Business Accounting Manual Business Transactions

Question: Describe about the Business Accounting for Manual Business Transactions. Answer: Introduction There was a time when the all the transactions of the business used to be kept manually. However, huge transformation of technology has taken place in last 30 years and now-a-days, twenty-first century is known as the era of technology. In this era, there is several software which helps to keel all the transactions of a business in a computerized way so that they can be preserved and can be used for further references. Among these various systems, Enterprise Resource Planning, commonly known as ERP, is one of the best systems in the world. The main function of ERP is to keep records of all the accounting transactions as well as other business transaction of an organization (Leon 2014). In todays world, the business operations of a company have become vast with the progress of technology. Companies now-a-days want one centralized system which will record and produce all the activities related to the business. This demand has increased the adoption of ERP system by most of the companies (ERP 2014). There are some industries which use the ERP system a lot. This vast use of ERP has give birth of accounting fraudulent (Brown et al. 2015). This reason has contributed to the development of Sarbanes-Oxley Act of 2002 or SOX which protect the investors from this type of accounting fraudulent. The main objective of this report is to identify the reasons for the high use of ERP system. On the other hand, another objective of this study is to explain the reasons and implications of SOX. Sarbanes-Oxley Act Discussion Sarbanes-Oxley Act, commonly known as SOX, is an act for the purpose of corporate governance in the businesses. This act was introduced in the year of 2002 (Hostak et al. 2013). This Act is also known as Corporate and Auditing Accountability and Responsibility Act. The main purpose of this act is to change the mode of financial practices and corporate governance which has caused much fraudulence in various businesses (Li 2014). There are eleven sections in the act which was developed as a reaction of the many corporate and accounting fraudulent like the Enron scandal, the Worldcom scandal and many others (Roy 2015). The bill contains many responsibilities of the board of directors of the public corporations and also contains a list of penalties for various illegal business practices. As per this act, the Security and Exchange commission needs to develop regulations to make sure that the public corporations are complying with this law. The main reason of the enactment of SOX is the increasing number of fraudulent cases in the public sector corporations. The major examples of corporate accounting scandals are the Enron Case, the Tyco International case, the Adelphia case, the Peregrine System case and the Worldcom case (Wisner and Brown 2015). This accounting and corporate governance scandals cost millions of dollars to the investors and stakeholders of these companies. The stock price of these affected companies collapsed as a result of the fraudulent by the board of directors and the auditors of these companies. This total process shook the security markets of the United States. The major eleven elements of SOX are discussed below: The first title is Public Company Accounting Oversight Board. There are nine sections in this title which provides independent rule regarding the audit of public corporations. This section also provides process and procedures to compliance with the audit rules (Li et al. 2015). The second part is about the independence of the external auditors that means to limit the conflict of interests. The third part is about corporate responsibility that refers to the individual responsibility of the executives towards the financial reports. The fourth part states that the financial reports of the companies must include the details of all the financial transaction of the companies. The fifth and sixth part says how to gain the investors confidence. As per the seventh part, the financial reports should be examined by the respective authority for various findings. The eights section provides various guidelines for the corporate and criminal fraud in the public corporations. The ninth section gives rules and regulations to encounter the white collar criminal activities. All the details about the corporate tax returns are given in the tenth part. The last section includes all the penalties of the corporate fraud (Litvak 2014). Implications The SOX rules and regulations have developed to eradicate various fraudulent and criminal activities in various operations of the public sector corporations. On the other hand, the main function of SAP ERP is to record all the transactions of the business so that the internal and external stakeholders can get all the relevant business information (Monk and Wagner 2012). Thus, it can be clearly observed that there is a bog role of SAP ERP in the success of a business. The huge function of SAP ERP in an organization increases the risk of fraudulent and criminal activities in the organization. Hence, the following modifications have been done as per the SOX Act to prevent the fraudulent. As per the act, there will be new function in the SAP that will help to control business assessment in the organization. The condition is that only the internal staffs with higher SAP knowledge can access this system. This modification has been done as per the United States Public Company Accounting Oversight Boards Auditing Standard No. 5. This is a risk based top down approach (Shin, Lee and Park 2013). Another modification is that the SAP ERP will share reduction of cost related immediate results with the external auditors of the companies. This process will help in conducting the IT Audit earlier. The conduction of earlier IT Audits will help to reduce the organizational fraudulent and criminal activities. According to the SOZ Act, the internal auditors need to be trained about the SAP ERP at the time of the implementation of the SAP system in the organization. This process will make the internal auditors to become a SAP ERP expert. Thus, the SAP ERP operations will be audited by both the external and internal auditors. This process will add an extra benefit to the stakeholders of the companies. The modified SAP ERP will have the security control of ITGCs. That means the ITGC security issues can be controlled through the modified SAP system. This process will help in reducing the security related criminal activities of the organizations. These are the major modifications done in the SAP ERP system as per the SOX act. Success and Failure of SAP ERP SAP ERP is one of the best accounting information software in todays world. There are a lot of reasons behind the popularity of SAP ERP software. A large number of companies around the globe starting from small size to big size are implementing SAP ERP system for the smooth running of their business. Now-a-days, the operation of SAP ERP is not only bound in the accounting areas, but also it has operations in all areas of the business. This is one of the general reasons why companies are adopting the SAP ERP technology for their business (Bernroider and Mitlohner 2015). On the other hand, there are companies that have failed to implement the SAP ERP system in their business operations. The name of a company that has successfully implemented the SAP ERP system is GrainCorp Limited. GrainCorp Limited is an Australian company listed in Australia Securities Exchange. This company receives and store grains and other related commodities and provide logistics solution to market these products. The SAP ERP system in GrainCorp has been implemented by UXC Oxygen. The implementation of SAP ERP has given the company the chance to grow worldwide. The company was facing some major problems like to develop technology to expand offshore, integration of the contract management and financial operations and many others. After the successful implementation of SAP ERP system, the company got rid of these challenges. UXC Solution has designed the SAP ERP system as per the requirement of the company. This aspect indicates that the SAP ERP system is flexible and it has the scope for customization. On the other hand, the installation of SAP ERP system does not include a large cost. The com panies can only ad those systems that are required for their business operations. GrainCorp has been benefitted in several ways after the implementation of the SAP ERP. The business process has been improved due to the removal of inefficient double handling. The system has given Graincorp better visibility of the various business operations of the company (Fallon and Polovina 2013). The financial management has become more efficient due to the implementation of SAP ERP. The streamline reporting has made the financial process easy. On the other hand, daily, weekly and monthly processing has been decreased. The most important aspect is the single source of information (Lee, Chen and Yang 2015). This process makes the decision making process easier. There are various diagrams that show the reason for the popularity of SAP ERP. Though there are success stories of SAP ERP implementation, there are also some shocking incidents where the renowned companies failed to successfully implement the SAP ERP system. As a result, the companies had to face millions of dollars (Zeng and Skibniewski 2013). One of such incident is the case of New York Citys City Time Project. The main reason of this fallback is cost overrun and other criminal activities regarding the SAP ERP system. The budget for the total operation was $ 63 million. However, at the end of the project, the cost incurred was $ 760 million which was more than ten times of the estimated budget. The original costs were more than the estimated costs because of the fraudulent. Some of the top level employees of the company were involved in the criminal activity regarding the project. The responsible employees were charged. Thus, it can be observed that the internal reasons are responsible for the SAP ERP failure of this project (Maier, Laumer and Weinert 2015). Conclusion and Recommendation From the above discussion it can be observed that there is a lot of importance of ERP systems in todays diversifying business world. There was a time when ERP systems were only used for the purpose of maintaining the accounting information of the business. However, the scenario has been totally changed today. Now-a-days, ERP systems are used for various purposes of the business that is managing accounting and other information; control the business operation; keeping the records of all business transactions like sales, purchase and others; maintaining the logistics of the business and many others. These are the reasons why businesses all over the world are choosing ERP systems for their businesses. However, it can be seen that there are many fraudulent and criminal activities are taking place in businesses regarding the accounting activities and many various activities of the business. To protect the business from all these fraudulent and criminal activities, Sarbanes-Oxley Act, commonly known as SOX, was introduced in the year of 2002 by the United States Government. The SOX Act is consists of eleven parts and each part consists of many sections. This law provides all the guidelines, rules and regulations to prevent organizational fraudulent and criminal activities regarding the accounting and auditing factors of an organization. As per the guidelines of this law, the SAP ERP system had to be modified to comply with the rules and regulation of this act. It has been seen that there are many companies all over the world have been successful to implement the SAP ERP system. The many features of SAP ERP help to do that for the companies. There are instances of companies that failed to implement SAP ERP for internal problems and fraudulent among the organizational people. Some recommendations are given below based on the whole report: It is recommended that all the ERP system including SAP ERP must comply with the Sarbanes-Oxley Act in order to run the various business operations smoothly. Thus, it is suggested that the ERP systems must be integrated in accordance with the Sarbanes-Oxley Act. It is recommended that the companies need to determine the budget of the SAP ERP implementation project in an effective way. In case of cost overrun, the company can face a huge amount of loss due to this reason. It is recommended that the companies that have successfully implemented the SAP ERP system need to employ SAP ERP for more operations. This will reduce the dependency on manual system and this process will lead to the minimization of human errors. These are the recommendations and suggestions for this purpose. Thus, it can be concluded that ERP system is becoming an integrated part of business for the purpose of organizational success. References Bernroider, E.W. and Mitlohner, J., 2015. Characteristics of the multiple attribute decision making methodology in enterprise resource planning software decisions.Communications of the IIMA,5(1), p.6. 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