Jeamer plc was an UK listed company that produced digital audio equipment for the retail market. The company’s products were sold throughout Europe, North America, Australia and Canada, and were widely regarded as the best in the market. Indeed during the period 1995 and 2001 the company’s digital audio equipment consistently won high praise from both consumer groups and retail critics.
In January 2003, however, Jeamer plc suddenly went into liquidation. The company failed with debts amounting to £125m. The failure of the company was headline news around the world with press speculation focusing on the possibility of large scale financial reporting irregularities and potential management fraud. However in April 2003, following extensive enquiries, the company receivers published their findings. Their report indicated that whilst some unacceptable accounting irregularities had been evident in the company’s published financial reports for a number of years, the principal cause of Jeamer plc’s failure had been an inadequate accounting information system.
The company receivers’ report concluded that: whilst accounting information was produced on a regular basis, this information was often out of date and of little use to managers.
Required
Describe the main function of an accounting information system for a company such as Jeamer plc and explain the possible risks associated with the failure of such a system.