Accounting Technology Accreditation Standards

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Accounting Technology Accreditation Standards: The Role of Accounting Systems Faculty

Gary P. Schneider, PhD, CPA (Ohio) College of Business California State University, Monterey Bay 100 Campus Center Seaside, CA 93955-8001 Voice: 831 582-4015; fax: 831 582-4251 [email protected] Marylou L. Shockley, PhD College of Business California State University, Monterey Bay 100 Campus Center Seaside, CA 93955-8001 Voice: 831 582-5218; fax: 831 582-4251 [email protected]

September 14, 2017 Submission to AIS Midyear Meeting

Acknowledgements: The authors are indebted to Constance Lehmann, Alex Kogan, Cynthia Lohrke, and participants at the 2017 AIS Educator Annual Conference for helpful comments on earlier drafts of this paper.

Accounting Technology Accreditation Standards: The Role of Accounting Systems Faculty

Abstract

This paper begins with the rationale for, and an analysis of, the accreditation standard related to the integration of information technology in accounting programs that was introduced in 2013. The standard, contained in Appendix A7 of the AACSB International—The Association to Advance Collegiate Schools of Business (AACSB) Accounting Accreditation Standards (AACSB 2013a). The paper then discusses alternatives for implementation of elements that can be included in existing accounting curricula and explores alternatives such as adding new courses and relying on existing courses outside the accounting major to fulfill the requirements of the new standard. Faculty currently teaching accounting information systems (AIS) courses have been leaders at many schools in developing courses and strategies for meeting the new standard. The paper concludes with an evaluation of those alternatives.

Introduction

More than 160 accounting programs worldwide hold AACSB accounting accreditation (AACSB 2017), with most of those programs in the United States. Only a handful of programs in other countries hold this accreditation. However, many of these programs are leaders in curriculum development and the nature and composition of the courses taught at these schools often serve as templates for courses taught at other schools. The main accounting faculty organization in the United States, the American Accounting Association (AAA) is also influential in the

development of accounting curricula, with at least three of its sections (Accounting Information Systems, Strategic and Emerging Technologies, and Teaching and Learning) devoting substantial resources to both direct and indirect curriculum development. In this paper, we use the term “AIS faculty” broadly to include accounting department members who teach courses in accounting systems, information systems auditing, and other courses that have a significant technology or data analytics component.

The AACSB generally revises its accreditation standards every ten years, and the Business and Accounting Accreditation Standards adopted in April of 2013 included a new standard, Standard A7, that requires programs with separate accounting AACSB accreditation to include learning experiences “related to the integration of information technology in accounting and business” (AACSB 2013a, 30). Specifically, the standard requires “the development of skills and knowledge related to data creation, data sharing, data analytics, data mining, data reporting, and storage within and across organizations” (AACSB 2013a, 30).

Both the standard itself and an explanatory white paper (AACSB 2014) provide some guidance, but many accounting programs are currently struggling to comply with this standard even though the phase-in period (2013-2016) has ended (Chan and Kogan 2016; Coyne, Coyne and Walker 2016; Du 2016; PWC 2015).

Genesis of Standard A7

Accounting academics’ work in reviewing the quality of accounting education over the years has resulted in specific guidance for increasing coverage of technology in the accounting curriculum, but more profound are the repeated concerns issued by joint academic-practitioner committees, working groups, and commissions. Almost 20 years ago, a report sponsored by three major accounting organizations and the then “Big 5” accounting firms included specific recommendations for including technology topics in accounting courses (Albrecht and Sack 2000, see especially the tables on pp. 46-47).

Since then, other groups of accounting practitioners and academics have discussed the need for accounting students to be taught current technologies; even arguing that the future of accounting could be in jeopardy if they are not. The Pathways Commission Report (AAA 2012, p. 68) warned that, “If the accounting community continues to concentrate on the financial accounting system and not understanding the technology and dynamic business processes that run companies of the 21st century, the accounting profession has the potential to become obsolete.” Although the Pathways Commission did not make specific recommendations regarding technology inclusion in curricula, it did note the importance of having the accounting practice community engage with academics in defining the body of knowledge that should be included in curricula. Direct responses from practice have been more specific. The American Institute of Certified Public Accountants (AICPA) highlighted the need for technical proficiency in their list of “Functional Competencies” provided as part of the Core Competency Framework and Educational Competency Assessment (AICPA 2015).

Public accounting firms have been specific in their calls for accounting students to increase their understanding of current technologies and data analytics (Deloitte 2013; PwC 2015). They argue that accountants with information technology and data analytics expertise are uniquely qualified to guide corporate strategy, serving as a link between business activities and the information technology functions that facilitate those activities. Revisions to the existing curriculum to address these skills can prepare accountants to work as systems designers, data analysts, and IT auditors. Noting that business schools were not creating programs in data analytics quickly enough, KPMG undertook a direct sponsorship of such programs at Villanova and Ohio State, populating the new programs with their interns and paying all expenses for them (McCabe 2017). In the second year of the program, KPMG announced it would expand this sponsorship to nine additional schools (Ether 2017).

The need for accounting students to master the technologies of accounting systems has been long discussed by AIS faculty (Borthick 1996). Coyne et al (2016) note that these technologies have evolved over the years, with companies moving from hiring programmers to create their own accounting systems from the inception of computerized AIS through the early 1990s, at which point most companies were using integrated accounting and enterprise resource management software purchased from vendors (and often customized by consultants) that relied on underlying relational database systems. This evolution has required accountants to continually learn about and adapt to these systems throughout their careers.

An example of the accounting academy generally addressing the need for schools to include current technologies in curricula is the AAA’s “Accounting IS Big Data” annual conference,

begun in 2015 with major sponsorships provided not only by the “Big 4” firms, but also technology providers such as Tableau, Oracle NetSuite, IBM, and Microsoft (AAA 2017). Topics at recent conferences have included cybersecurity, blockchain, machine learning, integrated reporting, data analytics, managing big data, predictive analytics, audit analytics, and data analytics in tax practice. Although much of the conference is devoted to emerging research topics for accounting faculty in these areas (Schneider, Dai, Janvrin, Ajayi and Raschke 2015), there is a substantial portion of the program devoted to the incorporation of technology topics into accounting courses.

Distinguishing Accounting Standard A7 and Business Standard 9

When working on the 2013 revision to its accreditation standards, relevant committees of the AACSB considered the need to include specific language in both Standard 9 of the business standards (which would apply to all accredited business programs) and the accounting standards. The language in these two standards is different in somewhat subtle yet important ways. Standard 9 requires business degree programs to address general skills in information technology at a level that enables students to become “able to use current technologies in business and management contexts… [and can integrate] … data management, data analytics and information technology… [into] … evidence-based decision making” (AACSB 2013b, p. 35). Standard A7 requires accounting programs to “develop skills and knowledge related to the integration of information technology in accounting and business” [including] skills and knowledge related to data creation, data sharing, data analytics, data mining, data reporting, and storage within and across organizations” (AACSB 2013a, p. 30).

The two standards are substantially different in both depth and scope. Under these standards, business students must learn general skills that will enable them to use technologies, data management, and data analytics. Accounting students must acquire both skills and knowledge about information technology, its integration into accounting and business, and have specific data management, data analytics, and data storage skills and knowledge. The standard for accounting students requires learning that is more in-depth and also is more broadly defined. The inclusion of specific language regarding data (sharing, analytics, mining, reporting and storage) in the accounting standard is notable because most pre-2003 accounting curricula included these topics only in an AIS course, and that course was either an elective or not taught at all in a number of accounting programs. Indeed, in some accounting programs, these topics were addressed in non-accounting courses that were electives for accounting majors.

These differences are emphasized in a white paper issued by the AACSB (2014) to clarify and help accounting programs interpret Standard A7. Notably, that white paper states an expectation that: “the learning experience for accounting students exceeds what is normally included in a ‘business core’ for most business school majors” (AACSB 2014, p. 5). Thus, any attempt to include these technology concepts and skills in non-accounting courses cannot use courses that deliver technology topics to all business students unless those courses are taught to the higher standard required for accounting students. This likely precludes most accounting programs from using a core information systems course to satisfy the A7 requirement.

A possible alternative would be to include all necessary A7 topics in an AIS course (or perhaps a second, advanced level, AIS course added to the curriculum). Although this might be possible, the white paper cautions programs considering this approach, stating that Standard A7 “demands an interdisciplinary approach that draws input from professionals and academic scholars with expertise in information systems, statistics, computer science and engineering, [and information technology-related] ethical issues” (AACSB 2014, p. 5). This language in the interpretation suggests that any such courses might need to be team-taught with faculty from the relevant disciplines or be taught by accounting faculty with academic qualification in those areas. The documentation of course content and faculty qualifications for these educational experiences will be substantial. Further, the expectation that academics outside accounting will devote time and resources to the creation of courses that would only be taken by accounting majors could be unrealistic at many smaller schools, especially given that these courses would need to be taught at a level that is more in-depth than content taken by other majors in the business program.

Role of AIS Faculty in A7 Compliance

AIS faculty have made considerable efforts to make similar adaptations in their courses (see, for examples: Borthick, Bowen and Gerard 2008; Borthick, Jones and Kim 2001; Borthick and Schneider 2016; Bradford and Gerard 2015; Premuroso and Kirkham 2013; Vician and Mortenson 2017) and many of these innovations have found their way into AIS textbooks (for a recent summary, see Coyne, et al 2016, especially Table 1). These developments and the devotion of many AIS faculty to keeping their courses current with rapid changes in technology is important because under the A7 standard, the importance of the AIS course is likely increased.

However, the AACSB (2014) white paper on the standard includes specific admonitions, stating that programs should not “focus … on ‘accounting information systems’ only, but on information storage, management, and analysis” (p. 5) and “philosophically, the learning focus should be on information management and analysis, not simply ‘accounting information systems’” (p. 7). Perhaps there is some good news for programs seeking to cover these topics in an AIS class or other classes taught by AIS faculty: In many cases, AIS faculty are active researchers in information management and related areas (data analytics, database theory and design, and so on). Still, program administrators will need to exercise care in assembling and maintaining documentation of course content and faculty qualifications.

Notwithstanding the AACSB’s concerns regarding the AIS course itself, AIS faculty have a greater likelihood than other accounting faculty to have tight integration of their research programs and their teaching innovations (Krahel and Vasarhelyi 2014) and are thus well equipped to lead innovation in the integration of new technologies throughout the accounting curriculum, not just in specific AIS courses. For example, a large proportion of the research published in the last ten years in continuous auditing and continuous monitoring has appeared in AIS, rather than auditing, journals.

Given the concerns and constraints suggested by Standard A7 and its interpretation, AIS faculty are well positioned to play a major role in curriculum design and assurance of learning. Although most programs will be unable to rely on AIS faculty to provide all coverage for the coursework required, AIS faculty can be important resources for collaborative work in designing curriculum,

specifying ways to get A7 topical coverage into multiple accounting courses, and assessing the results.

Integration of A7 Topics in Existing Non-AIS Accounting Courses

Financial Principles These courses are typically taught to all business majors and thus will only have a limited role in satisfying A7 requirements at most schools. However, there are ways to use large data sets in an introductory course to give students a sense of the magnitude of data used in doing accounting. When discussing the accounting for basic transactions, an instructor might provide a brief overview of electronic data interchange (EDI) and show how the ANSI X12 format for a simple transaction (for example, a purchase order) includes elements that would be stored in both the buyer’s and seller’s databases.

Managerial Principles These courses are typically taught to all business majors and thus will only have a limited role in satisfying A7 requirements at most schools. However, managerial topics lend themselves to an inference-based learning approach using large amounts of data. Presenting students with a large (million row or greater) spreadsheet of sales or purchases information and asking them to perform specific analytics (for example, sales by customer by region, sorted by size) could help instantiate important concepts while imparting data management and analytics skills.

Financial Accounting and Reporting (Intermediate and Advanced Levels)

Financial accounting courses at this level all involve estimates (product warranty expense, uncollectible account expense, gift card breakage) that can be estimated based on data analytics using large data sets. Interactive data graphics can be used to evaluate inventory obsolescence when multiple attributes of large numbers of products are plotted. Simulations of large consolidations (hundreds or thousands of entities) can provide the basis for developing data management and error-checking diagnostic skills.

Cost or Advanced Managerial Complex performance management systems can be created in spreadsheet software with large numbers of variables for large numbers of managers. Activity-based costing and management simulations can be based on large data sets. Transfer cost problems with multiple departments and multiple products can be built and analyzed with spreadsheet or database software.

Taxation Large data sets can be used to build simulation of tax strategy problems for multinational companies. Managing sales and use taxes across multiple jurisdictions (there are more than 800 distinct sales/use tax rates in the United States) is also a topic that lends itself to big data analytics.

Auditing Almost every public accounting firm now uses a combination of interactive graphics, machine learning, and advanced spreadsheet tools (such as Tableau) to perform analytical review procedures on audits. Many firms expect beginning auditors to have some facility with using or

writing database queries in a language such as SQL. Using large data sets with a querying tool to draw a sample or analyze an entire population can provide real-world experience for students in this class.

Accounting Information Systems The AIS course is often the location for database skills and knowledge development. Data management, data querying, and database design can all be taught in the context of accounting systems. Accounting internal control can be taught here (or in the Auditing class) with graphics tools being used for business process modeling or flowchart construction and interpretation. In many AIS courses, students learn how to construct accounting systems using database management software.

Summary In summary, there are opportunities for introducing A7 topics into almost every accounting course. Resources, such as free or low cost academic licenses for software tools such as Tableau, IBM Watson, and Oracle NetSuite, are increasingly available to accounting faculty and students. Large data sets designed for use in accounting courses, such as the Hub of Analytics Education at Northeastern University, are also becoming available. Standard A7 and its interpretation both suggest that a good way to incorporate these topics into the accounting curricula is to include them across the curriculum. In the next section, integrating A7 topics into non-accounting courses is outlined.

Integration of A7 Topics in Existing Non-AIS Accounting Courses

Many accounting programs will comply with A7 by requiring accounting students to take specific non-accounting courses that are not in the business core and could even be taught by faculty outside the business unit. Accounting programs that do not include faculty in their departments who are trained in other disciplines, notably information technology, might find this pathway to be a necessary component of their A7 compliance plan.

Rather than discuss specific courses that could be required of accounting students, this section lists topics that would be likely candidates for coverage in non-accounting courses. These topics include: •

Business statistics

•

Data management

•

Data analytics

•

Data privacy

•

Data security

•

Technology-driven changes in the work or business environment

•

Machine learning

•

Complex decision making

•

Data analytics tools (interactive graphics, data mining, artificial intelligence)

•

Information systems design

•

Relational database theory

•

Relational database querying

•

Non-relational database design, management, and querying

•

Big data management technologies

This list is neither exhaustive nor all-inclusive. Some of these topics would not be appropriate for some accounting programs but would be essential for others. Many of these topics could be taught in accounting courses, particularly AIS courses, if taught by appropriately qualified faculty. Each program will need to make decisions based on its resources and the resources of other academic units in its organization about where to teach these topics and how to best integrate them in their curricula.

One issue that could arise is the need for an accounting student to take an entire course in another field (for example, computer science) to gain the knowledge of one or two topics. Administrative solutions to these kinds of problems will be more or less available at different schools.

Conclusion

The practice of accounting is becoming much more data-driven and technology dependent. Accreditors such as the AACSB have, and will likely continue to, increase the level of technology skills and knowledge required of accounting graduates. This paper outlined the AACSB standards for accredited accounting programs under Standard A7, explained the genesis of that standard, contrasted the requirements of that standard with the lower standards required of business programs, and provided suggested strategies accounting programs might pursue to meet the A7 standard in ways that consider the specific constraints and opportunities at various types of schools.

As Krahel and Vasarhelyi (2014, p. 14) note: “The fact that A7 is becoming a component of the AACSB’s standards speaks to higher education’s need to begin the process of educating a generation of continuous learners with an attitude of adaptability and an appetite for change. Fields such as big data, continuous audit, and automation are the current frontiers of this change, and AIS research does and will continue to incorporate such developments into a robust curriculum.” The challenge is upon us as AIS faculty to take a leading role in meeting the requirements of A7.

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