International Journal of Accounting Information Systems

7 (2006) 1 – 6

Enterprise systems and the re-shaping of accounting

systems: A call for research
Steve G. Sutton ⁎
University of Central Florida, United States
University of Melbourne, Australia

Received 14 February 2005; received in revised form 25 February 2006; accepted 26 February 2006

Abstract

Enterprise systems (and their primary form, enterprise resource planning systems (ERPS)) have
fundamentally re-shaped the way business event data is collected, stored, disseminated and used. This
change in information processing orientation fundamentally affects every area of accounting and should
drive radical changes in audit processes. Yet, the extant research in accounting has largely ignored this
phenomenon and researchers have provided little of value in offering guidance to the respective practice
communities through empirical findings. It is the editorial team at IJAIS's desire to promote the extension
and growth of the enterprise systems research in accounting and the impact it has had and will have across
the various disciplines of accounting. This issue of the journal is the first in a planned series of annual
special issues on the role of enterprise systems in accounting.
© 2006 Elsevier Inc. All rights reserved.

Keywords: Enterprise systems; Enterprise resources planning; Enterprise resource planning systems; ERP

1. Introduction

While enterprise systems (also commonly known as enterprise resource planning systems
(ERPS)) have become the norm in the business environment and vendors have experience maturity
in sales of such systems, the accounting research community has largely ignored the impact such
systems have on all facets of business organizations. To a large degree, the power of enterprise
systems and the embedded tools and structures have allowed organizations to focus on increased
globalization, outsourcing of core functions, and restructuring of business processes and trading

⁎ Dixon School of Accounting, University of Central Florida, 4000 Central Florida Blvd, Orlando, FL 32816, USA.
E-mail address: [email protected].

1467-0895/$ - see front matter © 2006 Elsevier Inc. All rights reserved.
doi:10.1016/j.accinf.2006.02.002
2 S.G. Sutton / International Journal of Accounting Information Systems 7 (2006) 1–6

partner relationships. Yet, these phenomena have been largely ignored by the accounting research
community and the vast majority of the on-going research ignores the fact that enterprise systems
have changed the environments in which we focus our research.
There is a slowly evolving and growing literature on enterprise systems and accounting that has
largely been driven by European and Australian researchers applying research methods that are
scantly used by North American and Asian researchers. This broader view of research methods has
facilitated exploration of the basic phenomena that arise in enterprise system-driven environments.
However, the application of these research methods have generally failed to meet the standards
expected by journals aligned more with traditional North American accounting research methods.
A middle ground is needed where the traditional North American researchers recognize the need to
bring their own research skill sets and adapt them to the discovery level research that is needed in
enterprise systems, while field researchers (and particularly case researchers) need to recognize the
need for more externally valid research strategies. While discovery of how given individuals in a
selected organization have been impacted by and have adapted to enterprise systems is of value, the
major contributions to the enterprise systems in accounting research will come from research that
presents findings that are applicable to a broad range of organizations and these are the findings
that will be of interest to the readers of a journal such as the International Journal of Accounting
Information Systems (IJAIS).
Evolution of the discipline mandates the acceptance and use of a wide range of research methods
in a rigorous (but not to the degree of rigor mortis) fashion in order to get a broad range of views and
understanding as to the impact of enterprise systems. While the extant research lacks depth, one
encouraging sign to date is the broad diversity of the set of studies that have been published in
IJAIS. Dillard et al. (2005) provide a critical theory view of enterprise systems and the role in
controlling individuals and the organizational structures within which they operate. Poston and
Grabski (2001) and Nicolaou and Bhattacharya (2006-this issue) provide an empirical archival view
on the impact of enterprise systems on organizational effectiveness, while Rikhardsson and
Kræmmergaard (2006-this issue) provide an alternative view on performance and effectiveness via
the use of multiple case studies. Nicolaou (2004) similarly uses a multiple case methodology, but
the end result of this study is the development of a construct for measuring post-implementation
review that can be applied in other future studies. Bradford and Florin (2003) use a questionnaire-
based methodology to enhance the understanding regarding the diffusion of enterprise systems
technology and user perceptions on the success of implementation. Other research related to design
science and modeling of enterprises (e.g. McCarthy and Geerts, 2002) along with behavioral
research investigating users aptitude to such models (e.g. Dunn and Gerard, 2001; Dunn and
Grabski, 2000; Dunn et al., 2005) can also be perceived as adding to the overall body of research on
enterprise systems in accounting. Thus, in a short time the research domain has benefited from the
diversity that has sprouted at its basic foundation.
From a methods standpoint, the future looks bright if the momentum can build in regards to the
evolution, growth and expansion of enterprise systems research. Yet, very little of this research has
explored the behavioral aspects of enterprise systems (with notable exceptions aforementioned) and
this is an area that many AIS researchers are well-prepared to tackle. Arnold's (2006-this issue) paper
on opportunities for behavioral accounting research in enterprise systems should be particularly
enlightening in this regard. Equally important, Arnold specifies desirable approaches in field
research related to enterprise systems and it is intended from this point forth that her prescriptions
will be relied on heavily by authors and reviewers for IJAIS.
From a discipline oriented perspective, the future also looks bright. There are many opportunities
across the multiple sub-disciplines of enterprise systems in accounting from which researchers can
 S.G. Sutton / International Journal of Accounting Information Systems 7 (2006) 1–6 3

contribute to the overall understanding of the enterprise systems environment. In the following
sections, these are briefly touched upon not as a comprehensive list but as examples of how the
various aspects of enterprise systems and accounting might be explored.

2. Financial accounting

Enterprise systems change the financial accounting environment substantially as the processes
used to record, assimilate and distribute such information all radically change. The recording
process for transactions can generally be traced back to such individuals as a production worker on
an assembly line, a warehouse worker at a receiving dock, or a cashier each scanning a bar code
that captures the data and triggers the update processes that form the basic financial accounting
records. Similarly, financial reports no longer need to be constructed by a set of accountants, but
rather the procedures are encoded into the enterprise system to automatically generate the financial
reports and make them available to decision makers. Even the process for making closing entries
and closing out the books at the end of the period is becoming ever more automated with
companies such as Cisco Systems reporting closing processes that take hours rather than days
(Sutton, 2000).
The challenges in financial accounting are now more issues surrounding the timely delivery of
information as opposed to the processes for assimilating and refining reports. As enterprise
systems evolve, the reality of continuous reporting becomes more likely. If we move to a
continuous reporting environment, what information should be reported? Surely not mundane
items like depreciation. How should it be reported? Certainly XBRL seems to hold promise as an
enabling technology and enterprise systems are increasingly being designed to support automatic
conversion of reports to XBRL. Should the database of the enterprise system be opened up to
allow users access to disaggregated information? If so, are users left on their own to figure out
how to re-aggregate the information? Should there be a set of pre-defined filters for extracting the
data and if so, what should these look like? Should we consider how digital dashboard techno-
logies often provided within enterprise systems software could be used to develop useable and
useful digital dashboards for assessing and monitoring financial accounting information? There
are lots of questions with very few answers.

3. Managerial accounting

Managerial accounting is the area that has been receiving the greatest attention in the evolving
research literature particularly within the European research communities. A number of case
studies have been completed that examine how enterprise systems impact managerial control
environments and how management is able to retrieve and aggregate the information they need in
this new environment. But, we really need to move to the next stage with the development of more
generalized theories that help us to understand the phenomena in a more generalized fashion.
Again, I point you towards Arnold's (2006-this issue) article that discusses increasing the depth of
such research in a fairly detailed fashion.
Similar to the area of financial accounting, one phenomenon that is becoming quite clear is that
the role of managerial accountants as the generators of cost reports is diminishing in value rapidly.
Report generation is automatable and there is little value in humans doing such work. Rather, the role
of the management accountant adds value in being able to sift through the vast data warehouses of
information in order to understand patterns and changes that effect the organization's efficiency,
effectiveness, and achievement of operational and strategic goals. Research tells us little, however, of
4 S.G. Sutton / International Journal of Accounting Information Systems 7 (2006) 1–6

how prepared managerial accountants are for this new environment. The aforementioned studies on
the behavioral effects of enterprise systems models along with studies that have examined users'
proficiency at data querying (i.e., Bowen and Rohde, 2002; Bowen et al., 2003) could greatly inform
such research during design and execution. How effective are users at using online analytical
processing (OLAP) tools? How effective are users at data mining within data warehouse contexts?
How affected are managerial accountants using these new tools by the various heuristic biases that
have been well-reported in the audit and psychology literature? Are new types of heuristic biases
introduced by these technologies? Currently, we know very little about this decision environment.

4. Auditing and assurance

Perhaps what is best known about the audit and assurance environment is that auditors are
generally adapting very poorly to the changes that have been brought on by enterprise systems. As
noted previously, financial accounting transactions are largely captured through a non-accounting
employee scanning a bar code and the remainder of the process is executed and completed by the
rules embedded in the enterprise system. If the rules are wrong, the information generated will be
wrong. However, there is little evidence that auditors provide any type of review of the manner in
which these rules have been programmed and business events are actually being recorded.
Systems reliability assessments must become a part of the audit, but how can auditors effectively
execute such audits? What techniques and methodologies can and should be used?
Coupled with the earlier discussion on continuous financial reporting must be the associated
existence of continuous auditing. It seems unrealistic and highly risky to move to a model of
continuous financial reporting where assurance over that information is not provided. But how can
continuous auditing be delivered in an enterprise systems environment? Early research has provided
design science instantiations that demonstrate the capability to both monitor business process
controls (Alles et al., in press) and to implement continuous monitoring over potential sources of
financial transaction fraud (Kuhn and Sutton, 2005) in SAP R/3 environments. These instantiations
demonstrate the capability, but they do not attempt to tackle the bigger conceptual issues of how such
monitoring should optimally be completed, how completeness of the monitoring metrics can or
should be determined, or even what are the core objectives of such systems. This is another area in
great need of research.
Finally, it is difficult to consider audit and assurance issues in today's world without
considering the impact of the U.S. Sarbanes–Oxley Act (SOX). While SOX is intended to help
assure the reliability of systems of internal controls, it likely also has unintended consequences
related to enterprise systems. Are more organizations being forced to convert legacy systems to
enterprise systems in order to meet internal control requirements? Are less organizations willing
to convert from one enterprise system to another due to the requirements to fully document both
systems? Little is yet known about the impact SOX will have on enterprise systems selection,
implementation and use.

5. Accounting systems

While to most readers, the previously noted areas are likely to all be considered accounting
systems issues, there are certain issues that are more systems specific and should be considered.
Namely, the research in intelligent systems to date has focused almost exclusively on stand alone
decision aiding systems. Yet, in today's world, and in particular in enterprise systems environments,
intelligent systems are increasingly being delivered as components of much larger systems. This has
 S.G. Sutton / International Journal of Accounting Information Systems 7 (2006) 1–6 5

significant ramifications for how such intelligent systems are adopted by users, relied upon by users,
simply used, and the level of knowledge transfer to the user that is likely to take place. Similarly, how
is knowledge transfer to the user affected when the knowledge is embedded in an underlying
knowledge management system as opposed to being within an embedded intelligent decision aid?
Or, versus being embedded in a decision analysis tool such as those used to mine data warehouses?
Our research community needs to collectively step back and think about how the contemporary
enterprise systems environment has changed the environment in which our research is conducted.

6. Concluding comments

Enterprise systems have radically changed the business environment as well as other orga-
nizational environments that are of great interest to the broader accounting research community.
Researchers have been slow to evolve our research programs to tackle this new environment.
There is a great need for more enterprise systems research and it is the intent of the editorial team
at IJAIS to foster research in this area.
The opportunities are abundant and the need is great. We hope that the research community
will embrace this changing environment and add to the relevance of our research as we pursue an
agenda of understanding the impact of enterprise systems, the desirable methods for addressing
enterprise systems integration, and primarily enhance our understanding to the point that we can
provide leadership to organizations in the ethical and value enhancing application of enterprise
systems technologies.

Acknowledgements

I would like to thank the delegates attending a panel session at the 2006 Mid-Year Meeting of
the Information Systems Section of the American Accounting Association for feedback on my
presentation that is at the roots of substantial parts of this perspectives paper. In particular, I would
like to thank Carolyn Strand, Stephanie Bryant, and Chris Wolfe whose thoughts during the
creation of the panel pushed me to consider these ideas in more depth than I might otherwise have.
I would also like to thank Constantinos Stephanou who is the creator and driving force behind the
International Conference on Enterprise Systems in Accounting the venue that has drawn me into
the enterprise systems research community and been the source of many of my evolving thoughts.
Finally, I thank Vicky Arnold who always participates in the discussions that help formalize my
ideas. Nonetheless, I retain all responsibility for the limitations of the prior discussion.

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