It is becoming increasingly apparent that contemporary business environment presupposes involvement of multiple aspects. Hence, accounting has become a strongly beneficial and compulsory element of a successful business performance. Taking this point into account, the growth of computer technologies in this area has accordingly increased. One of the organizations that successfully deployed information systems in auditing environment is American Eagle Energy Corporation. Thus, the following study is focused on its accounting information system and internal controls.
There is no doubt that contemporary business implies involvement of numerous perspectives, which makes this sphere extremely complicated. A modern legal doctrine requires publically trading companies to report about their financial performance on a regular basis in order to preserve fairness and transparency of business and its contribution to the national economy of the United States. For this reason, accounting has become much more than a bureaucratic aspect of business since financial statements are not only a reflection of legal compliance but also a powerful tool for gaining competitive advantages via forecasting and alignment of business orientation. At the same time, recent developments in the sphere of information technologies enable organizations to establish a flexible and reliable internal control. In such a way, American Eagle Energy Corporation follows this trend and demonstrates successful auditing and accountability of filed financial statements. In regard to that, accounting information system of American Eagle Energy Corporation presents a perfect example of accountability and intelligence in the auditing process of publically traded enterprises.
Specifically, the following study focuses on a discussion and description of internal control and accounting information system of American Eagle Energy Corporation. The paper gives an account of Integrated Framework and managerial perspective of integrated accounting system. The study reveals the relations between responsibilities of managers and functions of information technologies. Along with that, the following paper discusses basic principles of functioning of integrated accounting system within the corporation. They include primary data flows, accounting cycle and some distinct implications on these procedures in the integrated model. Additionally, the study estimates applicability of such technologies as REA and ERP since they are quite widespread among organizations equal to American Eagle Energy Corporation. As the thesis statement, structure, and key terms of the study have been outlined, it is necessary to proceed to the next section.
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In relation to Integrated Framework of the corporation, its basic components need to be outlined. First of all, it is pertaining and maintenance of reliable accounting data that accurately and fairly reflects the transactions and other activities of the company’s assets. The second component is a reasonable assurance of transactions and permission for preparation of financial statements in accordance with the existing standards and policies (Unites States Security and Exchange Commission, 2014). The third element of Integrated Framework is particularly focused on prevention of unauthorized acquisition that may affect the material side of the financial statement of the enterprise. The main objective of the framework is provision of a justified quality assurance and accountability of required financial reports that comply with the current legal requirements and federal standards of audit (Unites States Security and Exchange Commission, 2014). In generall, Integrated Framework succeeded to evaluate financial performance of the firm and validate the reliability of auditing procedures. The evaluation was approved by Committee of Sponsoring Organizations of the Treadway Commission (Unites States Security and Exchange Commission, 2014). Thus, the company’s managers came to a conclusion that no flaws in internal control of finances were detected as well as none of material discrepancies. In reliance on the annual report of the company, effectiveness of Integrated Framework can be admitted. However, the report does not provide any information about technological perspective of auditing (Unites States Security and Exchange Commission, 2014). Nevertheless, this issue does not matter much in this case since a capacity of the internal control can be confirmed. Thus, a heavy reliance on human resource can be also observed which is why managerial perspective should be discussed.
It is becoming increasingly apparent that responsibility of managers in relation to maintenance of internal control and integrity with information system is direct. Managers provide an assessment of input data as well as validation of output results. This dimension of responsibility is accompanied with the management of tasks and personnel assigning to their completion. To the greatest extent, internal control still undergoes certain external influences which is why managers are responsible for a flexible contingency planning. It is hard to argue that information system is simply a technology of appropriate tracking auditing processes while managerial perspective is still addressed by human resource (Hall, 2015). With respect to that, managers create and regulate the existing Integrated Framework in physical as well as cyber environment. In regard to physical conditions of internal control, managers strive for meeting two objectives: strategic planning and legal compliance. Unexpectedly, strategic planning is a much harder task since it presupposes a heavy reliance on data and its passing to executive teams that formulate overall business orientation of the firm. In reference to responsibilities of managers in a cyberspace, direct integrative initiatives is the primary goal. Managers verify a preliminary accountability of input data and schedule data division to specific marts of the database (Hall, 2015). One may argue that it is a matter of IT department, but it does not work with the data itself which is why managers are expected to ensure an appropriate immersion of data into a cyberspace. However, the presence of Cloud technologies simplifies certain tasks and opens possibilities for interactive decision-making for managers.
In regard to implications on integration of auditing with computer technologies, it is appropriate to note that computer technologies of audit are expected to meet three objectives, which are the following. First of all, information system needs to encode the input data into one of programming languages for further distribution within a database (Hall, 2015). As a consequence, the second task presupposes memory allocation and distribution as various packages of data are divided to specially assigned data mart (Hall, 2015). The third objective is task management and multiprogramming as the information system plans and assigns specific tasks to selected operators of output data. As it has been already mentioned, these objectives are still governed by managers so that functionality of information system is limited to the extent of executive force. However, implementation of Cloud-based technologies provides better opportunities and flexibility for information system. Regardless the type of information system, each company is recommended to avoid an exposure of its IT system to the following threats. In such a way, even the most bureaucratic company does not have to limit access for its employees to information system. Limited access to data is often accompanied with human errors and dramatic difficulties in reliability of reported financial statements (Hall, 2015). For the same reason, data leaks are also harmful. Eventually, intrusion of malicious software within a corporate network is the most dangerous threat as it may corrupt or completely eliminate stored financial data.
In broad terms, a cycle of auditing is always accompanied with involvement of computer technologies except output and input entries. The general principle of accounting data flow in information system is the following (Appendix 1). The initial data is presented as output and is entered into the primary flow of data within the information system. Then, it is encoded into a specific programming language so that it can be recognized within the entire information system (Appendix 1). At this stage, the primary data flow stops as it precedes division of data to specially assigned marts. Classification of marts can include unlimited number of categories, but a common practice of the company witnesses the standard assigning of marts in accordance with departments and their primary functions (Hall, 2015). Consequently, already assigned data flows are directed to output operators. This stage is peculiar from the perspective of type of data processing. Since American Eagle Energy Corporation utilizes real-time data processing, no human-involved verification of data is present. Needless to say, this life-cycle may obtain different forms of structure for some specific purposes, but American Eagle Energy Corporation prefers not to amend its Integrated Framework. Changes of data within marts or reassignment of task to the other department is also possible, but such administrative properties are usually available for senior managers and information technology specialists. Again, restriction of accessibility is a relatively compulsory element in accounting cycling, but it needs to be present for obvious reasons of security.
For this reasons, testing of such elements of integrated system in accounting as password access and protection from malicious software should be accomplished on a regular basis. One may argue that integrated information systems need to undergo different kinds of testing, but it is becoming increasingly difficult to ignore the fact that the information system will be unable to operate in case it is devastated with external intrusion or malware (Gelinas, Dull, & Wheeler, 2015). In such a way, password testing should estimate a complexity and resistance to attempts of hacking the access. Additionally, limitation of attempts to enter a password should be always verified as long as it may help detect an attempt of unauthorized access to the database. Hence, password recovery can be also tested for cases of already detected intrusion or an average human error. By the same token, resistance to malware can be tested. Updating of firewalls and other security systems should be checked. In addition, anti-virus system capacity can be evaluated as standard corporate anti-virus software may not meet the requirements. However, the best way to address problems of security is establishment of offline reserve database, implementation of physical identity validation, and in-depth contingency planning for incident reaction and data recovery. These requirements are applicable to any information system, but integrated accounting systems require a peculiar attention as the corporation depends heavily on the collected data. Security should be associated with the basic factor of preserving reliability of data, which is the primary objective of the internal control.
American Eagle Energy Corporation
Analysis of primary data flows within American Eagle Energy Corporation has witnessed the fact that the enterprise utilizes extremely basic data for its primary inputs. For instance, such data as the growth of covered area of work, interest of work rates as well as sales of oil and gas volumes are included in the primary data flows (Unites States Security and Exchange Commission, 2014). The choice of basic data for primary flows can be explained by the need to indicate a distinct orientation of the company’s performance. In other words, these data is the clearest representation of the firm’s success which is why it is encoded for any aspect of accounting (Unites States Security and Exchange Commission, 2014). The data may seem to be excessively direct and straightforward for departments that work with specific areas of the enterprise performance, but this informational foundation aligns all departments with strategic orientation of the company. Furthermore, a high degree of integrity is abundantly clear since all transactions and business processes are compared to the primary flow of data. However, that implies a substantial amount of work for managers and IT operators, but according to marts, a distinct division of data excludes the possibility of confusion data packages. Supplementary data can be also included in the primary flow, but a common practice suggests that it is included in a related department after a manager’s decision. Thus, work of managers is considerably simplified from that perspective.
The relationship between managerial accounting and involvement of information technologies is extremely positive since this integrity delivers an effective level of intelligence for the entire company (Gelinas, Dull, & Wheeler, 2015). Computer technologies enable managers to focus on a specific document and data set in the whole complex of documents, reports, and files. This reduces the probability of a human error as well as time spent for search and identification of a required data set. More developed information technologies such as Cloud ERP or Business Intelligence are able to forecast financial data or even conduct a profound risk management for the enterprise (Gelinas, Dull, & Wheeler, 2015). More importantly, managers do not have to be concerned about standardization of reporting and legitimacy of filed financial statements. Most of contemporary information technologies presuppose cycling of governmentally-approved protocols and certificates that are incorporated in the database. Recent changes in federal policies suggest that publically-trading organizations need to report about their financial performance throughout WAN connection that is commonly practiced (Gelinas, Dull, & Wheeler, 2015). Nevertheless, managerial value in the accounting integrated system remains dominant as long as use of provided IT is a matter of human decision-making. However, this responsibility presupposes a larger context as additional requirements to cost control and contingency planning are also involved. Generally, technological perspective of integrated accounting system can become an effective method of internal control provided that the managerial aspect of the system is accordingly professional and reasonable. Therefore, there are several different types of data processing.
The first and most traditional method of data processing is batch. This method involves managers in comparison and verification of input data so that the primary data flow is created offline and prepared in advance (Pathak, 2005). Evidently, this method is dramatically slower, but it is more reliable because all input data is verified by managers. In addition, managers have sufficient time for amending layout of the database in case it is needed. Such a need may emerge after amendments in related policies and standards or strategic orientation of the company (Pathak, 2005). However, American Eagle Energy Corporation is not planning to take any actions in terms of random walk model, but a possibility to take an unplanned action should be present. Conversely, real-time data processing updates data online and does not involve human participation as it validates the input as well as output data. Needless to say, lower accountability of this method expects additional contingency planning to be involved, but its capacity of internal intelligence compensates probability of errors. Real-time processing should be verified for the first time data being immersed in the database when the following transactions will be conducted according to integrative model (Pathak, 2005). There is no distinct preference regarding the choice of data processing type, but the majority of companies including American Eagle Energy Corporation prefer to apply real-time processing as an overall role of accounting data has become more significant in a modern business environment.
Along with that, a REA approach should be mentioned. This approach relies on integration of such entities as resources, events, and agents (Hall, 2008). Consequently, the approach enables information system to serve the needs of all members of organization since three entities are related to each department to a particular extent. Thus, the first stage of REA performance is addressing events, resources, and agents. The basic principle of REA relates to economic duality as it economizes on resources for better serving events, with flexible involvement of agents (Hall, 2008). This model is quite applicable to American Eagle Energy Corporation as long as its managers are expected to deal with enormous amounts of data on a regular basis (Hall, 2008). The second benefit of REA approach is multistep creation of integrative model. These steps include expected events and entities for a future modeling, identifying expenditure of resources for a certain event, measurement of participation of agents assigned to particular data entities, and determination of any present relations or implications between entities or events. The third advantage addresses the enterprise context of accounting since it creates corporation-wide model of integration accounting data and information system (Hall, 2008). It merges data and required properties in one model that works according to established pattern. Then, it activates primary connections and access to data as well as allocates data to desired marts. REA approach could have been an effective application to the corporate internal control of the enterprise because it still needs to unify its financial statements not only for internal and governmental accountability but also for gaining certain strategic advantages as managers would be able to focus on the development of a better business strategy instead of managing accounting procedures.
In addition, implementation of ERP technology could have rendered much effective internal control. ERP technology unifies all data with a common protocol so that hierarchical issues do not thwart the information system from a flexible communication (Class of Enterprise Systems, 2012). ERP technology is easily combinable with Cloud technologies as it also unifies the entire database throughout common access to data. Its basic functions align transactions, control, and integrity of accounting information system. Therefore, it can be quite applicable to the accounting system of American Eagle Energy Corporation because of two reasons (Class of Enterprise Systems, 2012). The first one is a prevailing reliance on the primary data flow so that it can be encoded in the basic protocol of audit procedures (Class of Enterprise Systems, 2012). In consequence, the second reason suggests that the corporation is ensured with internal accountability of the information system. The unified model of accounting prevents the system from any deviations, with no restriction to access (Class of Enterprise Systems, 2012). It is worth mentioning that freedom of access does not mean authorized rights to amend the model. Hence, suggested technologies of accounting information system can be successfully deployed to auditing procedures of the enterprise because they comply with GAAP, PCAOB, and COSO. These standards require data transparency, reliability, and relevance to various extents so that all information technologies are capable of meeting these requirements. However, the company seems to develop its own model of Integral Framework that has been approved by Committee of Sponsoring Organizations of the Treadway Commission.
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This paper has focused on description and discussion of accounting information system of American Eagle Energy Corporation. The paper has given an account of Integral Framework of the firm as well as the most prominent technologies of integrated accounting that can be implemented in auditing procedures of the corporation. In such a way, the enterprise utilizes its own custom model of internal control and integrated accounting. The model has been proved to deliver a reliable reporting of SEC filings so that managers as well as third parties have admitted a 100% accountability of Integral Framework. It is worth mentioning that managerial perspective has been also paid an appropriate attention to since the study has indicated its significance to traditional and computer-based accounting. As a matter of fact, managers remain the main driving force of integrated accounting since they make decisions concerning deployment of integrative models and their contingency planning while information technologies provides flexible intelligence and operational convenience.
It is appropriate to make a general comment on the fact that all discussed information technologies are applicable to integrated accounting system of American Eagle Energy Corporation. Needless to say, each of them has certain advantages and disadvantages, but general compliance with standards of accounting and gaining of strategic benefit for the corporation can be equally measured. However, the corporation relies on its vision of integrated accounting system so that applicability of these technologies is only hypothetical. Still, the unique approach to integrated accounting systems does not have to be regarded as a deviation from a particular trend. Instead, the corporation’s innovativeness contributes much to advances in accounting information systems.