Accounting Information System: Technology in Financial Reporting - Research Paper

Introduction

There is a saying that nowadays, a business could not survive without information technology. The saying might be exaggerated. But, in the real world, there is the use of at least some accounting software in most companies, and these programs would necessarily work similarly. The aspect of technology in financial reporting is indeed a fascinating topic especially when we look at the implementation of the accounting information system where information technology is used in the automation of all the financial processes and reports leading to lower chances of errors within the financial report models before it would be witnessed. According to Belfo and Trigo (2013), to fully implement the use of technology in the financial reporting models, it means that all the internal and external stakeholders like the suppliers, employees, customers and the shareholders must have access and be able to use the technological devices in accessing the reports. Therefore, the research to be conducted will be looking at the impact that technology use within organisations has created in line with financial reporting to be specific.

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Motivation and Justification

Accounting is a critical aspect of any organisation since it is the department that deals with the flow of finances within any organisation. The preparation of the financial documents is, therefore, one of the activities that should be given primary attention to ensure that there are no errors or little or any (Hoehle, Scornavacca & Huff 2012). The interest of the shareholders regarding their business is based on the reports given to them by the managers since it is through such reports that they get to know whether or not their venture is making a profit. The only way to avoid any possible errors in financial reporting is through the use of technology which as compared to man, have been proven to have little or no errors. It is true that man controls technology, but this does not change the fact that technology is more accurate than a man in most cases.

In the nowadays world, there are still some organisations have not up to date employed the use of information technology in the management of their financial information. Therefore, there is the need to conduct intensive research on the pros and cons of using technology in financial reporting and then use the knowledge acquired from the research to educate others on the importance of using technology in financial reporting. The use of technology in financial reporting has brought a lot of positive transformations in the process. Therefore, it would be in the best interest of any organisations to tap into this advantage that others are using to stay ahead of them. Besides, technology is a means through which businesses can take advantage in the market since most of the people tend to trust technology than man, and as a result, an organisation whose activities are technology-oriented has the advantage of attracting more stakeholders than those that still use the traditional methods (Zeff 2013).

Research Aim

Some of the determinants of the financial reports quality include leadership, computerised accounting systems and transparency (Keating & Frumkin, cited in Sugut 2012). This research is only going to focus on computerised accounting systems. It is going to be explored the contribution of the computerised accounting systems in the performance of financial statements within Australian small and medium companies. And the main research question for the research is to what extent does the computerised accounting systems contribute to the performance of financial statements within Australian small and medium companies. And there would be a series of other questions which would help in the examination of the research question and the stated research problem. Some of those questions would include the followings. What are the effects of computerised accounting systems on the quality of financial reports? How does computerised accounting systems contribute to the performance of financial statements? By addressing these questions, the answers will be contributing to the overall question of the research. The aim of the study would be therefore to address the research question stated above by providing information supported by evidence on to what extent computerised systems in the accounting field has contributed to financial statements' performances within Australian small and medium companies. In other words, the research is based around the computerised accounting systems and financial statements in terms of the impacts that the use of computerised accounting systems has on the quality of financial reports.

Literature Review

Computerised accounting systems entails the use of computers and other software systems which are established to ensure that decision making is made easy. There are many benefits associated with such systems, and they include the timelines, the speed of conducting routine transactions, accuracy, quick analysis, and reporting. When the information flow is efficient and effective, the decision-making by the management is enhanced, enabling the organisation to achieve business and corporate objectives (Sugut 2012).

The use of computerised systems can lead to a spontaneous generation of quick data required by the management for analysis of various financial reports like variance analysis and budget analysis. Through the use of a computerised accounting system, it becomes easy to retrieve the income statements and balance sheet together with other accounting reports at any time. Such systems also assist the managers in the identification and solving of problems instantly. The further importance of the computerised accounting systems is that it helps in enhancing or improving the business performance since when the accounting systems are computerised, it means that the applications are highly integrated, and therefore the business process is transformed leading to the enhancement of accounting features such as inventory control, statutory process and reporting (Agnes, Number & Birevu 2011). According to Anaeli (2018), a computerised accounting system refers to the collection of all the components such as the storage, the inputs like data entered on the computers, reporting financial information and the transaction processing. The professional accountants in the contingent world are now using such systems to conduct their duties. A computerised accounting system is a scheme applying the use of software in all the processes of input, processing, storage and output in the accounting processes to make efficient the whole process of financial recording, computation, processing and reporting.

Financial reports have a significant role especially in the decision-making process since their general purpose is to provide information that the management can use in decision-making. Since decision-making is an essential practice within any organisation, it, therefore, implies that the quality of the financial reports is a huge deal as well (Abdallah 2014). Consequently, it points out that the financial statements should be of very high quality if effective decisions are to be made based on them. The computerisation of the accounting information also makes the data protected from any security breach hence making the organisational data to be safe. All the organisations are trying to make use of the available resources to increase their revenues and profitability. One of the necessities to achieve this is to be able to make quick and accurate decisions based on reliable and correct information. This is an element that has significantly increased the need for the use of information systems. Today accounting information system has become pertinent to management information systems, and it represents one of the most critical systems in the economic entity used both by the private and public organisations though in varying importance and consciousness.

The corporate world has witnessed various changes in the last decade, and every aspect of the business has taken the route of technology, managerial and financial reporting being one of them. The world of financial reporting and accounting is growing continually due to the vastly growing field of information technology (Hoehle, Scornavacca & Huff 2012). Almost daily, new software programs are coming out to improve the accounting processes and to create reports that are interactive and user-friendly, and such reports range from the profit and loss statements to other more complex reports. The programs have become easy to use all over the world due to the automation of financial and accounting processes. However, too much reliance on the automated processes can lead to the sabotage of the data integrity due to the increased importance of data controls.

Organisations today have recognised how information technology is aligned to business as an enabler aimed at supporting the business processes (Tijani & Mohammed 2013). It is with no doubt that the emergence of information technology has presented a lot of strategic opportunities to the business manager and accounting professionals. The adoption of commercial software by small and medium enterprises is an excellent appeal due to reasons such as the following. The increasing low costs associated with the accounting packages that are generalised as compared to the customised application; the growing demand by small and medium enterprises' businesses unable to engage full-time in-house staff to develop systems; and the presence of vendors who provide packages that are specific to the industries. A lot of precision and attention is required in financial management as it helps with several things. The first thing is that it becomes easier to study and calculate data when computerised accounting systems are used. Rows of financial data become more accessible to compute due to the eased input and calculations. There are no more headaches involved in the computation and processing of tones of data (Banker, Chang & Kao 2012). Managers can now gather and pass the reports to the CEOs that can make important decisions free from obstructions since the financial data have high accuracy levels which make the data understandable. With the use of computerised accounting systems, CEOs can now take to a step higher financial management within their organisations.

Awerbuch and Preston (2012) state that all the business and most specifically the financial service businesses are in dire need of effectively monitoring the current and future risks potential impacts. Such organisations cannot just focus on the present risks and ignore future potential risks. In the last ten to twenty years, one of the significant developments is the strengthening of the highly professional risk functions (Banker, Chang & Kao 2012). Management and board have received great relief as a result of such people keeping a sceptical and independent eye on things. According to Dandago and Rufai (2014), it may prov...