TWO FIELDS…ONE JOB: THE RELATIONSHIP BETWEEN ACCOUNTING AND IT By: Jodi L. Benson July 2005

Abstract Taking a look at how Information Technology and Accounting correlate to each other can show some instances as to how important each field is nowadays. It is felt to be a duty in light of recent scandals to protect shareholders in their confidence of the financial documents that are disclosed. Some major government regulations include the Sarbanes-Oxley Act, COSO, and CoBIT.

Introduction The accounting industry finds it impossible to avoid learning important skills pertaining to Information Technology. The whole accounting field is seen moving towards to the online world where these records are available around the clock. It is necessary to face the challenges like improving the security and planning for the storage of large amounts of data.

Accounting Software It is needed to understand that in software for the accounting field is that certain software should be made for specific areas in the market itself. Have software suitable for their local conditions and terminology. – Ex. Taxes in each state are different In purchasing software, remember is that the more sophisticated tools used in the software, the more it will cost. Again, it is up to the business itself where they see themselves going.

Accounting Software Keys to remember in purchasing software: – Keep accounting processes simple – Has a clear upgrade path – Make sure that the software you buy is well supported – Check the online capabilities of the software

The Sarbanes-Oxley Act of 2002 In light of the recent scandals that occurred in the early 2000s – Enron, WorldCom, Adelphia, Tyco, Rite Aid - Congress had taken a step and passed the Sarbanes-Oxley Act of 2002, also known as the “Act” or “SOX”. This law looks to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws. Also in relevance to the internal controls of the businesses.

The Sarbanes-Oxley Act of 2002 Four major elements – Public Company Accounting Oversight Board – PCAOB or “Peek-A-Boo” – which would grow and implement reforms that will eventually restore the investors’ confidence in financial reporting and auditing process. – Prohibits audit firms from providing audit and non-audit service in a number of areas at the same time. – Requires corporate responsibility of establishing audit committees. – Requires enhanced financial disclosures that provides direction for management assessment and implementation of internal controls

The Sarbanes-Oxley Act of 2002 In the area of information security of the Sarbanes-Oxley, it is believed that it revolves around the internal controls in one particular section even though it is not specifically stated. Accurate data can only be insured through a system that is a confidential system with integrity and provides availability.

COSO and CoBIT The Committee of Sponsoring Organizations of the Treadway Commission, or COSO – Lays out an evaluation basis to be used by managers to assess the internal controls and disclosure requirements, in general. The IT Governance Institute established an audit- based framework known as the Control Objectives for Information and related Technology – CoBIT – An interpretation of COSO from an IT perspective.

Accountants and IT The IT systems of a company should be relied upon as being accurate with the systems being secured against unauthorized users and modifications that are not permissible. There has been a considerable increase in the need for accounting professionals with IT control knowledge and skills. In companies today, they have acquired a shortage of well-trained college graduates that have led them to cross-train their current staff.

Accountants and IT It is seen by the firms throughout that information systems is the second most important topic of study for an accounting major, right after communication skills of all forms

Conclusion Some industries hope that having a knowledgeable employer of graduates with IT control will encourage accounting schools to include Accounting Information Systems (AIS) or IT auditing in their programs. From the pressures of deregulations, the Sarbanes-Oxley Act, and going back to basics eventually clash with shareholders’ expectation for growth and profitability.