An Evaluation of the Effect of Accounting System on Financial Reporting of Tertiary Institutions in Adamawa State (a Case Study of Adamawa State University Mubi)
Objectives of the study
The general objective of the study was to assess the accounting system practice in order to increase the quality of financial and audit reports in Adamawa state University Mubi.
Based on the aforementioned general objective, this study will specifically address the following specific objectives.
- To assess the accounting system practice of Adamawa state University Mubi.
- To identify the role of accounting system on internal control over financial accounting and audit report
- To examine impact of accounting system on accounting transaction and audit reporting quality
- To investigate the effect of accounting system on financial and audit reporting
Review of Theoretical literature
Definition and concept of Accounting system
In managing an organization and implementing an internal control system the role of accounting system (accounting system) was crucial. An important question in the field of accounting and management decision-making concerns the fit of accounting system with organizational requirements for information communication and control. Although the information generated from an accounting system can be effective in decision-making process, purchase, installation and usage of such a system were beneficial when the benefits exceed its costs. Huber, (1990) agrees that automated accounting system aids decision making for management of organizations. Benefits of accounting 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.
The relationship between reporting quality and organizational performance has been studied by several researchers, for example: (Biddle et al.: 2009, pp. 112-131). Muda et al. state that accounting plays an important role in encouraging accountability, efficiency, and effectiveness of public services. The quality of information will improve the quality of management in seeing changes around the organization so that it can quickly and accurately respond to these changes. The same thing is known from the IPSASB statement (2013), which states that the allocation of resources by the government is inadequate if it is supported by poor quality financial information. The same view is conveyed by several researchers who concluded that the quality of financial reporting is closely related to company performance (Pneman & Zhang: 2002, pp. 22-37; Richardson et al.: 2001). Furthermore, Bell et al. document that the audit opinion and the timeliness of the submission of local government financial reports have a significant positive effect on the financial performance of local governments (Muda et al.: 2018; Bell et al.: 2018).
The accounting system (accounting system) describe the accounting information, which are intended to collect financial data to reach the information needed for internal or external decision-makers (Bodnar and Hopwood, 2010). The use of accounting information is vital in the management activities of a company, given its quantitative information on various activities. Accounting information is primarily intended to be useful in economic decision-making. Accounting information is needed not only by management in the direction of cooperation but also by shareholders, who need periodic financial data in order to assess the performance of the institution’s management (Nnenna, 2012).
Accounting system Quality
Accounting system play crucial and important role, providing information that could help the organization’s management perform its duties to the fullest. Many researchers have pointed out that the success or failure of an organization in achieving its objectives depends on the quality of the accounting system. The development of accounting system has a significant impact on the performance and effectiveness of operations in the organization, as the management of organization needs information that is characterized by consistency and confidence in decision –making. Further, the success of decisions and increasing their effectiveness depends heavily on the success accounting system presented to the decision makers at the right time (Al-Ali, 2014). In this regard, Al-Samaerraie, and Al-Zoubi (2004) stated that good and successful systems must be characterized by integrity, simplicity, flow of information, multiplicity of elements, in addition to excellence, correlation and correct outputs. In the same context, in order for the accounting system to be of high quality, and should be distinguished from other systems, identified by Al-Sibaei (2010) as follow:
Information by Romney and Steinbart (2015) is the data has been organized and processed to give meaning to the user. Users need the information to the make decisions or improve the decision making process. Gelinas and Dull (2008) describe the notion of information as follows: Information is the data is presented in a form that is useful in decision making activates. In line with various previous opinions (Laudon and Laudon, 2014) states the information is the data that has been shaped into something that has meaning and useful for users. Likewise with the views expressed by Susanto (2013). The information is the result the data processing that gives meaning and benefits for the user. Based on various definitions that have been presented, it can be concluded that has meaning and useful for variety of users. Valuable information/Quality and can be used in decision making should have the characteristic/traits of certain (Stair and Reynolds, 2011). A high quality product information own characteristics, attributes or quality that makes information through the information timely, easily understood and can be verified Valuable information /quality accounting to Stair and Reynolds (2011) must have the characteristics: easily accessible, accurate/precise, complete, economical, flexible, relevant, reliable, safe, sample, available timely and verifiable.
One indicator of a skill importance was the ability of that skill to leverage other areas of knowledge and create the ability to solve semi-structured and unstructured questions. In the U.S. those accounting functions that were highly structured and require the least amount of individual decision-making have been outsourced (Ramakrwashnan and Frangulescu, 2007). Skills that were unique provide competitive advantage and require company specific knowledge should be retained in house (Alvwerez et. al, 2007). For this reason it was imperative that accounting educators shift the focus away from structured skills to ones that cannot be highly automated and were enabled by technologies such as spread sheets, databases and computer assisted audit tools and techniques.
Many researchers have highlighted the role of accounting information can play in companies to achieve their goals, for example Patel (2015) emphasizes on the important of accounting information in making decisions. He added that the accounting information always plays an essential role in decision making of the managers related to the financial and economic issues and affects to the survival of an organization. In addition, accounting tools such as cost accounting system, management accounting system, price and profitability provide the useful information to the manager to make the financial and economic decisions also. Similarly, Hafij, Ahmed, and Tamanna (2014) evaluated the usage of accounting information by the decision makers in practices in five strategic decisions were as such as basic strategic decision, manufacturing decision; human resource decision, long term investment decision and marketing decision were considered for his study.
Government Financial Reports can be said to be of quality if they contain predetermined characteristics so that the information generated can become the basis for decision-making for its users. The internal control system is an integral process that is carried out continuously. This is supported by previous research, namely Kewo & Afiah, which states that understanding of the financial accounting system affects the quality of financial report information (Kewo & Afiah: 2017, pp. 568-572). This means that employees of the accounting/finance section of the Government Work Unit have understood the accounting process to become financial reports so that the goal of making quality financial reports can be achieved. The research results of McDonald explain that the financial accounting system has a positive and significant effect on the quality of financial reports (McDonald: 1999, pp. 11-22; Bordeleau et al.: 2020, pp. 173- 185). This means that the higher the level of application of the regional financial accounting system will improve the quality of financial reports. The ministry’s performance will increase if the quality of government financial reporting increases, as well as this, can be seen from the objective of measuring financial performance according to Chohan, namely as a report on the operation of government activities aimed at assessing the organization’s financial performance in terms of efficiency and effectiveness as well as monitoring actual costs and costs, which is budgeted (Chohan: 2019; Bordeleau et al.: 2020, pp. 173-185). The efficiency ratio is a ratio that describes the comparison between output and input or realized expenditure and realized regional revenue.
This chapter presents about the study research methodology. The first section presents the research design and approach. The second section presents data source and data collection. The third section presents about sample selection and determination. The fourth section of the chapter presents about method of data analysis. Finally, ethical consideration was presented.
According to Kothari (2008), there were 3 types of research design; Descriptive, Exploratory and Explanatory research design. Descriptive research design/statistical research/: research that describes phenomena as they exist. It can be used to identify and classify the element or characteristics of the subject. It would include techniques like case studies, observation and review of previous related studies and data and also it involves with collecting data in order to test hypotheses or answer questions concerning the current status of the subjects of the study.
Exploratory research design: type of research conducted for a problem that has not been clearly defined. It helps determine the best research design, data collection method and selection of subjects. It should draw definitive conclusions only with extreme caution. Given it was flexible and fundamental nature. Exploratory research often concludes that a perceived problem does not actually exist and the results were not usually useful for decision-making by themselves, but they can provide significant insight into a given situation.
Explanatory research design: the first type of correlational design and conducted when researchers want to explore the extents to which two or more variables co-vary, that was, where changes in one variable were reflected in changes in the other (Creswell, 2008). The purpose of the study was to explore a new universe, one that has not been studied earlier and research was mainly concerned with causes (why) or factor about some phenomenon.
As explained previously main objective of this research was to identify the correlation among two variables namely accounting system and practice of accounting and auditing report quality of the institution empirically. The central issues of conducting the research was to show the impact of accounting system and provide remedies to deal with problems which arises on practice of accounting system in descriptive manner that will make it explanatory for it deals with the relation of two variables. Thus, this study used a descriptive research design to achieve its objectives.
DATA ANALYSIS, RESULTS AND DISCUSSION
This chapter involves data analysis, results & discussions of findings. This chapter is structured into many sections; Section the first part involves summary of the statistics, the second section analysis the empirical model, chapter discussions and conclusion given are discussed in another chapter.
SUMMARY, CONCLUSION AND RECOMENDATION
Chapter five consists of a brief summary of findings that were obtained. It also presents the deduced conclusions and offers recommendations on how to improve the present circumstances of the companies. The research implications are discussed and suggestions of opportunities for further research presented.
Summary of the Study
The thesis intended to find out the impact and practice of Accounting system on the accounting and auditing report of the companies. The study measured impact and practice of Accounting system on the accounting and auditing report of the companies based on the various descriptive mode of evaluation, including, frequency, percent, mean and standard deviation and additionally information quality, service quality, system use, user satisfaction and net benefits of the accounting system are also seen as qualitative data presentation and evaluation.
Findings of the thesis
The finding obtained from the analysis was when the institution’s system is upgraded there were the problem of accurate data migration by MIS therefore internal auditor of the institution is not participating to solving this problem. There is no adequate training for internal auditor or there is no on job training how to find faults exists and the way of understand problem area occurred. The new system developed is called ERP, this system is not allow modifying of the transaction by accountant or underwriter if the problem occurred rather you report to MIS directorate to modify your transaction, Therefore it takes a few days to correct it as the respondents gave me the interview.
Few number of the respondents cited that there was lack of proper training and lack of proper system documentation as some of the challenges they face. Other respondents also noted that high staff turnover was another challenges of using the accounting system. They indicated that when the staff turnover was high, some of super trained staff leaves the institution and they happen to be having more information about the accounting system than the normal users of the accounting system.
The thesis was conducting through data gathering by using questionnaire distributed among employees of Adamawa state University Mubi based on the formula of Yamane sample selection, and secondary data of internal and external annual report also used as the evidence of the research. The respondents have explained their opinion on the impact of internal auditor on the accuracy and integrity of financial report. As their consistency of the management report and accounting system there is check and balance of the proposed plan settled at the beginning of the year and there is also examination and verification of the plan toward achieved or not by using the designed system.
accounting system of the institution have major role to prevent irregularities of payment, because all user of the system can see any payment at the time of payment or finally as a report of the statement. These develop control of activities because manager and other authorized body have the opportunity to verify and control all payments and collection on the system. Large number of the employee of the institution are updated themselves with new technology that the companies uses such as GIIS and ERP system available by the institution.
This study showed that there is strong relationship among the accounting system and accounting and auditing report of the institution, which means right to use to accounting information, will lead to contribute the efficiency and accuracy of the report prepared. Therefore, I can be concluded that accounting system have an impact on the quality of accounting and auditing report of the institution.
A good accounting system, institution, or organization can increase its value through increasing quality and efficiency, especially in terms of supply chain efficiency and effectiveness, improving internal control structures, and improving decision making. this is because the existence of an accounting system can make the financial reporting process of an agency easier and faster because the management of data into accounting information can be done through the system so that it can reduce the risk of recording errors which will then result in the information presented and disclosed in the Ministry’s financial statements. The institution becomes more qualified and reduces the possibility of material misstatement of the organization. The Government Agency Accountability System will specifically regulate how government agencies report their performance in accordance with the provisions of the prevailing laws and regulations. With this regulation, the measurement and reporting of government finances can be a starting point in assessing the performance of the institution in a more systematic and structured manner. The implementation of accounting system can also help reduce errors caused by negligence and the inability of a person to prepare financial reports so that they can present information in financial reports more accurately and validly. Valid information will result in unbiased decision-making and make optimal performance. In the context of governance, the government, which acts as an agent, certainly has more information than the general public, who acts as a principal. us, to reduce information asymmetry and increase agency accountability, government agencies are required to submit accountability reports containing performance achievements on management activities carried out; this will also have an impact on financial reporting which encourages accountability, efficiency, and effectiveness of public services. The quality of reporting will improve the quality of management in seeing changes around the organization so that it responds quickly and appropriately to changes.
Recommendations of the Study
The thesis summarize that as employees was hired or in a job by human resource management directorate of the institution for different department and branches they not equipped them by providing training on the accounting system of the institution in collaboration with MIS directorate and other concerned body. For this reason they not well deal with accounting and auditing report prepared by the system and not examine reports of external auditor in relation to their daily activity. Therefore, trainer facilitator of the institution should plan the budget to provide the training for those employees who have access to use the system of the institution and they should focus especially on new employee of the institution.
As it was known that practice of accounting and auditing report are depend on the transaction posted daily that determine accuracy of the financial report of the institution. The study understand from the respondents that there is knowledge and skill gap exist by the employee on transaction posting to exact ledger to hold the expense to its appropriate ledger. As report of the company shows the performance of the institution, accountant and other user of the institution should try to upgrade themselves to solve this problem by asking the concerned body.
The respondents also publicize that there is the problem of duplicate ledger and wrong account balance. Sometimes the system of the institution is stuck for more than a day, especially the report generate part of the system. More about the system stacking problem is the concern of MIS directorate therefore they should equip themselves on such like problem not occur because as the system become disturbed the institution was losing its customer.
As a whole there was the problem of delegation of work within one department, according to the respondent accountant were doing similar activity in the finance directorate therefore there was no well practiced job rotation among the employee that offer the accountants to understand different activity performed in the institution. The finance directorate of the institution should give the opportunity to the employee to practice every activity undertaken in the finance directorate.
- Periodic financial data in order to assess the performance of the institution’s management (Nnenna, 2012)
- International Organization of the Supreme Audit Institutions (INTOSaccounting system, 2001), internal control and integral process International Organization of the Supreme Audit Institutions
- AU Section 319 and Committee of Sponsoring Organizations (COSO) defines internal control
- Dixon (1990) appropriate performance
- Freeman, 1987, 1994 study on the basic properties of accounting numbers, and predictive
- Hansen & Mowen, Computer-integrated manufacturing, Communication Technology
- Adamawa state University Mubi. (2019/20) Annual Report
- Kinney, The implementation, assessment, and monitoring of effective internal control
- Ndifon and Patrick (2014) studied the Impact of Internal Control Activities on Financial Performance of Tertiary Institutions in Nigeria.
- Siayor (2010), on internal control policies and procedures adopted
- The United Kingdom Auditing practice Committee (UKAPC, 1979) defined internal control
- Tsedal (2015) on the Assessment of Internal Control Effectiveness in Selected Nigerian Public
- Hafij, Ahmed, and Tamanna (2014) evaluated the usage of accounting information on Computer-integrated operational information system (Hansen & Mowen, 2007
- (Nwinee et , 2016). Effectiveness of accounting system depends on the perception of dissuasion makers
- (accounting system) was acknowledged as an effective tool to deal with the exterior and interior changes (Shagari, Abdullah, & Saat, 2017)