Do Firms Use The Database Accounting Approach in The Design of Their AIS?

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Do Firms Use the Database Accounting Approach In The Design of Their AIS?
Article · April 2005
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Do Firms Use the Database Accounting Approach in

the design of their Accounting Information Systems?
Siew H. Chan, Western Michigan University

Lee J. Yao, La Trobe University, Australia
John R. Carlson, Baylor University
Abstract
This paper examines current progress toward a dynamic database accounting system.
Further advances in database technology and interactive communication media, coupled with
improvements in financial reporting practices, are encouraging more organizations to adopt some
forms of database-driven accounting system. This paper presents a typology that categorizes
accounting systems based on both the accounting and technological approaches used. A
dynamic database accounting system allows for passive information retrieval as well as
interactive queries and dynamic, real-time information presentation. The ability of users to
access current accounting information and to configure its contents and format for their
particular needs is essential for good decision-making. The typology provides the underlying
foundation for the formulation of three propositions. A field study was conducted to provide
some insight into the propositions. The data obtained from forty-two firms are discussed.
Because larger firms with larger IT expenditure will implement AISs that resemble dynamic
database accounting systems, users in these firms will perceive the firms’ technological approach
to be more sophisticated and have higher user satisfaction and interest in the use of the AIS.
Keywords
Dynamic Database Accounting System, Database Approach, Events Theory,
Double-entry Accounting Theory, Accounting Information System
Introduction
Accounting information is acquired, stored, processed, and disseminated in order to meet

the unique needs of a variety of organizational stakeholders. These stakeholders include
investors, creditors, government agencies, management, and employees. Under the traditional
accounting system, financial accounting information refers explicitly either to the audited or
unaudited financial statements; that is, the income statement, balance sheet, statement of retained
earnings, and statement of cash flows. The central use of this information by these stakeholders
(users) is to support decision making both within and outside the organization. However, the
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The International Journal of Applied Management and Technology, Vol 3, Num 1
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pre-determined rigidity found in the traditional approach may be failing to always supply all
users with the best information possible. The traditional annual reports prepared by accountants
may also preclude users from making timely investment decisions. Thus, use of such reports to
communicate accounting information to users may not represent an optimal media choice (Daft
et al, 1987). Technological and accounting-theory advances are coming together to make an
alternative, dynamic database accounting system possible. Under such a dynamic database
accounting system, financial accounting information refers to the traditional reports noted above
plus other additional reports (financial and/or non-financial) generated by the users using the
underlying accounting data in the database.
Implementation of Sorter’s (1969) events theory requires a database approach to support
dissemination of corporate accounting information to dispersed users who have access to the
database technology. Indeed, the dynamic database accounting system has become feasible with
advances in database technology. In addition to passively communicating information, the
dynamic database accounting system can be used to provide interactive decision support to users.
For example, in the case where interactive media are used as a platform for communicating
accounting information to users, through the use of client side applications (e.g., Java applets)
and/or server side programs (e.g., Java servlets), users can be presented with interactive,
browser-based applications that support information retrieval, analysis, report-generation, and
more. Such systems are simply not possible in the traditional text-based system. This paper
presents a typology for understanding the variety of approaches an organization may pursue in
implementing such an accounting system. Modern approaches such as balanced scorecard or
management cockpit are not discussed here because this paper emphasis on accounting database
systems that are mostly built on more traditional technologies.
The next section describes the characteristics of the traditional accounting and the dynamic
database accounting systems. The third section explains the technological and accounting
approaches for communicating accounting information to users. The research model and
propositions are presented in the next two sections. Finally, data collected from a field study are
discussed, implications of the paper are reviewed, and concluding remarks are offered.
Characteristics of Accounting Systems

The characteristics of the traditional accounting system and the dynamic database
accounting system are summarized in Table 1. These include: accounting theory, data storage,
information access, security, auditing, and update schedule.
Dynamic database accounting Traditional accounting system

system
Accounting Theory Events theory Double-entry theory
Data Storage Database Combination of paper and database
Information Access Interactive media with Boolean search Linear
Security Stringent security protocols Minimal security protocols
Auditing Real-time attestation of internal Periodic attestation of financial
controls records
Update Schedule Continuous Periodic
Table 1 Characteristics of Accounting Systems

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Accounting Theory
While the traditional accounting system is based on the value theory, the events theory is
the underlying theoretical foundation for the dynamic database accounting system.
Value theory. At present, firms use the traditional double entry bookkeeping system to
report accounting information. Sorter (1969) viewed the current accounting system as a value
approach to accounting. This theory assumes that the “users’ needs are known and sufficiently
well-specified so that accounting theory can deductively arrive at and produce optimal input
values for used and useful decision models” (Sorter, 1969). The following criticisms of the
value approach have been identified: (1) it is not feasible to specify input values that are optimal
for a wide variety of uses because accounting data are used by different groups of users for
different purposes; (2) neither economists nor accountants have been able to determine the
theoretically correct decision models used by different users for each specified use; (3) the value
approach is viewed to be unnecessarily restrictive (for example, events such as contingencies or
commitments are disclosed in the footnotes and are excluded from the main body of the financial
statements if they do not have an impact on income or net asset values); and (4) the value theory
could not explain many current developments in accounting (for example, the subcategories of
sales and cost of sales in the income statement do not form the basis for the income theory)
(Sorter, 1969).
Under the traditional accounting system, the accountant aggregates the firm’s accounting
information and discloses the accounting methods used in the footnotes to the financial
statements. However, valuable accounting information may be lost in the process of aggregation
by the accountant. In addition, communication of accounting information to users via various
business periodicals and annual reports may not be timely for decision-making. Therefore, it is
envisioned that Sorter's events approach to accounting will be the future direction of accounting
information disclosure.
Events theory. Under the events theory, relevant economic events, rather than financial
statements, are the primary units of corporate financial reporting. This theory asserts that “the
purpose of accounting is to provide information about relevant economic events that might be
useful in a variety of possible decision models” (Sorter, 1969). Proponents of the events theory
view the accounting function as the provision of information about relevant economic events that
permits “individual users to specify their own input values for their own individual decision
models” (Sorter, 1969). They are also in favor of less aggregation of accounting information by
accountants because they feel that the loss of information resulting from such aggregation and
valuation is greater than the associated benefit (Sorter, 1969). The theory proposes that users,
rather than accountants, should be given the rights to aggregate and assign weights and values to
the accounting data on the basis of their predictions or utility functions (Sorter, 1969).
Beaver and Rappaport (1984) proposed that the database approach to corporate accounting
reporting has become technically and economically feasible with the spectacular growth in data
processing and communication technology. The events theory is seen to provide a conceptual
basis for implementation of the database accounting approach to corporate financial reporting
(Cushing, 1989). The dynamic database accounting system allows users to use their own
discretion in aggregating the disaggregated data in ways that are appropriate for their decision-
making. Current accounting reports contain many estimated figures; in contrast, a dynamic
database accounting system would contain all relevant information related to the operating
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results and financial position of firms, thereby allowing users to determine appropriate ways for
aggregating the disaggregated data in the database. As a result, accountants do not have to make
any estimates for expenses such as depreciation, bad debts, warranty obligations, and inventory
obsolescence.
Currently, very few accounting systems exist that implement an events-driven database
approach. However, the Securities Exchange Commission’s (SEC) Electronic Data Gathering
Analysis and Retrieval (EDGAR) can be considered as the first step toward the eventual
implementation of the database approach to corporate accounting reporting, although EDGAR
does not follow the database approach to reporting accounting information as its database
consists of traditional reports rather than event-based data. The primary purpose of EDGAR is to
increase the efficiency and fairness of the securities market for the benefit of investors,
corporations, and the economy by accelerating the receipt, acceptance, dissemination, and
analysis of time-sensitive corporate information filed with the agency (see the SEC Web page,
http://www.sec.gov). Some companies voluntarily submit their actual annual reports on
EDGAR, although they are not required to do so. Firms under the SEC’s jurisdiction are
required to file certain documents via the EDGAR database system; for example, firms are
required to file their annual reports on Form 10-K or 10-KSB (see the SEC Web page,
http://www.sec.gov). It is expected that the SEC may require firms to file an increasing amount
of financial and non-financial accounting information via EDGAR.
Data Storage
The data stored in the traditional accounting system can be in the form of paper, database,
or a combination of paper and database. Traditionally, source documents (such as invoices, turn
around documents, purchase orders etc.) are usually in paper form. The data in these documents
can be entered into and stored in databases, and reports can be generated either periodically or on
demand to facilitate the decision making process. However, the traditional accounting system’s
use of database technology is limited mostly to screening purposes and accessing aggregate
information because: (1) the information is not timely, (2) the information is not comprehensive
(for example, notes to the financial statements are usually not included in the databases and this
makes it difficult to identify differences in accounting practices among firms), and (3) the
adjustments made to the information in the databases may not be easily identifiable or
understandable.
Users may become more willing to use databases to facilitate their analytical work on
specific firms if the information contained in these databases becomes more comprehensive,
consistent, reliable, and comparable. Further advances on database technology and design,
coupled with improvements in accounting reporting practices, may lead to an increase in the use
of databases. The dynamic database accounting system uses a full-fledged database approach to
create, store, disseminate, and communication information to users. This system provides users
with ease of access to a considerable amount of accounting information. In addition, the system
can be designed to provide users with access to current (real-time) data and/or periodically
aggregated or delayed data, depending on the needs of the organization and the users.
Information Access
The suggested platform for implementation of the dynamic database accounting system is
online, interactive media such as the World Wide Web (WWW). The characteristics (such as
graphics, sound, animation, text, hyperlinks, and so on) inherent in such interactive media allow
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for effective and efficient presentation of a much larger body of information relative to printed
media (Landow, 1990). In addition, database technology can be incorporated into interactive
media systems to permit users to search for relevant information from massive amounts of data
contained in databases, and to retrieve and store a variety of information, including graphics and
sound. Users can either search for information in interactive media by means of navigating
textual or graphic links, or by using the query mechanisms of the computer system to find
specific information. Online presentations of definitions can be less disruptive than paper
presentations because the computer can perform the definition search for the reader. The
availability of Boolean search functions also makes finding the desired information within a
given report (or set of reports) much faster. When properly designed, interactive media systems
can be more effective than paper-based reports for conveying information to users (Carlson and
Kacmar, 1998).
Security
Although the manner in which data are aggregated and analyzed can be adapted to the
needs of users through the use of interactive media, it is important that users’ access rights to the
actual source data are finely defined and strictly enforced. Internet borne viruses and worms
have the potential to damage online accounting information; however, this remains more of a
theoretical concern than an actual threat. On the other hand, “crackers” (criminal hackers) may
use viruses (or other means) to gain access to online systems. Even without such access,
crackers have used Internet-based attacks (such as the distributed denial of service – “DDoS” –
attack) to overload particular servers making it difficult for legitimate users to establish
connections. DDoS attacks on popular web sites such as Yahoo, eBay, E*Trade, etc. caused a
tremendous amount of concern among federal regulators and system administrators
(http://www.zdnet.com).
These security concerns and difficulties may be the most troublesome drawback of current
online, interactive media technologies (including the WWW). In reality, however, it is not
impossible to set up a secure Web server (successful sites such as eBay, Amazon, IBM, etc.
should attest to that). Moreover, there are a variety of technologies that allow a firm to create a
secure extranet with encrypted transmission of data, while still providing the rich content and
interactive control users need. Examples include Virtual Private Networking (VPN) and secure
hypertext transfer protocol (HTTPS), both of which allow aspects of the communication between
the client and server to be strongly encrypted.
Auditing
The dynamic database accounting system provides users with quick and easy access to
massive amounts of data stored in its databases. For example, users can query the databases to
create reports as and when they deem fit and necessary, and at their convenience. The issue of
the quality of the data that the users are accessing is of paramount importance. The dynamic
database accounting system will not achieve wide users’ acceptance if the users could not rely on
the reports generated from the data contained in the databases for decision-making. The
traditional audit performed by independent auditors on firms provides a reasonable level of
assurance to users of the firms’ financial statements. Similarly, in the context of the dynamic
database accounting system, some form of auditing system must be in place to increase the users’
confidence in the quality of the data accessed. Thus, the continuous auditing approach is clearly
needed to provide a reasonable level of assurance of the reliability and currency of the data
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254 _______________________________________________________________ iJAMT
contained in the dynamic database accounting system. Continuous auditing is defined as “a type
of auditing that produces audit results simultaneously with, or a short period of time after, the
occurrence of relevant events” (Kogan et al, 1999). The embedded audit modules approach
proposed by Groomer and Murthy (1989) allows accounting information to be captured on an
ongoing basis. This approach is perceived to continue to act as an essential architecture for
continuous auditing (Kogan et al, 1999). Audit firms may be engaged to perform accounting
services such as attestation of the quality of data in the dynamic database accounting systems of
firms, accumulation and reporting of relevant data, and preparation of reports on accounting
systems and controls. The current trend is toward more auditing based on internal controls,
system reliability assurance, and real-time assurance on online databases (Elliott, 1996). These
auditing trends and capabilities are foundational for the dynamic database accounting system to
be successful.
Update Schedule
The required business information should possess a set of attributes -- integrity,
independence, timeliness, and responsiveness (Elliott, 1996). However, since the data in the
traditional accounting system are updated periodically (i.e., weekly, monthly, quarterly, or even
yearly), these data are not current and may in fact impair the decision making process. As a
result, the data in traditional accounting systems may lack integrity, independence, timeliness,
and responsiveness; in fact, it may not make sense to even evaluate these attributes in light of the
staleness of the data.
A primary objective of the dynamic database accounting system is to ensure that users
receive the highest quality business information in whatever form, place, or time. It is relatively
easy for firms to update and correct any data in the dynamic database accounting system because
the data are generated from a centralized data source. Thus, users of the dynamic database
accounting system will obtain the most accurate and up-to-date information immediately after an
update occurs. Users can use the dynamic database accounting system to obtain timely
accounting information at any day and time. Time zones, weekends, and holidays do not
interfere with database-driven reports. For example, EDGAR filings are posted to the Web site
24 hours after the date of filing by firms (see the SEC Web page, http://www.sec.gov).
Technological and Accounting Approaches
The events theory calls for a radically different method of communicating accounting
information to users than is currently employed. Moreover, advances in information technology
make it likely that a database approach could be implemented in the near future. However, no
single technological or accounting approach is dictated in order to implement such a system,
rather, a variety of approaches are possible (Table 2).
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Accounting Approach
Technological Approach Traditional Database
Offline Current approach utilizing a User is provided with
predefined set of paper or electronic version of the
electronic reports. database and tools to query
data to produce customized
reports.
Online Periodic User may download User may query database
electronic versions of a set using on-line tools to
of predefined reports; these produce customized reports
reports are based on most based on most recent
recent periodic (e.g., periodic data.
quarterly) data.
Online Current User may download User may query database
reports are based on current based on current data.
data.
Table 2 Approaches for Communicating Accounting Information to Users
The various approaches to reporting accounting information can be categorized by looking

at both the applied accounting theory (either the traditional approach currently employed or the
events-based database approach) and the technological approaches possible (either off-line, on-
line with periodically updated data, or on-line with continuously updated data); such a
descriptive typology is presented in Table 2. Moreover, there is a progression along each
dimension from less to more sophisticated. Therefore, the top-left cell (traditional, off-line)
represents the least sophisticated approach: users are provided with paper (or electronic) reports
based on periodically aggregated data. These reports are based on traditional accounting formats
and are both non-interactive and non-customizable. As a result, users are limited in their ability
to derive a rich understanding of the problem situation, especially in cases where the users’ needs
are novel and/or unanticipated by the traditional accounting reports.
At the other extreme, the bottom-right cell (database, on-line current) represents the most
sophisticated approach. Users are provided with access to both an up-to-date data set and tools
to query the data to produce customized reports. This access could be provided through the
interactive media system (e.g., an Intranet or Extranet) or via a proprietary network or system
(e.g., Lotus Notes). In any case, users can be required to log-on to the system (with a password
provided by the organization) and, once their identity and access rights are verified, can be
provided with access privileges appropriate to their needs and congruent with the organization's
security concerns. Finally, query and analysis tools can be provided via a number of client and
server-side technologies, including: Common Gateway Interface (CGI), Java applets and/or
servlets, active server pages (ASP), or Java server pages (JSP).
In addition to the extremes represented by these two implementations, there are a variety of
possible intermediate approaches described by the typology. In fact, these intermediate
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approaches may be viewed as stages in a possible progression from the traditional approach to a
fully realized database approach. However, the typology does not suggest that there is any
specific path (or ending point) by which these stages must be implemented which is universally
best for all firms; nor, in fact, does it suggest that all (or any) intermediate stages must be
implemented.
The typology is, however, meant to be both descriptive of the approaches available to
organizations in designing an accounting reporting system and suggestive of possible
progressions toward more sophisticated systems. For an organization that finds itself in any
particular cell (bottom-right excluded), movement either down or right (or both) will lead to a
more sophisticated reporting system which will provide greater benefit for its users.
Research Model
The research model is presented in Figure 1. The degree of innovativeness of a firm’s

accounting information system (AIS), operationalized via the firm’s technological and
accounting approaches, is influenced by drivers of innovativeness of the AIS; namely, revenues
and information technology (IT) expenditure. The technological approach can be offline, online
periodic, and online continuous. The accounting approach can be traditional, database, or a
hybrid of the traditional and database approach. The degree of AIS innovation mediates the
users’ perceptions of sophistication of a firm’s AIS and technological approach. This
relationship is moderated by user characteristics (i.e., ability, knowledge, and experience in a
given task and technology) and task characteristics (i.e., complexity, difficulty, ambiguity,
structure, and novelty). Since it is difficult to examine the effects of task and user characteristics
in the current setting, this study assumes that user and task characteristics are constant. Finally,
the users’ perceptions of the AIS have an impact on their user satisfaction and interest in use of
the AIS.
Propositions
The present study is exploratory in nature. One of this paper’s objectives is to provide some
insight into the relationships among the core constructs (i.e., drivers of AIS innovation, degree of
AIS innovation, user perceptions, and outcome measures) stipulated in the research model
presented in Figure 1. Development of the three propositions is discussed below.
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Task Characteristics
• Complexity
• Difficulty
• Ambiguity
• Structure
• Novelty
•
Degree of AIS
Drivers of AIS Innovation User Perceptions
Innovation • Accounting approach • Sophistication of AIS
• Revenues (traditional, database, • Sophistication of
• IT expenditure hybrid) technological approach
• Technological
approach
(offline, online
periodic, online
continuous)
User Characteristics
• Ability
• Knowledge
• Experience
Figure 1 Research Model
Revenues1 and IT expenditure are identified in the research model as drivers of AIS
innovation. These innovation-enabling factors are posited to act independently or interactively
to have an impact on the type of AIS implemented by a firm. Firms that are larger in size and
have larger IT expenditure are predicted to have the necessary economic and technological
resources for implementing more innovative AISs (that resemble more closely the dynamic
database accounting systems) compared to firms that are smaller in size and have smaller IT
expenditure (Yao et al, 2005). Shin (1999) found that IT expenditure, independent from firm
sizes, significantly linked to the innovativeness of the firms. This leads to the first proposition:
Proposition 1: Firms with more innovation enabling factors2 will implement

more innovative AISs (i.e., systems that resemble more closely
the dynamic database accounting systems) than firms with fewer
innovation enabling factors.
Users’ perceptions of the AIS are expected to change in response to a change in the degree
of AIS innovation. When the degree of AIS innovation is viewed as a continuum, firms that use
the traditional accounting and offline technological approach are deemed to be at the lowest end
of innovativeness while firms that use the database accounting and online continuous
technological approach are considered to be at the highest end of innovativeness. The two
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components of user perceptions include sophistication of a firm’s AIS and technological

approach. Therefore, the second proposition suggests that:
Proposition 2: Users will perceive a firm’s AIS and technological approach to be

more sophisticated when the degree of AIS innovation is high,
assuming user and task characteristics are constant.
A number of studies (Gibson, 1994; Hunton, 1996; Ramarapu et al, 1997; Szajna and
Scamell, 1993; Yuthas and Eining, 1995) have attempted to examine the outcome measure of
user satisfaction in the AIS context. This research signifies the importance of the role of this
factor as a measure of the success of AIS. Their findings indicated that user perception were
subject to the influenced of different user and task characteristics. Hunton (1996) and Yuthas
and Eining (1995) found that the ability, knowledge and experience of an user affect the
perception of how fast a systems response, while Szajna and Scamell (1993) and Yuthas and
Eining (1995) found that complexity, difficulty, ambiguity, structure and novelty significantly
affect how users believe how well the systems were working. Further, tremendous amount of
resources are being committed to the development and implementation of systems and lack of
system use not only leads to wastage of resources but also defeats the purpose of the best
systems possible. As a result, it is important to understand how user perceptions of the AIS
might influence their satisfaction with the use of the AIS. In addition, research attention should
be directed at another important outcome measure; that is, the users’ interest in use of the AIS.
Specifically, the users’ level of interest in use of the AIS will increase if they perceive the AIS to
be interesting to use. Support for this contention is provided by Chan (2001) who found that
users were more motivated to use a decision aid and performed better when the aid was
perceived to be fun or interesting to use. Chan and Yao (2005) in their study also found that
hackers were attracted to hack when systems sophistication level was high. Finally, the third
proposition states that:
Proposition 3: Users who perceive a firm’s AIS and technological approach to be

more sophisticated will be more satisfied with the AIS and will
experience increased interest in use of the AIS.
Data Analysis
This section discusses the data collected on forty-two firms that participated in a field study
conducted by graduate students at a university located in the east coast. The field study was
completed as part of the requirement for a graduate accounting information systems course. The
students wrote and presented their reports to the class on the last day of the semester. They also
completed a questionnaire (Appendix B) in their respective groups in class. Samples were
collected only if the firm have used technologies for more than five years, have some forms of
automated accounting systems, and have operations in the east coast area. The respondents were
either the CFO or the CIO of the firm who has significant decision power to influence the
selection of accounting systems. The firms vary in size and industry. An analysis of the data
collected on the sample firms is presented on Appendix C.
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Results
Due to the relatively small sample size, nonparametric correlations were performed to
provide some insight into the data gathered on the forty-two firms. The Spearman rank
correlation was run because it is appropriate for rank-ordered variables such as degree of AIS
innovation (accounting and technological approach), user perceptions (sophistication of AIS and
technological approach), and outcome measures (user satisfaction and interest in use of the AIS).
The correlation coefficient for revenues and IT expenditure, drivers of AIS innovation, is
0.635; this suggests that revenues and IT expenditure are appropriate measures of the degree of
AIS innovation. The correlation coefficients for the two drivers of AIS innovation and degree of
AIS innovation are as follows: revenues and degree of AIS innovation, 0.415; and IT
expenditure and degree of AIS innovation, 0.454. The positive relationship between the drivers
of AIS innovation and the degree of AIS innovation provides some initial evidence for
Proposition 1; that is, firms that are larger in size and have larger IT expenditure will implement
AISs that resemble more closely the dynamic database accounting system, compared to firms
that are smaller in size and have smaller IT expenditure. These results are presented in Table 3.
REVENUE IT ACCTEC
REVENUE Correlation 1.000 .635 .415
Coefficient
Sig. (1-tailed) . .045 .153
N 42 42 42
IT Correlation .635 1.000 .454
Coefficient
Sig. (1-tailed) .045 . .129
N 42 42 42
ACCTEC Correlation .415 .454 1.000
Coefficient
Sig. (1-tailed) .153 .129 .
N 42 42 42
*Correlation is significant at the .05 level (1-tailed)
Table 3 Correlations between Drivers of AIS Innovation and Degree of AIS Innovation
Table 4 shows the correlations between the degree of AIS innovation and the users’
perceptions of sophistication of the AIS and technological approach. The correlation coefficients
between the degree of AIS innovation and the users’ perceptions of sophistication of the AIS and
technological approach are 0.624 and 0.703 respectively. These results show some initial
evidence for Proposition 2; that is, users will perceive a firm’s AIS and technological approach
to be more sophisticated when the AIS resembles more closely the dynamic database accounting
system.
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260 _______________________________________________________________ iJAMT
ACCTEC SOPHAIS SOPHTEC

ACCTEC Correlation 1.000 .624 .703
Coefficient
Sig. (1-tailed) . .049 .026
N 42 42 42
SOPHAIS Correlation .624 1.000 .863
Coefficient
Sig. (1-tailed) .049 . .003
N 42 42 42
SOPHTEC Correlation .703 .863 1.000
Coefficient
Sig. (1-tailed) .026 .003 .
N 42 42 42
* Correlation is significant at the .05 level (1-tailed)

**Correlation is significant at the .01 level (1-tailed)
Table 4 Correlations between Degree of AIS Innovation and Sophistication of AIS and
Technological Approach
Table 5 illustrates the correlations between the users’ perceptions and the outcome
measures of user satisfaction and interest in use of the AIS. The correlation coefficients between
user satisfaction and the users’ perceptions of sophistication of the AIS and technological
approach are 0.680 and 0.705 respectively. The correlation coefficients between interest in use
of the AIS and the users’ perceptions of sophistication of the AIS and technological approach are
0.769 and 0.752 respectively. These findings provide some initial evidence for Proposition 3;
that is, the users’ perceptions of sophistication of a firm’s AIS and technological approach will
lead to higher user satisfaction and interest in use of the AIS.
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SOPHAIS SOPHTEC AISSAT AISLIKE AISINT

SOPHAIS Correlation 1.000 .863 .680 .520 .769
Coefficient
Sig. (1-tailed) . .003 .032 .093 .013
N 42 42 42 42 42
SOPHTEC Correlation .863 1.000 .705 .533 .752
Coefficient
Sig. (1-tailed) .003 . .025 .087 .016
N 42 42 42 42 42
AISSAT Correlation .680 .705 1.000 .752 .779
Coefficient
Sig. (1-tailed) .032 .025 . .016 .011
N 42 42 42 42 42
AISLIKE Correlation .520 .533 .752 1.000 .675
Coefficient
Sig. (1-tailed) .093 .087 .016 . .033
N 42 42 42 42 42
AISINT Correlation .769 .752 .779 .675 1.000
Coefficient
Sig. (1-tailed) .013 .016 .011 .033 .
N 42 42 42 42 42
* Correlation is significant at the .05 level (1-tailed)
**Correlation is significant at the .01 level (1-tailed)
Table 5 Correlations between User Perceptions and User Satisfaction and Interest in AIS
Implications
The traditional accounting system will eventually change in response to the availability of
advanced information technologies and changing user expectations. Sorter’s events theory and
the database approach to corporate accounting reporting are largely feasible today, from
technological and accounting theory standpoints. Although the costs and institutional resistance
to such transitions are indeed high, firms are clearly moving toward a dynamic database
accounting system (for at least parts of their systems) as predicted by our model. Moreover,
these innovative firms are benefiting from more satisfied users who are more interested in using
their systems.
It must be emphasized, however, that the use of a dynamic database accounting system
should not be viewed as a replacement for good judgment and sound decision-making. Although
users may have the tendency to place undue trust in computer-based data and analyses, they must
not limit themselves to information in such a system to the exclusion of other sources that they
might traditionally use. In addition, users are not recommended to rely solely on the analysis
________________________________________________________________________
262 _______________________________________________________________ iJAMT
tools provided by such a system to the exclusion of other tools and approaches they have
traditionally employed.
Future research may explore a number of possible questions related to the dynamic
database accounting system. First, it is important to develop an understanding of what factors
and features encourage users to utilize more fully AIS at their disposal. Clearly, system
satisfaction and interest are important constructs, but additional work could focus on more
specific technological characteristics. Second, the problem of information overload may be
reduced if future research efforts could identify the types of relevant financial or non-financial
accounting information, analysis tools, and presentation formats to be put on a dynamic database
accounting system. Third, it is interesting to see that 23 of our 42 (55%) sample firms could not
be categorized into a single cell in Table 1, instead occupying two cells. This indicates that
certain of their systems had been transitioned to a more sophisticated form while others had not.
While this may simply be a factor of development and deployment timetables, it may also
represent differential needs on the part of users for certain types of accounting information and
perhaps on varying levels of management comfort with the online exposure of certain aspects of
accounting information. Finally, studies should be conducted to examine the changing role of
auditors; that is, real-time auditing of real-time information accessed by the users. Real-time
auditing is essential because it provides reasonable assurance to users on the integrity of the
information put on the dynamic database accounting system. Additional work is needed to
determine whether it is beneficial to make differing levels of accessibility available to users
through the sale of passwords to create a multi-tier market with users who can afford different
levels of quality and/or scope of information. Users could purchase passwords to gain access to
the information stored in the databases of firms. Further, systems can be set up in such a way
that the users can access either audited or unaudited accounting information. Even though
unaudited accounting information can be timelier than audited accounting information, users
may face a risk of deficient decision making if they use unaudited information. As a result, users
of audited accounting information may receive more assurance than users of unaudited
accounting information. However, researchers need to consider the problem of insider
information if different users are given different levels of access.
Concluding Remarks
Sorter’s events theory and the database approach to corporate accounting reporting can be
said to have materialized. Firms adopting more innovative AISs, based on our framework, tend
to be larger and to focus more resources into information technology. The importance of the
database accounting approach has increased and the information technologies for its
implementation have improved. It is expected that continued improvements would be made to
database technology to ensure improved security and availability of real time data. For example,
improved user interface between the database technology and other applications such as word
processing, spreadsheet, electronic mail, and graphic images might allow users to manipulate
data and produce various kinds of reports for decision-making. Current operating system and
application vendors (e.g., IBM, Apple, and America Online/Time Warner) have implemented a
vertically integrated strategy (e.g., IBM’s integration of hardware, operating system, and
database features; Apple’s integration of hardware, operating system, and user interface; and
America Online’s integration of Internet Service Provider-style Net access with various content
services to provide users with an integrated Web experience) so that users can create, store,
___________________________________________________________________________
iJAMT __________________________________________________________________ 263
retrieve, and disseminate information in a relatively easy manner. Finally, the typology and
propositions put forth here provide a guideline for practitioners to review AIS development and
to serve as a framework for researchers interested in the topic. Further empirical investigation of
these propositions should provide valuable insights into use of the database approach for
corporate accounting reporting.
__________________________
The authors wish to thank the two anonymous reviewers for their invaluable comments. This
paper is dedicated to Dr Barry Cushing who passed away recently after losing the battle to liver
cancer. This paper was ‘born’ because of his help and guidance.
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___________________________________________________________________________
iJAMT __________________________________________________________________ 265
Notes
1. Revenue denotes size of firms.
2. Include innovativeness of staff, management skills and stages of technology advent etc.
APPENDIX A
GROUP PROJECT
This assignment requires you to visit any organization of your choice to study the
accounting information system currently used by the organization. This organization can be any
profit or non-profit entity. If your organization uses more than one system, describe all the
systems used by the organization.
Your report should contain the following information:
1. Describe the organization (e.g., the size of its workforce, amount of its annual
revenue, its total assets, the amount of money and resources it invests in information
systems each year, and the industry the organization is in)
2. Describe the technology used in the organization (i.e., the accounting systems and
information systems currently in use and the use of network technology, the Web, or
database technology)
3. Identify and describe the accounting information system currently used by the
organization
4. State the purpose and/or objectives of the system and provide an estimate of the
amount of money and resources invested in the system
5. How was this system developed and how is it maintained – internally, externally, or
some combination?
6. Identify key managerial issues (e.g., the importance that the organization places on
information systems, the presence of a chief information officer or an information
systems department in the organization, and other systems related issues)
7. Evaluate the organization's attitude toward security issues and its strategies for
dealing with these issues (i.e., use of passwords, control matrix, firewalls, etc.)
8. Describe the input (i.e., the source data or documents) of the system
9. Describe the process of the system (i.e., how does the system process information?)
10. Describe the output (i.e., the accounting reports) of the system in general terms using
descriptive names (more details for these reports will be requested below)
________________________________________________________________________
266 _______________________________________________________________ iJAMT
11. Are any of these accounting reports provided to employees and/or external
constituents outside of the United States? If so, does the system convert or reformat
these reports in accordance with local accounting regulations?
12. Identify the characteristics of the accounting reports (i.e., how do the users access the
reports? What is the format of the reports (HTML, pdf, mdb, jpeg, gif, text, etc.)?
How useful are the reports to the users for decision-making (i.e., are the reports
timely, relevant, and reliable?)?
13. Describe the accounting reports in terms of Table 1, i.e., do the users use a predefined
set of paper or electronic reports? Can the users download electronic versions of a set
of predefined reports? Are these reports based on most recent periodic (e.g., weekly,
monthly, quarterly, or annually) or current data? Are the users provided with an
electronic (e.g., CD-ROM based) version of the database and tools to query data to
produce customized reports? Can the users query the database using on-line (e.g.,
Internet/Intranet based) tools to produce customized reports based on most recent
periodic (e.g., weekly, monthly, quarterly, or annually) or current data?
14. For reports that are generated periodically, state whether the report is weekly,
monthly, quarterly, annually, or only generated on the basis of need?
15. Identify the persons/groups who have access to the accounting reports and explain the
reason for such access
16. How are the reports audited -- in the traditional, periodic manner, or some other
approach?
17. Identify the accounting reports most frequently used by the respondent
18. How satisfied (rate on a scale from 1 to 5 with 1=very satisfied and 5=least satisfied)
is the respondent with the use of the accounting information system and accounting
reports?
19. Does the respondent rely (rate on a scale from 1 to 5 with 1=great reliance and
5=little reliance) on the accounting information system and accounting reports for
decision-making?
20. Does the respondent feel that their accounting information system technology and
approach is “ahead of the curve”, “behind the curve”, or “about in line” compared to
other firms in the industry?
21. Provide demographic information of the respondent (i.e., age, gender, position in the
organization, number of employees supervised, number of years in the organization,
and job responsibilities)
22. Obtain the email address of the respondent for follow-up purposes.
___________________________________________________________________________
iJAMT __________________________________________________________________ 267
TABLE 1
Accounting Approach
Technological Approach Traditional/Static Database/Dynamic
Offline Current approach using a User is provided with an
reports.
recent periodic data. periodic data.
reports are based on based on current data.
current data.
Use this table as a guide for answering question 13
APPENDIX B
Group: ___________
________________________________________________________________________
268 _______________________________________________________________ iJAMT
Based on your review of your firm’s accounting information system, answer the following
questions by circling the response that best represents what you feel. Decision-making relates to
managers who use accounting information to make operational and tactical decisions.
1. How effective do you think the firm’s security precautions are for its accounting
information system?
Not at all effective Very effective

____________________________________________________________
1 2 3 4 5
2. How innovative do you think the firm’s accounting information system is?
Not at all innovative Very innovative

____________________________________________________________
1 2 3 4 5
3. How do you think the respondent perceived the quality of the accounting reports
generated by the accounting information system?
Very low quality Very high quality

____________________________________________________________
1 2 3 4 5
4. How do you think the respondent felt about the accuracy of the accounting reports
generated by the accounting information systems?
Not at all accurate Very accurate

____________________________________________________________
1 2 3 4 5
5. Do you think the respondent found the accounting information system useful for
decision-making?
Not at all useful Very useful

____________________________________________________________
1 2 3 4 5
6. Do you think the respondent found the accounting reports (generated by the accounting
information system) useful for decision-making?
Not at all useful Very useful

____________________________________________________________
1 2 3 4 5
___________________________________________________________________________
iJAMT __________________________________________________________________ 269
7. Do you think the respondent felt that it is important to be skilled at using the accounting
information system?
Not at all important Very important

____________________________________________________________
1 2 3 4 5
8. Do you think the respondent felt that it is important to be skilled at using the accounting
reports (generated by the accounting information system)?

____________________________________________________________
1 2 3 4 5
9. Do you think the respondent found the accounting information system easy to use?
Not at all easy Very easy

____________________________________________________________
1 2 3 4 5
10. Do you think the respondent found the accounting reports (generated by the accounting
information system) easy to use?
Not at all easy Very easy

____________________________________________________________
1 2 3 4 5
11. How satisfied do you think the respondent was with the use of the accounting information
system?
Not at all satisfied Very satisfied

____________________________________________________________
1 2 3 4 5
________________________________________________________________________
270 _______________________________________________________________ iJAMT
12. How satisfied do you think the respondent was with the use of the accounting reports
(generated by the accounting information system)?
Not at all satisfied Very satisfied

____________________________________________________________
1 2 3 4 5
13. How much do you think the respondent liked using the accounting information system?
Very little A lot

____________________________________________________________
1 2 3 4 5
14. How much do you think the respondent liked using the accounting reports (generated by
the accounting information system)?
Very little A lot

____________________________________________________________
1 2 3 4 5
15. How much do you think the respondent relied on the accounting information system for
decision-making?
Very little A lot

____________________________________________________________
1 2 3 4 5
16. How much do you think the respondent relied on the accounting reports (generated by the
accounting information system) for decision-making?
Very little A lot

____________________________________________________________
1 2 3 4 5
17. How important do you think it is for the respondent to be effective at using the
accounting information system?

____________________________________________________________
1 2 3 4 5
___________________________________________________________________________
iJAMT __________________________________________________________________ 271
18. How important do you think it is for the respondent to be effective at using the
accounting reports (generated by the accounting information system)

____________________________________________________________
1 2 3 4 5
19. How often do you think the respondent used the accounting information system for
decision-making?
Not often Very often

____________________________________________________________
1 2 3 4 5
20. How often do you think the respondent used the accounting reports (generated by the
accounting information system) for decision-making?
Not often Very often

____________________________________________________________
1 2 3 4 5
21. In general, do you think the respondent found using the accounting information system:
Not at all interesting Very interesting

____________________________________________________________
1 2 3 4 5
22. In general, do you think the respondent found using the accounting reports (generated by
the accounting information system):
Not at all interesting Very interesting

____________________________________________________________
1 2 3 4 5
23. How volatile do you think is the industry that the firm is in?
Not at all volatile Very volatile

____________________________________________________________
1 2 3 4 5
24. How sophisticated do you think is the accounting approach used by the firm?
Not at all sophisticated Very sophisticated

____________________________________________________________
1 2 3 4 5
________________________________________________________________________
272 _______________________________________________________________ iJAMT
25. How sophisticated do you think is the technology used by the firm?
Not at all sophisticated Very sophisticated

____________________________________________________________
1 2 3 4 5
26. How do you think the respondent felt about the accuracy of the accounting information
systems in providing him/her with information for decision-making?
Not at all accurate Very accurate

____________________________________________________________
1 2 3 4 5
27. Refer to the table below. Which one of the six cells would you classify your firm in?
Mark your response in one of the spaces below:
___ Offline technological approach, traditional/static accounting approach

___ Offline technological approach, database/dynamic accounting approach
___ Online periodic technological approach, traditional/static accounting approach
___ Online periodic technological approach, database/dynamic accounting approach
___ Online current technological approach, traditional/static accounting approach
___ Online current technological approach, database/dynamic accounting approach
TABLE 1
Accounting Approach
Technological Approach Traditional/Static Database/Dynamic
Offline Current approach using a User is provided with an
reports.
recent periodic data. periodic data.
reports are based on based on current data.
current data.
___________________________________________________________________________
iJAMT ________________________________________________________________________________________________ 273
APPENDIX C
Sat'n Rel
Total Rel
No of Revenue Accounting Systems w/ AIS on
Company Name Industry Assets on Technological Approach
empl ($) Used & Actg Actg
($) AIS
Rpts Rpts
based on current data,
Elite Software
Harris and Brown 18-20 Data/Dynamic accounting
1 law firm 96 3 Million Program, Automated 1 1 3
Law firm Million approach, Online Current,
Data Processing
Dynamic approach
Custody Management
Mellon Financial global financial 5,979 2.8 offline, online periodic,
2 26,000 System, Institutional 2 1 1
Corporation company Million Trillion online current
Accounting System
William Filene's women's apparel and 468.8 Extra, General ledger
3 10,061 1.8 Billion
and Sons, Inc accessories Million 3.0
Effective management
manufacturing and system's time critical
4 EMX Controls Inc. 100 25 Million 2 1 1
distributing company management, Cobol
database system
Massachusetts
The
public governmental 22,587 Management offline, online periodic,
5 Commonwealth of 72000 N.A. 3 1 1
organisation Billion Accounting and online current
Massachusetts
Reporting System
50 offline, online periodic,
6 Lassell Village health care industry 100 3.5 Million Real Estate program 2 1 1
Million online current
manufacturing, sesrvice 10-15 SAP software offline, online periodic,

7 NEC Systems 1,500 2 3 3
industry Million package online current
online periodic,
8 ServiSense service company 50 15 Million CostGuard, Ubill, TRS 1 1
traditional/static methods
South End
9 Community Health health care industry 175 Dynamics 4 online periodic
Center
Micros 2700
Hospitality
10 Jae's Café restaurant 102 4 Million 3 4 4 not defined
Management System,
Business Works
Morgan Memorial nonprofit charity
11 581 20 Million Solomon 1 1 1 offline, online periodic
Goodwill Industries organisation
1,750 Quickbooks, offline, online periodic,

12 Health Care For All health care industry 25 900,000 1 4 4
Billion Peachtree online current
______________________________________________________________________________________________________
274 _____________________________________________________________________________________________ iJAMT
mechanical and
Shooshanian 14.5
13 electrical engineering 120 Semaphore AIS 1 2 2 online current
Engineering, Inc. Million
consulting
Technical Timeslips, ACCPAC
nonprofit consulting
14 Assiatance 15 3 Million 250,000 Small Business 1 5 5 offline
organisation
Collaborative, Inc. Edition
Solomon IV, Microsoft
Advance Energy provides managements 6.88
15 21 719,564 Great Plains Business 3.5 1 1 online periodic
Systems, Inc. services Million
Solutions software
Information
209.51 309.27 offline, online periodic,
16 UMASS Boston education industry 2,400 Associates FRS, 5 5 5
Million Million online current
PeopleSoft financials
Massachusetts Bay
1,140.36 7.36 GEAC Accounting traditional/static, database
17 Transportation transportation industry 6,500 1 1 1
Million Billion System dynamic
Authority
18 A.H. Burns, Inc service industry 17 1.5 Million 600,000 Quickbooks Pro 1 1 offline, traditional/static
Thomson Design architectural, planning

19 6 n/a N.A. DELTECH 1 offline
Associates and design firm
Microsoft Great Plains
service/recreation
20 O'Lindy's 9 385,648 100,947 Small Business 1 3 online current
industry
Manager
manufacturing of
Advanced scientific and medical online periodic,
21 85 15 Million 7 Million Dataflo 4 3.5
Instruments, Inc instruments and database/dynamic
supplies
household products offline, online periodic,
22 Gillette Company 35,200 9.3 Billion SAP, Oracle 2 1
industry online current
State Street globalfinancial SAP, Oracle, GEAC, online periodic,

23 20,000 6 Billion 2 2
Corporation institution PeopleSoft database/dynamic
Visual Manufacturing
Harry Miller Co.,
24 manufacturing company 50 N.A. 5 Million v. 5.2, Crystal 3 1 offline, online
Inc.
Reporting
Cafetek, Great Plains
L.P.M. Holding rent, service catering, 4.4
25 400 26 Million Dynamics, Ceridian 1 1 online periodic
Company, Inc. foodservice company Million
program
2,551 153
manufacturing (shock
26 Barry Controls 400 Billion Million Ceridian, Oracle 2 1 online periodic
and vibration systems)
Euro Euros
independent public
80.46 2.42
27 Massport authority 1,142 Peoplesoft 2 1 database approach
Million Billion
(transportation)
_________________________________________________________________________________________________________
iJAMT ________________________________________________________________________________________________ 275
communications 1.2 Peachtree, FileMaker

28 Boston Idea Group 14 2 Million 2 3 1 offline
organisation Million Pro
internet technology,
BancBoston health care, mergers 750 4.4 PEPM, IBM
29 120 3.5 2.5 periodic
Ventures and acquisition, media, Million Billion Mainframe
restaurants
manufacturing (coaxial
30 San-tron Inc. 50 5 Millions Dejawin, Lotus 3 1 periodic
gadgets)
31 Hill & Barlow LLP law firm 348 CMS Open 1 1 offline, online
Asian American 102 offline, online periodic,

32 commercil bank 50 703,000 FiServe 3 1
Bank Million online current
U.B. Vehicle (18.97 678.61 offline, online periodic,

33 independent lessor 62 LVS, VCollect 5 5
Leasing, Inc. Million) Million online current
Educator for social 20 offline, online periodic,

34 education industry 1,900 1 Million Budget system 5
responsibilities Million online current
Bridgewater
offline, online periodic,
35 Goddard Park patient service centre 500 40 Million N.A. BGPMA 1 3
online current
Medical Associates
South Shore
Association of nonprofit service 2.5 offline, online periodic,
36 130 4.9 Million Quickbooks 1 1
Retarded Citizens agency Million online current
facility
TAGS Hardware, 2.3
37 retail industry 50 7 Million PACE 1 1 periodic
Inc. Million
Stride Rite manufacturing 434.2 333.75 JDA's Merchandise traditional/static, database

39 2,400 3 1
Corporation (footware) Million Million Management System dynamic, periodic
information and 4,149 3.26
online current -
40 Getronics, LLC communication 28,535 Million Billion SAP 2 1
database/dynamic
technologies Euro Euro
Cornea Athena, Checkbook
41 health care industry 23 2.4 Million 3 3 periodic
Consultants solutions
New England Solomon, TM1
nonprofit religious
42 Europe Missions 140 13 Million 4 Million Forecasting system, 1 1 offline, online periodic
organization
Corporation Lotus
______________________________________________________________________________________________________
276 _______________________________________________________________ iJAMT
___________________________________________________________________________
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Article · April 2005

Siew H. Chan John R. Carlson

SEE PROFILE SEE PROFILE

Technology Impacts on Work-Family Conflict View project

Interactive classroom technology and student experience View project

The user has requested enhancement of the downloaded file.

Do Firms Use the Database Accounting Approach in

Siew H. Chan, Western Michigan University

Accounting information is acquired, stored, processed, and disseminated in order to meet

Characteristics of Accounting Systems

Dynamic database accounting Traditional accounting system

Table 1 Characteristics of Accounting Systems

Technological and Accounting Approaches

Table 2 Approaches for Communicating Accounting Information to Users

The various approaches to reporting accounting information can be categorized by looking

The research model is presented in Figure 1. The degree of innovativeness of a firm’s

Figure 1 Research Model

Proposition 1: Firms with more innovation enabling factors2 will implement

components of user perceptions include sophistication of a firm’s AIS and technological

Proposition 2: Users will perceive a firm’s AIS and technological approach to be

Proposition 3: Users who perceive a firm’s AIS and technological approach to be

*Correlation is significant at the .05 level (1-tailed)

ACCTEC SOPHAIS SOPHTEC

* Correlation is significant at the .05 level (1-tailed)

SOPHAIS SOPHTEC AISSAT AISLIKE AISINT

Elliott, R. 1996. AICPA Council Meeting. Chicago.

Groomer, S. M. and U. S. Murthy. 1989. Continuous auditing of database applications: An

Shin, N. 1999. Does information technology improve coordination: An empirical analysis.

Yuthas, K. and Eining, M. M. 1995. An experimental evaluation of measurements of

1. Revenue denotes size of firms.

Your report should contain the following information:

Use this table as a guide for answering question 13

Not at all effective Very effective

Not at all innovative Very innovative

Very low quality Very high quality

Not at all accurate Very accurate

Not at all useful Very useful

Not at all useful Very useful

Not at all important Very important

Not at all important Very important

Not at all easy Very easy

Not at all easy Very easy

Not at all satisfied Very satisfied

Not at all satisfied Very satisfied

Very little A lot

Very little A lot

Very little A lot

Very little A lot

Not at all important Very important

Not at all important Very important

Not often Very often

Not often Very often

Not at all interesting Very interesting

Not at all interesting Very interesting

Not at all volatile Very volatile

Not at all sophisticated Very sophisticated

Not at all sophisticated Very sophisticated

Not at all accurate Very accurate

___ Offline technological approach, traditional/static accounting approach

manufacturing, sesrvice 10-15 SAP software offline, online periodic,

1,750 Quickbooks, offline, online periodic,

Thomson Design architectural, planning