In this video, we walk through 5 ISC practice questions on improving performance of AIS. These questions are from ISC content area 1 on the AICPA CPA exam blueprints: Information Systems and Data Management.
The best way to use this video is to pause each time we get to a new question in the video, and then make your own attempt at the question before watching us go through it.
Improving Performance of AIS
An accounting information system is everything a company uses to record its transactions and turn them into financial information: the software, the data, and the people and procedures around it. Orders, invoices, payments, and payroll all flow through it and end up in the general ledger and the financial statements. When that flow is slow, error-prone, or held together by manual workarounds, the business has to decide what to change. Three common options are robotic process automation, outsourcing, and system changes, and each fits a different kind of problem.
What Performance Means
There’s no single official list of what makes an accounting information system perform well, but improvements usually aim for information that is timely, accurate, and produced at a reasonable cost, from systems that share data and stay available as the business grows.
Improving performance starts with identifying what is falling short. If invoices sit for days before anyone enters them, the problem is timeliness. If staff key in data from one system to another and figures don’t agree, the problem is that the systems don’t share data. If the system slows down or goes offline during busy periods, the problem is availability and capacity. These point toward different fixes, so it’s worth naming the problem before choosing the solution.
Robotic Process Automation
Robotic process automation, or RPA, is software that performs repetitive computer tasks the way a person would. It logs into systems, opens files, copies data from one place to another, and clicks through screens, following rules it has been given. It runs on top of the systems a company already has, so it doesn’t require replacing or reprogramming them.
RPA works well when a task is repeated often, the steps are the same every time, and the data arrives in a consistent format. Posting daily payments from a bank file to open invoices is a good example. A bot can post the ones that match a clear rule and route the rest to an accountant, which speeds up the work and reduces the risk of keying errors.
What RPA can’t do is apply judgment or fix a process that’s broken underneath. If two systems don’t share data, a bot moving information between them only makes the workaround faster. Bots can also stop working correctly when the systems they rely on are updated.
Outsourcing
Outsourcing means hiring an outside company to perform a process the business would otherwise handle itself. It’s most useful for processes that aren’t central to the business or that require expertise the company doesn’t have in-house. A growing company facing payroll tax rules in several new states is a common example, since a payroll provider already has the systems and knowledge to handle them.
The key point is that the company hands off the work but not the responsibility. Its financial statements still include those transactions, so it has to monitor the provider. That’s typically done by reviewing the provider’s SOC 1 report, which is an independent auditor’s report on the provider’s controls relevant to its clients’ financial reporting. The company also keeps controls over its own part of the process, such as approving the invoices it sends.
System Changes
A system change means upgrading, replacing, or connecting the software a company uses. The most common example is moving from several separate programs to an integrated enterprise resource planning (ERP) system, where one shared database supports orders, inventory, the general ledger, and more. A transaction entered once updates everything, so data doesn’t have to be exported and re-entered.
This is the right fix when the system itself is the problem, such as programs that don’t share data, software losing vendor support, or a system that can’t handle growth. The trade-off is implementation risk: cost, disruption while staff learn the new system, and data migration errors when existing records are moved into it.
Matching the Change to the Cause
The best change is the one that addresses why a problem is happening, at a reasonable cost. Adding staff or automating a broken process treats the symptom. And if a company already owns a system that works, extending it usually beats buying a new one.
