THE EFFECTS OF COMPUTERISED ACCOUNTING ON FINANCIAL PERFOMANCE IN BANKS: A CASE STUDY OF CENTENARY BANK, ISHAKA BRANCH BY AMANIGARUHANGA BENJAMIN 1153-05014-00638 A RESEARCH REPORT SUBMITTED TO COLLEGE OF ECONOMICS AND MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF A DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION IN ACCOUNTING AND FINANCE OF KAMPALA INTEHNATIONAL UNIVERSITY SEPTEMBER 2018
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THE EFFECTS OF COMPUTERISED ACCOUNTING ON FINANCIAL
PERFOMANCE IN BANKS:
A CASE STUDY OF CENTENARY BANK, ISHAKA BRANCH
BY
AMANIGARUHANGA BENJAMIN
1153-05014-00638
A RESEARCH REPORT SUBMITTED TO COLLEGE OF ECONOMICS AND
MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE AWARD OF A DEGREE OF BACHELOR OF BUSINESS
ADMINISTRATION IN ACCOUNTING AND FINANCE OF
KAMPALA INTEHNATIONAL UNIVERSITY
SEPTEMBER 2018
DECLARATION
I AMANIGARUHANGA BENJAMIN do declare to the best of my knowledge that
this research report titled "The effect of computerized accounting on financial
performance in banks (A case study of Centenary Bank Ishaka Branch)" is my
original work and it has never been submitted by any institution or university for any
From the table above, it can be noted that, out of the 27 respondents, 5 had diplomas, 8
with degrees and 2 with Masters, of the other 8 had 4 certificates, 3 were Students and I
had a masters.
25
Graph 4 Pie Chart Showing Level Of Education
PIE CHART SHOWING LEVEL OF EDUCATION
DIPLOMA
• DEGREE
MASTERS
OTHERES
Table 5 A table showing the number of years that employees have served at Centenary Bank.
Number of Below 5 5-10 10-15 15 years and
years above
No. of 3 3 2 1
respondents
Source. Primmy data.
The table above shows that out of 9 respondents, 3 have worked with Centenary for less
than 5years, 3 for 5 to 10 years and 2 respondents worked with the bank for the period
between 10-15years and 1 for more than 15 years.
26
Graph 5 A Graphs Showing The Number Of Years Employee Respondents Has Served At Centenary Bank Ish aka Branch.
i ----------3.5 -.---------------------------
3
2.5 23 = " "" 2 = 0 c. "' 1::: 1.5 .... 0 0 z 1
0.5
0
Below 5 Years 5-10years 10-15 years above 15
No of years
Table 6 Position occupied by respondents in the Bank.
Position No of respondents
Head ofiT Department I
Tellers 5
Data officers in IT Department 3
Customers 18
Total 27
Source. Primary data.
From the table above, it can be seen that the respondents consisted of one Head of
Department, 5 tellers, 3 Data officers and 18 customers.
Response on quality of financial reports as a 1·esult of computerized accounting.
I. No more fraud and money laundering due to use of this system
I disagreed.
2. rate the Understandability of the computerized accounting system
27
!agreed
3. The cost of installing computerized accounting system is very high
I was not sure
4. The security of finances has risen to a sophisticated level
5 agreed
5. There has been reduced operational costs
6 strongly agreed
6. There is Increased reliability on financial reports
9 agreed.
7. Data loss has been prevented hence quality financial reports
4 strongly agreed.
Table 7 Response on quality of financial reports as a result of computerized accounting.
Responses.
A
SA
D
SD
N
Total
Source: przmary data
Key
A. Agree
SA. Strongly agree
D Disagree
SD Strongly disagrees.
N Not sure
No of respondents Percentage
16 59.3%
9 33.3%
0 0%
0 0%
2 7.4%
27 100%
28
From the table above, it can be noted that out of 27 respondents, 59.3% agreed that
computerized accounting improves the quality of financial repotis produced, 33.3%
strongly agreed while 7.4% were not sure.
Graph 6 A pie chart showing responses on quality of financial reports as a result of computerized accounting at centenary bank lshaka Branch.
• agree
• strongly agree
• not sure
Effectiveness of the Human capacity for computerized Accounting at Centenary
Bank
Explained in detail below are the details of how respondents responded to different
questions under human capacity for computerized accounting.
1. Computerized accounting systems speed up transactions.
8 respondents strongly agreed,
2. Centenary bank has cut down costs due to this system.
4 respondents agreed.
3. Computerized systems help in completion of complex tasks
7 agreed
4. The banks work is done efficiently due to the use of this system.
1 agreed
5. Internet fraud and hacking are a gone case due to the use of this system.
4 agreed.
6. System and server failure.
29
2 were not sure
7. There are high levels of efficiency.
I strongly agreed.
Table 8 Response on the effectiveness of the Human capacity for computerized Accounting at Centenary Bank.
Responses. No of respondents Percentage
A !5 55.6%
SA 10 37%
D I 3.7%
SD 0 0%
N I 3.7%
TOTAL 27 100%
Source. Pnmary data
Key
A. Agree
SA. Strongly agree
D Disagree
SD Strongly disagrees.
N Not sure
From the table 55.6% agreed that Human capacity helps on computerized systems and
37% of respondents strongly agreed 3.7% disagreed 3.7% were not sure.
30
Graph 7 Effectiveness Of Human Capacity For Computerised Accounting
EFFECTIVENESS OF HUMAN CAPACITY FOR COMPUTERISED ACCOUNTING
• AGREE
• STRONGLY AGREE
• DISAGREE
• NOT SURE
Response on how the organizations structure influences computerized accounting.
1. Computerized Accounting Unit is of great impot1ance in the institution
3 strongly agreed
2. There are sufficient resources to fund the existing structure
1 disagreed
3. Roles and Functions of the unit are well executed.
1 was not sure
4. Comparability and Consistency are reflected within the operation
15 were not sure
5. Relevance and materiality are key and first hand in the depat1ment
3 agreed
6. The organization structure has a high level of reliability
2 agreed.
31
Table 9 Response on how the organizations structure influences computerized accounting.
Responses.
A
SA
D
SD
N
TOTAL
Source: primary data
Key
A. Agree
SA. Strongly agree
D Disagree
SD Strongly disagrees.
N Not sure
No of respondents Percentage
5 18.5%
3 11.1%
2 7.4%
0 0
17 62.9%
27 100%
From the table above, it can be noted that out of 27 respondents, 18.5% agreed that
organizations structure and influences computerized accounting.! 1.1% strongly agreed
while 7.4% disagreed while 62.9% were not sure.
32
Graph 8 Response on how the organizations structm·e influences computerized accounting.
Response on how the organizations structure influences computerized accounting.
• Agree
• Strongly agree
• Disagree
• Not sure
4.1 INTERPRETATION OF DATA FROM INTERVIEW.
When asked on the rate of producing data, both the IT Department and tellers said that
computerized accounting increases the speed of repot1ing by using computerized
accounting as compared to manual systems. The head of the IT department however
said that the speed of rep011ing needs committed staff to ensure that data is always
updated all the time.
In response to the costs of computerized accounting as compared to manual systems,
the head of the IT depa11ment said that costs reduce as the companies computerize the
systems. He gave an example of employing many people to handle different tasks yet
computer can handle the work which could be handled by about 10 people. He said that
manual costs increases operational costs.
When respondents were asked whether computerized accounting has an effect on
profits, the Tellers said that computerized accounting has helped them to be up to data
33
all the time, and that the system helps them to forecast and compute financial ratios
which are helpful in profit making.
In response to how the bank can safeguard from fraud as a result of computerized
accounting, the head of the IT department said that they have controls in place to
prevent fraud from being committed further when asked the controls put in place, she
said that different checks like segregation of duties have been put in place to ensure
correctness of a transaction.
34
CHAPTER FIVE
5.0 DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 INTRODUCTION This chapter summarizes findings, conclusion and recommendations. The mam
intention of in the study was stated in chapter one to investigate the effect of
computerized accounting on financial Performance at Centenary bank. Some of the
outcomes were presented in chapter four. In this chapter the researcher interprets the
results and findings and discusses the objectives of the research, the researcher
furthermore gives recommendations and conclusions on each.
5.2 DISCUSSION OF FINDINGS. The results of the study as presented in chapter four are discussed in this section. The
respondents mainly included the people who have at least attained diploma level. This
can be evidenced from table I. This shows that most of employees at Centenary in IT
depattment and accounts are generally educated. The researcher tried to interview only
personnel with accounting knowledge. These were selected on the grounds that they
possess the knowledge required for the study. Among these respondents included, the
Head of IT department and accounts team as evidenced on table 2.
The researcher also interview customers since they are the end users of the system and
being stakeholders therefore provide the best information.
HUMAN CAPACITY FOR COMPUTERIZED A SYSTEMS ON FINANCIAL
PERFORMANCE
Generally, on the effect of Human Capacity on computerized accounting system. Most
of the respondents were of the view that it should be used alongside manual systems.
This is as a result of a big number of respondents consisting of 55.6% and 37%
respectively who supported the argument. In relation to Kimunya et el (2005) argued in
their research most organizations move through a progression of accounting systems by
first beginning with manual systems, then to computerized spread sheets based tools
then to computerized system.
35
Computerised accounting affects profits making at Centenary bank. This was reached
upon through an interview with financial manager of Ishaka branch. He sighted some
areas where computerised accounting assists in profit making like aiding in forecasting,
and accounting financial ratios. This contributes to earlier studies by basic college of
accounting where the reports showed that Banks use computerized accounting to gain
competitive advantage.
In conclusion, it is one thing to be noted that human capacity largely influences
computerized accounting systems, the systems cannot operate themselves and need
human beings to put in data but such data should be fed consciously and carefully. This
therefore gives credence to the call for need to train the personnel so as to maximize
profits.
QUALITY FINANCIAL REPORTS WITH THE USE OF COMPUTERIZED
ACCOUNTING ON FINANCIAL PERFORMANCE.
The possibility of making errors as a result of computerized accounting is generally
low. This is evidenced from the table where the biggest percentage of respondents 25
respondents said that the quality of financial reports increases due to use of
computerized accounting system.
The quality of financial reports as a result of computerized accounting is generally
high. This was evidenced in the table where by a big portion of 59.3% and 33.3% that
supported the argument that quality is very high and or high respectively. In connection
to De Thomas' research in 1985 that was carried in S.tvffis, it was revealed that the
quality of financial reports is high.
In conclusion it is worth noting that quality financial reports are as a result of the use of
computerized accounting systems but if there is one thing to reckon over and over, it is
the fact that there is need to keep the standard high as already set. This can only be
possible by eliminating all forms of data loss and routine training of the personnel that
man these systems to ensure efficiency.
36
ORGANIZATION STRUCTURE FOR COMPUTERIZED ACCOUNTING
SYSTEM AND ITS IMPACT ON FINANCIAL PERFORMANCE.
The speed of reporting increases with the rate at which financial reports are produced.
Though commitment of staff must be guaranteed as one of the Tellers commented
through an interview through an interview. Related to thi_s is a study by Dug! as in 2001
who said that a computerised accounting system is faster and efficient in processing of
information. Another research by the basic college of accounting found out that
computerized accounting found out that computer is more efficient in processing data.
There is cost reduction as a result of computerized accounting. This is affiliated to the
cost reduction as was highlighted through an interview with the Head of IT department
In conclusion Every transaction (event that change the financial resources or
obligations of the bank must be recognized, classified and documented; in addition
there must be corresponding accounts identified and changed. The transactions shou ld
be recorded in appropriate journals (with transaction data, affected accounts' titles,
debit and credit of each affected account and explanation specified in the journal
record. This in turn helps inform of data backup.
5. 3 CONCLUSION The computerized accounting system has proved to be effective in providing
information regarding the financial position of an entity in a timely and efficient
manner in Centenary Bank, accounting information system serves the purpose of
furnishing information about the entity's economic resources, claims against those
resources, owner's equity and changes in the resources and claims. Accounting
software enables timely and faster generation of financial reports. This helps managers
to easily identify and solve problems instantly and take evidence-based decisions within
various departments of the Bank. Computerized accounting system also enables data to
be available instantly and be made available to different users in different locations at
the same time meaning that transactions can be done at anytime. Among the many
benefits of computerized accounting systems is high speed and mobility of reporting,
reliability, no routine work, increased accuracy, internal control system of increased
37
productivity, easy back up and restoration of records; the disadvantages include:
extremely high costs on developing, introducing and using the system, special trainings
for personnel, increased personnel costs, dependence on machines etc.
5.4 RECOMMENDATIONS. During the study, several inefficiencies were identified that could handicap the smooth running of the entire financial system of the Centenary Bank. These include poor accounting information system maintenance, inadequate on- job training for tellers and finance staff and weak internal audit. Hence, the study recommends the following:
QUALITY FINANCIAL REPORTS WITH THE USE OF COMPUTERIZED
ACCOUNTING ON FINANCIAL PERFORMANCE.
The Bank should ensure routine system maintenance programs in order to get rid of
shortfalls such as viruses and fraud among others that may affect the system operations.
This should be done so that the system can operate to the expectation of management
and other end users.
The bank also needs to employ full time staff with adequate knowledge on installation
and maintenance of computerized accounting systems. The purpose and effect of this is
that data loss is prevented and quality is assured. Consequently even the cost of
installation for this system becomes cheaper since there will be readily available
manpower for purposes of maintenance and installation.
ORGANIZATION STRUCTURE FOR COMPUTERIZED ACCOUNTING
SYSTEM AND ITS IMPACT ON FINANCIAL PERFORMANCE.
It is also important that the employees handling transactions are trained so as to
improve on the accuracy and speed in posting. With increased improvements and
versions of accounting packages, finance and accounting staff need 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.
In addition to the training, it is important to constantly appraise the staff to check which
staff is failing the system as regards to reporting unbiased financial information. The
Bank needs more internal audit reviews to appraise and check the strength of the
38
instituted controls within the system. The computerized accounting system is prone to
fraud in cases where physical cash is involved.
HUMAN CAPACITY FOR COMPUTERIZED A SYSTEMS ON FINANCIAL
PERFORMANCE
Quarterly Internal and yearly external audit reviews should be carried out. Without
internal audit reviews, there may arise cases of teaming and lading fraud that may pass
unnoticed. It is therefore important that external auditors come in once in a while to do
audit. This in turn ensures that the there are high levels of transparency, the bank's
work is done efficiently and the cost of operation is cut down hence profit
maximization.
39
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COLLEGE OF ECONOMICS AND MANAGEMENT DEPARTMENT OF ACCOUNTING AND FINANCE
October, 8TH 2018
To whom it may concern
Dear Sir/Madam,
RE: INTRODUCTORY LETTER FOR AMANIGARUHANGA BENJAMIN REG NO 1153-05014-00638
This is to introduce to you the above named student, who is a bonafide student of Kampala International University pursuing a Bachelor's Degree in Business Administration, Third year Second semester.
The purpose of this letter is to request you avail him with all the necessary assistance regarding his research.
Topic:- COMPUTERISED ACCONTING AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS
CASE STUDY: - CENTENARY BANK ISHAKA BRANCH
Any information shared with him from your organization shall be treated with utmost confidentiality.
., 'j
tur ref: Ref: KIU-AF I 5246
our ref:
'ate:08th October 2018
Head of Department Accounting and Finance Kampala International University
Dear Sir I Madam,
Centenary Bank
RE: AMANIGARUHANGA BENJAMIN REG. NO. 1153-05014-00638
With reference to the letter dated 8th October 2018, for the above
mentioned student requesting for assistance in our institution for
his research 1n Computerized Accounting and Financial
Performance of Commercial Banks.
We hereby confirm that Amanigaruhanga Benjamin has been
availed with opportunity to do his research with Centenary Rural
Development Bank.
Centenary Bank: Head Office - Mapeera House Plot 44-46 Kampala Road and Plot 2 Burton Street. P.O . Box 1892 K•mpala. UGANDA. Call C entre: 0800 200555.Te1:+256 (0)41 346856, 251276/7. Fax: +256 (0)41 251273 email: info@cente n:arybank.co.ug. website: www.cente n:arybank.co.ug
Ugandans· Prof. john Ddumb> Ssentamu (Chatrmon). Mr. Fabian Ka<o (Managtng Dtrector). Dr. S1mon M.S. Kagugube (Execuuve Dtrector). Mr. Henry Kibtrige. Mr. Andrew Obol. Dr. Peter Ngateg•ze. Mt. Rev. Dr Cypmn K. Lwanga. Mt. Rev. Paul Bakyenga
Ke nyon· Mr Klmathi Mutua Duul1. Mr Jacco Minnaar.