Introduction. Scope of Paper

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1 Information Technology in the Accounting Curriculum Gerald Trites, FCA, CA*IT, CA*CISA Consultant to the Information Technology Advisory Committee of the CICA Research Fellow - UWCISA Introduction For more than sixty years, accountants have been trying to deal with the effects of computer technology on their profession. With the introduction of personal computers in the early 1980s, and the consequent evolution of networks and then the internet in the early 1990s, the issues related to IT escalated considerably. The introduction of technology into society is one of the great revolutions of human history. The period of its existence has been a relatively short time for the profession to absorb this revolution. To complicate matters, IT is not static, but rather changes very quickly, complicating the process of dealing with it. It should not be surprising that the profession finds itself in a state of disarray when it comes to understanding IT and its effects. Scope of Paper The purpose of this paper is to consider the current state of the accounting curricula in Canada and to make recommendations as to its content. Extensive reference is made to the CICA Competency Map, as one of the guiding forces in shaping the curricula, including some analysis of its pros and cons. The paper builds on writings in other jurisdictions, and may be applicable to them as well. The Central Question The accounting profession is one of the oldest of all the professions, because for as long as there has been business activity and the exchange of money, there has been a need to keep financial records. Throughout that time, accountants have used the technology of the time, whether it was papyrus, quill pens, pencil and paper or computers. Accountants have always viewed the technology they used as being secondary to their prime function of being accountants. Indeed, this is understandable, since the accounting discipline presents numerous issues that can exercise even the keenest of minds, such as valuation, matching and realization. Moreover, the older technologies were very simple, and while they have had a major impact on the way in which accounting was done, they changed very slowly, and therefore any changes in accounting methods occurred very slowly as well, making adaptation relatively easy. Modern technologies, however, are very different than those of older times. They are constantly changing and they are much more intrusive into the resolution of the issues that accountants face. For example, asset valuation in an online, real time world, where a vast array of information is instantly available, is a much different exercise than it was in pre information technology times. In the world of information technology, where to get information and how to evaluate it are skills that are now crucial to resolving accounting issues, and the accountant must have an understanding of where and in what form information is stored, how to get it and how to use it. Therefore they must have an understanding of technology, at least so they can find the information they need to perform accounting functions with sufficient expertise. In a recent paper, Bob Hurt recommended a course that could also include conducting research using IT an increasingly important skill in today s information economy. Although students would not emerge from this course as experts in every form of IT, they would develop some competence in each area, to be expanded later in the curriculum. 1 1 Teaching What Matters: A New Conception of Accounting Education, Bob Hurt, California State Polytechnic University, Pomona, California, Journal of Education for Business, May/June,

2 The issue before accounting educators today is how should they develop and deliver accounting programs so as to meet this need for technology knowledge without degrading the value of education their students receive in the traditional core areas of the accounting discipline, which, as noted, are demanding in themselves. The Big Picture As accountants have struggled with these questions over the past fifty years, various approaches to the inclusion of information technology (IT) in the accounting curricula have been proposed and used. Several special reports have been issued, all urging educators in one way or another to devote more effort to IT, some saying even that the future viability of the profession rests on responding adequately to this challenge. Most recently, the CICA issued a report in 2004 titled Strategic Crossroads for the CA Profession, which observed that, while the CA profession has adapted to the technological revolution and it will continue to use this invaluable tool to meet the needs of employers and clients, nevertheless The CA profession, despite recent efforts and successes, is not yet clearly positioned as mastering information technology competencies. 2 In the efforts of the profession so far, two broad approaches have been employed the integrative approach and the discrete subject approach. Under the integrative approach, the idea was that IT would be taught along with and as part of the preexisting subject areas, such as financial accounting, management accounting, auditing and tax. The persons responsible for teaching the subjects would therefore be expected to acquire enough knowledge of IT to be able to include meaningful content in their courses to enable the students to learn how the particular area would be affected. Under the discrete subject approach, however, the IT implications of, say, auditing, would be taught as a separate subject, normally by specialists. The students would be left to do the integrating. In some educational systems, there have been both, with separate subject teaching combined with integrative modules. Over the years, educators have flipped back and forth on these issues, as have, incidentally, the practitioners of accounting. In the Strategic Crossroads report, the recommendation was made to structure the educational curriculum according to: A multi-stream approach that is strong in the core areas but is broadened to include other knowledge and competencies in management, finance and information technology; 3 The Canadian CA Delivery System Under the Canadian constitution, education is a provincial responsibility. Therefore educational programs are generally run by the provinces, and any national educational programs are carried out on a cooperative (and sometimes not so cooperative) basis, where individual provinces generally have a veto. The CA program therefore follows this dictum, where the provinces run the delivery systems, and the national qualifying examination for chartered accountants, called the Uniform Evaluation (UFE) is prepared under the direction of a committee of provincial representatives, each having veto powers. The delivery system is organized on a cooperative basis, mostly with regional Schools of Accountancy, with the Atlantic provinces having ASCA (The Atlantic School of Chartered Accountancy), the Western Provinces having CASB (The CA School of Business), and the large provinces of Ontario and Quebec with their own delivery systems run by the provincial CA professional organizations the Institute of Chartered Accountants of Ontario (ICAO) and the Ordre des Comptables Agréés du Québec (OCAQ). Each of these 2 Strategic Crossroads for the CA Profession, The Council of Senior Executives Strategic Planning Task Force, October, 2004, CICA, Toronto. 3 Op cit, pg 25. 2

3 organizations establish or guide the content of their delivery systems, including the information technology content. ASCA The ASCA program contains a single course on information technology called Management Information Systems. The course description states: This course deals with the impact of information technology and systems on business organizations. A managerial or end user approach to information systems concepts and applications will provide an understanding of how information systems support key business functions, the information resources available to managers, and the role of managers and accountants in the systems development process. The course helps prepare students for their future role as professional accountants involved in the planning, designing, evaluating, controlling, auditing and use of computerized information systems. Lecture only (Summer session) The program also contains four integrative modules, with IT mentioned as one of the integrative elements in each of them. These modules integrate core accounting functions with each other and with IT. CASB The CASB program is structured around integrative modules, which are staged as Role Playing exercises, the role being that of a recently qualified chartered accountant. For admission to the program, students must have a university degree with certain specified course requirements. Listed among those requirements is one on IT as follows: Information Systems and Technology (one intermediate course required; a second intermediate or advanced MIS course is highly recommended) In essence, this requirement is similar to that of ASCA, except that the second recommended course is a differentiating feature. ICAO ICAO runs a program under which it also sets admission standards for the students. In these standards, there is a requirement for at least one 3 credit course in Information Systems. OCAQ The Quebec Ordre has approved certain universities in the province to deliver programs that it will accept for entry into the profession. The area of computer systems is listed as one of the areas to be covered. The CA Competency Map The content of the UFE is guided by the CA Competency Map, which is issued by a national Committee under the authority of the Provincial Institutes. Many universities refer to the Competency map in determining the content of their accounting programs, especially where those programs are specifically directed to the CA Profession. The competencies identified in the Competency Map are classified into six categories with Information and Information Technology being one of them. This category is described as: competencies related to the evaluation of an entity s information needs and the development and use of information technology in achieving its strategic and operational goals and objectives. 4 4 Competency Map, pg 14 3

4 The Competency Map then sets out the level of competency required for each of the specific competencies in the map. For this purpose, it uses a three tier scale of, from lowest to highest, Comprehend, Detect and Perform. It is further explained in the Map with the following example dealing with advising a client on IT strategy 5 : Comprehend In normal circumstances, the entry-level CA at a comprehend proficiency level would be able to describe and explain: general business systems concepts; transaction processing in possible business and accounting applications; strategic considerations in the adoption and implementation of information systems; information systems elements and control techniques; the importance of the company having an IT strategy; and what the main elements of such a strategy might be. Detect In normal circumstances, the entry-level CA at a detect level of proficiency would, in addition to the tasks noted above at the comprehend level, be able to assess the company s IT strategy by: identifying, through the CA s basic understanding of IT strategy, whether such a strategy is required; assessing whether an existing strategy appears to be in line with the organization s current strategic objectives and whether it would require the implementation of a new computer system; identifying, through the CA s basic understanding of key business processes, e.g., purchases, payables, payments and sales, receivables, receipts and IT architecture (networking, databases), the entity s key system, functional and IT requirements; analyzing given material or ideas on a preliminary basis; based on the work performed, forming a preliminary conclusion on the appropriate IT strategy; identifying other merits, implications or possibilities that a preliminary evaluation has revealed; and identifying the need for any further work or analysis. Perform In normal circumstances, the entry-level CA at a perform level of proficiency is, in addition to all the tasks noted in comprehend and detect above, able to assist the entity with its IT strategy by: providing advice on the development of, or required changes to, its information technology strategy to ensure it is in line with the entity s strategic objectives (the underlying knowledge includes knowing what the various strategic approaches currently available are); and advising the entity on which best-practice solutions are in line with the entity s strategic objectives. The map notes that Candidates at the perform level will possess a deeper knowledge of business processes and IT infrastructure than expected of those at the detect level. (The underlying knowledge includes knowing what the existing best practices are.) 6 A Look at the Real World There can be no debate about the fact that technology has become a major element of business strategy and administration. Virtually every business, no matter how small, uses information technology to record its transactions, and produce reports that tell the owners and managers how the business is doing. Accountants who do not understand how the technology works cannot help with this process of recording transactions and producing reports in other words, they cannot do accounting. Generally, the larger the business, the more complex the technology used and the greater the challenge. This need for IT understanding is compounded by the events over the past few years which have clearly shown that the world is expecting much more of auditors. Now, auditors are required to place a much 5 Competency map, pg 185/186 6 Competency Map, pg 186 4

5 greater emphasis on internal controls, because of the passage of the Sarbanes-Oxley Act, the Canadian Investor Confidence rules and the new Audit Risk standards, all of which require more work on internal controls. Of course, all control systems make extensive use of IT, and it is therefore necessary for auditors to understand the implications of IT on internal controls over financial reporting. An important issue, therefore, is whether the educational delivery system for accountants is in step with current events, particularly with regard to the impact of IT on controls. In addition, there is risk with all information systems. An evaluation of the risks requires an understanding of the risks inherent in information technology again, an important issue for accountants to address. At the fundamental level, CA s have long been the masters of setting up accounting systems. With technology they are in danger of losing this advantage. Many practitioners make up for the lack of exposure in this area in their educational programs by learning on the job, after qualification. In the Hurt paper, the recommendation was made that: The final group of basic skills required of all accountants is information technology. Competence in basic personal productivity software (word processing, spreadsheets, and presentation graphics) could be expanded and applied in accounting settings. Students would also develop hands-on familiarity with general ledger packages, relational databases, and other software tools that cut across the traditional areas of accounting practice. A focus on hands-on teaching of software is anathema to many academics, as in their minds it edges too close to job training rather than conceptual teaching. Nevertheless, accounting is an applied discipline, and the use of accounting software is at the core of the discipline. Adequacy of Present IT Levels of Knowledge Is the delivery system meeting the needs of the marketplace? The CICA Information Technology Advisory Committee, in making representations to the CA Competency Map Committee in 2006 made the following comment: In the experience of ITAC members who deal with CA s and who hire them, CA s do not demonstrate an adequate level of understanding of IT. Clients of CA firms express frustration about this lack of understanding. They themselves need to deal on a daily basis with the implications of IT in making managerial, operating and strategic decisions, and expect their CA auditors and advisors to understand these issues as well. The CA s we are delivering do not have this knowledge, which would indicate that the educational and CA delivery system is not working well in this area, even though IT has been a separate competency. When one considers the real world needs and then the course content included in the requirements of the Schools of Accountancy, it should be no surprise that the needs are not being met. A single introductory course on Management Information Systems cannot really be expected to deliver on those demands. Moreover, they cannot be expected to deliver on the demands of the Competency map, which does require some competency in a range of IT expertise. As noted above, the Strategic Crossroads Report noted that the CA profession is not yet clearly positioned as mastering information technology competencies. Attempts are being made to meet the shortfall, at least partially, within the individual areas of competency other than IT. For example, IT implications of Auditing are usually included in a chapter of standard auditing textbooks. In addition, most programs dealing with internal controls will have a section dealing with the impact of information technology. One problem that arises here is whether the faculty who teach these courses really have the level of IT knowledge they should have to teach the IT concepts. Often, they do not, in which case the IT content becomes marginalized. Strengths and Shortcomings of the Existing Delivery System Exhibit A summarizes the IT competencies set out in the competency map. It is clear that the competencies have a strong strategic focus, a strong focus on controls impact, under the overall heading of Impact on 5

6 Organizational performance, and some emphasis on IT Design, which requires a knowledge of new developments in technology and some emphasis on managing system installation and upgrades. Exhibit A Information and Information Technology Section of the CA Competency Map Specific Competencies and the Recommended Levels of Competency VI-1 Assesses Information Technology Strategy VI-1.1 Identifies the entity s IT needs - D VI-1.2 Evaluates the entity s existing IT strategy - D VI-2 Evaluates the Impact of Information Technology on the Entity s Organizational Performance VI-2.1 Identifies the role information technology plays in a given control system - P VI-2.2 Contributes to the evaluation of IT-related elements of a given control system - D VI-2.3 Uses IT to improve an existing control process - D VI-2.4 Contributes to the evaluation of the entity s systems development and program change processes - D VI-2.5 Investigates the dependence of systems on third parties - P VI-2.6 Evaluates the IT internal audit function - D VI-3 Improves the Entity s IT Design VI-3.1 Evaluates the business impact of new developments and trends in technology - D VI-3.2 Improves the entity s IT design and development - D VI-3.3 Develops business case to support IT proposals - D VI-3.4 Evaluates and decides on IT acquisition and sourcing - C VI-4 Designs and Manages System Installations and Upgrades VI-4.1 Designs and manages or advises on system installations and Upgrades - D, C VI-4.2 Designs and implements IT accounting systems using commercial accounting software - D VI-5 Contributes to Developments in IT VI-5.1 Contributes to public debate - C Here we can observe that some of the IT competencies can be learned largely in non-traditionally IT oriented studies. Business strategy and policy, for example, is normally an important part of any business degree. The main precepts of business strategy apply to situations where IT is a factor. The additional knowledge that is required relates to the impact on IT on strategy, particularly on the formulation of IT strategy itself and the issue of conforming the IT strategy to the general business strategy. Knowledge gained about general business strategy can be leveraged in dealing with the IT implications. A general MIS course can provide a good deal of the knowledge required by a newly qualified CA in understanding the IT strategy, which is set at the Detect level. The competencies required with regard to the IT impact on Controls may be a different matter. Here, the key areas of 2.1 and 2.5 are set at the highest level - Perform. This requires a high level of expertise in the role of IT in control systems and the dependence of systems on third parties. Indeed, these are key areas for accountants. The question that arises of course is whether the delivery system contains the content necessary to enable newly qualified accountants to reach this level in these areas. Clearly they will not do so in the course on MIS or an intro course in Information Systems. Also, they are unlikely to do so in the one chapter in the traditional auditing text on computerized systems. This chapter, if indeed it is even covered by a particular professor, does not comprise a large enough part of the course to have any major impact, certainly not enough to have the desired result as envisaged by the competency map. Since this is all the IS coverage most CA Students will receive in their program, it follows they do not have the requisite level of knowledge. There are two approaches to modifying the system so as to achieve the goals. One method would be to mandate an accounting information systems (AIS) course for the program. Such courses generally provide 6

7 a good idea of the structure of accounting information systems. In addition, they usually provide excellent coverage of the controls structure that should be implemented in a system. Another method would be to include a course devoted exclusively to the area of IT Controls, utilizing the normal control frameworks, like Information Technology Control Guidelines of the CICA, CoBit of ISACA, and COSO. As an example, the University of Waterloo has developed courses such as this for their Master of Accounting program. This alternative goes directly to the need for an emphasis on controls, and therefore may present a more efficient approach. The competency with regard to IT design, even though largely at the detect or even comprehend level, is also unlikely to be met with a single MIS course. Again, an AIS course is exactly what is needed for this competency. An AIS course provides the necessary knowledge about structure, sometimes using, for example, the REA analysis, and how it ties into control systems. Many such courses include examples of systems used in practice, through class projects and assignments. O Donnell and Moore, in their article in the CPA Journal, recommended that Business Schools include AIS courses as mandatory elements of their accounting programs. 7 Finally, the competency regarding system installation and upgrade is one that could draw heavily upon other areas of competency. The reason for this is that the major issues involved with systems installation or any change center around process change, and the people and other management issues that result from dealing with process change. Most generic management and business degrees contain a good deal of content about business process change management. There are usually generic methodologies for such change when it involves IT, such as Systems Development Life Cycle (SDLC) or Systems Acquisition and Development Method (SADM) or specific methodologies, such as SAP s ASAP or Oracle s AIM. These can be easily worked into generic courses dealing with business process change, and indeed make interesting and relevant content for the students. Recommendations In summary, the recommendations for change in the delivery system are as follows: 1. Maintain the requirement for an intro MIS or IS course; 2. Require the inclusion of hands-on experience with common accounting software packages; 3. Require students to take a course in AIS; 4. Require students to take a course on IT controls frameworks; 5. Require recognized courses to include IT Strategy content in their Business Policy and Strategy courses 6. Require recognized courses that include Business Process Change to include content dealing with change in IT oriented implementations. 7 Are Accounting Programs Providing Fundamental IT Control Knowledge?, Joseph O'Donnell; Jennifer Moore, The CPA Journal; May 2005, pg 75 7

8 Bibliography and References: (1) Strategic Crossroads for the CA Profession, The Council of Senior Executives Strategic Planning Task Force, October, 2004, CICA, Toronto. (2) The CA Candidates Competency Map: Understanding the Professional Competencies of CAs, Issued 2006, Effective for the 2007 UFE. (3) Student Resource Guide, Version 5.0, April 2007, CA School of Business. (4) The Accounting Curriculum and IT, J. E. Boritz, School of Accountancy, University of Waterloo, Waterloo, Ontario, Canada, September, 1999 (5) Accounting Education: Designing a Curriculum for the 21st Century, Virginia Anne Taylor; Martin Rudnick, Journal of American Academy of Business, Cambridge; Mar 2005 (6) Enhancing the Master of Business Administration (MBA) Managerial Accounting Course, Fern H Zabriskie and David E McNabb, Journal of Education for Business, Mar/Apr 2007, pg 82 (7) Are Accounting Programs Providing Fundamental IT Control Knowledge?, Joseph O'Donnell; Jennifer Moore, The CPA Journal; May 2005, pg 75 (8) Teaching What Matters: A New Conception of Accounting Education, Bob Hurt, California State Polytechnic University, Pomona, California, Journal of Education for Business, May/June,