EFFECT OF ACCOUNTING INFORMATION SYSTEM ON FINANCIAL REPORTING

QUALITY: A REVIEW OF THEORIES AND EMPIRICAL WORKS

BY
AENDE, Ternenge Robert
&
AGBO Boniface Agada

A SEMINAR PAPER PRESENTED TO THE DEPARTMENT OF ACCOUNTING AND

FINANCE, UNIVERSITY OF AGRICULTURE MAKURDI, IN PARTIAL
FULFILMENT OF THE AWARD OF MASTER OF SCIENCE (M.Sc.) DEGREE IN
ACCOUNTING.

1
 MAY, 2016

Abstract

The alignment of Business and IT is still an important concern of both business and
technological managers. The vast directions of accounting 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 performance, 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 performance, others suggested accounting information system aids
management strategy. Furthermore most studies were carried out in advance economies, where
advanced computerized accounting information system techniques have been in practice.

Keywords: Accounting Information system, Data Quality, Financial Performance.

2
1.0 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 and Teru, 2015). Accounting information system is a manual or

computer-based system that increases the control and enhances the synergy in an organization, to

assign the quantitative 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 performance, there is a

persistent misuse of resources and poor accountability (Bukenya, 2014). Reliability, relevance,

accuracy, timeliness, and clarity are true measures of perceived quality of accounting

3
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 Information and 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, and

most 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 a sound 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 as the efficient

and orderly conduct of accounting transactions, safeguarding the assets in adherence to

management policy, prevention and detection of error, prevention of fraud and detection of fraud

and ensuring accuracy, completeness, reliability and timely preparation 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

4
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.

Statement of the Problem

The vast directions of accounting 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

5
designing more sophisticated accounting information systems to meet strategic goals and

enhanced performance.

This study seeks to examine the effect of accounting information system design on the

performance 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

Objectives of the Study

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, performance 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 computerized accounting

system on financial reporting quality to examine: the extent to which computerized accounting

contributes to financial reporting quality, how an Enterprise Resource Program improves the

outputs of the accounting information system, and if an Enterprise Resource Program improves

the internal control of the accounting information system.

6
Methodology

The effect of AIS implementation on financial reporting quality has been studied by

several researchers using different analytical methods. This paper is an empirical study on the

effect of accounting information system on financial reporting quality. It employs the secondary

source of information by making use of available relevant literature on accounting information

systems with respect to enhancing financial reporting quality.

2.0 REVIEW OF RELATED LITERATURE

Theoretical Framework

Several theoretical underpinnings underlie the subject matter of accounting information

system on reporting quality. Some of these theories include: Contingency theory, Innovation

Diffusion Theory, Theory of Reasoned Action and Its Derivatives in User Acceptance,

Innovation Diffusion Theory, Theory of Planned Operational Control, Socio-Technical Systems

Theory of Information Technology Acceptance, and Activity Theory.

a. Contingency Theory

Contingency theory suggests that an accounting information system should be designed in a

flexible manner so as to consider the environment and organizational structure confronting an

organization (Nzomo, 2013).

Gordon and Miller (1976) laid out the basic framework for considering accounting

information systems from a contingency perspective where the accounting information systems

also need to be adaptive to the specific decisions being considered within a framework.

7
 b. Innovation Diffusion Theory

Diffusion innovation theory predicts the process by which is perceived to be new by a unit of

adoption is communicated through certain channels amongst members of a system over time.

According to Shy (1997), diffusion theory posits five characteristics of innovations that

affect their diffusion: trialability (the opportunity to try an innovation before committing to use

it), relative advantage (the extent to which a technology offers improvements over currently

available tools), compatibility (its consistency with social practices and norms among its users),

complexity (its ease of use or learning), and observability (the extent to which the technology’s

outputs and its gains are clear to see).

c. Theory of Reasoned Action and Its Derivatives in User Acceptance

Theory of Reasoned Action (TRA) defines relationships between beliefs, attitudes norms,

intentions, and behavior. According to this theory, an organizational behavior (e.g., use or

rejection of technology) is determined by one’s intention to perform the behavior, and this

intention is influenced jointly by the organizational attitude and subjective norm, defined as “the

organization’s perception that most businesses/clients who are important to it think it should or

should not perform the behavior in question” (Zozak, 2005). According to TRA, attitude towards

a behavior is determined by beliefs about the consequences of the behavior and the affective

evaluation of those consequences. Belief is defined, by Zozak (2005), as the organizational

subjective probability that performing a given behavior will result in a given consequence.

Affective evaluation is “an implicit evaluative” to the consequence; thus the attitude construct in

TRA is general in nature and is not anchored to any given belief set. This approach represents an

8
information processing view of attitude formation and change which states that external stimuli

influence only through changes in the organization’s belief structure (Zozak, 2005).

d. Theory of Planned Operational Control

According to Model (1996), the Theory of Planned Operational Control (TPOC) is a

descendant of the theory of reasoned action (TRA) and adds a third antecedent of intention,

perceived operational control, to the TRA model. Perceived operational control is determined by

the availability of skills, resources, and opportunities, as well as the perceived importance of

those skills, resources, and opportunities to achieve outcomes. The Theory of Planned

Operational Control (TPOC) holds that attitudes, subjective norms, and perceived operational

control are direct determined of intentions, which in turn influence accounting operations

e. Socio-Technical Systems Theory of Information Technology Acceptance

The socio-technical systems perspective has become influential in the analysis of the

organizational impact of information technology. The theory views any organization as an open

system of interdependent sub-units transforming inputs to desired outputs. The gainful

employment of any technology hinges on the ability and willingness of users to employ it for

worthwhile tasks (i.e., those deemed central to the organization’s goals). Socio-technical

systems theory has given birth to a framework for technology design that emphasizes holistic

job satisfaction (rather than just task performance) and user participation throughout the

development process. Thus, socio-technical theorists recommend the analysis of all

stakeholders, not just the direct users of a technology, the formation of planning groups to

oversee the design, the performance of prototyping exercises, and the analysis of likely impact

the technology will have on the organization. In studying technology acceptance, socio-

technical theorists conceptualize acceptance in terms of two competing forces: control and

9
enhancement. Control factors are those that impose rules or structures upon the users, thereby

removing autonomy (control over their own actions) from them. Among the control issues

raised with respect to technology design are: access, reliability, confidentiality, monitoring,

pacing, stress, social contact. Low or high presence of certain factors (e.g., low reliability, high

pacing) with the introduction of a new technology is likely to reduce the user’s perception of

control and thus increase the risk of resistance (Connor, 1997). Enhancement factors include

sense of mastery, growth of knowledge, discretion, ability to act informally, requirement for

certain skills, and enabling worker cooperation. A technology that is designed to support such

factors is likely to increase user acceptance in an organization.

f. Activity Theory

Activity theory is an approach to understanding human work and technology which

emphasizes the long-term well-being of workers or users. Eschewing “one best way” task

design for user-determined task procedures, action theorists seek to design work practices that

are enriching and that lead to development of skills and knowledge. Activity theorists argue that

acceptance of technology is contingent on the extent to which it meets these goals in the context

of the user’s own work. Activity theory largely aligns itself with the broad humanistic aims and

the methods of the socio-technical approach. It is at least partially distinguishable by its

emphasis on the product of the organizational process which characterizes socio-technical

systems thinking (Martin and Leben, 1989).

Conceptual Framework

The basic concepts especially around the study objectives need to be clarified on AIS and

financial reporting quality. This will not only sharpen the direction of this study but will also

provide a framework upon which the study findings will be validated.

10
a. Concept of Information System

Idris, (2005) defined the information system as "A system which includes a set of elements

and reactants components of the relevant reciprocity that work together to collect, operate, store,

distribute necessary information for the decision- making process in the organization".

Information system is a system consisting of a set of parts and procedure interacting with each

other in order to collect, process, and store the appropriate data, and deliver the appropriate

information in the appropriate time and place and accuracy suitable for the process of decision-

making in the organization and in a form which contributes to achieve its objectives".

b. Accounting Information Systems

Romney and steinbart (2012), and Gel, (2010) defined an accounting information system as

a collection of parts and sub systems that are connected with each other and with the surrounding

environment and operate as a single overlap relationship between each other and between the

system that combines, where each part depends on the other in achieving the goals sought by the

comprehensive system of accounting, in order to provide data and information to decision

makers. It then means, accounting information systems collect, record, store and handles data to

provide information to decision-makers via advanced technology or simple system or in between

of the two.

Characteristics of Accounting Information

In order for accounting information to achieve its desired goals, it should have the following

basic properties; it should be Appropriate, Credible, Timely, understandable, important, and

posses’ financial data quality (Ahmad, 2006).

11
c. Financial Data Quality

Miller, (2002) acknowledged the concept of accounting information quality as a new model

to achieve tremendous benefits that indicate the need of administration to communicate with

shareholders to understand their needs and serve them fast and in the best possible way. Such

characteristics aim to help administrators when developing accounting standards and assist

accountants in the preparation of financial statements in assessing the accounting information

that results from the application of alternative accounting methods and distinguish between what

is a necessary clarification and what is not according to the users of accounting information.

d. Quality of Accounting Information and Financial Performance

The key components of effective financial management include: access to relevant

information; use of that information to enhance management standards; and assurance that the

information is accurate, relevant and secure (Barrett, 2004). Accounting information systems

maintain and produce the data (e.g., financial statements containing information about accounts

and their balances) used by organizations to plan, evaluate, and diagnose operations and financial

position (Peters et al, 2001). Therefore, the aim of the regulators should be to make an

accounting system that offer maximal benefits at lowest possible cost.

According to Goitom, (2003), the better the quality of accounting information, the greater

the possibility for a business success and this is possibly because accounting can be viewed as an

information measurement and communication system to serve macro and micro-economic

activities. Investment decisions made in a vacuum are gambles; useful decisions are made

depending on useful information (Sserwanga, 2003). Sometimes decision makers may be fed

12
with irrelevant and useless information than they can use, they may overlook information on

serious problems (Stoner, Freeman, and Gilbert, 1995).

A financial report that does not reflect economic reality will result in poor decision-making.

It is therefore necessary for public enterprises' managers, the supervision authority and the

government as controllers to appreciate the need for quality accounting information in order to

minimize waste. The objective of accounting is to provide information that is useful to making

rational decisions. Usefulness is characterized by relevance and reliability. It should be noted

that the restoration of financial discipline in local governments through enhanced reporting

standards and practices would be an important step leading to improvements in the quality of

municipal governance and in the quality of citizens lives (Temple, 2002).

It was noted further that quality reporting is a critical part of the performance management

effort. It improves communication with internal and external stakeholders, leads to better

decision-making and ultimately improves performance (Bisnow, 2004)

e. Accounting Information System and Data Quality

The output of accounting information system (AIS) depends on the quality of data, garbage

in garbage out is the result of poor data quality, and therefore data quality is important to AIS

(XU, 2003). The processes of data collection, storage, and utilization must work properly in

order to achieve high data quality (Lee and strong 2003). According to (Xu 2009), inaccurate and

incomplete data may damage a firm’s competitive ability. These studies also agreed that input

control and competent employees are important to data quality of accounting information

system.

Empirical Review

13
 Extant literature about the quality of accounting information and how it affects decision-

making, financial performance, profitability, organizational effectiveness, strategy management,

foreign ownership and timeliness of financial report has been studied by several researchers

using different analytical methods.

Khaled and Abdulqawi (2015), analyzed the role of accounting information systems and

the effect of their use in improving the value chain of the business organizations using a study

tool (questionnaire) based on the theoretical framework and previous studies. Using the

appropriate statistical analysis tools for the study data (arithmetic mean, standard deviation, and

testing of T-test One Sample) the research found a deficiency in the level of the availability of

the basic components of accounting systems and the level of the quality of accounting

information required to improve the value chain of business organizations in public

shareholding industrial companies in the Kingdom of Bahrain in general, and recommended the

need to work on improving the level of the basic components of accounting systems to improve

the quality of accounting information, in order to improve the value chain of public

shareholding industrial companies in the Kingdom of Bahrain; specifically in regards to the

existence of clear and specific work procedures in the accounting system, the level of the

effectiveness of internal control measures, clear definition of responsibilities and authority, and

management's attention in training and continuing education programs for employees.

Hla and Teru (2015), examined the efficiency of Accounting Information System on

performance measures using the secondary data in which it was found that the biggest impact

Information technology has made on accounting is the ability of companies to develop and use

computerized systems to track and record financial transactions in facilitating management

decision making, internal controls, and quality of the financial report. The study recommends

14
that businesses, firms, and organization should adopt the use of AIS because adequate

accounting information is essential for an effective decision-making process and enables all

levels of management get sufficient, adequate, relevant and true information for planning and

controlling activities of the business organization.

Iskandar (2015) conducted deductive analysis which supported the phenomenon. He sought

evidence through empirical facts and analysis of factors affecting the success of the application

of Accounting Information System with a purpose to find solutions for problems related to the

quality of accounting information systems of State-Owned Enterprises (SOEs). The study

concluded that the quality of accounting information system is affected by management

commitment and user competence. Thus, for an improved management commitment and user

competence, emphasis should be placed on the linking theories to organizational culture.

Murungi and Kayigamba (2015) focuses his study on the impact of Computerized

Accounting System on Financial Reporting in the Ministry of Local Government in Rwanda,

evaluating the nature of computerized accounting system and how it affects the quality financial

reports. Primary data was collected by administering questionnaire. From the findings, 98% of

the respondents admit that the Ministry uses both cash based and accrual based system of

computerized accounting, 38% of the respondents agreed that computerized accounting improves

accountability, while 31% of the respondents maintain that the system provides financial

statements on time. With increased improvements and versions of accounting packages, the

study recommends that finance and accounting staff should have constant and continuous

training by the authorized dealers of the packages so that they remain well equipped with the

knowledge and experience of the package.

15
 A study by Muhindo, Mzuza, and Zhou (2014) examined the impact of Accounting

Information Systems on Profitability level of small scale businesses in Kampala city, Uganda.

Secondary data was collected to analyze the problem of continuous low performance levels in

small scale businesses that do not have accounting information systems. The study findings

revealed that there is a positive relationship between accounting information systems and

profitability level of small scale businesses. This study therefore recommends policy makers

should come up with tax waivers or tax reductions on equipment to be used in these systems.

Henry, Adeniran and Olawale (2014) examined the extent to which Accounting

Information Management has enhanced the profitability of Nigerian banks. The study model

specified, accounting information on Liquidity, credit quality, cash flow, wage rate, exchange

rate and Inflation rate as the Jointly Pre-determined variables while, Profitability the

Determined variable. The work involves the use of Ordinary Least Square (OLS) Regression

technique to fit a realistic model into the collected time data, and several model’s validity

techniques such as Coefficient of determination (R2), Multiple Correlation coefficient(r),

Durbin-Watson, Akaike info Criterion (AIC), Schwarz Criterion (SWC) and F-statistic were

employed to validate this model. The model was also tested for Stationary using Unit Root test

and Augmented Dickey Fuller (ADF). The result revealed that accounting information had

impacted significantly on the growth of Profitability in Nigerian banking industry observed in

the R2 of 80.24%, Correlation coefficient of 0.90, Durbin-Watson of 1.76, AIC of 7.48, SWC of

7.87 and F-result of 43.13 with significance value of 0.000034. Also, the Stationary test carried

out for the model shows that there is a short run relationship at First Difference between

Profitability and all the explanatory variables considered in this research. Hence, the availability

of sufficient accounting information has positively impacted on the Profitability of Nigerian

16
banking industry and the implication of this is that pragmatic policy options need to be taken in

the banking industry to effectively manage credit quality, cash flow among other explanatory

variables to enhance banking industry performance in the country.

Saeidi, (2014) investigated the impact of Accounting Information Systems on Financial

Performance in India employing primary data. The research found positive relationship between

the Knowledge and understanding of managers and accountants, decision making, financial

performance and organizational resource. Thus, the use of accounting information systems

improves organizational performance of managers.

Dandago and Abdullahi (2014), opined that Information technology has tremendously

stimulated expansion of the banking networks and range of the offered services during recent

years, thus becoming a critical business resource because its absence could result in poor

decisions and ultimately business failure. The study employed both primary and secondary data,

and used ANOVA to test hypothesis observed that accounting information technology can

improve banks performance by reducing operational cost and by facilitating transactions among

customers within the same or different network. Therefore, accounting information system is

relevant in simplifying issues and in the provision of quality information in the Nigerian

banking industry. That explains why the banks spend a greater part of their resources on

information technology and consider its application as a comparative edge in the competitive

banking industry. It recommended that, all Nigerian banks should continue to utilize and

upgrade their information technology for efficient service delivery and profitability.

Tazik and Mohamed (2014) examine the Impact of Accounting Information System

Effectiveness and Foreign Ownership Structure on Audit Report Quality. Data was obtained

17
through structured questionnaire survey administrated on senior accountants from companies

listed on Bursa Malaysia and secondary data was collected from participants’ financial annual

reports in 2011. A multiple regression analysis was used in this study, modeling audit reporting

quality as a function of explanatory variables. The results indicate that foreign ownership

structure (FOS) is a strong moderator for the relationship between accounting information

system effectiveness (AISE) and audit report quality (ARQ). Further, a significant negative

relationship is found between AISE and FOS with ARQ. Overall, the findings in this study

provide some evidence supporting the resource based theory, which identify AISE as a resource

that could improve timeliness of corporate reporting.

Bukenya (2014) explored the relationship between the quality of accounting information

and financial performance of the public sector in Uganda. The central question of the study was

whether quality of accounting information had any impact on the financial performance of the

public sector. The researcher adopted a blend of cross-sectional and descriptive research designs

and stratified random sampling. Relevance, reliability, understandability, accuracy and

timeliness were concluded to be true measures of the quality of accounting information through

factor analysis. T-tests and ratio analysis employed revealed that the reporting units where

financial accounting information was perceived of high quality reflected higher levels of

financial performance. Regression and correlation analyses revealed a significant positive

relationship with approximately 58% of the financial performance levels attributed to financial

information quality. It is therefore desirable that public sector entities employ highly skilled

professionals that adhere to reporting requirements of the legal and regulatory framework

guiding the preparation and presentation of accounting information.

18
 Eb et al. (2013) focused on the Role of Accounting Information Systems in South African

financial institutions. A total 150 respondents were surveyed from different types of financial

institution using random sampling and analyzed using Statistical Package for the Social Science

(SPSS). From the results of the statistical analysis, it can be deduced that the use of AIS is

relatively accepted within accounting firms, which is largely as a result of the ‘change’ that

comes with the use of such application. Hence, this emphasis on innovation adoption and

diffusion initiatives should be focused on developing user attitudes that are conducive to

effective utilization and acceptance behavior. For proper and effective usage of AIS, there must

be an increased awareness of the usage and of AIS to facilitate its wide adoption. Therefore,

higher levels of formal education should be encouraged, alongside workshops, training and re-

training of users for adequate improvement.

According to Abdallah (2013), the use of the accounting information systems impact on the

quality of financial statements. A statistical analysis of the questionnaires retrieved was done.

Cronbach's alpha test was used to measure test for stability and also simple linear regression test

was also used to test the hypothesis of the study. The researcher found out that accounting

information systems impact positively on the quality of the data submitted to the Income Tax

Department in Jordan. Abdallah recommends the development of software and hardware to be

used in the information systems and the training of personnel in the harmonization of

accounting information systems.

Belfo and Trigo (2013), studied the role of Accounting Information Systems by analyzing n

the main responsibilities of accountants and financial professionals. It was observed that several

of these responsibilities are already suitably supported by traditional technology answers, while

others represent challenges that do not have appropriate responses and therefore deserve to be

19
the focus of future research. This work foresees future technological answers to Accounting

domain challenges on external and compliance reporting through web services, mobile devices,

cloud computing, environmental scanning, business intelligence, enterprise application

integration, business process management, computer-assisted auditing tools and techniques, and

big data.

Also Onaolapo and Odetayo (2012) employed purposive sampling technique when he

examined the effects of Accounting Information on Quality of Financial Reports and Decision –

making, with special reference to selected construction firms in the Ibadan metropolis. The study

result shows that accounting information system affects organizational effectiveness.

Recommendations were subsequently made to both the managers of such organization and

government on how the use of Automated Accounting Information System (AAIS) known as

‘Contract Plus– Financial and Project Accounting’ package software can enhance performance in

finance departments.

Alzoubi (2012) conducted a study aimed at identifying the effectiveness of the accounting

information system for companies that adopt "Enterprise Resource Planning (ERP)" systems, and

its relationship with the quality of accounting outputs (information) and the internal control. To

achieve the goal of this study, the researcher chose companies located in Al Hassan Industrial

Zone, particularly companies that use ERP systems. The researcher used means and frequencies

to describe the sample of the study and the questionnaire responses besides t-test to test the

hypotheses of this study. The results showed that the integration of accounting information

system within the ERP system improves the quality of accounting information system output and

the internal control system in companies. Hence, the study recommends encouraging different

20
business organizations in Jordan to move towards the adoption of ERP application because it is

of immense benefit in the field of control and decision-making.

Naranjo, (2004) examines the effect of Accounting Information System design on the

performance of organizations pursuing different strategic priorities. The alignment between

sophisticated accounting information systems and organizational strategy was analyzed. The

enabling effect of the accounting information system on performance was also examined.

Relationships are explored using data collected from 112 CEOs in 218 hospitals in Spain. The

findings provide support of an indirect effect of sophisticated accounting information system on

performance, acting through a prospector strategy. The ANOVA analysis shows performance is

highest when a dominant strategy is well matched with a dominant AIS design and lowest when

strategy is mismatched with AIS design. The study recommends designing more sophisticated

accounting information systems to enhance performance and meet the strategic goals of an

organization.

3.0 Conclusion

Accounting information system had been widely used by many organizations to automate

and integrate their business operations, where many businesses adopt this system to improve

their business efficiency and increase competitiveness. The qualitative characteristic of any

Accounting Information System can be maintained if there is a sound internal control system to

ensure the achievement of operational goals and performance.

The biggest impact IT has made on accounting is the ability of companies to develop and

use computerized systems to track and record financial transactions. Paper ledgers, manual

21
spreadsheets and hand-written financial statements have all been translated into computer

systems that can quickly present individual transactions into financial reports.

Reports issued to users have been improved by computerized accounting systems. Improved

reporting allows users to determine if an organization is a good investment for growth

opportunities and has the potential to be a high-value entity.

Furthermore empirical literature of prior studies reviewed have shown that accounting

information system adoption does increases firm’s performance, profitability, and efficiency of

operations.

4.0 Recommendation

The vast directions of accounting 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 performance. The study therefore recommends further investigations into the

relationship between accounting information system and financial reporting quality especially in

technological adapting economies such as Nigeria.

22
Reference

Abdallah, A. (2013). The Impact of Using Accounting Information Systems on the Quality of
Financial Statements. European Scientific Journal. Vol. 1. PP. 41-48.

Ahmed, B. (2006). "The Role of Accounting Information Systems in the Rationalization of

Administrative Decisions in the Palestinian Businesses: An empirical study on limited
contribution in private companies in Gaza Strip," Unpublished Master Thesis, Islamic
University, Gaza.

Alzoubi, A. (2012). The Effectiveness of the Accounting Information System Under the
Enterprise Resources Planning (ERP). Research Journal of Finance and Accounting. Vol.
2. PP. 10-18.

Barrett, P. (2004). Financial Management in The Public Sector - How Accrual Accounting and
Budgeting Enhances Governance and Accountability, Auditor-General for Australia.

Belfo, F. and Trigo A. (2013). Accounting Information Systems: Tradition and Future
Directions. Procedia Technolog., Vol. 9. PP. 536 – 546.

Bisnow, M. (2004). Performance and Accountability, Relmond Van Daniker's interview with
Mark Bisnow of 'Bisnow on Business ' about performance reporting.

Budiarto, D. and Prabowo, R. (2015). Accounting Information Systems Alignment and SMEs
Performance: A Literature Review. International Journal of Management Economics and
Social Sciences. Vol. 4. PP. 58-70.

Bukenya, M. (2014). Quality of Accounting Information and Financial Performance of Ugandan

Public Sector. American Journal of Research Communication. Vol.2. PP. 183-203.

Connor, D. (1997). Information System Specification and Design Road map. Englewood Cliffs,
NJ., Prentice- Hall.

Dandago, K. and Abdullahi, S. (2014). Information technology and Accounting System in the
Nigerian Banking Industry, Asian Economic and Financial Review, 2014, 4(5):655-670.

Eb, A., Pretorious, P., Awosejo, J. and Zuva, T. (2013). The Role of Accounting Information
Systems in Accounting Firm. International Journal of Advanced Computer Research. Vol.
1. PP. 21-31.

23
Gel, E. (2010). The Effectiveness of Accounting Information Systems in Civil Iraqi Commercial
Banks from the standpoint of the Administration, Unpublished Master Thesis, University
of the Middle East, Jordan.

Goitom, G. (2003), Accounting Policies, Professionalism, Competence and Quality of

Accounting Information in Public Enterprises in Ethiopia, Unpublished dissertation at
Makerere University Business School.

Gordon, L. A. & Miller, D. (1976). A contingency framework for the design of accounting
information systems, Accounting Organizations and Society, 1(1), 59-69.

Hafnawi, M. (2001). Accounting Information System (1st Ed.). New jersey Lawrence Erlbaum
Associate.

Henry W., Adeniran G. and Olawale N. (2014). Effects of Accounting Information Management
on Profitability of Nigerian Banking Industry. International Journal of Humanities Social
Sciences and Education (IJHSSE) ,Volume 1, PP 100-105.

Hla, D. and Teru S. (2015). Efficiency of Accounting Information System and Performance
Measures – Literature Review. International Journal of Multidisciplinary and Current
Research. Vol. 3. PP. 976-984.

Idris, T. and Morsi, J. (2005). Contemporary Marketing. Alexandria, University House.

Iskandar, D. (2015). Analysis Of Factors Affecting The Success Of The Application Of

Accounting Information System. INTERNATIONAL JOURNAL OF SCIENTIFIC &
TECHNOLOGY RESEARCH . Vol. 4. PP. 155-162.

Khaled, M. and Abdulqawi, A. (2015). The Effect of using Accounting Information Systems to
Improve the Value Chain in Business Organizations - Empirical Study. European Journal
of Accounting Auditing and Finance Research. Vol.3. pp. 1-11.

Lee, Y.W., & Strong D. M. (2003). Knowing -why About Data Processes and Data Quality.
Journal of management information system.20 (30), 13-39.

Marshall B, and Paul, S. (2012). Accounting Information Systems, 12th Edition, Prentice Hall
Business Publishing.

Martin, J. and Leben, J. (1989). Strategic Information Planning Methodologies. Englewood

Cliffs, NJ.: Prentice- Hall.

McGuckin, M. and Doms, M. (2006). The Effect of Technology use on Productivity Growth,
Economic Innovation and new Technology. Prentice-Hall, Englewood Cliffs, NJ.

24
Miller, P. (2002).Finding Customer Focus through the Power of Competition Quality Financial
Reporting. The Journal of Accountancy.

Model, E. (1996). A Professional’s Guide to System Analysis. New york: McGraw-Hill.

Muhindo A., Mzuza, M., and Zhou J. (2014). Impact of Accounting Information Systems on
Profitability of Small Scale Businesses : A Case of Kampala City in Uganda. International
Journal of Academic Research in Management. Vol. 3, PP. 185-192.

Murungi, S. and Kayigamba, C. (2015). The Impact of Computerized Accounting System on

Financial Reporting in the Ministry of Local Government of Rwanda. Journal of
Emerging Trends in Economics and Management Sciences (JETEMS), Vol. 6, PP.261-
265.

Naranjo, D. (2004). The Role of Sophisticated Accounting System in Strategy Management. The
International Journal of Digital Accounting Research, Vol. 4, PP. 125-144.

Nzomo, S. (2013). Impact of Accounting Information Systems on Organizational Effectiveness

of Automobile Companies in Kenya. Research Project submitted in fulfillment for the
requirement of the award of degree in master of Business Administration University of
Nairobi.

Onaolapo, A. and Odetayo, T. (2012). Effect of accounting information system on organisational

effectiveness: A case study of selected construction companies in Ibadan, Nigeria.
American Journal of Business and Management. Vol. 1, PP.183-189.

Peters, J., Krishnan R., Rema P. and Kaplan D. (2001). Data Quality Assessment in accounting
information Systems Working Paper.

Saeidi, H. (2014). The Impact of Accounting Information Systems on Financial Performance – a

Case Study of Tcs – India. Indian Journal of Fundamental and Applied Life Sciences. Vol.
4, pp. 412-417.

Shy, O. (1997). Industrial organization: Theory and Practice. The MIT Press.

Sserwanga, A. (2003). Presumptive Income Tax Law and Quality of Financial Reporting,
Unpublished dissertation at Makerere University Business School Kampala, Uganda.

Stoner J, Freeman E, & Gilbert D Jr. (1995). Management. 6th ed., Prentice Hall international
Inc. England.

Tazik, H. and Mohamed, Z. (2014). Accounting Information System Effectiveness , Foreign

Ownership and Timeliness of Corporate Financial Report. Proceedings of 5th Asia-Pacific
Business Research Conference 17 - 18 February, 2014, Hotel Istana, Kuala Lumpur,
Malaysia, pp. 1-12.

25
Temple, F. (2002). Seminar on Local Government Financial Accountability, World Bank
Country Director for Bangladesh.

Topash, K. (2014). Evaluation of Efficiency of Accounting Information Systems: A Study on

Mobile Telecommunication Companies in Bangladesh. Global Disclosure of Economics
and Business. Vol 3(1). pp. 40-55.

XU, H. (2009): Data Quality Issues for Accounting Information System Implementation:
Systems Stakeholders and Organizational Factors. Journal of Technology Research. Vol. 1
. pp. 1-11.

Xu, H., (2003) Critical Success Factors for Accounting Information System Data Quality.
unpublished dissertation at university of Southern Queensland.

Zozak, S. (2005). The role of information technology in the profit and cost efficiency
improvements of the banking sector. Journal of Academy of Business and Economics,
February 1.

26