THE EFFECT OF ACCOUNTING INFORMATION SYSTEM (AIS) ON ORGANIZATIONAL PRODUCTIVITY OF FIRM

CHAPTER ONE

INTRODUCTION

1.1.          BACKGROUND TO THE STUDY

 The emerging global economic scenario characterized by advancement in information technology, rapid changes in production processes, increased sophistry of the consumer, fierce market competition and unethical skimming activities of producers in the drive to survive the unpredictable and complex business dynamics, has brought to the fore the crucial role of accounting information in economic and business discourse especially in relation to administrative effectiveness (Curtis, 1995).

As we all know, accounting speaks the language of business as it records all transactions of an individual firm or other bodies that can be expressed in monetary terms. Predicated on the going concept, accounting is the scheme and art of collecting, classifying, summarizing and communicating data of financial nature required to make economic decisions.

Over several numbers of years the performance of accounting has increased right from the single entry system to double entry system. The main aim of the accounting system is to provide financial data like purchase, sales, expenses and income of the organization but in today’s modern world accounts maintenance is helpful in many ways. Previously accounts are maintain to know profit or loss of the organization but now a days it is also useful for increasing profitability of the organization by way of accounting information system. Businesses include transactions which produce information for better analysis of business performance and accounting information system is a delivery system for accounting.

Accounting Information Systems (AIS) are a tool which, when incorporated into the field of Information and Technology systems (IT), were designed to help in the management and control of topics related to firms’ economic-financial area. But the stunning advance in technology has opened up the possibility of generating and using accounting information from a strategic viewpoint.

 Accounting information systems (AIS) as a part of company’s information systems (IS) are seen as facilitating decision making within organizations and should be tailored to an organization’s environment, requirements of task, and structure. An 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.

In addition, specially trained accountants work with AIS to ensure the highest level of accuracy in a company's financial transactions and recordkeeping and to make financial data easily available to those who legitimately need access to it, all while keeping data intact and secure, this indirectly boost the productivity and performance of the organisation.

Furthermore, Management of various organizations in Nigeria relies heavily on information generated from the AIS employed by the company.  Moreover, quality reports are keys to arrive at an ideal investment, and a traditional way of recording, summarizing and reporting company financial reports led to less optimal decisions. Investment in good and reliable accounting systems has become a major concern for all managers as it leads to better management and analysis of firm’s performance.

 Accounting information system is an ingredient in most, if not all, financial managerial decisions for various organisation. In developed economies, these decisions are worth billions of dollars each year. In some cases, the decisions are lacking in quality. Consequently, if researches can improve decision making through improved information, society will benefit.

 The Accounting Information System is considered to be one of the most important systems of any organization. Its objective is to provide necessary information to the managers at different levels. This information helps them in discharging their responsibilities in an effective and efficient manner in the areas of planning, resource control, performance evaluation and decision making. Accounting Information Systems (AIS) are a tool which, when incorporated into the field of Information and Technology systems (IT), are designed to help in the management and control of topics related to organization’ economic-financial area. But the stunning advance in technology has opened up the possibility of generating and using accounting information from a strategic viewpoint.

 Finally, the main purpose of accounting information system in any organisation  is to give information about profit or loss and financial position of the business to its owner. This information is also useful to investors, auditors, suppliers, buyers, bankers and other financial institutions etc. But more importance of accounting information is concern to the person within the organization. Since every decision involves a number of alternatives. Accounting information must help the user to decide his course of action.

1.2.          STATEMENT OF PROBLEM

Currently, most organizations continue to increase spending on information system and their budgets continue to rise. Moreover, economic conditions and competition create pressures about costs of information. Generally, information system is developed using information technology to aid an individual in performing their job. Therefore, most organizations focus on developing information system in order to support decision system, communication, knowledge management, as well as many others. The key part of information system needed for decision making in organization is accounting information system.

Moreso, the world and human life has been transformed from information age to a knowledge age (Curtis, 1995), and knowledge has been recognised as the most valuable asset. In fact, knowledge is not impersonal like money and does not reside in a book, a data bank or a software program (Choe, 1996). Choe believed that knowledge is always embodied in a person, taught and learned by a person, used or misused by a person. Accounting information system is an unbiased tool for an effective administration and management. Poor accounting information system jeopardizes administrative effectiveness, which makes managers malnourished administratively especially in Nigerian construction industry. The consequence of this has been the current distressed syndrome that most Nigerian companies are facing. Huber (1999) stressed that companies must learn to manage their intellectual assets (i.e. knowledge) in order to survive and compete in the ‘knowledge society’. Indeed, knowledge management is concerned with the exploitation and development of the knowledge assets.

However, there is uncertainty in predicting how growing need for accounting information system will change the productivity and performance of the organization since the Accounting information system provides a base to an organization, to deal with its vendors, customers and employees. The fact that the most Businesses has not incorporated the use of better accounting information systems in their day to day transactions, a number of issues need to be addressed. As accounting gives business information in terms of transactions and in monetary terms.

Based on the fact that the financial accounting is one of the social sciences which aim to serve various needs of the private and public business facilities, it is affected by the changes of the general economic, social, legal and political and political conditions prevailing in each country or certain environment at each period. The accounting information system is resulted by certain requirements which change due to various environmental factors within the economic, social, legal and political environments in which the accountancy works.

It is on these premises that the study wishes to examine the effect of quality of accounting information on the organization performance.

1.3.          OBJECTIVES OF THE STUDY

 The main objective of this study is to examine the effect of accounting information system on organization performance in Nigeria.

Other specific objectives aimed to be achieved are:

1. 1). Determine the effect of accounting information system on organizational productivity.
2. 2). Examine how Accounting information system lead to better decision-making by Managers.
3. Ascertain the role of accounting information systems and its potential contribution in Tax computations.
4. Identify the challenges confronting the implementation of the accounting information system.
5. Determine the extent of awareness and perception of managers regarding accounting information system. 
6. To determine the effectiveness of accounting information system in decision making of managers on organizational effectiveness.

1.4. RESEARCH QUESTION

The research question provides a framework and guidelines through which substantial knowledge of the research study can be understood.

The research question asked includes:

1. What are the effects of accounting information system on organizational productivity?
2. How does Accounting information system lead to better decision-making by Managers in the organisation?
   1. The role of accounting information systems and its potential contribution in Tax computations?
   2. What are the challenges affecting implementation of the accounting information system?
   3. The extent of awareness and perception of managers regarding accounting information system?
   4. How effective is the accounting information system in decision making of managers towards organizational effectiveness?

1.5. STATEMENT OF HYPOTHESIS

The hypotheses are stated in the null form for testing:

HYPOTHESIS ONE

Ho:  There are no significant relationship between accounting information systems and the organizational performance.

HYPOTHESIS TWO

Ho: There is no positive relationship between financial performance of the organization and tools of accounting information system.

1.6. SIGNIFICANCE OF THE STUDY

An accounting Information system is an orderly, efficient scheme for providing accurate financial information and controls. Regulatory requirements and internal administration policies are key considerations in the design of an effective accounting system. Thus accounting systems show the books, records, voucher, and files and related supporting data resulting from the application of the accounting process. It involves the design of documents and transactions flow through an organization.

The study is of key importance to the construction companies as well as other firms in the same sector in terms of determining the benefits accruing due to the integration of accounting information systems in their operations. This enabled constrcution industry in gauging the model in terms of enhancing organizational effectiveness. The study is useful to other researchers interested in the problem under investigation as the study has laid a platform on which further studies related to the subject can be undertaken.

This study will be of great significant to management of various organisations, companies, accountants, auditors, economist, financial analyst and other users of financial or accounting information, It will give them positive insight about the relevance of a Accounting Information System, it key features, advantages, types, it effect on organizational performance, productivity, and profitability, as well as enlightened the general public on the benefits of it application on the organization financial reporting.

The study would provide a theoretical basis about accounting information system successful adoption dimension to firms. It would provide practical guidance for accounting information systems implementation in small and medium business and it would also provide empirical and practical contributions for organization in effectively applying accounting information system in their operations.

Finally this study will be of great significance to schools and students, it will serve as a reference point for future researchers who will want to research more on the topic.

1.7. SCOPE OF THE STUDY

Conceptually the study hovers around the implicit effect of accounting information System on organizational performance in the construction sector.

In the light of broad coverage, the researcher focuses on it effects of organizational productivity in the construction industries in Oyo Metropolis, using staff members of construction company case study.

1.8. LIMITATIONS OF THE STUDY

As with all studies, limitations exist and must be acknowledged.

The limitations of the study are as given below:

• Inadequacy of required research Material: due to it complex structure, we were posed with problem of generating enough research material to fast track the completion.
• Because the sample is chosen from the one state Of Nigeria. That’s why the findings and analysis is varying slightly in organization to organization.
• Transportation constraints: this is also a limiting factor, as there are little or not enough money to transport to the case study location and this might not be enough to give us desired results.

1.9. DEFINITION OF TERMS

1. Accountant: An accountant is any person who possesses a professional license to practice accountancy from a recognized professional body and has legal capacity and authority to carryout the duties of accountants in taxation and audit practice.

1. Financial statement

A financial statement (or financial report) is a formal record of the financial activities of a business, person, or other entity. It also provide information regarding the position and performance of a business, such as its assets, liabilities, equity, income, expenses and cash flow.

3. Accounting Information Systems

Accounting Information Systems (AIS) are a tool which, when incorporated into the field of Information and Technology systems, are designed to help in the management and control of topics related to organization’ economic-financial area. But the stunning advance in technology has opened up the possibility of generating and using accounting information from a strategic viewpoint (El Louadi, 1998).

4. Accounting Software

Accounting software is an application that records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, payroll, and trial balance. It is a part of the accounting information system.

5. Internal Controls

Internal controls encompass a set of rules, policies, and procedures an organization implements to provide reasonable assurance that; its financial reports are reliable, its operations are effective and efficient, and its activities comply with applicable laws and regulations.

6. Accounting

Accounting is defined as the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of the information.

1. Profitability

Profitability is referred to as the ability to make profits progressively over a long period of time. Profits itself has different meaning to the different people.. Profit is also sometimes taken as return accruing to shareholders.

1. Organizational effectiveness

Organizational effectiveness was succinctly defined by Daft (1983) as “the degree to which an organization realized its goals”. However, Mondy, (1990) defined it aptly as “the degree to which an organization produce the intended output”.