Information technology in the accounting curriculum

Information technology plays a vital role in supporting the activities of both profit-oriented and not-for-profit organisations. Accountants, in addition to extensively using various types of information technologies, often play important managerial, advisory and evaluative roles in connection with the adoption and use of various information technologies by organisations of all types and sizes.

The mission of the International Federation of Accountants (IFAC) is the development and enhancement of an accountancy profession able to provide services of consistently high quality in the public interest. The Education Committee of IFAC is charged with the development of standards, guidelines and other documents on both pre-qualification education and training of accountants and on continuing education for members of the accountancy profession.

This article is largely extracted from an Exposure Draft for a revised International Education Guideline for Information Technology in the Accounting Curriculum.

Information Technology in the Accounting Curriculum
The term information technology or IT is used in the guideline to encompass: hardware and software products; information system operations and management processes; human resources and skills required to apply those products and processes to the task of information production; and information system development, management and control.

Society expects that accountants who accept an engagement or occupation have the required level of competence to perform the work required. The accountancy profession as a whole has the obligation to ensure that candidates for membership possess the breadth and depth of knowledge and skill required to demonstrate competence, and the credibility of the accountancy profession depends on its success in fulfilling this obligation. In addition, the accountancy profession has an obligation toensure that, after qualifying, members keep abreast of relevant developments through continuing professional development.

The body of knowledge and skill required of accountants includes a variety of important areas. IT is one of the core competences of accountants and requires special attention due to its explosive growth and its rapid rate of change. The following trends are particularly noteworthy:

• Wide availability of powerful yet inexpensive computer hardware, including the widespread incorporation, through miniaturisation, of powerful computing capabilities in numerous devices.
• Wide availability of powerful, inexpensive and relatively user-friendly software with graphical user interfaces.
• The shift from custom tailored systems to pre-packaged software.
• The shift from mainframe to small computers used alone or, increasingly, as part of networks devoted to information-sharing and co-operative computing with corresponding changes in the nature, organisation and location of key information system activities, such as the shift to end-user computing.
• Increasing availability of computerised data for access in real or delayed time, both locally and through remote access facilities, including via the Internet.
• New data capture and mass storage technologies leading to increasing computerisation of data / information in text, graphic, audio and video formats and emphasis on managing, presenting and communicating information using multimedia approaches.
• Convergence of information and communication technologies, affecting how people work and shop.
• Increasing use of networks to link individuals, intra-organisational units and inter-organisational units through systems such as e-mail and the Internet, including the World Wide Web.
• Increasing use of the Internet for commerce between organisations and individuals and between organisations and other organisations through electronic commerce systems such as electronic data interchange (EDI) and electronic funds transfer systems (EFTS).
• Mass marketing and distribution of IT products and services such as computers, pre-packaged software, online data retrieval services, e-mail and financial services.
• Reduction of barriers to systems used, encouraging a wider penetration of information systems into profit-oriented and not-for-profit organisations of all sizes for accounting and broader management and strategic purposes and increasing the role of end-user computing.
• Wider penetration of information technologies such as computer-assisted design and computer-assisted manufacturing (CAD/CAM), computer imaging systems, executive information systems (EIS) and electronic meetings systems (EMS).
• New system development techniques based around information technologies, such as computer-assisted software engineering (CASE), object-oriented programming and workflow techniques.
• Continuing development of intelligence support systems incorporating expert systems, neural networks, intelligent agents and other problem-solving aids.
• New business re-engineering approaches based on effective integration of information technologies and business processes.

Addressing the challenges
The growth and change that has come about as a result of the above trends has created a number of important challenges that the accountancy profession must address. These are discussed below.

Information technologies are affecting the way in which organisations are structured, managed and operated. One of the most dramatic developments affecting organisations is the fusion of business and IT strategy. Entities can no longer develop business strategy separate from IT strategy and vice versa. Accordingly, there is a need for integration of sound business and information technology planning and the incorporation of effective finance and management controls within new systems.

Traditionally, accountants have been entrusted with the task of evaluating investments in business systems, evaluating business system designs and reporting on potential weaknesses. Increasingly, information technology deployments are supported by extensive organisational restructuring around such technologies. To maintain both the accountancy profession’s credibility and capability in supporting new, strategic information technology initiatives and the public’s trust and confidence, the competence of accountants in IT strategy must be preserved and enhanced.

Information technologies are changing the nature and economics of accounting activity. The career plans of accountants and related training systems must be based on a realistic view of the changing nature of accounting, the accountancy profession's changing role in providing services to business, government and the community at large and the knowledge and skills required for future success as a professional accountant.

Some IT skills, such as the ability to use an electronic spreadsheet, are now indispensable, and professional accounting bodies must ensure that candidates possess core IT skills before they qualify as members of those bodies. In addition, since an increasing number of accountants is engaged in providing IT-related advisory and evaluative services, it is important that professional accountancy bodies maintain the quality and credibility of these services through both pre-qualification and post-qualification education requirements.

Changing the competitive environment
Information technologies are changing the competitive environment in which accountants participate. Information technologies are either eliminating some areas of practice that were once the exclusive domain of accountants or reducing their economic attractiveness. For example:

• Accounting and accounting system developments were once the virtually exclusive domain of accountants. Today, inexpensive, easy-to-use and powerful pre-packaged accounting software is reducing the demand for those activities or enabling non-accountants to offer those services. At the same time, there is increasing demand for professionals with a combination of business and IT skills to help organisations structure their systems to provide effective and efficient support for their primary objectives and activities.
• Tax planning and tax return preparation have traditionally represented important activities for many accountants. Pre-packaged software is also reducing the demand for tax return preparation services. The professional tax planning expertise that was once the exclusive domain of individual practitioners is increasingly being embedded within these same tax packages, reducing the demand for such services as well.
• In the past, accountants with internal and external auditing expertise were needed in great numbers to vouch and trace documents, to perform a variety of analyses and to document audit work. Today, the computerisation of business records and the availability of computer-assisted auditing tools mean that these activities can be performed faster and more thoroughly, again reducing the demand for such activities. Software packages are now available for continuous auditing whereby transactions can be continuously monitored and cross checked.
• Insolvency practitioners are now testing and using ‘expert systems’ for evaluating insolvency situations. Software is used to assist practitioners in decisions of whether to liquidate or restructure as a going concern.

New opportunities for accountants
IT changes have created many new opportunities for accountants in areas such as information development and information system design, information system management and control and information system evaluation.

Information development and information system design
Accountants have traditionally produced information to enhance management decision-making. With the advent of new information technologies and expanded sources and means of access to information, accountants can help bring richer sets of information to bear on specific managerial decisions and screen out superfluous information. One of the implications of the growth of such services is the need to expand accountants’ perspectives beyond their traditional focus on accounting information to other important types of information and performance indicators, including non-financial information.

Information systems are increasingly viewed as a potential means to achieve competitive advantage. Accountants, by virtue of their broad business backgrounds, financial skills and objectivity, can provide valuable advisory services relating to assessing investments in strategic information technologies and advising about control systems required to meet the needs of management and, in some cases, the requirements of legislators and regulators.

Multiple objectives exist within most information systems installations. This will invariably lead to cost versus quality versus control trade-offs; i.e. information systems personnel may resist implementing additional controls if they perceive them to detract from the ease of use or efficiency of a system, since these criteria may be important in their performance evaluations. Accountants can provide a valuable advisory service by bridging communications gaps, adding a sound business perspective to the consideration of IT control issues and vice versa.

Information system management and control
Information system management skills are not primarily technological but, rather, include: an understanding of strategic and operational business planning and associated IT issues; the ability to perform appropriate analyses of IT investments; an understanding of IT related benefits and risks; the ability to stimulate and manage organisational change; and the ability to communicate effectively about IT topics.

Information system management has been characterised by a communication gap between top management or functional managers lacking IT skills and technologists lacking in business backgrounds. Accountants can provide a valuable service by bridging such communications gaps, adding a sound business perspective to the consideration of IT issues and vice versa.

Information system evaluation
Accountants have traditionally provided evaluative services in their roles as internal and external auditors. As information technologies proliferate, there are increasing demands for objective assessments of information system controls such as controls over information privacy and integrity and controls over system changes.

In addition there are concerns that information system failure and the reliability of information processing continuity provisions when systems do fail. Other areas of concern are the proliferation of incompatible sub-systems and the inefficient use of systems resources.

It is evident that IT is fundamentally changing professional accounting, whatever the accountant’s work domain or role. Consequently, professional accountancy bodies must address these changes through their educational process by including coverage of important IT knowledge and competency areas in pre-qualification education programmes, pre-qualification work experience and post-qualification professional education in both general work domains and speciality areas.

The IT curriculum
The guideline suggests that accountants may be engaged in a variety of roles, such as:

• user
• financial manager (accountant, controller)
• designer of financial information systems (member of business system design team or task force, producer of financial information, analyst)
• internal financial or operational auditor
• external adviser (accountant, auditor, tax practitioner, consultant, insolvency practitioner).

The guideline establishes a framework for organising IT-oriented education for accountants and the core competency areas to be covered. It identifies the IT education requirements for accountants under seven main headings:

1. general IT knowledge
2. IT control knowledge
3. IT control competencies
4. the accountant as a user of information technology
5. the accountant as a manager of information systems
6. the accountant as a designer of information systems
7. the accountant as an evaluator of information systems.

While the four broad roles of user, manager, designer and evaluator are not as specific as the areas in which many accountants actually work, they represent the key elements of knowledge and competence accountants require and provide a useful framework for organising an educational approach. Finally, the guidelines suggest that member bodies may wish to recognise the qualification of members who have achieved specialist status in a recognised domain of IT activity by granting them specialist designations or some other appropriate recognition.

The ACCA Curriculum
Information Technology is a significant force in contemporary organisations and society. It has changed the way organisations work and interact with their customers. These changes will continue. For example, the next ten years are likely to see significant technology-led changes in how education and training is delivered and assessed. Technology has affected established professions, eroding some of their traditional roles and activity, but at the same time providing new opportunities and challenges.

The accountancy profession is no exception. Traditional areas of income generation have either been lost or are under threat. However, new opportunities are emerging (for example, technology consultancy, software package selection and business analysis) while new challenges continue to arise (for example, continuous auditing systems, and real-time financial reporting). It is one of the tasks of the accounting curriculum to anticipate and reflect such changes.

ACCA’s examinations currently implement the recommendations of the IFAC Guidelines. Competencies in the user role are provided in Paper B3, Information Technology Processes in the Accounting Technician scheme. Paper 2.1, Information Systems of the Professional scheme recognises the roles of the manager, designer and evaluator and these are sign-posted in the study guide. The strategic element of information systems is the focus of the new optional Paper 3.4, Business Information Management.

ACCA recognises that the role of the accountant and auditor are increasingly reliant upon and influenced by developments in the IS environment. Today’s professional accountant as user, manager, designer and evaluator needs to have expertise in computing and information systems in order to effectively carry out their roles.

Accountants must continue to be appropriately educated and trained for the modern environment. To this end the professional accounting curriculum must continue to focus on IT and computing as an integral aspect of accounting education in the 21st century.

Reference
Information Technology for Professional Accountants – Exposure Draft IEG-11, September 2001

Steve Skidmore is Examiner for Paper 2.1