Running head: LIMITATIONS OF CLOUD ACCOUNTING PLATFORMS 1

Limitations of Cloud Accounting Platforms

Name

Institution
LIMITATIONS OF CLOUD ACCOUNTING PLATFORMS 2

Why UK Firms May Have Chosen not to Adopt Cloud Computing for Accounting Information

Systems

Literature Review

1. Data Security Challenges

Integrity of accounting information is among of the main principles upon which the

accounting practice is based. Allahverdi (2017) notes that with integrity of accounting

information relies significantly on the security of the information, which allows organizations to

maintain the accuracy, completeness and reliability accounting data. Despite the major

advancements that have been made in the field of cloud computing, cloud systems are still

significantly vulnerable to attacks by hackers (Allahverdi, 2017). This exposes cloud accounting

information systems to the threat of unauthorized access, distortion, damage or them of sensitive

accounting information. Li (2018) also points out the threat of computer viruses and worms to

the security of cloud-based accounting system. In spite of installation of protective mechanisms

such as antivirus software and firewalls, cloud servers exist in an online environment where

malicious software is being developed at a faster rate than the development of security measures.

According to Li (2018), the maintenance of accounting information on cloud servers threatens

the entire accounting structure of organizations, as the loss or destruction of accounting

information can have severe implications on the operational and management efficiency of

organizations.

2. Performance Issues

According to Du and Cong (2010), the performance of cloud computing resources can

become compromises by a wide variety of factors. In case the demand for cloud accounting

resources increases rapidly, the resources available may not be sufficient to handle the high
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capacity, which may result in a decline in the performance of the system. The authors note that

performance issues usually occur when organizations are under significant pressure to deliver

critical information in the form of reports from the accounting systems. For instance, during a

major audit of the financial systems or when compiling the tax returns of a company. This

problem is capable of influencing the capacity of organization to compile, analyse and present

required financial information in a timely. Christauskas and Misevičienė (2012) note a similar

performance issue in that cloud-based accounting information systems are largely reliant on the

internet to perform effectively. According to the authors, this implies that unreliable and

fluctuating internet connections for organizations may render cloud accounting systems

inoperable (Christauskas & Misevičienė, 2012). This would then cause organisations to incur

additional costs associable with restoration of internet as well as additional costs of maintenance

of the cloud servers to facilitate continuity of accounting activities.

3. Application Constraints

Brandas, Megan and Didraga (2015) are keen to note that large multinational

organizations handle a significant bulk of data related to accounting on a daily basis and as such,

they require ample storage capacity for their accounting information. The researchers also note

that most cloud service providers have bandwidth restrictions and thresholds, the surpassing of

which is associable with the incurrence of additional charges. In addition, Brandas et al. (2015)

highlights that cloud accounting, unlike conventional accounting systems is a field that is still in

its initial stages of development and in fact is less than ten years old. As such, cloud service

providers do not have functions and applications for every accounting activity required to

maintain proper records of account. Dimitriu and Matei (2014) also identifies that while cloud

computing may be appropriate for small and medium size enterprises, most applications are not
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designed to handle complex accounting requirements associable with larger organizations. The

researchers assert that the main limitations for large organisations include inventory management

for large quantities and values of stocks and payroll restrictions regarding the number of workers

the cloud-based systems can accommodate efficiently (Dimitriu & Matei, 2014).

4. Information Secrecy and Confidentiality Concerns

According to Dimitriu and Matei (2015), the current economic environment is

characterized by a high level of competition as well as operational challenges and thus,

businesses have a greater need for privacy regarding the sharing of their financial information.

The researchers note that information privacy and secrecy concerns are among the main obstacle

to the migration of organizations from conventional paper based and information based

accounting systems to cloud accounting platforms (Dimitriu and Matei, 2014). Zhang (2014) also

identifies a similar challenge relating to information privacy with respect to the flow of

information over cloud platforms. According to the researcher, the sharing of information across

different platforms and the easy access of information from remote locations increases the

probability of unauthorised sharing of sensitive information to competitors, which can have

major adverse implications on the competitiveness of an organisation (Zhang, 2014). Similarly,

the sharing of confidential information with parties such as government tax agencies and

contractors through cloud servers can pose a threat to the confidentiality of accounting

information in case hacker infiltrate the cloud-based systems of the organisation (Zhang, 2014).

5. Limited Control of Data

Research by Rong-sheng (2014) suggests that limited access and control to financial data

by organizations is a potential hindrance to the adoption of cloud-based accounting systems by

organizations. The researcher highlights that various cloud accounting services are offered by
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organization that are independent from their clients and in fact, have significant control over the

storage of the accounting data of firms (Rong-sheng, 2014). Furthermore, cloud service

providers do not grant their clients full access to their own data and usually act as trustees of the

information for security purposes. While this is a benefit for organizations using cloud-based

accounting information platforms, it exposes organizations to the risk of data loss in case of

security infringement of the cloud service organization (Rong-sheng, 2014). In addition, Gosnell

(2017) identifies that many cloud accounting service providers force organizations to go through

numerous loopholes in order to gain access to historical information. Gosnell (2017) notes that

organizations using cloud accounting services have to incur additional expenses, christened by

the service providers as ‘retrieval costs’ in order to access specific historical information on a

temporary basis.

Potential Threats Related to Cloud Accounting Systems that Require Urgent

Address

Security Violations

This is arguably the most prominent threat to cloud-based accounting information

systems due to its numerous negative implications on organizations as well as their stakeholders.

There is need to develop advanced security measures oriented towards optimization of three

major security aspects. First, secure cloud systems should preserve the accuracy, completeness

and integrity of accounting information by preventing against unauthorised modification,

retrieval or destruction of information (Allahverdi, 2017). Second, security measures must also

focus on enhancing the availability and accessibility of accounting information. In this regard, it

is imperative to ensure that only authorized users can access or use accounting data therein.

Contract-Originated Problems
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The relatively new field of cloud computing lacks a comprehensive legal framework to

address the numerous contractual problems attributable to the acquisition of cloud accounting

services (Du and Cong, 2010). Service providers often include numerous ambiguities and

loopholes that often expose unsuspecting organizations to lawsuits, fines and penalties and other

numerous legal problems. These contract-related problems are a challenge not only for

organization using the services but also the whole of the cloud computing industry. Ionescu,

Ionescu, Bendovschi and Tudoran (2013) emphasize the importance of redefining the contractual

laws and regulations of cloud accounting in order to impose more responsibilities on the service

providers to provide quality service and shield organizations from the adverse implications of

using cloud-based accounting information systems.

Performance Inadequacies

Cloud-based accounting systems were developed in order to optimize efficiency of

accounting by organizations in terms of allowing accounting functions to take place from remote

locations and optimizing the sharing of files among various users in organizations. However, the

rampant performance issues that have plagued cloud computing software platforms threaten the

long-term sustainability of these accounting systems. Thus, it is critical for all stakeholders

involved to discuss ways of improving the effectiveness of cloud computing to meet the

accounting needs of organizations (Zhang & Gu, 2013). Issues to address with respect to

performance include the speed and efficiency of inputting, processing and sharing information as

well as capacity to access and share information in the absence of a strong internet connection

(Zhang, 2014). Addressing these performance shortcomings can result in a higher rate of

adoption of the innovative accounting systems as well as greater contributions to advancement of

cloud computing by relevant stakeholders.

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References

ALLAHVERDİ, M. (2017). Cloud Accounting Systems And A Swot Analysis. Journal of

Accounting & Finance.

Brandas, C., Megan, O., & Didraga, O. (2015). Global perspectives on accounting information

systems: mobile and cloud approach. Procedia Economics and Finance, 20, 88-93.

Christauskas, Č., & Misevičienė, R. (2012). Cloud-computing based accounting for small to

medium sized business. Inžinerinė ekonomika, 14-21.

Dimitriu, O., & Matei, M. (2014). A new paradigm for accounting through cloud

computing. Procedia economics and finance, 15, 840-846.

Dimitriu, O., & Matei, M. (2015). Cloud accounting: a new business model in a challenging

context. Procedia Economics and Finance, 32, 665-671.

Du, H., & Cong, Y. (2010). Cloud computing, accounting, auditing, and beyond. The CPA

Journal, 80(10), 66.

Gosnell, P. (2017). The challenges of cloud accounting. Australian Restructuring Insolvency &

Turnaround Association Journal, 29(1), 14.

Ionescu, B., Ionescu, I., Bendovschi, A., & Tudoran, L. (2013, June). Traditional accounting vs.

Cloud accounting. In Proceedings of the 8th International Conference: Accounting and

Management Information Systems, Bucharest, Romania (pp. 106-125).

Li, Y. (2018). Research on Management Accounting Teaching Based on Cloud Accounting

System under Big Data Background.

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Rong-sheng, Q. I. N. (2014). On the Development of Cloud Computing and Its Challenges to

Accounting and Auditing [A]. Journal of Contemporary Finance and Economics (English

Version 2014)[C], 7.

Zhang, C. (2014). Challenges and Strategies of Promoting Cloud Accounting. Management &

Engineering, (17), 79.

Zhang, L., & Gu, W. (2013). The simple analysis of impact on financial outsourcing because of

the rising of cloud accounting. Asian Journal of Business Management, 5(1), 140-143.