Impact of Enterprise Resource Planning On Accounting Process Essay

Based on past researches Enterprise resource planning ( ERP ) systems defined as an integrate concern procedures and information engineerings into a synchronised suite of processs, applications and prosodies. ERPs are expected to heighten all of the corporate public presentation due to redesigned or reconstruct concern procedures, integrated concern maps, accelerated coverage rhythms and expanded information capablenesss ( O’Leary 2000 ) .

On other manus Enterprise Resource Planning ( ERP ) system is concern or fiscal direction package, which used to pull off and incorporate concern maps in the organisation. Therefore it ‘s consists of, finance, Human Resource, gross revenues, material direction, control and production planning. An illustration for those who provides these solutions is SAP in Germany and Oracle. But many organisations now are restricted their operation to companies who have the same ERP.

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Many organisational effects of ERP systems have been widely addressed in the popular literature. However, there is a littlie of empirical research analyzing the impact of ERP system on house public presentation. Recently, calls for empirical researches into the effects of ERP system on house value have viewed in the literature ( Lee, 2000 ) .

In the yesteryear, an increasing figure of houses that ‘s impacted by information engineering as a signifier of computerized dealing processing and electronic telecommunications. For competitory grounds, companies have to alter the line and so computerized system that ‘s called enterprise resource be aftering systems ( ERPs ) .

An ERP system has a combined database that integrated together by links all systems in all sections of the company as a whole consist for illustration capital budgeting together with fiscal accounting, etc. ERP systems, by associating all sub-systems through a information warehouse, enable a company to pull off its operations overall.

Why houses motivated to alter toward ERPs

We can state that the traditional accounting are changed since the information engineering become the chief driven in the word, This is apparent through a passage in accounting map from record, maintaining and external coverage to that provides seasonably and relevant information in term to accomplishing strategic ends. These developments have prompted the accounting organic structures, academic and professional to name for a alteration in the course of study and proficient instruction in the field of accounting. Harmonizing to the IMA ( 1999, 3 ) , pupils should see comptrollers as concern spouses instead than merely “ scorers, ” and encourages “ accounting pedagogues to develop alterations in the accounting course of study ” that reflect the two most critical work activities for direction comptrollers today: strategic planning and procedure betterment, “ neither of which is by and large taught in the accounting course of study ” ( IMA 1999, 6-7 ) . Similarly, the AICPA ‘s Core Competency Framework expects accounting professionals in the twenty-first century to possess a “ wide concern position ” in add-on to proficient competences, and to map as valued concern advisers ( AICPA, 2000, 1 ) .

Association between comptroller and ERPs

Past literature found grounds that traditional function of accounting in the organisation are decreased.the movable from accountant to non-accountant such as IS or IT people become easy through implement ERPs, and really the monopoly of accounting cognition is break down since information system sharing and lending information through the organisation as a whole. In this sense, the traditional position of accounting as the nucleus of an organisation ‘s information system is being challenged and the boundaries of accounting questioned. The fact that the function of comptrollers to supply information are besides seen to worsen by the recent retrenchments, both in absolute and per centum footings, of accounting sections of several companies that have implemented ERP system.

On the other manus, many groundss indicate that by utilizing these new information engineerings systems the comptroller and besides professional have a clear developed for themselves. Actually the modus operandis of accounting occupation are changed while ERPs perform many undertakings that were caused the bad feeling, hence and as a effect many houses focus and looking for comptroller who can utilize their clip and experience in information engineering enterprises, concern direction, and strategic decision-making.

In general, from the broad truth of ERPs we can asseverate that accounting occupation has witnessing the phenomenon of hybridisation between IS people and accountant, whose way is double sided.

The decision, by ERPs many of accounting pattern are moved to be more effectual and efficient and altering the accounting construct for the narrow position to the big position, further enable comptroller to acquire more cognition in IT country by affecting them in planing these package ‘s to outdo understanding all of accounting procedure every bit will as organisation operations.

ERP System and Accounting Procedures

The increasing alterations in the organisation procedure and concern procedure and the needed for solutions to maintain these alterations are besides increasing, because without this version houses will neglect in survive and win in the environment as a whole ( Nicolaou, 1999 ) , one of these solutions offers by IT that ‘s become a necessary tool to expeditiously and effectual response to these alterations.

Enterprise Resource Planning as a portion of information engineerings is an illustration which aims to portion common informations across the organisation and automate concern procedure put the most of import is to supply or bring forth existent clip informations, every bit will as enhance determination doing procedure, planning and controlling of operations are more distinguishable advantages to companies following these solutions ( Duff and Jain, 1998 ; Gupta, 2000 ) .

ERP System Implementations

ERP execution is really different from any execution of traditional information system for several grounds:

The incorporate nature of ERP applications causes dramatic alterations on work flow, organisational construction and on the manner people do their occupations.

ERP systems are non built but adopted ; this involves a mix of concern procedure reengineering and bundle customization.

Execution of ERP system is non merely a proficient procedure but it is a societal and proficient challenge as it poses a new set of administrative processs.

While the houses be aftering to implement an ERP system, this determination represents a great trade of investing from the company ‘s resources. ERP systems, sold by sellers such as SAP and Oracle Corporation, typically cost $ 15 million and executions take, on norm, 21 months to finish ( O’Leary 2000 ) . The execution costs rise to upwards of $ 100 million for big international corporations ( Davenport 1998 ) . In add-on, significant one-year costs are incurred to keep and sporadically update the system.

Over the past decennary, corporations have experienced both successful and unsuccessful ERP executions and the benefits, complexnesss, and hazards of ERP systems have been documented in the popular imperativeness ( e.g. , Bartholomew 1997 ) . Recently, the bulk of ERP systems imperativeness coverage has been devoted to Oracle ‘s acquisition of rival PeopleSoft Inc. and its conflict with industry leader SAP AG for market portion ( e.g. , Bank and Clark 2004 ; Bank and Boslet 2005 ) .

The Benefits of Enterprise Resource Systems in general

Replacing complex interfaces between different systems with standardised cross-functional dealing mechanization, ERP systems use a beginning of informations that integrates enterprise maps such as gross revenues and distribution, stuffs direction, production planning, fiscal accounting, cost control and human resource direction. An ERP system is expected to cut down order rhythm times, which in return might take to improved throughput, client response times and bringing velocities. Due to automatize fiscal minutess, cash-to-cash rhythm times and the clip needed to accommodate fiscal informations at the terminal of a one-fourth or twelvemonth can be minimized. The ERP system collects all endeavor informations one time during the initial dealing, shops the informations centrally and performs updates in existent clip. The standardised firm-wide minutess and centrally stored endeavor informations will besides greatly facilitate the administration of the house

Equally good as the possible advantages of ERP systems ( e.g. , helping concern procedure reengineering, cut downing complications with Sarbanes-Oxley Act conformity ) have made them the system of pick among many corporations ( O’Leary 2000 ; Bradford and Roberts 2001 ; Winters 2004 ) . By 1999, 70 % of Fortune 1000 houses had either adopted or were in the procedure of implementing ERP systems ( Cerullo and Cerullo 2000 ) . Anterior accounting research confirms these positive outlooks as ERP acceptance proclamations have engendered positive market responses and ERP executions have led to improved operational public presentation ( e.g. , Hayes et Al. 2001 ; Hunton et al. 2003 ) .

ERP system and Accounting Information

ERP systems are expected to roll up and circulate timely information to directors and therefore better their ability to procedure and analyse accounting information ( Davenport 1998 ; Hitt et Al. 2002 ) . ERP systems are besides implemented to supply direction with a incorporate endeavor position of the house ‘s fiscal status at all times ( Dillon 1999 ) . In add-on, these integrated systems eliminate barriers between house maps, leting directors unprecedented entree to accounting information ( O’Leary 2000 ) .

The combination of increased director entree to/discretion over accounting information and an unequal system of cheques and balances could take to heighten chances to pull off fiscal statements in ways that meet directors ‘ aims ( e.g. , all in net incomes outlooks ) , but do non reflect the true fiscal status of the house. Therefore, the representational fidelity and, in bend, the dependability of accounting information may be impaired following ERP system executions.

The standardised, automated, and integrated ERP system environment is besides expected to expeditiously treat minutess and cut down the length of the fiscal coverage rhythm, therefore leting houses to rapidly circulate accounting information to external users ( e.g. , O’Leary 2000 ; Hitt et Al. 2002 ; Jacobs and Bendoly 2003 ) .

Some anecdotal grounds suggests that ERP system acceptance can positively impact the seasonableness or relevance of fiscal accounting information thru diminishing the fiscal close rhythm ( e.g. , Brown 1997 ; Jensen and Johnson1999 ; Wah 2000 ) .

Dependability of Accounting Information

Reliability is an indispensable feature for accounting information to be utile for determination devising. Dependability represents the extent to which the information is indifferent, free from mistake and representational faithful ( FASB 1980 ) . Despite the cardinal function of dependability, it is a complex and elusive concept of accounting information. Dependability is hard to stipulate exactly in accounting criterions and pattern, and it is hard to analyze straight with research. Greater apprehension of the empirical literature on accounting information dependability should help standard compositors and regulators in set uping fiscal coverage criterions, preparers and hearers in implementing criterions, and fiscal statement users in measuring accounting information dependability ( hypertext transfer protocol: // ) .

An empirical inquiry that remains is whether the improved accounting information provided by ERP systems allows directors greater discretion in describing fiscal information to external users. Fiscal statements can be viewed as a joint attempt of both direction and the hearer ( Antle and Nalebuff 1991 ) . If ERP system executions allow directors greater entree and control over fiscal accounting informations ( Dillon 1999 ) , the chance for in-between direction to pull off fiscal statements to run into top degree direction ‘s aims ( e.g. , crushing analysts ‘ prognosiss of net incomes ) is increased. Increased chances taking to fiscal statement direction is consistent with the literature analyzing the fraud trigon and AS no. 99 ( e.g. , AICPA 2002 ; Wilks and Zimbelman 2004 ) . In add-on, the built-in information clip lags nowadays in bequest systems frequently needed direction to pull off external accounting information through more crystalline year-end accommodations. In contrast, the changeless watercourse of accounting information and enterprise-wide position provided by ERP systems may supply direction with the chance to pull off fiscal accounting information intermittently throughout the twelvemonth.

Relevance of Accounting Information

The other main benefit of ERP system executions cited by Poston and Grabski ( 2001 ) is improved efficiencies through cybernation. From the position of fiscal accounting information ; this indicates a decrease in the fiscal coverage rhythm for ERP system adoptive parents. A decrease in the length of the coverage rhythm should let adoptive parents to supply fiscal statements to external users in a more timely manner and, in bend, increase their relevance. Prior research has provided empirical grounds to propose that other possible ERP system benefits ( e.g. , reduced costs ) are realized by houses following the system ( e.g. , Hitt et Al. 2002 ) .and some Surveies analyzing the seasonableness of net incomes indicate that houses publish fiscal studies earlier when they have “ good intelligence. ”

The branchings of these surveies are that houses appear to strategically find the seasonableness of their fiscal accounting information and those houses supplying “ good intelligence ” to external users has inducements to shorten the clip slowdown between their financial twelvemonth terminal and coverage day of the month.

Research Purposes

The intent of this research is to supply grounds via a questionnaire on the impact of ERP systems for companies following them with peculiar accent on there accounting procedures as portion of concern procedures and whether ERP system has impact on the utility of accounting information.

Research Aims

This research aims to supply reply ‘s to the undermentioned inquiries:

What is the impact of ERP systems on accounting procedures?

What changes has the acceptance of ERP systems brought in the accounting pattern?

How has the application of ERP systems influenced accounting procedures?

Why companies implementing an ERP system?

Is there any relationship between implemented ERP system and Accounting information? And what is this relation?

Research Problem

The survey job can be identified by analyzing the impact of ERP system when implemented or expected to implement on the accounting procedures and the utility of accounting information as a method to better the public presentation.

Research Hypothesis

Information system capable of bring forthing tremendous benefits for organisations

To prove this hypothesis I will seek cod information about the effectivity and efficiency, strategic determination devising and concern procedures

ERP system become a necessary tool for companies to stay competitory

This hypothesis will be test by reply this inquiry.

How can ERP systems be managed to go beginning of sustainable competitory advantage?

ERP system executions lessening ( addition ) the dependability ( relevance ) of accounting information.

Importance of the research

The importance of this research comes from its aims of analyzing the consequence of ERP system as a method to minimise to be comparing with its benefits and to acquire a competitory advantages by utilizing this system.

On other manus, analyze the relationship between information system and the accounting will give us a clear position for the consequence of IS on accounting patterns.

Research methodological analysis

The preliminary research interviews with directors, comptrollers and every bit good as with some concluding ERP users in companies following ERP systems is expected to conducted.and a inquirer study will be introduced as the instrument for informations aggregation.

Research Sample

This survey will implemented at houses that use the ERP systems with consider the banking sector as a portion of these houses. Equally will as take advantages of academic instructors on the universities.

Research Restrictions

The chief restriction of this survey is the sample itself, in which lead to miss in generalizability of the consequences.and The higher cost associated with execution the ERP system will diminish the companies that use these systems.

Literature reappraisal

C Spathis, S Constantinides on there surveies examines via an explorative study of 26 companies, the implicit in grounds why companies choose to change over from conventional information systems ( IS ) to ERP systems and found that ( ERP ) systems offer many advantages in this new concern environment as they cut down rhythm times, lower operating and increase client satisfaction.

Ariela Caglio examines how the acceptance of a new Enterprise Resource Planning ( ERP ) system challenges the definition of the expertness and functions of comptrollers within organisations. he propose to gestate the possible alteration in comptrollers ‘ expertness as a structuration procedure and ERP systems as modes of structuration supplying new interpretative strategies, norms and co-ordination and control installations.

Joseph F. Brazel and Li Dang examine whether ERP system executions have impacted the determination utility of accounting information. They found that ERP acceptances lead to a tradeoff between increased information relevance and reduced information dependability for external users of fiscal statements. After implementing the system, houses concurrently see both a lessening in describing slowdown and an addition in the degree of discretional accumulations.

Scorta Iuliana when analyzing the Critical Success histrions in Rumanian SME ‘s ERP execution said “ Because there is grounds that the overpowering bulk of ERP executions exceed their budget and their clip allotments, research workers have begun to analyse ERP execution in instance surveies in order to supply an execution model that maximizes efficiencies and cognition on how to pull off bad undertakings like ERP executions ” .

Gary Spraakman Found from the respondents that ERP systems are leting capital budgeting, budgeting, runing statements, prediction, public presentation measuring, and bing to be more elaborate, more accurate, and rapidly reported. And said “ it is inferred that the acceptance of ERP systems is at an early phase and that there are other unidentified factors lending to direction accounting alterations ” .

Cook et Al. ‘s survey suggests that ERP systems can increase the effectivity of capital budgeting by grounding fiscal Numberss to activities instead than halting at pecuniary steps with pre-ERP patterns. There statements were converting, but they could non be verified.

James E. Hunton and others investigates the extent to which investors believe that endeavor resource planning ( ERP ) systems enhance steadfast value by analyzing alterations in fiscal analysts ‘ net incomes anticipations before and after they receive an proclamation that a house plans to implement an ERP system. And the consequences of there current survey indicate that a cardinal group of information consumers, fiscal analysts, reacted positively to the proclamation of ERP execution programs.

Hayes, D. C. , and others founds that the market reacted favourably to ERP proclamations, as cumulative unnatural returns environing the proclamation day of the month were significantly positive. Additionally, they hypothesized that market reactions to little healthy and big unhealthy houses would be more positive than the reaction to little unhealthy houses.


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