The influence of computerized accounting on financial reporting in AziCCUL Ltd Mankon Bamenda
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The recent development of information technology has had a dramatic influence on the accounting information system; computers have become smaller, faster, easier to use, and less expensive leading to the computerization of the accounting system.
This study was conducted to assess the influence of computerized accounting on financial reporting in AziCCUL Ltd Mankon, Bamenda.
The study was set to address the objectives of assessing the benefits of computerized accounting in AziCCUL Ltd, examining the qualities of financial reports produced by MFIs in Cameroon and the relationship between computerized accounting and financial reporting.
The researcher used a descriptive and analytical research design to establish a relationship between two variables and to exhaust all areas in the research.
A sample size of fifteen employees from various departments was used and sampled on a non-random purposive method. Questionnaires were used to collect data that was processed by tabulation, bar charts, and also narrations, in the form of description was accounted for an easy understanding of the findings.
While assessing the benefits of the computerized accounting system, the findings indicated that 70% of the respondents were in agreement that computerized accounting systems minimizes errors and allows easy posting of transactions on the ledger, 30% disagree with the view.
On examining the qualities of financial reports generated by the firm, 87.5% of the respondents accepted that financial reports produced are reliable and 12.5% of respondents disagreed. The researcher found out that AziCCUL Ltd runs a fully computerized accounting system in financial reporting thus benefiting from the system.
The institution can maintain the financial report qualities of timeliness, reliability, accuracy because of a computerized accounting system.
The research recommended that there is a need to consult with system analysts to match the institution’s information needs with available software. Training staff, proper authorization, and the use of appropriate accounting software will save time and fewer mistakes in the company.
This study was carried out to assess the influence of computerized accounting on the quality of financial reporting in microfinance institutions in Cameroon. This chapter presents the background of the study, the research problem, the objectives of the study, the research hypothesis, the research questions, the significance of the study, and the scope and the limitation of the study.
1.1 Background to the study
Accounting is an essential part of any business, large or small owners, profit-making or not for profit organizations. From experience, it can be seen that many small enterprises do their accounting manually and they are satisfied.
Others may be considering using a computerized system since accounting software is much affordable. Manual and computerized accounting systems perform basically the same processes, the accounting principles and concepts are the same with differences lying in the technicalities of the process.
Although a computerized accounting system is expensive, its advantages lie in speed and being able to store larger quantities of information in smaller spaces than with the manual system.
According to Kogan (1986), accountability refers to a condition under which a role holder renders account to another so that judgment may be made about the adequacy of performance. Lerner and Tetlock (1999), equate accountability not only to reporting but also to the justification of performance, they continue to describe accountability as the implicit and explicit expectations that anyone may be called.
According to Pandey (1998), Financial reporting to the company’s stakeholders for instance the government, public, donors is a statutory obligation for every organization.
Saleemi (1981) defined financial reporting as the process of supplying financial information that is reliable, accurate, and complete to the various stakeholders for making economic decisions.
This is always to inform of financial statements such as a statement of comprehensive income, statement of financial position and cash flow statement, and other financial annual reports which provide an overview of the company’s current financial strength.
Microfinance is an activity carried out by registered entities that do not have the status of banks or on regular basis. Loans operations and or savings, collection and offer specific financial services to populations who mainly operate outside to traditional banking channel/ these are institutions that are established to render or offer financial services to the poor in rural/urban areas. (ACC 413, handout 2, 2016).
Microfinance is defined as a development tool that grants or provides financial services and products such as very small loans, micro-savings, micro-insurance, and money transfer to assist the very or exceptionally poor in expanding or establishing their businesses. (Robinson, 1999).
The computerized accounting system is the application of the computer-based software used to input, process, store, and output accounting information (Millichamp 1995). The application is to support, advancing technologies that enable firms to use computer programs to perform tasks, which were previously done manually.
The need for computerization of the accounting system is due to an increase in the number of transactions, as a result of the policy of continuous expansion of the business.
It is noted that business accounting records cannot be accurately maintained when the firm expands and when the system is not computerized.
It is the computer-based system that the firm can use to post numerous transactions to the right ledgers and prepare proper financial statements.
It is from this need that MFIs consider it very important to computerize their systems and different functions as it considers two mandatory rules that govern its operations. These rules are:
- Technology must benefit your business and,
- If technology does not benefit your business then you don’t need it.
For this reason, the accounting section which the institution considers very important is highly computerized to improve on record-keeping, proper maintenance of different loss of cash, or loss of accounting records.
Computerized accounting systems in commercial organizations, which will help to integrate, simplify and streamline all the business processes and transactions cost-effectively and easily (Indira 2008).
Business organizations should adopt a suitable accounting package to derive benefits from it (Mike et al 2006) for instance for a small business, personal finance organizers like quicken, Microsoft money, and quick books are usually good enough to handle accounts of small businesses. It’s however noted that the way accounting data is entered, processed, and stored has considerably changed.
It is no longer necessary to have a huge room full of ledgers and records; there are accuracy and efficiency in keeping records, low cases of omission, and loss of accounting records using computers. These changes in financial reporting might be due to several factors.
In Cameroon, many MFIs have adopted the use of computers in many sections of their activities such as recording daily collections, recording customer’s savings (account details), preparation and presentation of their year-end financial reports, etc.
Therefore the researcher focuses on investigating the influence of computerized accounting on the quality of financial reporting in MFIs in Cameroon.
1.2 Research Problem
As information technologies grow more progressively, the manual accounting systems have become gradually inadequate for decision needs (Brecht and Martin, 1996).
Consequently, public and private sector firms in both developing and developed economies view CAIS (Computerized accounting systems) as a vehicle to ensure effective and efficient information flow in the recording, processing, and analysis of financial data.
Effective and efficient, information flow enhances managerial decision-making, thereby increasing the firm’s ability to achieve corporate and business strategy objectives (Manson, McCartney, and Sherer, 2001).
The experience of advanced countries is that managing complex FMIS (financial management information systems) projects require considerable management skill. However, this is typically in short supply in DCS (Distributed Control System).
Top managers may not be computer literate. The consequence is often the binding constraint when introducing FMISs is not the technical capacity to create them but the capacity to manage them. (Keating &Frumkin (2003).
in most MFIs, funds from customers are poorly managed and their accounting systems are in poor order. Many MFIs do not have qualified accountants and have problems preparing accurate and timely financial reports, which is one of the major customer and stakeholders requirements.
Since the 1950s, when technology started to be applied in business (Otieno and Oima,2013), most developing countries have moved away from the use of a pen and a paper and started to adapt to the use of accounting software’s to facilitate the generation of quality, quick and accurate financial reports.
However, due to other poverty-related issues, there is a lack of consistency coupled with irregularities registered in the field of technology which handicap the regular use of computerized accounting system. Studies to evaluate the impact of using this technology to generate financial reports are limited.
A few studies have been done on the effects of computerized accounting systems on the quality of financial reports which included; Mwaura (2013), the study assessed Financial Accountability on The Performance of Non-Governmental Organizations In Kenya, (Otieno and Oima 2013) studied the implementation of the computerized system in Kisumu County, Kenya.
Another study by Byenkya Denis Mark (2011), the study was conducted to assess the impact of computerized accounting on financial reporting in Uganda Breweries Limited. Thus this study intended to address the following research question: Does the use of Computerized Accounting systems influence the quality of financial reports?
With the fall of CONFINEST a major microfinance institution in Cameroon, many MFIs in Cameroon have changed their systems of operations from manual to computer-based systems. With the advent of ICT packages and computerized accounting software, MFIs in Cameroon have adopted and are applying ICT in almost all areas of their actions, due to its inter-sectional link.
It appears to be reaping most of the benefits of revolution in technology, as can be seen by its application to almost all areas of its activities such as: using of debit and credit cards, inter-regional money transfer, using computerized accounting systems in the recording, preparation, and presentation of their financial reports. For this reason, the researcher is prompted to assess the influence of computerized accounting systems on the quality of financial reporting in Microfinance institutions.
1.3 Research Questions
This study will answer the following questions:
- How has computerized accounting influence the quality of financial reports of MFIs in Cameroon (Bamenda municipality)?
- What are the qualities of financial reports prepared by MFIs in Cameroon (Bamenda municipality)?
- What is the relationship between computerized accounting and financial reporting in MFIs in Cameroon (Bamenda municipality)?
- What is computerized accounting? V. What is financial reporting?
- Who are the users of the financial reports prepared by the MFIs?
- How have the activities of MFIs impacted the economy of Cameroon?
- To what extent does the quality of financial reports of MFIs influence the decisions of potential investors and their customers?
1.4 The Research Objective
In every research, the objectives are the aims or reasons for carrying out the research. These objectives are therefore divided into main and specific.
The main objective of the study is to critically assess the influence of computerized accounting on the quality of financial reporting in MFIs.
The specific objectives are:
- To examine the quality of financial reports prepared by MFIs in Cameroon (Bamenda municipality).
- It ensures efficient performance in accounting records.
- Computerized accounting reduces the monotony of doing repetitive accounting jobs.
- Keeping financial statements and budget records using accounting software.
- Computerized accounting makes sure accuracy in accounting records and statements.
- It prevents clerical errors and omissions in accounting records.