Ombudsmen: the convergence of accounting and IT.

• Author: Chiu, George
• Position: Specialty Expansion

CPAs are the bean counters and the IT people are the techics, right? Not anymore. Tightened compliance requirements, a global business environment and advancements in information availability have pushed these traditionally administrative Functions to the front line of firms and companies. Accounting and IT are being looked upon to identify new business opportunities and execute strategic initiatives, all while maintaining their traditional support of day-to-day business functions. Here's why--and what it means to CPAs.

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Regulatory Environment

The Sarbanes-Oxley Act of 2002 and recent financial turmoil have forced companies to strengthen their internal controls. Additionally. the Dodd-Frank Act of 2010 requires financial institutions to implement further measures to ensure their integrity and sustainability. These increase the burden on business cost and, as such, the nature of key internal controls must move away from detective controls (identifying and correcting errors) to preventive controls (minimizing errors before (hey occur).

A detective control, for example, is a monthly review of all journal entries to ensure all journal entries arc approved; whereas, a preventive control involves systematically routing all journal entries for approvals in accordance with the business authorization policy. Preventive controls are usually more efficient and effective in mitigating business risks as they are designed to identify and resolve errors before they occur. A reduced number of detective controls means less manual resource is required to resolve issues that could have been prevented in the first place.

What this means is that CPAs and IT professionals must work together to understand business-risk compliance requirements, which place higher reliance on technology to reduce manual errors and enhance record keeping efficiency.

Compliance is a requirement that takes time and resources away from making and executing other strategic decisions (read: a cost-saving effort, not a revenue generating one). As such, companies must integrate compliance requirements into routine business activities that can be automated to focus their human resources on the (op line.

Global Business Environment

While the CPAs keep the books. IT is tasked to support a global structure. Regardless of a centralized or decentralized organizational structure, top management has to have the ability to know what is going on in the day-to-day business, as...