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Mini-series Part 3: Digitalization and the accountant

In the first two parts of this mini-series, I discussed the definitions of (Part 1) and role of AIS (Part 2) in digitization and digitalization. In this third part, I would like to highlight the development of the role of the accountant in this regard. Digitalization is both boon and bane of the future accountant – on one hand, it helps further the minimizing of his/her involvement in the nitty-gritty daily grind, the “bean-counting” the end of which has long been heralded by the automation of accounting processes. On the other hand, though, it raises questions about the legitimacy of the role – in other words, are accountants still needed? It seems an inevitable development that more digitalization means less and less accountants are needed to perform the same tasks, both in scope and quality. In this highly interesting article published by the WHU in Vallendar/Germany, the authors highlight eight challenges that current and future (management) accountants might face when confronted with the digitalization trend. The video below helps as an executive summary of the article, but I highly recommend to have a good read – you will learn that the digitalization trend does not have to automatically mean the end of the (management) accountant – if they get proactive with the technology and concepts involved.

Mini-series Part 1: Definition of digitization and digitalization

In the next three posts on this blog, I would like to introduce the topic of digitization/digitilization, and the effects on accounting and accountants. If one does a Google or Twitter search about this topic, one finds a variety of articles that indicate its rising importance. In this post, I would like to summarize a few definitions for the terms “digitization” and “digitalization”, largely following the distinctions made in this blog post

Digitization is the process of creating digital versions of analogue and/or physically represented data. This has per se no business or accounting meaning, but is a necessary part of the digitalization process (see below). The output of digitization can then be used by computers and software for further processing. Archives, for instance, digitize their records to preserve them, make them searchable, and distributable if needed (you can find an example for the US National Archive digitization project here).

Digitalization in turn is the leveraging of digital technologies and digitized information to enable, improve, transform and support businesses, business operations, business processes, decision-making, big data usage, etc.. Digitization is a necessary step in the digitalization process, especially if companies want to reduce (or even eliminate) the dependency and use of physical records (typically on paper). This does not only help improve the business, but also save a considerable amount of costs in paper usage, waste, and archival storage. Where the purpose of digitization is the conversion of records into a digital format, digitalization is geared towards actionable business needs.

Very often, these terms are used synonymous, but in fact, they are not! The difference (or rather complement) between them can be likened to cost and management accounting. There, cost accounting denotes the tools and actions to record, process and output costing data, whereas management accounting adds the purpose of decision-making to the cost accounting toolbox. This entails important implications for accounting information systems, which I will cover in the second part of this mini-series.

 

 

 

A big hack

As you may know, hacking is always a threat in information systems. Every few months we hear of one. The latest reported by Reuters is a hack of millions of mail accounts – mainly mail.ru, but some Google and Yahoo accounts.

So what is the one simple step to protect your mail account – change the password regularly 🙂

Security threats for 2016

  In Chapter  2, we outline some of the security issues in any information system. These threats are many and we do not cover them in great detail. Recently, Kim Zettner from wired.com provided a great summary of the security threats faced by information systems in the coming year. It is worth a read.

What an operating system probably should not be

  In chapter two of our book we describe some basic concepts like operating system – which is the software running a computer.

There are many such operating systems and some like Linux are open source, meaning the underlying code can be changed as required. Apparently, North Korea has taken an open source operating system to another level, modifying it to track file usage. You can read an article here about it, but I guess what it reminds us is that operating systems are about controlling after all.

Mind the digital gap!

A recent study of Go.On UK has found that in the UK around 12 million people and 1 million small businesses are lacking the five basic digital skills of managing information, communicating, making payments, solving problems, and creating material online. Accordingly, these digitally excluded individuals and businesses are at great risk to miss out on vital job skills as well as crucial profit-making abilities. This article published on the BBC Technology website illustrates why missing the digital train is not an option in 2015!

A basic security tip

Very often there are media reports on security breaches and identity theft. And quite often companies get the blame. Mostly however it is the user that is the weak link. Take for example this article where many U.S. taxpayers online details were compromised. The article notes how details were hacked from other websites and these same details were used to gain access to the IRS online tools. So how can such breaches be prevented. Simply have different passwords for each site. But that’s tricky! Well not really, use a password manager like Dashlane which randomly generates passwords. It will also auto fill them in your browser and remind you to change them at regular intervals. Simple, and more secure than reusing the same password.