Enhanced speed through IT use in accounting
Discuss about the Impact Of Accounting Information Systems On Performance Measures.
The emergence of technology has revolutionized the way businesses conduct their activities. Before, the use of IT in business operations, things were done manually, but today most accounting systems rely on IT to carry out their operations. Information Technology, largely deals with the application of telecommunications equipment and computer applications to retrieve, manipulate, retrieve and transmit data. Accounting is complex, and there is a high likelihood of accounting specialists to make various mistakes when performing their calculations manually without the input of IT. However, the accounting spectrum has changed for the better since the application of IT came into force. Businesses in the modern world rely heavily on IT in accounting to manage their operations. Ideally, this literature review is more focused on the use of IT in accounting.
Lim, (2013) believes that the use of IT enhances speed in computation. Accounting deals with figures and which need to be calculated to determine the correct position of financial data of any Kuwaitian company. Business transactions require cash flows which in most cases need speedy computation which can be offered by IT. Also, the large corporation dealing huge financial data can only have its data transmitted, retrieved or measured speedily if there is of information technology. Furthermore, to carry out financial reporting within a short period IT must be in place. In essence, what Lim, (2013) is trying to argue is that when organizations apply IT to their accounting activities they are likely to carry them out within a short time. In the same breath, Banker, Chang, & Kao, (2002) indicate in their research that quantitative and qualitative information they analyzed from the research site estimate that productivity increased significantly following IT implementation. From the reasoning of these authors, it is apparent that IT improves the activities of a company, which then results in productivity. Therefore, if the IT implementation enhances speed in computations, in all probability it contributes to increased performance.
Besides, from the literature it has also come out that the use IT in accounting enhances accurateness specifically in computation. In the literature of Lim, (2013) the aspect of accurateness fundamentally came out. Organizations, whether profitable or non-profitable handle huge amounts of data and in some cases when doing computation of preparing financial statements, there is a likelihood of making accounting errors. Fortunately, the IT can help minimize some accounting errors that occur from omissions and commissions. According to Lim, (2013) “accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof.” From this definition of accounting there is classifying, summarizing and recording of transactions or events usually monetarily and errors are likely to be made in data classification, recording or summarizing when computations are manually conducted. Thus, the point being put forward by this author is that to have accurate financial information then IT must be implemented, because it would eliminate any possible errors that are likely to occur in manual computation. When IT is used definitely the computation would be digital and what an accounting specialist has to is just entering data and have it summarized or computed digitally. Further, Amiri, & Amiri, (2014) adds that the application of IT has boosted the accounting functions in most organizations. Therefore, to maintain accuracy of these accounting functions like recording, which requires the reproduction of accounting books, the Information Technology needs to be applied. In nutshell, accuracy empowers the accounting functions like analyzing, summarizing, classifying and recording (Gambetta, García-Benau, & Zorio-Grima, 2016).For that matter the literature insists that organizations need to step up their efforts to implement the use of IT for them to be better positioned in handling accounting functions.
Enhanced accuracy in computation through IT use in accounting
In other literature, it has been found out that there is a positive relationship among the SMEs using AIS (Accounting Information Systems) and SMEs in Spain and improved performance indicators and productivity (Urquía, Pérez & Muñoz, 2011). Although, the research used the SMEs of Spain, what is important is the positive relationship the AIS has on the performance and productivity. From the research, what has come out is that when organizations use whether medium or large use accounting information system there performance and productivity shoots up. Businesses are likely to progress, grow or expand if they their performance or productivity is upward. In most likely, businesses that do not use AIS stand no chance of gaining improved performance and productivity and that directly threatens the survival of a business. Thus, what Urquía, Pérez & Muñoz, (2011) argue is the use of Information Technology has a direct and significant impact on productivity and performance. That is to imply that Kuwait in its capacity as a country needs to encourage enterprises or firms to adopt the use AIS like some firms in Spain to have a greater chance of improving their performance and productivity. However, Amiri, & Amiri, (2014) argue that the findings that IT and performance have a direct and positive relationship are mixed or contradicting. The authors reportedly claim that the mixed findings do not directly show the relationship between the performance and IT, but what the authors acknowledge is that the use of accounting information system or IT, improves accounting management. If IT improves accounting management, it implies that the company would be more responsible and accountable financially. In reality, if the financial management of a company is effective, theft, corruption, or data manipulation can be eliminated, and that would give the company an impetus or motivation to improve its performance to meet its financial goals or needs.
Besides, Amiri, & Amiri, (2014) noted that the current accountants are potentially able create values for economic units that can change the society. The traditional accounting functions like recording and processing today are automated in fact reliably and as a result the accountants are able to ensure that organization incur low extra added values. What these authors point out is that as things stand right now since the adoption of IT in accounting systems, added values or overheads that organizations incurred during the traditional accounting are eliminated. Hence, data manipulation that aims to defraud the company so as to stifle its efforts to change the society by increasing its productivity and improving quality has been reduced significantly by IT implementation. In addition, organization units or departments are also using IT to hasten their operations. By using IT, the units are able to record data to make predictions that can define corrective actions. The point in this case is that IT has helped the decentralization of accounting and that has allowed many departments to be accountable when handling accounting documents. Since, many organizational units manage accounting documents it is possible to identify problems the company is facing and come up with a corrective action to solve such problems. If business organizations are able to identify problems impacting their activities and correct them, it simply means that they can perform optimally (Gambetta, García-Benau, & Zorio-Grima, 2016).
Enhanced productivity and performance through IT use in accounting
Nevertheless, the use of IT applications is also requirements in law. Accounting is field that is regulated in almost all countries. Most market economies are regulated by the government, therefore to meet some accounting laws, then it would be prudent to use technology. For instance, (Gambetta, García-Benau, & Zorio-Grima, 2016) gave the case study of data analytics in bank audit in Uruguay. The authors stated that failure to use Computer Assisted Audit Techniques (CAATs) is punishable by law in Uruguay. In Uruguay, it is a regulatory requirement for banking organizations to use CAATs, which is part of the IT to carry out its accounting functions. If the auditing is done, it is found that an enterprise failed to observe ERP (Enterprise resource planning) and XBRL (eXtensible Business Reporting Language) there is a probability of an organization contravening CAATs and that can attract punishments like fines. Centrally, the argument is that the use of IT has made it easier to carry financial auditing and sharing of financial information openly. For instance, XBRL allows companies to communicate properly or understandably their financial data especially online. Financial information are supposed to be accessible to the public, and therefore (García-Benau, & Zorio-Grima, 2016) point out that auditing and sharing of financial data is mandatory, even under the law. Thus, IT can be seen to have revolutionized the sharing of accounting information between organizations and citizens.
In conclusion, the literature under review in this paper has shown that the use of IT has improved accounting functions, hence increasing accountability and responsibility. Financial management to some large extent has been enhanced and cases of fraud, errors and slowness or delays in recording, classifying or summarizing big accounting data has been eliminated. Most importantly, the articles reviewed in this paper have also noted enterprises that use IT are likely to have enhanced performance, productivity and management. Therefore, it is without doubt that the use of IT in accounting is essential to businesses, because if used properly enterprises stand to gain high productivity or performance that promotes business survival, expansion and growth.
List of References
Amiri, S., & Amiri, N. (2014). Information Technology (IT) and its Role in Accounting
Practice. International Journal of Economy, Management and Social Sciences, 3(1).
Banker, R. D., Chang, H., & Kao, Y. C. (2002). Impact of information technology on public
accounting firm productivity. Journal of Information Systems, 16(2), 209-222.
Gambetta, N., García-Benau, M. A., & Zorio-Grima, A. (2016). Data analytics in banks’ audit:
The case of loan loss provisions in Uruguay. Journal of Business Research, 69(11), 4793-4797.
Lim, F. P. C. (2013). Impact of information technology on accounting systems. Asia-Pasific
Jornal of Multimedia Services Convergent with Art, Humanities and Socialgy, 3(2), 93-106.
Urquía Grande, E., Pérez Estébanez, R., & Muñoz Colomina, C. (2011). The impact of Accounting Information Systems (AIS) on performance measures: empirical evidence in Spanish SMEs.
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