CHAPTER ONE
INTRODUCTION
1.1 Background of the study
The role of technology in the information age is well recognized by business, industry and government and is completely woven in to their organizational structures and strategic planning processes Glover (1993).The quality of strategic planning is limited by the quality of information available to decision makers and that executive information systems were critical in furnishing the necessary data which produced information
Few centuries ago, before the inception of Information and Communications Technology (ICT), the accountants of an organization were using a socially acceptable behavioral method of reporting accounting and economic reports, carried out during accounting year ends, the preparation of accounting records, book such as the Statement of Profit and Loss account, the Statement of Financial Position, 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 big impact has been made on accounting practice by Information and Communication Technology (ICT); and it depends on 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).
It is obvious that when accountant scholars in Accounting Information System (AIS) and other areas of accounting, such as financial, Auditing, Tax and managerial should work together on projects, 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 improvecoordination 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, 2008).
Through information technology (IT) services available to Diamond Bank plc it can now give its customers a unified channel access to manage their personal financial information. The adoption of this technology by this bank has increased operational efficiencies reduced cost through high utilization rates in the information technology environment. The adoption of information technology has helped banking industry (Diamond Bank plc.) to keep the pace with changing customer’s needs and market dynamics and create a competitive differentiation in products and services. The complex nature of the banking system, its products and services have made it necessary for banks to embrace this change as quick as possible. Since this medium of banking has proven to be very efficient in most countries of the world (for example America) Nigeria banks has also adopted it. Indeed information technology has made a great impact on the accounting system of banking industry here in Nigeria and abroad as well. Due to the problems with banking practice that hindered the performance of effective banking business, information technology has also enhanced the performance of Diamond Bank plc in service delivery, reducing cost and providing customers with the best convenient alternative to the banking industry practice. Accounting system is a system to record the accounting transaction and events of a business and account for them in a way that complies with its policies, procedures, laws and standard. The basic elements of accounting system are concerned with collecting, recording, evaluating and reporting transaction and event of the banking industry Galina, Oram& Wiggins (1993).Therefore, information technology helps in collecting recording, evaluating and reporting transaction and events of the banking industries (Diamond Bank plc).
1.1 STATEMENT OF THE PROBLEM
The desire to undertake a systematic investigation on the impact of information system in the banking industry is due to difficulties faced by banking industry to achieve their service rendering objective, large market share and target profit as part of the purpose of their existence. This is because the quality of services rendered by some of the banking industries has created a negative multiplier effect on the banking industry as their chance of optimizing profit is affected. There are lots of complaints from the beneficiaries of banking services or bank customers that poor information technology result to inefficient application of computer to the accounting system of the banking industry. Some of the poor information and communication technology (ICT) products use in the banking industry include Automated Teller Machine (ATM), smart cards, telephone banking, alert, electronic funds transfer, electronic data interchange, electronic home and office banking. In this study the researcher seeks to find out how the information technology has impacted on accounting system of the banking industries by using Diamond Bank plc Garki Abuja.
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, Peachtree, Tax Software(Turbo Tax) and Statistical Package for Social Sciences (SPSS), CISCO.
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 use more of the 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
The main objective of the study is to examine the impact of adoption of information technology on bank operation (Diamond Bank plc). Other specific objectives of the study include:
1. To ascertain how the introduction of information technology has influenced bank performances as well as assessing logically whether the adoption of information system has influence on the growth and development in the banking industry.
2. To investigate the extent of effectiveness and efficiency in banking industry after the introduction of information technology.
3. To access how information technology on accounting system has assisted in the enhancement of globalization of Nigeria banking industry.
4. To access how information technology (IT) helps in the reduction of cost and therefore, increasing the revenue and profit of the bank.
1.4 RESEARCH QUESTIONS
In the light of the foregoing the following research questions are stated:
1. Does Diamond Bank plc benefit from information technology?
2. Does the benefit Diamond Bank plc acquires from information technology outweigh the associated cost?
3. How does information technology improve the performance of banking industry especially Diamond Bank plc?
4. What are the factors that militate against the successful application of IT in accounting practice in Nigeria?
1.5 RESEARCH HYPOTHESES
Hypotheses are ideas or working tentative statements put forward as a starting point for reasoning or expectation which may be accepted or rejected after testing Allan (2004). In analyzing the hypotheses, two options analyzed which is the Null Hypotheses (H0) and the Alternative Hypotheses (H1).For this study, the following hypothesis has been formulated.
Hypothesis One
Ho: ICT have created no significant impact on banking operation and performance
Hi: ICT have created significant impact on banking operation and performance
Hypothesis Two
Ho: There are no challenges faced due to the influence ICT has on accounting practices and bank operation.
Hi: There are challenges faced due to the influence ICT has on accounting practices and bank operation.
Hypothesis Three
Ho: there are no factors militating against the successful application of IT in accounting practice in Nigeria?
Hi: there are factors militating against the successful application of IT in accounting practice in Nigeria?
1.6 Significance of the study
Contribution to firm: Because of the complex nature of some firms, this study gives a comprehensive approach of firms employing ICT usage in the banking industry. The result of this study may be useful to auditing firms when trying to consider the technological need to improve the skill of their students in accounting practice.
IASB may also use these as a basis for setting guide and standards. The research is important to new generation banks as well as old generation banks that would want to adopt the recommendation of the research. Also to customers that want to embark on this new system of banking. It emphasizes mainly on what others have discovered/existing knowledge in this aspect of banking. It also contributes to already existing knowledge byway of emphasis.
Contribution to Auditors: It helps auditors to select the kind of application software to employ in carrying out their audit task.
Contribution to Academic: This study helps to fill the gap in the literature in understanding the practical side of the impacts of ICT in the public sector accounting and finance. This study gives out an insight into baseline assessment for ICT in public sector accounting and finance, and establishes Key Success Indicators (KSI) based on the responses from the sample used in the research. Hence researcher and students will find this useful in understanding more about the ICT environment in Accounting. The result of this study may be useful to auditing firms when trying to consider the technological need to improve the skill of their students in accounting practice. This research will also enable students and other stakeholders in the banks as well to be aware of the recent development in the banking sector, and how it can affect their performance.
This work can also serve researchers needs when trying to research more on the impact of ICT on accounting practice.
Contribution to the Government: To the government, this study helps the managers and leaders of public sector organizations to learn better ways of improving their ICT management. This study’s findings can help in policy formulation as it gives more insight of the ICT environment in the public sector accounting and finance.
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 FCT, Abuja. It will consist of accountants in the accounting and audit department of Diamond bank plc, FCT 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 banking firm 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. LIMITATIONS OF THE STUDY
Lecture permit: Due to the ongoing lectures in school, I was unable to leave as frequently required to gather necessary information for this research
Time constraint: The time given for this research was not enough to cover all areas of this study. In this study the impact of information technology on accounting system of banking industries, the research is limited by time. Though this research ought to be very broad and all embracing the research is limited by time to go that far and treat this exhaustively. The time allocation for this research work was not enough to exhaust the subject matter to its highest level possible. Sometimes relevant information could not be collected quickly.
Finance: I had limited finance to carry out the research in the aspect of Recharge cards to call and confirm appointment date to carry out my research at Diamond bank and also transportation and other miscellaneous expenses. The existence of financial problems on the side of the researcher was another problem. Funds were not sufficient enough to facilitate the research activities as the researcher was not sponsored by anybody/organization. There were costs such travelling expenses, follow-up questionnaires, printing and binding the different reports which affected the free flow of the research process.
Bank security/privacy: The study was also limited by secrecy of information in the bank, which requires permission of the banks higher authority hence most information was regarded as classified information. Lack of motivation from respondents in answering questionnaires was another limitation. The reason is due to the fact that many staff has many responsibilities to attend to, and some of the respondents feared giving classified information. This affected the validity of data given.
Bank policy: 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. Availability of financial data limited this research as the research was to rely on such financial data. Only financial information from 2012 to 2015 was made available. The computation error might also make the reliability of this work to be questionable.
1.9 Organization of the Study
Chapter one: This 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, Significance of the study, Scope of the study, Structure of the study.
Chapter two: This chapter critically reviews 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 levels, 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: This is chapter includes:- Introduction, Data presentation and the Summary of findings.
Chapter five: This is the Summary and conclusion of the research work. It also contains the recommendations, limitations and suggestion for further research and the References.
1.10 Definition of terms
Impact: to have direct effect or influence on a particular subject
Accounting:
Information: are facts that are conveyed or represented by a particular arrangement or sequence of things
Communication: is the act of conveying intended meanings from one entity or group to another through the use of mutually understood signs and semiotic rules
Technology: is the collection of techniques, skills, methods and processes used in the production of goods and services or in the accomplishment of objectives, such as scientific investigation.
Bank: is a financial institution that accepts deposits from the public and creates credit.
Industry: is the production of goods or related services within an economy.
TABLE OF CONTENTS
TITLE PAGE i
CERTIFICATION ii
DEDICATION iii
ACKNOWLEDGEMENT iv- v
ABBREVIATIONS vi
ABSTRACT vii
Resume viii - ix
CHAPTER ONE: Introduction
1.1 Background to the Problem 1 - 4
1.2 Statement of the Problem 4 - 6
1.3 Research Objective 6
1.4 Research Questions 6 - 7
1.5 Research Hypothesis 7
1.6 Significance of the Study 8 - 9
1.7 Scope of the Study 9
1.8 Limitations of the Study 9 – 11
1.9 Organization of the Study 11
1.10 Definition of Terms 12
CHAPTER TWO: Literature Review` 13
2.1 Introduction 13 - 15
2.2 Theoretical Literature Reviews 15 - 17
2.2.1 ICT 17 - 18
2.2.2 Meaning of Computerized Accounting System 18
2.2.3 Computer 18
2.2.4 Accounting 18 - 19
2.2.5 System 19
2.2.6 Accounting System and Its Components 19 - 20
2.3 Bank 20
2.3.1Banking 20
2.3.2 Banking System 20
2.3.3 Characteristics / Features of a Bank 20 - 22
2.3.4 Computerization of Accounting System at Diamond Bank 22 - 23
2.3.5 Audit 23
2.3.6 Auditing in ICT environment 23
2.3.7 Various groups of the bank 24 - 29
2.3.8 Impact of ICT system on auditing 29 - 30
2.4 Benefits of ICT to accounting 30 - 32
2.4.1 Empirical Literature Review of the Prior Studies 32
2.4.2 Performance Indicators of ICT 32
2.4.3 Accounting and application software 33
2.4.4 Impact of ICT at business level 33
2.4.5 Impact of ICT at work group level 33 - 34
2.4.6 Benefits of the impacts of ICT on work group 34 - 35
2.4.7 Summary 35 - 38
CHAPTER THREE: Research Methodology
3.1 Introduction 39
3.2 Research Design 39 - 40
3.3 Population 40
3.4. Sampling 40 - 41
3.5 Sampling Techniques 41
3.5.1 Sample Size 41 - 43
3.6 Data Collection Techniques and Tool. 43
3.7. Types of Data 43
3.7.1 Primary Data 43 - 44
3.7.2. Secondary Data 44
3.8. Data Processing and Analysis 44
CHAPTER FOUR: Data presentation, Analysis and Research findings. 45
4.1 Introduction 45
4.2 Data Presentation and Analysis 46
4.3 Background Characteristics of Respondents 46
4.3.1 General Information of Respondents 46 - 64
4.4 Research Findings 64 - 65
4.4.1 Key Performance Indicators (KPI) of ICT in Public Sector in Accounting 65
4.4.2 The Base Line Performance of the Public Sector in Accounting 65 - 66
4.4.3 The Performance of ICT in Accounting 66
4.4.4 The Impact of ICT in Accounting 66 - 67
CHAPTER FIVE: Summary, Conclusion and Recommendation 68
5.1 Summary 68 - 69
5.2 Conclusion 69
5.3 Recommendations 69
5.3.1 Training 69
5.3.2 Implement Effective Information System Controls 69
5.3.3 Integrate ICT Management with Management Activities 70
5.3.4 Continuous Users’ Survey 70
5.4 Suggestion for Further Studies 70
REFERENCES
APPENDICES
Appendix 1: Research Questionnaires
Appendix 2: Research Process
LIST OF TABLES
Pages
Table3.1: Sample Size Distribution of Respondents............................................
Table 4.2: Sex........................................................................................................
Table 4.3: Descriptive Statistics............................................................................
Table 4.4: Marital Status .....................................................................................
Table 4.5: How is success or failure of Information system in your organization accessed?................................................................................................................
Table 4.6: Processing Procedure for a Transaction to be paid………………………………
Table 4.7: What was the current status of Audit report before ICT was fully introduced in your organization?.........................................................................
Table 4.8: How long does it take to process a before the adoption of ICT transaction?............................................................................................................
Table 4.9: Where are records of transactions being stored before the adoption of ICT?..........................................................................................................................
Table 4.10: What is your opinion of the quality of your working condition after the implementation of ICT?.............................................................................................
Table 4.11: How do you post transactions before the adoption of ICT?..................
Table 4.12: Has ICT impacted your organization’s accounting in any of the following ways?........................................................................................................
LIST OF FIGURES
Pages
Figure 2.1: Conceptual Framework…………………………………………………………………..
Figure 2.2 Accounting system…………………………………………………………………………..
Figure 4.1: Information and Communication Technology Formal Training……….
Figure 4.2: Financial statement Status………………………………………………………………
Figure 4.3: The Status of Audit Report after ICT Adoption…………………………………
Figure 4.4: Time it takes to process Transaction………………………………………………..
Figure 4.5: The Recorded Transaction Storing…………………………………………………..
Figure 4.6: Posting Transaction…………………………………………………………………………
Figure 4.7: Preparation and Presentation of Financial Statement before
Adoption of ICT………………………………………………………………………………………………..
Figure 4.8: Quality of your Audit Report before Adoption ICT…………………………..
Figure 4.9: Posted transaction storage………………………………………………………………
Figure 4.10: Posting Transaction before ICT Adoption……………………………………….
Figure 4.11: Challenges Faced by Respondent Using ICT in Bank……………………….
ABBREVIATIONS
AIS - Accounting Information System
ATM - Automated Teller Machine
ERS - Resources Planning
ICT - Information and Communication Technology
IFRS - International Financial Reporting Standards
KPI - Key performance indicators
NBAA - National Board of Accountants and Auditors
SAP - Structural Adjusted Program
SPSS - Statistical Package for Social Science
CRM – Customer relationship management
ALM - Assets & Liabilities Management
ALCO – Asset & liability committee