Monday, 17 September 2012

The impact of ICT on accounting practice in Nigeria

1.1    Background of the study
            In the recent past centuries, before the inception of Information and Communications Technology (ICT), the accountants of an organization were using a socially acceptable behavioural method of reporting accounting and economic reports, carried out during accounting year ends, the preparation of accounting records, book such as the profit and loss account, the balance sheet, cash book, cash flow statement, income and expenditure accounts.
            The application of Information and Communication Technology (ICT), on accounting practice in Nigeria has become a subject of fundamental importance and concerns to all business enterprise and indeed a prerequisite for local and international competitiveness. It is obvious that the way accountants plan and take decision on what and how to provide their service in the accounting profession has been affected immensely by Information and Communication Technology (ICT). This has continued to change the manner in which accounting practice and their corporate relationships are organized worldwide and the variety of innovative device available to improve and facilitate the speed and quality service delivery.
            It is obvious that the biggest impact of Information and Communication Technology (ICT) has been made on accounting; and it is the ability of companies to develop and use computerized system to track and record financial transactions properly and accurately. The recording of business transaction manually on ledgers, papers, spread sheets etc has been translated and computerized for quick and easy presentation of individual financial transaction and give report on it. (Granlund & Mouritsen, 2003).
            A  vital message of the work is that researchers in accounting Information (AIS) and other areas accounting, such as financial, Auditing, Tax and managerial should work together on projects, as each party can learn a great deal from the other. By so doing, a synergistic relationship arising from such teamwork hold great potential to yield high-quality research results that can have notable impact on the accounting profession. (James E. Hunton, 2002). Shanker (2008) ascertains that the use of ICT in many organizations has assisted in reducing transactional cost, overcome the constraints of distance and have cut across geographic boundaries thereby assisting to improve
coordination of activities within organizational boundaries.
            It is very clear that, the computerized accounting system have improved the functionality of accounting departments by increasing the timeliness of accounting information. By improving the timeliness of financial information, accountants can prepare repots and operations analysis that gives management an accurate picture of current operations. The number of financial reports has also been improved by computerized system; cash flow statements, market shares reports and departmental profit and loss are now more accessible with computerized system.           
            A Prior observation shows that computerized accounting system have internal check and balance measures to ensure that all transactions and accounts are properly balanced before the financial statements are finally prepared. It also will not allow journal entries to be out of balance when posting, ensuring that individual transactions are properly recorded.
            Importantly, since the inception of Information and Communication Technology (ICT), computerized accounting system allow accountants to process large amounts of financial information and process it quickly through the accounting system. Quicker processing time for individual transactions has also lessened the amount of time needed to choose out each accounting period. Transaction that would have taken an accountant months or years to prepare would be done quickly and faster and thereby cutting high cost that would have resulted in preparing these reports (Pricewaterhousecoopers, June 2008).
1.2    Statement of the problem      
It seems that the use of Information and Communication Technology (ICT), by large or small firms has been a challenge to some users and companies.
It is presume that growth within management accounting and Information system is coming alive with the advent of Information and Communication Technology (ICT), such as Enterprise Resource Planning (ERS) system, software and ancillary equipment such as Automated Teller Machine (ATM), debit cards, electronic commerce, computer hardware, database, internet, intranets, Extranet, Telecommunication, Oracle, Structural Adjusted Program (SAP), Peachtree, Tax Software(Turbo Tax) and Statistical Package for Social Sciences (SPSS). 
            Based on these, it is perceived that most firms have device a way of recording and reporting transactions. The manner in which accountants can potentially add value to economic entities and societies is undergoing a metamorphosis. The accountant worth is now reflected in higher order critical-thinking skills, such as designing business processes, developing e-business model, providing independent assurance and integrating strategic knowledge.
            It is observed that, when Information and Communication Technology (ICT) first arrived on accounting profession, accountants initially automated existing processes rather than envisioning how information and Communication Technology could be used to conduct business in new and innovative ways. The system has been set; it is the duty of accounting profession to device a means of improving on the Information and Communication Technology (ICT).
Therefore; if accountants adopt the use of ICT on accounting practice in Nigeria, then greater speed, accuracy, timeliness and cost will be cut down on their task as a professional.
1.3    Objectives of the study
            ICT is presume to have affected accounting practice positively in so many ways, research in these area have shown that ICT and its perceived importance due to its usage across several groups of business firms, especially in the field of Auditing. The study is aim at achieving the following objectives:
i.                    To assess the impact of ICT on firms’ financial transaction reporting.
ii.                  To evaluate the challenges associated with information and communication technology in accounting profession today.
iii.                To assess and explore the impact of ICT usage since it can directly impact audit judgment, effectiveness and efficiency which form the basis for accepting the financial statement as to it true and fairness.
1.4    Research questions
Has ICT impacted on accounting practice since its introduction?
Are they any challenges faced by accounting practices as a result of the adoption of ICT?
Does the use of ICT have a resulting impact on the on the performance of audit exercise?
1.5    Hypotheses
 The followings null and alternative hypothesis is guide to this work
Ho1: ICT have created no significant impact on accounting practice
Ho2: There are no challenges faced due to the influence ICT has on accounting practices.
Ho2: ICT does not have a resulting effect in the performance of audit exercises.

1.6    Significance of the study
Because of the complex nature of some firms, this study gives a comprehensive approach of firms employing ICT usage in accounting practice in Nigeria.
IAS may also use these as a basis for setting guide and standards.
The result of this study maybe useful to auditing firms when trying to consider the technological need to improve the skill of their students in accounting practice.
This work can also serve researchers needs when trying to research more on the impact of ICT on accounting practice.
It helps auditors to select the kind of application software to employ in carrying out their audit task.
1.7    Scope of the study
This research into the impact of ICT on accounting practice covers a reasonable numbers of accounts and audit departments in Benue State, Makurdi.It will consist of accountants in the accounting and audit department of United Bank for Africa(UBA) Makurdi Branch, Benue State Ministry of Finance, Office of the Accountant General.
The efficiency of accounting practice and the factors that affect the use of ICT covers a wide aspect; ranging from profession, statutory and a host several factors, but this work is restricted to cover the impact within accounting practice and profession. The level of ICT investment by firms obtained will help our result to be generalized and practice. This study can also help in analyzing ICT environment that govern the preparation, presentation of financial statement and audit evidence. This study also serves as a guide for further research work on the field of ICT impact.
1.8      Structure of the study
Chapter one:  These comprises of the Introduction of the research work which includes the Background of the study, Statement of the problem, Objective of the study, Research question, Hypothesis, Significance of the study, Scope of the study, Structure  of the study.
Chapter two: These chapter critically review related literature. These looked at the introduction, the conceptual framework, the review of prior study; in terms of the software, the impacts of ICT at various level, the benefits and the summary.
Chapter three: Examine the Research methodology in terms of the introduction, the research design, the population, the sample size, the nature and source of data, the method of data collection, the techniques of data analysis, the decision rule and the summary.
Chapter four: Tries to see how the data are been analyzed which includes: the Introduction, Data presentation, test of Hypothesis and the Summary of findings.
Chapter five: This is the Summary and conclusion of the research work. It looked at the recommendations, limitations of the study, Suggestion for further research and the Reference.   

1.9    Definition of operational terms
Information and Communication Technology ICT refers to “the automated means of originating, processing, storing, and communicating information, and includes recording device, communication system, computer system (including hardware and soft ware components and data), and other electronic devices” (AICPA 2006a, AU 319.02).
Audit ICT usage refers to the manner in which auditors uses ICT throughout the process of their audit.
Auditing is the examination and verification of a company’s financial and accounting records and supporting documents by a professional so as to give his profound opinion as to the true and fairness of the financial statement of that company.
Accounting information system (AIS) is a system of collection, storage and processing of financial and accounting data that is used by decision makers.
Enterprise Resource Planning (ERP): is an integrated information system that serves all departments within an enterprise.
Automated teller machine (ATM): is an electronic banking outlet, which allows customers to complete basic transactions without the aid of a branch representative or teller.

      Literature review
2.1     Introduction
            In trying to assess the impact of ICT on accounting practice in Nigeria, one does not only need to concentrates on trying to gather fresh knowledge or facts but also need to concentrates on how to get himself familiarized with existing studies on the same subject and how to develop solution to solving the problem under review. In trying to do so, the researcher need to take into cognizance the findings made in the previous studies and also be able to know the answers to come out with; that could be useful for further research work.
            Information and Communication Technology needs not be over emphasis as people needs and relies on information systems to communicate effectively using physical devices (Hardware) e.g. telephone, computer, information processing and procedures  (softwares) e.g. the use of DMS,SPSS, Yahoo messenger, 2go, Facebook, communication channels (Network) e.g. intranet, extranet, internet, intercom and data store (data resource) has been so impacting from the onset of civilization.
2.2     conceptual framework 
            The advance in ICT and other business technology are making accounting practice easier, faster and cleaner; however, the rate at which technology has been introduced makes it more difficult for accountants to cope up with accounting practice.
It is important to consider where the impact of ICT lies, being in a broader information society conceptual model. These model used by OECD 2009 to illustrate the information society, identifies the following inter-related segments: ICT supply (ICT sector), ICT demand (use and users), ICT infrastructure, ICT products, information and electronic content and in a wider social and political context.
These research work will examine the impact of ICT on Auditing, individuals, work group, employment and production etc. and the application software that are needed in executing each task at the various sector of the economy.
2.3    Literature review of prior study
            The effectiveness of accounting practice and increase in productivity and high turnover as well as the profit of any organization is as a result of the impact of ICT.
            Electronic data processing (EDP) is the process of changing raw data, facts into information that are meaningful to the mangers and accountant for decision making. EDP is the function of planning, recording, managing and reporting business transactions by the use of computer and related peripherals. EDP in accounting practice; the accountant gets the data from the source documents which includes the receipt, invoice, payment vouchers, written cheques etc before there are been inputed into the computer and process into information meaningful to the users as output. (MIS by James O’Brien).
            According to Apulu and Lathan (2010), claim that ICT enables customers to receive immediate feedback that allow companies to react fast to customers’ demands and recognize new market niches. This entails that organizations that are able to exploit the potentials offered by ICT can handle various types of innovative processes in their businesses since ICT influences the performances of an organization in multifaceted ways. Thus ICT can bring about change in organizations and make them more competitive, innovative and assist to increase organizational growth. Alam and Noor (2009) argue that ICT offers enterprise avenues to compete on a global scale with improved efficiency and closer customer and supplier relationships. Therefore, ICT should be regarded by businesses as an important strategy to stay competitive.
            Currently, the manner in which accountants can potentially add value to economic entities and society is undergoing a metamorphosis. Many traditional accounting task dealing with the recording and processing of accounting transactions can be reliably automated. In this regard, accountants add little incremental value to organization, but now accountants worth is reflected in higher-order critical-thinking skills, such as designing business processes, developing financial strategies, designing e-commerce models, providing independent assurance to companies and individuals.

2.3.1                    Accounting and application software;
            This is a set of computer programs that help accountants of the 21st century to carry out their task effectively. Prior to the 1960s, the accountants were perceived as a book-keeper whose primary responsibility was ensuring that records were kept. The accountants fought a constant battle against the failure and lost of records. Computer provides more efficient means of keeping the books, and they afforded the accountant quick access to financial information for reporting purposes.
            Accounting software and applications such as peachtree, SAP, sharepoint, DMS, Turbo tax, Microsoft dynamics, Quick book, Oracle, spreadsheets, Global enterprise resource planning system (ERPS)loctus (e-mail) etc has help accountants like auditors perform their task effectively and efficiently.
These software and applications have helped tremendously in impacting on work group level and business process level.
2.3.2                    Impact of ICT at business level.
Information technology has made it possible to stay plugged in and connected on a 24/7 basis. Documents containing information regarding business operation and performance can be access effortlessly.
 2.3.3         Impact of ICT at work group level.
Information can be easily shared among colleague in an organization. ICT has made it possible to stay connected 24/7 with the help of:
Twitter etc.
The problem of one staff is not on seat so work should be delay or stop is eliminated as you can literally be flying over the Atlantic and still be able to talk and e-mail colleagues and clients.

2.3.4        Benefits of the impacts of ICT on work group:
Increase  productivity
Increased customers service relationships
Increased freedom to work from any were
2.3.5        Audit
          An audit is an official inspection of an organization books, accounts and financial statement. Audit can be carried out internally by the internal auditors in the entity internal control department or externally by an independent professional accountants (Auditor). It is aimed at; providing information as to true and fairness of the financial statement. It provide assurance  of accountability, identifies the weakness of the internal control system and make recommendations.
          The report of the auditor form an opinion as to the true and fairness of the financial statement. The report provide users such as individuals, tax authority, investors, creditors, Government etc as an assurance to rely upon for their decision making based on the audit report.
2.3.6        Impact of ICT system on auditing
(a)  Computerized accounting system.
          One of the greatest impact of ICT on accounting is the ability of companies (audit firms) to develop and use computerized system to track, extract and report on financial transactions. It allow the auditor to report quickly and easily for decision making.
(b)  Increase functionality.
          Computerized accounting system have improved upon the functionality of accounting departments by increasing the timeliness of accounting information. Accountants can now prepare reports and operations  and analysis that give management an accurate picture of the client firm under review.
(c )  Improved accuracy
          Errors and fraud are easily detected as it limit the number of accountants that have access to financial information. Less access by accountants ensure that financial information is audited by only qualified accountants or supervisors.
(d)  Reporting deadline/testing processing.
          Since the advent of ICT, accountants now process large volume of financial information quickly through the use of some audit software such as CAAT.
          Reporting that might have taken an accountant months or years to prepare can be done within a relatively short period of time, thereby aiding companies in cost control, which increase the companies overall efficiency.
(e)  Better external reporting
          Investors can be inform on time on the liquidity of the  company, and make informed decision as to whether to invest in the company or not. The existing shareholders will know the performance of the directors and how efficient they are.
2.3.7        Auditing in ICT environment
          At this point, the auditor tries to evaluate the effectiveness of the internal control system and the weakness as well relating the manner in which electronic datas are been processed, the time it take, the nature and the extent to which they is compliance base on substantive audit procedure. However, these can not be effectively achieved without a prior knowledge of computer system in planning, organizing, directing and controlling.
2.4  Summary
i.                    Computer hardware
          These are the physical parts of computer that can be seen, felt and touch. It include the input and output components firm like audit purchase large number of laptops to help them carry out their audit work at any point in time. These have replace the use of desktops computer which can not be move from time to time.
          In order for audit firms to carry out their task effectively, timely and accurately, the accountants try to construct and expand in their network base infrastructure. This may be increase in the bandwidth or the installation of central network system with the help of Local Area Network (LAN). Various branches can loop network from the main central network through the help of Virtual Private Network (VPN).
ii.                  Computer softwares.
          These are the part of the computer system that can neither be seen nor touch but are fully active for the smooth operation of the computer system. Softwares are programs that assist a particular task to be performed . firm have software that suit their purpose such as DMS, Turbo tax etc. some software like CAAT are design to fit the audit style of the professionals in the firm. Prior to the invent of these software, preparation of audit work paper is obsolete as the software does that.
iii.                Audit software
            These are software that are developed to serve audit purposes, most often, the generalized audit software (GAS). Design of audit program created for a particular audit will serve the needs of testing the audit programs of the clients. These program have a function of checking calculations, examining of records, corrections and comparism of clients records with the data obtained through other procedures.
iv.                 Nature of evidence generated using ICT
As a starting point, the evidence generated and or created using ICT are documentary evidence, since holding otherwise, that the oral evidence would amount to standing logic on its head. ICT stands as a long lasting evidence store house for clients companies.
v.                   Capturing Economic Events
Prior to the 1960s, the accountant was perceived as a bookkeeper whose primary responsibility was ensuring that records were kept. The accountant fought a constant battle against the failure of records.
On the low-value end of the spectrum falls the traditioned functions of identifying, measuring, recording accounting transactions as they pierce the boundary of the entity. But now, most of these functions are routines and predictable, cleverly written computer program can handle most of these activities.
vi.                 Junior and senior Auditors.
Most of the task of the junior auditors like preparation of audit working paper and audit procedures are relatively repetitive and involve substantial calculations and referencing across different accounts. Computer applications can automate such structured task and substantially reduce the processing time and error.
      Senior auditors assist in audit plan development, organization of audit activities, supervision and review of the work of senior auditors. The FIRM’S audit software organized all required audit procedures in a common list and cross-referenced them to items in the working paper.
Since electronic presentation of information facilitate user’s information acquisition (Jones et al, 1993), a senior auditor is likely to benefit from the convenient information gathering and organization enabled by the new software.

Research methodology
3.1        Introduction
      Research methodology is the process of collecting data for research projects.
This chapter describes the techniques and procedures used by the researcher in conducting the study and gathering the data for the study.
These research is designed to survey the application and impact of ICT on accounting practice, in particular the audit firm.
      It includes the description of the population of the study, the sample size, sampling techniques, source of data, method of data collection and method of data analysis and testing hypothesis.
3.2        Research Design
      This research is design to ascertain the use of ICT on accounting practice. These work is descriptive incline and a survey research.
The research is based on the impact of ICT environment  and the use in financial accounting practice towards the using of audit as a base for all financial accounting practice at large.
3.2.1     Population
The population selected was designed to obtain adequate and diverse views regarding the level and impact of ICT on accounting practice. It consist of accountants in the accounting and audit department of United Bank for Africa(UBA) Makurdi Branch, Benue State Ministry of Finance, Office of the Accountant General.
3.2.2     Sample size
      The sampling size to be use in this research work constitute of twenty (20) staffs of accounting departments and ten (10) in an audit firm making the total of thirty due to the constraints of gaining access to relevant information for each organization.
3.2.3     Nature and source of data.
      For the sake of these work, both primary and secondary data are used in the study. The primary data are collected by the researcher through the use of questionnaires while the secondary data are collected from already published accounts.
3.2.4     Method of data collection and analysis
      Data are collected with the help of questionnaires issued out to staff in that organization. The questionnaires are design in such a way to enable the respondents to provide answers as to the impact of ICT on accounting practice and the problem associated with it.
      The questionnaire is made up of twenty (20) question from which the respondent is expected to choose the option he/she consider suitable for him by ticking appropriately.
3.2.5     Techniques of data analysis.
      The use of Chi-square test was employ in these research base on the responses gathered from the respondent through questionnaires prepared for the sake of the research.
      In these study, the use of percentage , simple average  and chi-square will be use in taking the hypothesis.
      Because of the manner in which data are been collected, the level of significance is 5% and the level of confidence interval is 95%.
Chi-square formula is given as:
X2 =(OE)2
Where: X2 = Chil-square
              O= No of observation
              E= No of expected frequency
3.2.6     Decision rule
      A set of decision rule is important as to the null or alternative hypothesis.
This rule states that:
Ho should be rejected if the probability of obtaining a value of test statistic of a given magnitude, Ho is true, it is equal or less than some small number, α. It should be accepted if the probability of obtaining a value of the test statistic not a given. When Ho is false, is more than some small number α.
3.3 Summary/limitation
      The data collected undergoes several hands and opinion of people base on what they feel about the impact of ICT on accounting practice. The work suffer the problem of getting information from audit department and other source, thereby; making it more difficult to draw conclusion as to the impact of ICT on accounting practice.
      The computation error might also make the reliability of this work to be questionable.