The Impact of Accounting Information System On

Effectiveness of Manufacturing Firms in Jordan

Yousef Halaseh

School of Business, University of Jordan, Amman, Jordan

yhalasah93@gmail.com, yos8191500@ju.edu.jo

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TABLE OF CONTENTS

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INTRODUCTION

RESEARCH PROBLEM 4

OBJECTIVE OF THE STUDY 4

RESEARCH QUESTIONS 4

LITERATURE REVIEW 5

RESEARCH HYPOTHESIS 6

CONVLUSION 7

REFERENCES 8

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The Impact of Accounting Information System On Effectiveness of
Manufacturing Firms in Jordan

ABSTRACT

Accounting generally involves the process of identifying measuring and communicating

economic information to permit informed judgment and decision by user of the
information. Currently most organizations continue to increase spending on information
system and their budgets continue to rise and economic conditions and competition create
pressures about cost of information.

Therefore, most organization focus on developing information system in order to support

decision system communication. The study is important to determining the benefits
accruing due to the integration of accounting information system in their operation. The
design of the study is descriptive research method. In addition, both qualitative and
quantitative methods were applied in data collection and analysis.

Keywords: accounting information system, organization, global technology.

1- INTRODUCTION

The main objective of accounting information system to increase and improve the
productivity of a firm. A useful accounting information system should produce information
that is relevant to decision making. Information technology is designed to help in the
management and control of topics related to organization economic finance area. Accounting
information is an ingredient in most if not all financial managerial decisions, and in
developed economies, these decisions are worth billions of dollars each year.

Consequently, if researcher can improve decision making through improved accounting

information society will benefit. Therefore, this paper argues that, there is a relationship
between quality of accounting information system and effective administration and decision
making. The paper examines the relationship between accounting information system and
organizational effectiveness.

1.1 Accounting Information Systems

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 (Watts, 1999) elaborated that accounting is a process of recording, categorizing and
summarizing business transactions in a manner which is significant in monetary terms.
According to (Nzomo, 2013) definition, AIS is a device integrated in field of information
technology responsible in generation of reliable and more accurate financial reporting
used by business leader to make decision

1.2 Organizational Effectiveness

The measure of organizations effectiveness as stated by (Campbell, 1977) can be looked

on how information is being processed by a firm, flexibility in operations, adaptability to
change economic environment and profitability of a firm which is able to achieve goals
set based on the different criteria and perspective will be said to be effective.

1.3 The Relationship Between Financial AIS and Firm Effectiveness

(Niomi et al., 2018) from their study concluded that a good accounting information
system will lead to increase efficiency in transfer of financial information with in
different department and also with external parties and in the long run improved
performance.

1.4 Manufacturing Companies in Jordan

The manufacturing sector industry is a main contributor to Jordan economy accounting

for 22.5% of (GDP) in 2018, about 90% of national exports and employing 15% of the
country’s labor force. Jordan s industrial sector is composed mainly of mining and
quarrying and manufacturing. The challenges of the sector are that the high level of
taxation in Jordan hinders investors from investing in the country and also high cost of
operations posts a great challenge.

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 2- RESEARCH PROBLEM

Capital expenditure on information systems has been on the rise recently in many
organizations locally and globally. While operations within different departments in a firm
have seen a change from being manual and shifted to being automated with
the utilization of computer software. Accounting information is a tool for
effective administration since bad accounting information system will be
lead to ineffectiveness of administrations (Oaolapo & Odetayo, 2012). Also, some problems
that effect of computerized systems are at constant risk of hackers, power failures, viruses
and loss of information and other issue is the relatively high cost of accounting information
expert system and these systems must be updated and usually the firm staff needs some sort
of special training courses for effective use of the system.

3- OBJECTIVE OF THE STUDY

the main objective of this study is to examine the effect of accounting information system on
effectiveness in manufacturing firm in Jordan:

1. Determine the effect of accounting information system on performance in

manufacturing firms.
2. Examine how accounting information system to lead improvement decision making
by the manager.
3. Identify the challenge to implementation of accounting information system.
4. To determine the effect AIS in decision making of managers on manufacturing firm.

4- RESEARCH QUESTIONs

The research question provides a framework and guidelines through which substantial
knowledge of the research study can be understood.

1. what are the effect of accounting information system on manufacturing firm in Jordan?
2. what are the challenges effectively on implementation of the accounting information
system?
3. How effective is the accounting information system in decision making of managers
towards manufacturing firm?

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 4. RESEARCH METHODOLOGY

A systematic literature review methodology was followed in the completion of this research
paper, by reviewing previous literature regarding this topic to answer the research questions.
The review identifies the type of information searched, critiqued and reported within known
timeframes. The search terms, search strategies (including database names, platforms, dates
of search) and limits all need to be included in the review.

5- LITERATURE REVIEW

Locally, Alqatnani conducted a study in (2002) entitled “impact accounting information system
on management performance in industrial corporations in Jordan”. The study aimed to analyze
and clarifying role of accounting system in production of high quality accounting information
appropriate to meet the needs of accounting performance confidentiality in industrial
corporations in Jordan and the extent of the relationship between natural relationship and quality
of accounting information and its impact on use of accounting performance at area of planning
observation and decision making as the researcher chose a random sample consisted of (45)
companies that is equivalent to (61%) of the study community . the study findings show the
following; a positive relationship and statistical significant correlation between elements of the
accounting system and the quality of survival of organization. In addition, Rapina (2014)
discovered a strong relation between the organizational factors (management commitment,
organizational culture and organizational structure) on the quality of accounting information
system and how (AIS) effect on the quality of accounting information. Furthermore, he detects a
significant influence of AIS application on the quality of financial reports. While Srivastava and
Lognathan (2016) detected any firms try to increase its profitability so, the Accounting
information system will be important elements to reaching this goal. Also they define the role of
good accounting information system in increasing the company profitability target. From other
hand, they found a significant role of AIS on in decision making. But Nwinee et al. (2016),
examined how applying AIS enhances the management efficiency and decreased the cost of
control to achieving firm’s goals. Although Tan (2016), test the impact of AIS on internal
auditors in Turkey, he revealed the importance role of accounting information systems in
companies through enable all levels of management to access comprehensive information that
goes into the planning and controlling of activities within business organizations. In addition,
AIS provide high quality of information to internal and external users and typically cover six

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 main aspects: people, procedures, data, software, information technology infrastructure, and
internal controls. Alnajjar (2016), investigate the impact of accounting information systems on
the management performance and organizational performance. The result detect that the
accounting information systems significantly impact the management performance and
organizational performance. Through applying accounting information systems, the obtain
information will be more useful, for decision making in order to achieving the company's goals
and objectives, which increase the company performance. Samuel (2011), indicate that
Accounting Information Systems are essential means for organizations’ effective management,
for decision-making and controlling activities, also AIS is very effective tool for controlling and
coordinating the activities of an organization. Moreover, AIS consider a serious factor to produce
high quality of accounting information. The same result achieved by Hafij Ullah et al. (2014),
who confirm there is significant relationship between accounting information and strategic
decisions, whilst Awosejo et al. (2014), recognize the using of AIS improved the firms
productivity, from other hand Qatanani and Hezabr (2015), discover the main factors that
managers need to improve the accounting systems which in turn improve the quality of
accounting information required to progress the value chain of business organizations (clearly
defined responsibilities and authorities, specific work procedures, internal controls, recruit
employees who have the competent qualifications, training and high quality of accounting
systems). Furthermore, Almbaidin (2014) achieved to important fact about the role of accounting
information system in improving the effectiveness in Jordanian banks. From other hand Jawabreh
and Alrabei (2012), detect there is no relationship between accounting information system and
planning, controlling, and decision-making in Hotels same result achieved by Jose Antonio
Perez-Mendez and Angel Machado-Cabezas (2015), they find applying AIS does not assurance
improve the performance in companies, also Soudani, (2012), find there is no any relationship
between using AIS in improving the company's performance, Ismail and King (2005) revealed a
positive relationship between AIS and performance measures. Also Powell and Dent-Micallef,
(1997), notice that using IT didn't provide competitive advantage for achieving results. Saeidi
(2014), revealed Accounting information systems (AIS) which is part of information systems (IS)
are make easy the decision making process within organizations and should be modified to an
company’s environment, requirements, and structure.

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 6- RESEARCH HYPOTHESIS

H0: there is no significant accounting information system and financial performance in Jordan
firm.

H0: there is no positive relationship between accounting information system and firm
performance

7- CONCLUSION & EXPECTED RESULTS

The objective of this study was to examine the significant effect of accounting information
system on effectiveness of manufacturing firms in Jordan. On the basis of the literature
review of this research paper, the results would be that accounting information systems has a
significant effect on firms in general, and manufacturing firms will benefit as well.

It can also be concluded that accounting information enhance administrative effectiveness,

and leads to good financial reports and also leading to better decision- making.

In addition, the policy implication of the study is for International Accounting Standard
Board (IASB) to adopt good accounting information system and make its application
mandatory on manufacturing firms in Jordan in order to boost their effectiveness, and
improve the economic status of the country, therefore creating more jobs.

It is also recommended that more studies is conducted on the impact of AIS on the
performance of employees and the monitoring effectiveness of management on the
performance of employees.

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 REFERENCES:
1- Algtauna, adel mohammed, (2005)” impact for user of information technology on the
effectiveness of system accounting information’ a study on the banks and insurance
facilities shares listed in the market for indusrial shareholders company ‘unpublished
thesis arab academy for banking and financial sciences, Amman Jordan.
2- Rapina, (2014). “Factors Influencing The Quality of Accounting Information System
And Its Implications on The Quality of Accounting Information” Research Journal of
Finance and Accounting, Vol.5, No. 2, pp.148-188
3- Hafij Ullah, M., Khonadakar, J., and Fahim, S. (2014). “Role of Accounting Information
in Strategic Decision Making in Manufacturing Industries in Bangladesh”, Global Journal
of Management and Business Research:
4- Jawabreh, O. and Alrabei, A. (2012). “The Impact of Accounting Information System in
Planning, Controlling and Decision-Making Processes in Jodhpur Hotels” Asian Journal
of Finance & Accounting, Vol.4, No.1, pp.173-188 Nwinee, K., Akpos, Y., Vincent
G.and Ibinabo, T. (2016).
5- “Impact of Accounting Information System on Organizational Effectiveness: A Study of
Selected Small and Medium Scale Enterprises in Woji, Portharcourt”, International
Journal of Research, Vol. 3 No. 1, pp. 974 – 98
6- Qatanani, K. and Hezabr, A. (2016). "Impact of accounting information for management
decision making",European Journal of Accounting Auditing and Finance Research, Vol.
3 No. 6 pp. 1-11. 2.
7- Almbaidin, T. (2014). “The Effectiveness of Accounting Information System in
Jordanian Banks: From the Management Perspective” International Bulletin of Business
Administration, Issue 14.