ASSESSING THE IMPACT OF ACCOUNTING SOFTWARE IN THE PROCESSING OF ACCOUNTING INFORMATION

CHAPTER ONE

INTRODUCTION

1.1   Background of the study

Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions, and events which are, in part at least, of financial character, and interpreting the results thereof. Accounting can also be referred to as an information system that measures, processes and communicates financial information about an economic entity. Advancements in information technology have dramatically improved accounting systems and transformed economic life. Computers and other digital technologies have increased office productivity facilitating the rapid exchange of documents, research, collaboration with far-flung partners and the collection and analysis of data. Information technology gave all sorts of individual economic actors the new valuable tools for identifying and pursuing economic and business opportunities. Information Technology (IT) deals with the application of computers and telecommunications equipment to store, retrieve, transmit and manipulate data. This may also be described as anything that renders data, information or perceived knowledge in any visual format through any multimedia distribution mechanism. Applying in the context of business, it is designed to help management in their stewardship function, support management in their day-to-day operations and decision making. In 1880, machines were invented to help in the accounting system. As year years passed by, advancements in information technology also transformed accounting systems and their processes. There were many developments in the Accounting Information System (AIS). This is designed to help in the management and control of activities related to the firms’ economic and financial areas. The accounting system is essential for the majority of the business entities. The advancements of technology have to lead to the creation of a computerized accounting system that is commonly adopted by business entities at present. This has created a competitive market. Thus, entities need to improve their systems in order to match their information needs for better decision making. An information system is a set of interrelated subsystems that work together to collect, process, and store, transform, and distribute information for planning, decision making, and control. The use of computers in information systems can improve the efficiency of information collection, processing, storing, transformation and distribution. The accounting information system (AIS) is a tool that was incorporated in the field of Information and Technology systems. It is very important for business entities. This is the one responsible for generating reliable financial information needed for decision making. There are many varying designs of the system for they must consider factors that influence the way in which information is gathered and reported. It will still depend on the anticipated users of the information and the types of decisions they are expected to make. The design of the system may also depend on the size of the firm, the volume of transaction data, nature of operations, organizational structure and business form. Accounting evolved from everyday activities of an organization to produce relevant information for decision making. Information on financial activities is thus vital to the organization’s existence, survival and growth. A proper and accurate record of these activities is, therefore, an effective means of generating the required accounting information. Every corporate organization, private or public, requires records of its financial activities to be kept for performance evaluation. However, the method of transmitting financial information has been greatly influenced by rapid changes in Information Technology and the introduction of computers. The first computing machine created was used for accounting which marked the new beginning in the history of the profession as it is being increasingly embraced by organizations to simplify accounting records. The introduction of computers and innovations in Information and Communication Technology (ICT) has changed the manner accounting and Accounting functions are performed. Computerization of the financial accounting system has posed challenges to the accounting profession as accountants now face a number of problems, especially when doing accounting and Accounting of companies in the electronic environment. It has however increased the fraternity (scientific exposure) of accountants to improve the service levels and variety of services rendered to clients. Traditionally, auditors’ schedules included discrete phases of planning but in today’s continuously evolving technology-driven world of financial statements, auditors might have to revise the traditional audit schedule due to changes in technology and perform tests on a continuous basis.

1.2   Statement of the Problem

Accounting in the e-environment is highly challenging due to the fact the majority of documents are kept electronically. Some of the challenges include lack of source documents which evidenced a transaction, lack of audit trail, inadequate knowledge of the computerized process of accounting data and electronic initiation and approval of transactions.

1.3   Objectives of the Study

The objectives of this study include but not limited to;

1. To assess the relationship between accounting software and accounting information.

2. To identify the influence of accounting software in the gathering of accounting information.

3. To know the significant impact of accounting software in the processing of accounting information of an organization.

4. To identify the set-backs of accounting software and to proffer suggestible solutions.

1.4   Research Questions

1. What is the relationship between accounting software and accounting information?

2. What is the influence of accounting software in the gathering of accounting information?

3. What is the significant impact of accounting software in the processing of accounting information of an organization?

4. Are there setbacks in accounting software and what are the possible solutions to the set-backs if any?

1.5   Research Hypotheses

Ho: There is no significant impact of accounting software in the processing of accounting information of an organization.

Hi: There is a significant impact of accounting software in the processing of accounting information of an organization

1.6   Significance of the Study

In today’s business environment, most financial accounting systems have been computerized and automated with little or no paper documentation. Technologies have greatly changed the nature of audits which have so long relied on paper documents. Auditors performing attest services for clients that process financial transactions electronically, therefore, need to go extra miles to be professionally and technically competent in order to perform an acceptable audit.

1.7   Scope/Limitations of the study

This study is on assessing the impact of accounting software in the processing of accounting information.

Limitations of the study

1.        Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire, and interview).
2.        Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted to the research work.

1.8   Definition of terms

Accounting Software: describes a type of application software that records and process accounting transactions within functional modules such as accounts, payable, accounts receivable, payroll and trial balance.

Accounting Information System: is a structure that a business uses to collect, store, manage, process, retrieve and report its financial data so that it can be used by accountants, consultants, business analysts, managers, chief financial officers (CFOs), auditors and regulatory and tax agencies.

Trial Balance:  is a list of closing balances of ledger accounts on a certain date and is the first step towards the preparation of financial statements

REFERENCES

Adefila, J.J. (2008.) Research Methodology in Behavioural Sciences. Kaduna, Nigeria: Apani publication.

Al-Bashtawi, S.H., and Al-Husban, A. (2009). Determinants of Auditing Electronic Information System, Journal of the Faculty of Jordan University, Vol. 9, Issue 2009

Bansal, A. and Sharma, A. (2001). New Challenges of Accounting: Auditing in E-Environment in India, Auditing Journal. Vol. 14, Issue 7, 2001

Barry, E. and Elliot, J. (2004).Financial Accounting and Reporting. London: Prentice-Hall, ISBN 0-273-70368- 1.P.3

Frieling, A.B. (1959). Automatic Data processing, Elsevier Publishing Company, Netherlands.

Goodyear, L. E. (1913). Principles of Accountancy, Goodyear- Marshall Publishing Co., Cedar Rapids, IOWA, P.7.

Harry, W. (1982).Breakthrough to Computer Age. New York: Charles Scribner & Sons.

S. Shanker,(2013) “How is Information Technology Used in Accounting?”,Chron Small Business Demand Media.

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