Question: Critically Evaluate the Use of AIS As Compared to MIS in Organisations and Its

Question: Critically evaluate the use of AIS as compared to MIS in organisations and its users.[30}

Answer:

A system as according to James Hall (1999) is defined as a set of interrelated components that interact to achieve a goal or to serve a common purpose.

An information system is then a set of formal procedures by which data is collected, processed into information and distributed to the users. According to Gelinas(1999), a system can only be if it contains more than one part with each part functioning independently of the others though all parts serve a common objective as shown below.

Input process output

The input represents the economic events that take place in business for example the gathering of elements of financial statements by the accountants like assets and liabilities, the processing stage represents the recording, journalising and posting information, then the output represents the reports that come out for example the statements of financial position. An information system comprises of two broad systems which are accounting information systems (AIS) and management accounting information systems (MIS).

Accounting information systems (AIS)

An AIS is a system that collects, records, stores and produces information for decision makers as according to Vaassen(1999). The resulting statistical reports can be used internally by the management of the business or externally by other interested parties including, creditors and tax authorities. AIS combines traditional and accounting practisessuch as (Generally accepted accounting principles) GAAP with modern information technology resources.

Users of AIS:

Users of AIS are many and they use it for various reasons. Some need the information for internal use and others for external use. Suppliers and creditors mainly need to know about a company’s financial position. They need to know whether a company is liquid and solvent enough to meet its obligations when they are due.

Management need the AIS to get enough information for making economic decisions. Shareholders are also concerned as they need surety that the company in which they have entrusted their wealth is reliable. The government needs this information as well for security reasons and tax purposes.

An AIS comprises of six elements elements below as stated by Hurt(2008):

People

These are the system users, who make use of the information processed by the system and use it to make certain decisions for example accountants and auditors may then find out about liquidity and solvency of the business after obtaining the reports, hence this will help the management on decision making.

Procedures and instructions

They are the particular sequences or steps performed within one or more of the AIS functions. They include methods of retrieving and processing data for example the transaction processing system.

Database

This is the structured collection of business practises which will be stored partly in a computer system and partly in storage devices such as files, cabinets and desk drawers and allows the users to retrieve data from the databases for example oracle and M S access.

Software

These are the computer programmes and software used to process data so as to come out with the required information for example omni and pastel which is used by most organisations in Zimbabwe like Ernest and Young company.

Information technology infrastructure

These are the hardware used to operate the system meaning the equipment that make up the physical components of a system. These allow data to be entered, retrieved and stored.

Internal control

These are the security measures to protect sensitive data for example the use of passwords to check on the people that have accessed the system, the information they wanted and as well the time they did so and this will be to most organisations by use of the database security as it protects data from corruption and theft.

A well designed AIS successfully performs the following duties;

It captures data on the elements of financial statements, that is it has to document changes in assets, liabilities, equity and other transactions using either the debit or credit or the negative(-) or positive(+), this will be on the processing stage of the system.

It also transmits the data into relevant and reliable information and does this in a reasonable time, it outputs information that is beyond the financial statements, as according to Vaassen(2004), for example transaction histories and customer characteristics.

It as well recognises and adapts to the cost benefit constraint. AIS is all about choices and trade-offs as stated by Gelinas (1999), what should l capture?, what information technologies should l use?, therefore indoing all this, information is obtained and the benefit of having this information must outweigh the costs.

However no AIS is completely successful or totally unsuccessful as stated by James Hall(2005), it can also be successful if it achieves most of the goals set out for it.

Usefulness of AIS:

AIS automates and streamlines reporting as from Steinbart(2005). Reporting is of paramount importance in business, with no consideration of how much data is to be captured, reports have to be produced by accountants at the end of the financial year, however the AIS pulls data from the centralised database, processes it and ultimately produces information that can be easily consumed and understood by majority if not all of the users which include customers and managers.

AIS eliminates one of the major problems in business which is” human error” as according to Hurt(2008)for example the errors of double entry or omission by accountants are eliminated through the use of AIS, it is to a greater extend efficient compared to humans. Most of the information it delivers is in a manner desired by the business.

As noted by O’brien(1999) AIS ensures control in business in the different accounting functions, with the use of AIS, management gains control as most of the operations will be computerised and these computers are bound to doing only what they have been instructed to do without complaining or giving excuses of not performing some tasks like humans do.

Shortcomings of using AIS:

In the case that a natural disaster occurs for example floodsand earthquakes or even some disasters which are not natural such as fire caused by an electrical fault, an AIS can completely be destroyed and this leads to nothing except of the fall of the business since it will be left with nowhere toget any decisions to move on as stated by Laudon(1998).

An AIS can prove to be of less importance in places where high power shortages are experienced, a system needs power to carry out its functions in a desired manner hence if this is not provided then an AIS may fail to efficiently perform its functions which are to provide necessary information at low cost and in a reasonable time.

AIS also can be disadvantageous because it requires highly qualified personnelsince a small human error in inputing data, for example error of omission by an accountant can cause a major problem in the output meaning the whole process will have to be started again. It therefore means also that close supervision has to be done to avoid errors, which is very expensive and time consuming for the business.

Management accounting information systems:

Management information systems (MIS) are interactive human or machine systems that support decision making for users within the organisation as from Gelinas(1999). AIS alone as according to Eddy Vaassen(2004) did not seem sufficient for organisations to carry on business and to make important decisions as it focuses on financial transactions only or that it lacks a sound theoretical foundation, as a result MIS emerged as a way of catering for non financial transactions. The MIS is required in business as it provides management with the necessary information to monitor the actual performance of the business, its past, present and to predict the future. The system is not only a computer system but also contains other components which are:

People

These are the groups and individuals within the organisation but mainly the management who make use of the system for example the management can make some forecasts basing on the information produced by the system.

Data

This is the information pertaining to the organisation that is necessary for decision making and of importance to management’s planning and forecasting.

Technology

These are all the devices that allow MIS to operate and to perform all its functions for example the computers are used for a number of functions like input of data and storing the data.

Usefulness of MIS:

MIS ensures a good SWOT analysis for the business according to Eddy Vasseen(2004) since it considers both financial and non-financial practises . A business is bound to having quality decisions because it obtains from its information the real strengths, weaknesses, opportunities and threats and hence the decisions made from the real information are more reliable in terms of status of the business, whether it is still able to perform operations or not.

MIS gives rise to a good communication base and better planning in the business. In a business, MIS operates with the use of bottom up and top down information flowwhen gathering data to input in the system thus the lower level employees have more to communicate with the upper level managementas they share ideas hence planning comes up through making use of a variety of ideas as well as the decision support system (DSS), and quality decisions are made.

MIS also reduces the problem of human error, this is possible as there will be no use of human judgements and interpretations which are mostly biased. An example can be when there is a decline in the sales levels in business, one can simply blame the sales representatives but after use of MIS it can be discovered that the problem maybe a change in the seasons or consumer tastes and preferences.

Shortcomings of using MIS:

The use of MIS by companies may be disadvantageous to the general public as it leads to unemployment. MIS as a system completes the jobs which are to be done by a multitude of people on its on for example the processing stage requires a large number of manpower in a case of absentism of a MIS.This therefore promotes unemployment.

Another shortcoming of using MIS is that MIS like AIS can be affected by natural disasters for example floods and earthquakes. If such a problem arises then the whole business will be in danger as all its decisions and forecasts will be damaged. This automatically leads to a fall of the business.

MIS has another disadvantage that it only focuses on provision of information for internal use only. In a case that a business mainly considers the use of MIS then it means that other parties who are interested in the business runnings for example potential investors and customers may fail to get the information they want.

Similarities of AIS and MIS:

AIS and MIS are similar in that they both provide information for internal users. AIS produces financial statements for example the statement of financial position and MIS produces internal reports for example budgets which are used internally by management in decision making.

Another similarity between AIS and MIS is that they both make use of computer and human resources and this is according to Lauden(1998). Both AIS and MIS make use of data gathered by humans and fed into the computers as input, these computers then process the data for example assets, equity and liabilities with the help from software packages like pastel and then produce the statement of financial position as output.

Differences between AIS and MIS:

AIS and MIS are different in that AIS is historical whereas MIS is primarily forward looking. AIS respects some accounting practises like (GAAP) generally accepted accounting principles and (IAAS) International accounting standards which were formed long back unlike MIS which makes use of current information and makes forecasts and predictions there from.

Another difference between AIS and MIS is that AIS focuses mainly on financial transactions whereas MIS focuses mainly on non-financial transactions and some of the financial transaction as according to O’brien(1999).MIS considers some theoretical factors from the human resource like remuneration and customer complaints which are not even considered by AIS,that is AIS lacks a sound theoretical foundation as compared to MIS.

AIS and MIS, as according to Hall(2008) also differ in that AIS produces information for both internal and external use whereas MIS produces information for internal use only. The information from AIS for example the statement of financial position is used both internally by management and externally by other people who have interest in the business like potential investors and customers who may need to know a business ‘ financial position while information from MIS like budgets are used by management only for decision making.

Conclusion:

Conclusively, it can be deduced that MIS and AIS complement each other. For information from AIS to be relevant it requires some significant support from MIS, which is the same for AIS which requires support from MIS for it to be effective and efficient, hence both the systems are useful.

References

Accounting information systems, 3rd Edition, Eddy Vaassen(2004)

United Kingdom.

Basic concepts and current issues, R .L Hurt(2008), McGrall Hill International

London.

Accounting Information Systems, James.A Hall (2008),6th Edition

United States of America.

Management information systems,O’brien .J(1999)3rd Edition

McGraw Hill London.

Information systems and the internet, Laudon K.C(1998) 3rd Edition.

Brace college New York