system transition, and continuous renovation, which are all determinants of the success of implementing enterprise resource planning system. Hence, the evaluation before implementation is rather important. Due to the consideration of industrial characteristics, scale, degree of urgency, and software applicability, not many enterprises have currently officially implemented ERP software, among which, the majorities are from information/semi-conductor industry. However, without complete preparation beforehand, the huge investment of money, time, and human resource usually cannot generate the expected results because ERP system implementation involves too many resources and parties, is very time-consuming and capital-intensive.

Sivunen (2005) conducted a case study regarding the impact on organizational culture of ERP implementation in China. The study investigate the success factors that are critical in the implementation of ERP in a Chinese business context, in order to valuate whether organizational culture affect the CSFs, and how organizational culture affect ERP implementation practices in China. The research is based on the cross case-study of the ERP projects deployed by two different types of company in China, state-owned company and foreign invested company.

It is found in the case studies that teamwork mentality should be encouraged in the ERP implementation in China, especially in state-owned companies where employees are not used to work in teamwork environment, since teamwork is definitely a value integral to the success of ERP implementation. It was discussed earlier that a more 'traditional' management system, which is typical in the Chinese state-owned companies, characterized by seniority-based decision making through the steering committee and centralized decision making, is associated with more negative implementation results (Reimers, 2002). However, it is found in the case study that seniority-based management style actually has positive impact in ERP implementation in some cases.

It's also found that business process re-engineering and software modification should be considered simultaneously in ERP implementation in Chinese companies. Furthermore, the findings also imply that a good understanding of ERP system, having a clear business plan, sufficient personnel resources, as well as education and training are all essential and important in ERP implementation in China.

Iskanius (2009) have conducted a study regarding the critical risks of the ERP projects through cases of companies that are considered to be from the small to medium enterprises (SME's). First, by using company-specific risk analysis method, the critical risks of the ERP projects have been identified and assessed. Second, by using characteristics analysis method, the recommendations of how to divide the ERP projects into manageable sub projects have been given.

This study presents experiences that are obtained in case studies in which three SME companies were drawn an ERP project risk analysis and characteristics analysis. The case companies considered both of the methods as good tools; they forced the company to think of the potential risks that might go off at the different stages of the ERP project, whether these risks had to do with the technical and functional characteristics of the system itself, or with the expertise and commitment of the staff, top management or ERP system vendor. The RAM presents risks in a form and language that is understandable, because the analysis have been done in the company context. As negative aspect of this RAM is that it requires a significant amount of work, and also help from external experts. The CAM helped the case companies in dividing their ERP project into manageable entities and provided them with recommendations on what leadership/management aspects they should devote special attention to. The CAM also showed inadequacies in the fields of management and leadership that the implementation of an ERP system causes in companies.

Kumar et al (2003) conducted a case study regarding the investigation of issues in critical management issues in the implementation of ERP. The study focused in the evidences from organizations in Canada. The study investigated on the selection process being conducted in the implementation of the system. These processes involve the selection of the vendors, members of the project team, the project manager and others.

The research identifies a number of critical management challenges in the ERP implementation activities, such as training, upgrading infrastructure, project management and stabilizing ERP systems. Organizational strategies in testing and quality assurance, meeting incompatibilities' between organizational needs and the ERP systems, increasing user acceptance, and resolving challenges in shakedown are also documented. A number of avenues can be recognized for future detailed research, based on organizational concerns found in this study. For example a detailed study on training, one major organizational concern identified, would ascertain how effective ERP training can be carried out. Another natural extension of this study could be to explore the organizations which have stabilized their ERP systems and have moved to the onwards and upwards stage, a stage where the organization realizes business benefits.

Conclusion

An ERP solution is designed in improving the financial system as well as streamlining the business process and to upgrade the technology infrastructure of an organization. Thus, it helps adding value to the employees as well as stakeholders of an organization. This paper aimed in discussing the process of implementation of the system as well as the risks that are involved in such. Case studies were presented for means of discussions.

An ERP implementation project is different from other systems development projects. The prior literature had identified significant risk factors that included technological change, organizational change and project complexity. These factors are the hallmarks of most (if not all) ERP implementations. Consequently, it is important to understand how these risk factors can be mitigated. In this paper, controls required to minimize five types of risks that organizations must control in an ERP system implementation were identified. The results of this research provide support for the proposition that the success of an ERP system implementation is dependent, in the first instance, on identifying the major business risks and the controls that need to be put in place to minimize those risks.

The perceived benefit for the implementation of ERP projects is the improvement of financial system as well as the streamlining of the business process and upgrading the technology and infrastructure of the organization. It is viewed by the project members in adding value for the employees as well as to the stakeholders.

From the cases discussed in this paper, it is important to note that the success or failure of an ERP implementation is human resource. Unless the main manager of an ERP project implementation has real power in the decision making process of the company, as well as having a basic knowledge of the principles of ERP, and being objective, even the most perfect ERP software as well as the key consultants cannot ensure a perfect implementation of such.

Finally, the Sarbanes Oxley Act implies effective corporate governance. These outcomes are achieved because of the imposition of monetary and criminal sanctions for financial statements that are misleading as well as fraudulently influencing the external auditors. Significant deficiencies in financial reporting, material weakness in internal control as well as fraud were minimized, if not eradicated due to the responsibility of the management in fully disclosing all information with the audit committee and external auditors (Bautista 2004).

SAP ERP is confident that these implications are met because of its comprehensive features that cater the needs of both the company's management as well as the auditors. It also adheres to all international standards of reporting and accounting regulations.

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