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Accounting Information System: Role Of Relevance And Essay

Accounting Information System: Role of Relevance and Reliability in the Conceptual Framework

The development any system, whether manual or automated, requires a conceptual framework that serves as the foundation for the establishment of requirements, policies, standards and procedures. From the conceptual framework, the various applications can be developed and when these proved to be effective and efficient, best practices are established and become the model for other systems to follow. Developing an accounting information system is no different and the conceptual framework thereto requires an even more thorough understanding of what is needed and what the end state should be especially with regards to the information. The different information needs of the various decision makers results in two related, but different accounting information systems; managerial accounting and financial accounting (McMenimen 2003). But whatever information -- or even data, gathered for the development of the conceptual framework or the whole accounting information system itself, there are certain factors that must be met. Two of these critical ones are relevancy and reliability but before delving into the role of these two in the conceptual framework in accounting information system, understanding what comprises or what is a conceptual framework will be done first.

Generally, the conceptual framework of accounting information system provides the principles and concepts governing managerial and financial accounting. Consequently, it incorporates the standards and policies in the actual implementation of accounting information system. In layman's terms, one of the end results of the conceptual framework in accounting is the rules of engagement governing the practice of accounting. In Australia, "the role of the conceptual framework is to build a common understanding of financial reporting for all people in business. The framework also builds consistency with international accounting standards and concepts as it is aligned with an international framework....

The conceptual framework is used as a basis for developing accounting standards. (WestOne Services 2009)" In order to be effective and efficient, the conceptual framework should and must be relevant and reliable. For accounting information to have relevance, there should be a capability of providing the needed inputs and information to arrive at a decision, show the real accounting and/or financial performance, have "predictive or feedback value (Van Beest & Braam 2006)," and be available when needed or in a timely manner. On the reliability factor, the information therein must be verifiable, faithfully true and correct as well as being trustworthy. The objectives of relevance and reliability are (Barrett 2004):
greater focus on the better use of resources, budgeting and accounting; promotion of greater understanding, transparency and ownership of financial information; using financial information to make more informed decisions; and cultivation of a culture of accountability and performance based on sound values and ethical conduct.

Relevance and reliability are complementary but they are not the only roles or characteristics of the conceptual framework to ensure that there is sound accounting information system. There has to also be understandability and comparability where the former is a "qualitative characteristic of reports that ensures they use consistent methods and definitions while the latter is a qualitative characteristic of reports that ensures they use a clear, logical format that makes them easy to understand (WestOne Services 2009)." Taken all together, these roles or characteristics provide a strong conceptual framework thereby ensuring that high standards are developed in the accounting information system. Once standards and policies in accounting have been developed, there is a consistency that provides for definite rules and actions governing accounting activities.

Having the relevance, reliability, understandability, and comparability in the conceptual framework in accounting information system does…

Sources used in this document:
Bibliography:

Barrett, P 2004, Developments in Government Accounting and Auditing in Australia. Available from: <http://www.anao.gov.au/~/media/Uploads/Documents/developments_in_government_accounting_and_auditing_in_australia1.pdf> [22 August 2011].

Bullen, H 2005, 'A new conceptual framework project'. Revisiting the Concepts. Available from: <http://www.fasb.org/communications_paper.pdf

http://eprints.usq.edu.au/5950/1/Petrachat_Mula_COINF09_AV.pdf

Lambert, S 2008, A Conceptual Framework for Business Model Research. Available from: <http://ecom.fov.uni-mb.si/proceedings.nsf/0/1e893ee544d680fec12574810042ac2d/$FILE/22Lambert.pdf> [22 August 2011].
McMenimen, L 2003, The Accounting Profession. Available from: [22 August 2011].
WestOne Services 2009, Accounting and Finance 3B. Available from: [22 August 2011].
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