AN EMPIRICAL ANALYSIS OF THE VALUE OF ACCOUNTING

INFORMATION SYSTEM IN AN ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The emerging global economic scenario characterized by advancement in

information technology, rapid changes in production processes, increased

sophistry of the consumer, fierce market competition and unethical skimming

activities of producers in the drive to survive the unpredictable and complex

business dynamics, has brought to the fore the crucial role of accounting

information in economic and business discourse especially in relation to

enhancing effectiveness (Curtis, 2005). Gone were the days when business

organisations were simply required to make profit, survive and provide a fair

return to investors’ on their interest (Benstone, 2007). The modern business

organisations find itself in the atmosphere of global uncertainties, cut throat

competition locally and internationally and unprecedented change in the

economy (Okoli, 2012). Hence, a great demand is often placed on the

managers of these organisations to make pragmatic and informed decisions if

the organisation is to move forward as the success or otherwise of any

organisation is often a function of the sum of the decisions taken in the past.

However, the quality of decisions taken by managers rests upon the substance
and accuracy of information provided by systems available to them (Shillilain

& Meyer, 2003).

Accounting information which is sometimes referred to as a means to

an end, with the ending being the decision that is helped by the availability of

accounting information as described by Arneld and Hope (2000), helps

managers understand their tasks more clearly and reduces uncertainty before

making decisions. Financial reporting by companies is effected via the

preparation and publication of financial statements. These financial

statements are required to exhibit certain degree of quality in terms of their

information contents. When the financial reports disclose quality accounting

information, according to Benston (2007), the decision of the users (investors,

management, government, employees, creditors, analysts) of the reports could

as well be qualitative and informed. The users of the financial reports use the

reports frequently in passing judgments on the viability of a company.

According to Ghofar and Saraswati (2008) investors in many cases are too

dependent on the quality of accounting disclosure. However, the quality of

information disclosure in the financial reports is also an area of great

relevance which can be attained through effective accounting information

system (VanBeest, Braam & Boelens, 2009).

Accounting Information System (AIS) of the past focused on the

recording, summarizing and validating of data about business financials, the

organization that were concerned about the respective decisions associated

with financial accounting, managerial accounting, and tax compliance issues

Hollander et al. (2006). The need to integrate these often diverse systems led

to the accountant’s appreciation of shared databases that provide a cohesive

picture of the organization’s data, eliminating duplications and reducing data

conflicts (Okezie, 2004). This had led to the establishment of the Accounting

Information System.

Accounting information system has to do with any combination of

information technology and peoples’ activities that support operations,

management and decision making, though in a narrow sense (Okezie, 2004).

In a broader sense however, the term accounting information system is used

to refer to the interaction between people, processes, data and technology,

Grande, Estébanez and Colomina (2011). Accounting system, in recent times,

has tended to be a system of information that does not stop at limits of data

and financial information, but also it includes data and descriptive and

quantitative information which is useful in decision making for users distinct

with plurality and diversity Okoli (2012). Information provided by the system

must be capable of achieving the goal that it has been prepared for (Sajady,

Dastgir & Hashem, 2011). Hence the role of Accounting Information System

for effective decision making cannot be over emphasized (Borthick, 2000).

It is noteworthy to say here that Accounting Information System

derives its source from accounting data. Accounting Information Systems

produce results which enhances decision making. Hence, it can safely be

concluded that Accounting Information System is not an end in itself but a

means to an end i.e. decision making to improve corporate performance.

Accounting Information System produces detailed and comprehensible

accounting information which are invaluable basis for decision making Okoli

(2012).
1.2 Statement of the Problem

Existing literature have shown that accounting information system when

successfully implemented brings about better decision making by managers,

more effective internal control systems, enhances the quality of financial

reports and facilitates financial transaction processes (Khanagha, 2011;

Borthick, 2000; Copeland et al, 2008). However none of these studies have

empirically analysed the value of the successful implementation of

Accounting Information System in manufacturing organizations thereby

creating a research gap.

Moreover the studies have shown a situation or situations rather in

Spanish enterprises, Chinese Enterprises, American Firms where economies

are well developed. The researchers therefore seeks to bridge the gap so

created in the field of accounting information system and also determine

whether the values of accounting information system identified in earlier

studies are applicable to developing economies, specifically Nigeria using

Ashaka Cement Plc as a case study.

1.3 Objectives of the Study

The main objective of this study is to present an analysis of the value of

Accounting Information System (AIS) in Nigeria manufacturing firms with

Ashaka Cement Plc as case study. However, this broad objective is broken

down into the following specific objectives;

1. To determine the relationship between Accounting Information System

and effective decision making.

 2. To ascertain the extent to which Accounting Information System has

enhanced the profitability and shareholders’ value in manufacturing

firms.

3. To determine whether installed Accounting Information System has

improved the basic roles of costs minimization and the proper

allocation of scarce resources in manufacturing firms.

4. To examine the extent to which information technology can influence

the effective operation of the Accounting Information System in the

organization.

1.4 Research Questions

Based on the above stated objectives, the following research questions have

been developed to guide our study.

1. What is the relationship between Accounting Information System and

effective decision making?

2. To what extent has Accounting Information System enhance the

profitability and shareholders’ value in manufacturing firms?

3. Has the installed Accounting Information System improved the basic

roles of costs minimization and the allocation of scarce resources in

manufacturing firms?

4. To what extent can information technology influence the effective

operation of the Accounting Information System of the organization?

1.5 Research Hypotheses

From the stated study objectives and research questions developed, the

following null hypotheses have been formulated;

H01: There are no relationship between Accounting Information System and

effective decision making.

H02: Accounting Information System does not significantly enhance the

profitability and shareholders’ value in manufacturing firms

H03: The installed Accounting Information System has not improved the basic

roles of costs minimization and allocation of scarce resources in

manufacturing firms

H04: Information Technology has no significant influence on the effective

operation of the Accounting Information System in the organization.

1.6 Significance of the Study

This research work lays much emphasis on the value of good Accounting

Information System to organizations and as such will help business

organizations, the government and the general public in so many ways among

which are;

Firstly, the study is important to the management of business

organizations in showing them how to improve their Accounting Information

system and its effect on efficient decision making and enhanced performance

in order to achieve organizational objectives.

Furthermore, the study is also vital to the management of the studied

organization on what policies to adopt that will definitely improve the

Accounting Information system in order to enhance performance in line with

the code of ethics of the system. This is because effective and efficient

Accounting Information system is an essential tool for strengthening the

internal control system of the financial reporting for management.

 Finally, this work will be of immense help to students, researchers and

scholars as it will open a new area of study and form bedrock for further

research.

1.7 Scope of the Study

This study seeks to analyze the value of Accounting Information System in the
Nigerian manufacturing industry. However, for the purpose of this study, the
scope shall be limited to the analysis of the value of Accounting Information
System in Ashaka Cement Plc for the period of 2014, using the entire
workforce as the population of the study.

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