IMPACT OF ACCOUNTING INFORMATION SYSTEM ONTHE QUALITY OF FINANCIAL INFORMATION -A CASE STUDY OF MINISTRY OF FINANCE

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IMPACT OF ACCOUNTING INFORMATION SYSTEM ONTHE QUALITY OF FINANCIAL INFORMATION -A CASE STUDY OF MINISTRY OF FINANCE

Abstract

The vast directions ofaccounting information system on financial reporting quality presents the most important relations between the challenges and technological responses in pointing out the way for future research in order to improve the alignment between adopted technology and organization Effectiveness, in this particular case the support of management information systems to accounting and management.The main objective of this study is to review the theoretical and empirical literature on the effect of accounting information system on reporting quality to ascertain research gaps from past studies. The study concluded that past studies on the effect of accounting information system on reporting quality are limited and have yielded positive results; while some studies documented accounting information system improves financial Effectiveness, others suggested accounting information system aids management strategy. Furthermore most studies were carried out in advance economies, where advancedcomputerized accounting information system techniques have been in practice.

CHAPTER ONE

INTRODUCTION

  • Background to the Study

As part of management information systems, accounting information systems represent one of the most important systems in the economic unit and vary among organizations in terms of the application of accounting information systems and the consciousness of their importance.

Many organizations automate and integrate their business operations by accounting information system(Hla andTeru, 2015). Accounting information system is a manual or computer-based system that increases the control and enhances the synergy in an organization, to assign thequantitative value of the past, present, and future economic events. Data collections, data maintenance, data information accounting systems and knowledge management, data/security control and information generation are key functions performed by an accounting information system.

An information system seeks to take advantage of the surrounding circumstances in order to improve the quality and quantity of information and to enhance delivery mechanism to users, thereby providing various users with different forms of useful information to meet their various needs(Alzoubi, 2012). Despite the continuous production of accounting information as required by law, financial and accounting regulations aimed at improving financial Effectiveness, there is apersistent misuse of resources and poor accountability(Bukenya,2014). Reliability, relevance, accuracy, timeliness, and clarity are true measures of perceived quality of accounting information in that order. For financial information to serve its intended objective, it should be of good quality to ensure good decision- making.

Identifying management commitment to efficient Accounting Informationand quality reporting systems has been widely recognized as the most important factor for the achievement of Business success (Iskandar, 2015). Implementing accounting information systems usually require intensive capital, often with an unsatisfactory result after spending millions of naira, andmost businesses are forced to abandon the project. Even if the system was delivered on time and within budget, it does not guarantee that it will be used or preferred by the user, and might not achieve the expected benefits.

The role of accounting information system is significant because it derives its necessity from the level of contribution in improving the value chain of business organizations, and provides various resources and optimally allocates them under risk conditions and the uncertainty surrounding the business environment.

Other qualitative characteristics of accounting information can also be maintained if there is asound internal control system in an organization (Toposh, 2014). Internal controls procedures are set up to protect assets, ensure reliable accounting reports, promote efficiency and encourage adherence to company policies as essential to achieve objective such asthe efficient and orderly conduct of accounting transactions, safeguarding the assets in adherence tomanagement policy, prevention and detection oferror, prevention of fraud and detection of fraud andensuring accuracy, completeness, reliability and timelypreparation of accounting data.

An accounting information system(AIS)that is accurate, flexible to suit environmental changes, timely, provide administration the necessary information to plan and control economic activities and an effective feedback mechanism is effective and efficient(Hafnawi,2001).Well-designed AIS simplifies getting information to interested users by an authorized access. Also, auditors can use the data to assess a company’s internal controls, financial condition and the compliance with the Sarbanes-Oxley act.

An automated AIS issues instructions and procedures for collecting, storing, retrieving and processing data that is coded into an AIS software having a structured database. Having a pool of data in one place facilitates record keeping, reporting, analysis, auditing and decision-making activities of an economic unit.

1.2 Statement of the Problem

The vast directions ofaccounting information system on financial reporting quality presents the most important relations between the challenges and technological responses in pointing out the way for future research in order to improve the alignment between technology and organization, in this particular case the support of management information systems to accounting and management.

Research is needed to discover new potentialities and/or benefits that these systems can bring to the organization’s management and how they impact the role of the accounting function. The quality of accounting information systems can be improved through management commitment and user competence (Iskandar, 2015).

The use of AIS as a computer- based application brings a new trend of change from the conventional way of accounting to a computerized way which most people are not prepared for or find very difficult to adapt to (Eb, Pretorious, Awosejo, and Zuva, 2013). Organizations are designing more sophisticated accounting information systems to meet strategic goals and enhanced Effectiveness.

This study seeks to examine the effect of accounting information system design on the Effectiveness of organizations pursuing different strategic priorities. The alignment between sophisticated accounting information systems and organizational strategy is analyzed as evaluation of the efficiency of AIS with internal control in relationship to human resource, ERP, Account Receivable, Account Payable and Cash Control management.

This paper has two purposes. First, it attempts to review empirical researches on AIS. Second, it aims to identify research gap related to AIS effect on the quality of financial reporting as a basis of an empirical future research. To achieve this purpose, the study is divided into four sections: the introduction, review of the related literature and empirical studies, conclusion and recommendations

1.3.  Research Objective

An Accounting Information System provides necessary information to the managers at different levels in discharging their responsibilities in an effective and efficient manner in the areas of planning, resource control, Effectiveness evaluation and decision making, and thus considered to be one of the most important systems of any organization.

The main objective of the study is to assess the impact of accounting information system on the quality of financial information -a case study of ministry of finance.

The specific objectives of this study were

  • To assess the impact of AIS on Inventory Management
  • To determine the impact of AIS on Financial Statements
  • To determine the impact of AIS on organizational effectiveness

1.4 Research Hypothesis

In the light of the above statement of problem the following main hypothesis were formulated:

H1: Accounting information system has significant effect on organizational effectiveness.

Ho: Accounting information system has no significant effect on organizational effectiveness.

The following specific hypothesis were tested

H1: Accounting information system has significant impact on Inventory Management.

H2: Accounting information system has significant impact on Financial Statement.

 

1.5. Significance of the Study 

The study has generate the following benefits.

  • The research paper will provide an insight to the management and staffs of MINISTRY OF FINANCE, ABUJA on the effect of AIS on the organization overall effectiveness of MINISTRY OF FINANCE, ABUJA in Nigeria.
  • It provide an input for those organizations who would like to start using AIS to improve the quality of their financial data.
  • This study can also be used as a foundation for other researchers who would like to undertake research on similar and related area of study.

1.6 Scope of the Study

Due to time constraint the scope of the research is limited to one organization Pharmaceutical Fund and Supply Agency (MINISTRY OF FINANCE, ABUJA) which  the central office is located in Abuja.

The extent to which computerized accounting contributes to financial reporting quality and how it improves the outputs of the accounting information system will be discussed.

IMPACT OF ACCOUNTING INFORMATION SYSTEM ONTHE QUALITY OF FINANCIAL INFORMATION -A CASE STUDY OF MINISTRY OF FINANCE

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