Research

Research

 THE ROLE OF COMPUTERIZED ACCOUNTING INFORMATION SYSTEM IN FINANCIAL MANAGEMENT: “A CASE STUDY OF

 BRAC UGANDA NJERU BRANCH”

CHAPTER ONE

INTRODUCTION

This chapter is based on the introductory part of this study and it will contain the background of the study, statement of the problem, general objective of the study, specific research objectives, research questions, study hypothesis, scope of the study, significance of the study and conceptual framework. The main aim of including the introduction section is to create bases for this study.

Background to the study

Information systems have existed almost at every stage of human existence but being reflected differently at each stage (Haigh, 2011). The use of computer technology has made a tremendous global impact in all sectors of life and has made a huge transformation particularly in the way of doing business both within and across countries. Since 1950’s when information storage and processing using computers started, it became easier and quicker to handle massive data and produce more accurate and timely reports (Kharuddin et al., 2010). Since then, most organizations have been changing their ways of transacting business to increase their levels of profitability (Elliot, 1992; Porter, 1980; Fisher et al., 2000).  Over the last fifty years many, of the world’s largest firms have advanced from being simple manufactures of hard goods, or providers of basic services, to being sophisticated vendors using advanced computerized accounting systems. This means that commitment of customers and suppliers to contractual obligations has increased, thus, the need for sustainable accounting systems, (Krappe and Kallayil, 2003).

The evolution of computer technology has completely transformed accounting systems, and studies have shown that financial outcome of a firm will always depend on how much one invests and improves the accounting information system being used (Imeokparia,2013). In the area of accounting and finance, the use of hand in financial reporting has been replaced by the use of computer software’s to enable quick reporting and easy processing and storage of financial information, hence due to facilitation of accounting software’s, preparation and access of financial statements and use of accounting procedures has been made easy (Kharuddin et al., 2010). In the current business world, failure to use computer software almost implies that financial information may not be accurate, delays in financial reporting, and that financial information may not be stored for a long time.

Globally Business owners use accounting to record, report and analyze their company’s financial information and in doing this, companies often generate several pieces of financial information from business transactions, and compile this information into general ledgers and journals, (Osmond, 2011). Historically, accounting was a manual process using paper books and documents for financial information. Business technology has created significant advances in the area of financial management and accounting software

Most of the companies in African continent day by day hire accountants to help them carry out the mathematical requirements of accounting and balancing of books. Before the introduction of information technology into accounting, these accounting protocols were being performed manually. However, today many accountants and non-accountants like to use computer software to perform these duties, (Osmond, 2011). Several studies on computerized accounting systems and financial reporting have been conducted in banks to investigate the impact of information systems on preparation and publishing of financial reports (Imeokparia, 2013); in Small and Medium Enterprises (SMEs) of Nigeria to provide empirical evidence on the existence of computer-based accounting systems.

Accounting is an essential part of any business, large or small owners, profit making or not for profit organizations. Many small enterprises in East Africa 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 computerized accounting system is expensive, its advantages lie on speed and being able to store information.

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. (Birari and Patil, 2014). 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 2 upon to justify one‟s belief, feelings and actions to others. Computerization saves time on transaction hence leading to quality of financial reporting for instance timely, accurate and reliable information can be generated (Vietnamnet, 2012).

In managing an organization and implementing an internal control system the impact of accounting information system (AIS) is crucial. An important question in the field of accounting and management decision-making concerns the fit of AIS with organizational requirements for information communication and control (Norvilitis and Santa, 2002). Benefits of accounting information system can be evaluated by its impacts on improvement of decision-making process, quality of accounting information, performance evaluation, internal controls and facilitating company’s transactions, (Borden, 2008).

According to BRAC Annual report (2013), the organization’s main objective in developing African nations is poverty alleviation and empowerment of the poor especially women through integrated program interventions While all microfinance institutions aim at increasing incomes and employment, in developing countries the empowerment of women, improved nutrition and improved education of the borrower’s children are frequently aims of microfinance institutions.

However, many organizations are not enjoying the benefit of computerization of accounting system as they have continued to be inaccurate due to increased number of interruptions due to system failure or breakdown and untimeliness with its reliability left in question (as per European Union Audit Report by National Audit Organization 6 may 2003). According to Pandey (2008), Financial reporting to the company’s stakeholders for instance the government, public, donors is a statutory obligation for every organization. Saleemi (2009) defined financial management as the process of supplying financial information which is reliable, accurate and complete to the various stakeholders for making economic decisions. This is always inform of financial statements such as statement of comprehensive income, statement of financial position and cash flow statement and other financial annually reports which provide an overview of the company’s current financial strength. Osmond, (2011), states that; Accounting is several centuries old and that Luca Pacioli, an Italian friar from San Sepulcro, is the father of accounting. Pacioli is credited with developing the double entry bookkeeping system in 1494 using debits and credits to manage a company’s financial information. His system included ledgers and journals where financial information was kept relating to business transactions.. Most of the multinational companies in Uganda have adopted computers in accounting systems in their systems, however they face numerous challenges hence this study intends to investigate into the role of computerized accounting information system in financial management with specific reference to BRAC Uganda Njeru Branch.

Statement of the 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 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), However though BRAC Uganda uses computerized accounting systems in its system the company is faced with a multitude of challenges including

Loses, misappropriation of the organizations systems, loss of organizational stored data, and in accurate reporting it’s upon this that this study intends to investigate into the role of computerized accounting information system in financial management with specific reference to BRAC Uganda Njeru Branch.

Objectives of the study

General objective

The general objective of the study will be to examine the relationship between the roles of computerized accounting information system and the performance of BRAC Uganda.

Specific

1. To assess the relationship between financial planning and financial management in BRAC Uganda.
2. To determine the influence of financial monitoring on financial management in BRAC Uganda.

• To examine the relationship between financial evaluation on financial management in BRAC Uganda.

Research questions

1. What is the relationship between financial planning and financial management in BRAC Uganda?
2. What is the influence of financial monitoring on financial management in BRAC Uganda?

• What is the relationship between financial evaluation and financial management in BRAC Uganda?

Scope of the study

Content scope

This study will focus on the role of computerized accounting information system on financial management. Computerized accounting information system in this case becomes the independent variable and performance of BRAC Uganda becomes the dependent variable. Therefore, in this study, Computerized accounting information system will be limited to financial planning, financial monitoring and financial evaluation, whilst, performance will be limited to growth, sustainability, profitability, efficiency and productivity of BRAC Uganda.

Geographical scope

The study will be done in BRAC Uganda using BRAC Njeru Branch located in Buikwe district neighboring with Jinja district, Mukono and Kayunga district. It has a population of 795393 people. It is one kilometer from the main road (Kampala-Iganga high way) and opposite Pacific secondary school in Kyabaggu zone in Mbiko. This microfinance was chosen because it is among the companies in Uganda that use computerized accounting information system and can completely operationalize this study.

Time scope

The study will be limited to the period between 2010 and 2013 because this is the period when the company’s financial management seems to have started staggering (BRAC Uganda Annual Report, 2013).

Significance of the study

The study will enable management to understand the significance of preparing quality and reliable financial reports. The study will point out weakness in the accounting system which management needs to address. To the researcher, it will mark the beginning of efforts to add to existing knowledge. For the academic world, this study will shed some more light on the computerized accounting information system in this era of ICT.

For practitioners, this study will be of much relevance to financial controllers, managers, and directors in the small, medium and large-scale business.

Lastly, to the government of Uganda and policy makers, it is expected that the findings of this study will have important policy implications.

Conceptual Framework

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From the conceptual framework above, it can be realized that computerized accounting information system in form of computerized planning, monitoring and evaluation has a direct relationship with the financial management of the company in terms of sustainability, growth, productivity, efficiency and profitability. However, the figure reflects intervening indicators such as social, legal, economic, political and technological factors which may influence the relationship between roles of computerized accounting information system and the financial management of the company.

DEFINITION OF KEY TERMS

ACCOUNTING

Ware, E. O. (2015).defines accounting as the collection and recording of financial data about an organization whether in the private or in the public sector and analyzing the data so collected to suit the decision that needs to be taken and reporting the relevant information in a summary form to the user in a form that is meaningful to him or her.

Chionye (2003) defines accounting system as the art of identifying, recording, classifying measuring and interpreting in a significant manner the financial transaction of an organization for decision making. Summarizing from time to time the information contained in the record, for its significant presentation and interpretation to interested parties as an aid to decision making.

SYSTEMS

According to Hartzell (2006) defines system as any series of interconnected elements forming an organized whole with a common objective. Example can range from an individual central nervous system to a societies family and kingship arrangements.

Stallings (2010) states that computer system like any system consists of an interrelated set of components.

Ikemefuna (2006) defines system as a set of interrelated and interdependent parts arranged in a manner that produces a unified whole.

Information system (IS) is the study of complementary networks of hardware and software that people and organizations use to collect, filters, process, create and distribute data. Information Systems encompasses a variety of disciplines such as: the analysis and design of systems, computer networking, information security, database management, and decision support systems, (Jessup, and Valacich, 2008).