Accounting Information System for New Company

Accounting System

Accounting Information System

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The following plan details the business areas and services to be provided for a growing homeowners’ association by a certified accounting firm. The large growth in size of the association is cited as a need for this contracting with the accounting firm, and the specific business areas in need of servicing are identified as billing, collections, payments, reporting, taxes, and miscellaneous advisory duties. Input, output, and control requirements are listed in brief for each business area, with reference to current scholarly and regulatory/advisory information to ensure consistency and conformity with accounting standards. Automation of accounting processes is a major focus of the service provision, and levels of automation are fully discussed, with the decision to build an in-house automation system and certain automation challenges discussed.


The homeowner’s association is facing a problem of a major increase in the amount of accounting work it will need to take on. Though currently only comprised of one-hundred and fifty homeowners, this individual homeowners’ association is still growing and is also involved in a merger with four other homeowners’ associations over the next six months, adding five hundred homeowners for a total of at least six-hundred and fifty homes and homeowners. As the central surviving homeowners’ association following the merger, this association will be responsible for the accounting and financial needs of the association as a whole, and accomplishing these tasks on such a large scale is not something that can be handled in-house.

It is the desire of the homeowners’ association that the accounting firm will provide services in the following business areas: billing of homeowners on a quarterly basis with included penalties for late payment, collection of payments from homeowners via U.S. mail, payments to various vendors (e.g. lawn maintenance and refuse collection) and of other monies owed y the homeowners’ association (taxes, etc.), reporting all financial activity handled in the above business areas, tax preparation and filing, and providing advice as needed in areas of budgeting, purchasing, investing, and others. It is expected that the accounting firm will automate the billing and collection processes, and automation will also likely be achieved in the payment and reporting areas. Tax preparation will be semi-automated for efficiency as well as for accuracy, and the advisory function will be performed manually.

Proposed System Requirements


The billing processes put in place by the accounting firm shall be completely automated, other than the physical mailing of bills to be completed on a quarterly basis (and monthly thereafter for any payees that have failed to pay on time). Input requirements for this business area will consist of individual homeowners’ names and addresses, individual account numbers, and, following the issue of the bills in the first billing cycle, payment status. Output requirements are the physical bills, including properly calculated amounts for late fees, as well as reports for use in the later financial documentation of the association (AICPA 2011). Calculation and issuance controls are easily achieved through basic accounting software (Romney & Steinbart 2011).


Collection of payments from homeowners will also be fully automated, save for the physical process of retrieving checks from the specifically-purposed post office box to which checks will be mailed. Input requirements will consist of homeowner account numbers, payment amount (if full and on-time, this should equal $150 every billing cycle), and date of payment (which can be adjusted to the payment due date for all payments made early). Output requirements match typical outputs for this business area, including payment records and automated communication with the billing processes to either mark each account as paid or issue a new bill with calculated late fees each month a bill due goes unpaid (Turner & Weickgenannt 2009). Control on this system will include physical and software security measures that protect homeowner account numbers and other information, occasional manual audits to ensure accuracy, and the regular reporting of collection activity, all of which is in keeping with standard recommendations (Romney & Steinbart 2011; AICPA 2011).


The payment process will also be fully automated, issuing checks to payees on a monthly basis as agreed per contract or calculated via established parameters for taxes and other variable payments. Input requirements for the payment system include all relevant payee information and the amount or calculation method for each payment. Output requirements include the physical checks to be mailed to payees, when automated payment is not possible, and regular reporting of payment activity. Manual audits as well as automated checking of balance sheets will form highly important controls in this business area (COSO 2009; AICPA 2011).


The automation of reporting is still somewhat controversial, but it is believed that the relative simplicity of the accounting tasks for the homeowners’ association and the increased efficiency (and therefore cost-effectiveness) of automation will lead to a net benefit for the association (Romney & Steinbart 2011; AICPA 2011). Input requirements in an automated reporting system will be achieved quite easily from the other automated accounting tasks that produce relevant information for reporting (i.e. billing, collection, and payments) through an integrated software system (Turner & Weickgenannt 2009; Kruck 2011). Output requirements will consists of financial statements with all areas identified by law and/or standard practice as relevant to the overall financial health of the association (COSO 2009). Manual checking of reports on a quarterly basis and proper security procedures and software should provide appropriate controls.


Tax preparation has been an automated r semi-automated process in for many businesses and individuals for some time (Kruck 2011). A mix of automated and manual processes is recommended to ensure accuracy, however; the number of specific inputs is not the same year to year or even quarter to quarter, necessarily, and constant reviewing of updated or altered tax code is necessary to achieve the most effective results (Turner & Weickgenannt 2009). Output requirements in the tax area are relatively straightforward, consisting simply of the necessary documents required by local, state, and federal agencies and with the means of production and controls built into software already utilized by the accounting firm (Romney & Steinbart 2011).

Other Areas:

Other accounting needs might be identified as necessary as the homeowners’ association continues to grow and as the economic environment changes, and the accounting firm shall provide advisory functions to the homeowners’ association in determining and fulfilling these needs as they arise and are identified in accordance with standard practice (AICPA 2011; Romney & Steinbart 2011). Input requirements in this area will vary widely, and will be brought to the accounting firm’s attention by the client as well as from the firm’s ongoing awareness of environmental shifts that could affect the association’s financial position. Output requirements will also be highly varied, ranging from the identification and recommendation of investment opportunities to the potential reorganization of budgeting frameworks and reporting, as recommended via updates from a variety of professional organizations and advisory entities (COSO 2009; AICPA 2011). Controls are difficult to determine in this area, and will be developed and implemented on a case-by-case basis.

Proposed Manual Functions

The only business area where substantial manual functions are desired are in tax preparation and certain advisory functions. Though the tax preparation software utilized by the accounting firm is both efficient and comprehensive, with regular updates based on changes to tax law, manual audits of records and of filings is recommended to ensure no specific details of the business or of tax code are overlooked. The advisory function will be almost entirely manual simply due to the variety and largely qualitative and subjective factors of such tasks.

Make or Buy

The requirements of the homeowners’ association are not especially complex, and while a standard software package such as Quicken or Peachtree could certainly provide the necessary functions it would not be difficult to construct a system that will handle the association’s accounting needs using tools form the Microsoft Office suite and other supporting basic software. This will also increase the flexibility and the degree of tailoring that can be provided to the homeowner’s association, and the accounting firm will be more easily able to adapt the system to future clients, as well. All of this provides an ultimate cost savings and performance enhancement to the homeowner’s association, and will better utilize the knowledge, expertise, and development of accounting firm staff (Turner & Weickgenannt 2009).

Challenges to Automation

Though automation is relatively simple to employ in this case and is well-founded based on current literature and investigations, there are certain challenges inherent to its use (Kruck 2011; Turner & Weickgenannt 2009; Romney & Steinbart 2011). Changes to processes or the environment in which processes occur must be continually incorporated into all segments of the automation process, and it would potentially be easy to overlook a seemingly minor detail that could disrupt the accuracy of output requirement. Regular manual auditing of all automated processes to ensure accuracy and reliability is necessary to meet these challenges.


AICPA. (20110. AICPA Publishes New Attest Guidance for Reporting on Controls at a Service Organization. Accessed 30 October 2011.

COSO. (2009). Guidance on Monitoring Internal Control Systems. Durham, NC: COSO.

Kruck, S. (2011). The emergence of accounting information systems programs. Accessed 30 October 2011.

Romney, M. & Steinbart, P. (2011). Accounting Information Systems. New York: Prentice Hall.

Turner, L. & Weickgenannt, A. (2009). Accounting Information Systems. New York: Wiley.

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