SAINT MARY’S UNIVERSITY

SCHOOL OF GRADUATE STUDIES

MBA IN ACCOUNTING AND FINANCE PROGRAM

Accounting Information system practice and its impact on accounting and

audit reporting quality: Case Study in Awash Insurance Company S.C

BY

RABIRA MUZEYEN

ID.NO. SGS/0077/2011B

ADVISOR MISRAKU MOLLA (PhD)

DECEMBER 2021

ADDIS ABABA, ETHIOPIA

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Accounting Information system practice and its impact on accounting and
auditing report quality submitted to Saint Mary’s university department of
Accounting and Finance for the partial fulfillment of MBA in Accounting and
Finance.

BY

RABIRA MUZEYEN

ADVISOR MISRAKU MOLLA (PhD)

DECEMBER 2021

ADDIS ABABA, ETHIOPIA

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 SAINT MARY’S UNIVERSITY

SCHOOL OF GRADUATE STUDIES

MBA IN ACCOUNTING AND FINANCE PROGRAM

Accounting Information system practice and its impact on accounting and

audit reporting quality: Case Study in Awash Insurance Company S.C

BY

RABIRA MUZEYEN

APPROVAL BOARD COMMITTEE:

_______________________ ___________________

DEAN, GRADUATE STUDIES SIGNATURE

_______________________ ___________________

RESEARCH ADVISOR SIGNATURE

_______________________ ___________________

EXTERNAL EXAMINER SIGNATURE

_______________________ ___________________

INTERNAL EXAMINER SIGNATURE

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 DECLARATION

I, the undersigned declare that the work entitled “Accounting Information system practice
and its impact on accounting and audit reporting quality Case Study in Awash Insurance
Company S.C “ was the outcome of my own effort and study and that all sources of materials
used for the study have been acknowledged. I have produced it independently except for the
guidance and suggestion of my Research Advisor. This study has not been submitted for award
of any degree in Saint Mary’s University or any other University. It was offered for partial
fulfillment of the requirement for the degree of Master of MBA in Accounting and Finance.

STUDENT

By: Rabira Muzeyen

Signature___________________________

Date_______________________________

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 Approval from the Advisor’s

The Undersigned certifies that, He has read and hereby recommends for acceptance by the St
Mary’s University a thesis entitled: ““Accounting Information system practice and its impact
on accounting and audit reporting quality Case Study in Awash Insurance Company S.C “,
in partial fulfillment of the requirements for the MBA in Accounting and Finance of the St
Mary’s University.

Misraku Molla (PhD)

Supervisor

December, 2021

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 ABSTRACT

Now days, AIS is the most valuable and crucial assets of an organizations to maximize its profit
and to determine the ongoing process of that organization. Any organizations should focus on
developing information system in order to effective and efficient pass decision, communications
of their information’s, knowledge of financial report qualities and others. Management in AIC
based on information generated from the AIS employed by the company in order to assess
effective and qualified financial accounting and audit reports. In addition to this the ways of
recording, summarizing, audit and financial reports of AIC were brought to less optimal
decisions. The study was to correct the gap among the users of AIS of AIC. The study determines
the profit obtained and ongoing process of AIC, due to the integration of accounting information
systems. In this study both primary and secondary data were used. Primary data was collected
through questionnaires and the secondary data were taken from the company records and files.
Generally the findings of this study indicated that Accounting Information practices play role in
the accounting and audit report quality as well as effective decision-making mechanism and
controlling activities of the company.

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 ACKNOWLEDGMENTS

Almighty God and the generous cooperation of many people have contributed for the success
and completion of this study. First of all I would like to forward my special thanks to my advisor,
Professor Misraku Molla (PhD), for his valuable suggestion and comments while I am
conducting this valuable research. I also appreciate Staff of Awash Insurance Company S.C. for
their response and information’s during gathering valuable information’s for this study.
Additionally I would like to thank Saint Mary’s University that gave me an admission into the
School of Accounting and Finance to undertake this worthy course. Lastly I acknowledge my
families and all my friends, your moral and material support was so great to me. I am proud of
you all!

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 LIST OF ABBREVIATIONS

AIC=Awash Insurance Company

AIS=Accounting Information System

MIS=Management Information System

MBA =Master of Business Administration

ERP= Employee and Report Preparation

GIIS= General Insurance Information System

ROE=Return on Equity

ERP= Employee Report Preparation

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TABLE OF CONTENTS PAGE

CHAPTER ONE

1. Introduction…………………………………………………………….……………………….1
1.1. Background of the study………………………………………………………………….…..1
1.2. Statement of the problem …………………………………………………………………….2
1.3. Objectives of the study……………………………………………….……………………….3
1.3.1 Specific objective……………………………………………………………………………3
1.4. Research Questions………………………………………………………………………..….4
1.5. Scope and Limitation of the study…………………………………………………….….......4
1.6. Significance of the study……………………………………………………………...………4
1.7. Ethical consideration of the study……………………………………………………………5
1.8. Organization of the study……………………………………………………………………..5
CHAPTER TWO
2. Literature Review…………………………………………………………………………….....6
2.1. Review of Theoretical literature ……………………………………………………….…….6
2.2. Conceptual Framework of Finance Directorate……………………......................................22
CHAPTER THREE
3. Research Methodology………………………………………………………………………..24
3.1. Research Design………………………………………………………………......................24
3.2. Research Method………………………………………………............................................25
3.3. Data Sources and Collection Methods …………………………………………..................26
3.4. Sample and Population …………………………………………………………………......27
3.5. Data analysis technique…………………………………….…………..................................29
3.6. Data Reliability and Validity Test ………………………………………………………….29

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CHAPTER FOUR

Data Analysis, Results and Discussion…………………………………………………………..30

4.1 Introduction ………………………………………………………………………………….30
4.2 research questions discussion and findings ………………………………………………...42
4.3. Result and Discussion for open ended questions …………………………………………...42
CHAPTER FIVE

Summary, conclusion and recommendation

5.1 Introduction….........................................................................................................................45
5.2 Summary of the Study ………………………………………………………………………45
5.3. Findings of the thesis …………………………………………………………………….…45
5.4 Conclusion …………………………………………………………………………………..46
5.6 Recommendations of the Study ……………………………………………………………..47
References......................................................................................................................................49

Appendix

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Lists of Tables Page

Table 1: Summary of the population selected sample …………………………………….…...28

Table 2: Respondents Profile …………………………………………………………..…….…31
Table 3: Is there AIS practice in Awash Insurance Company? …………………………………32
Table 4: Did AIS play role for financial reporting quality? ………………………………..…33
Table 5: Did AIS have a role in internal audit report quality? ………………………….………33
Table 6: The role of AIS for decision making and controlling financial data …………………33
Table 7: The role of IT department for AIS to control the asses of necessary data……………..34
Table 8: Did you get and necessary training on AIS? …………………………………….....…34
Table 9: Do you familiar with new technologies such as ERP, GIIS? …………………………35
Table 10: Do you think Management reports generated by the system are consistent? ……..…35
Table 11: The accounting information system contributes to construct its information …...…35
Table 12: Internal auditor gives valuable comments by understanding the AIS of AIC.............36
Table 13: AIS are integrated with other management information systems ……………………36

Table 14: AIS contribute to the reliability of financial reporting………………………….……37

Table 15: AIS encourage efficient and effective use of resources and operations ………….....37

Table 16: AIS improve controls by limiting access to company data …………………….…...38
Table 17: AIS comprise detective controls, which are designed to identify errors…….……….38
Table 18: There is knowledge and skills gap on transaction posting ledger on AIS …………...39

Table 19:.How do you rate your AIS towards organizational effectiveness…………………….39

Table 20: The AIS system is reliable ……………………………………………………...……40
Table 21: It is easily understandable …………………………………………………………....40
Table 22: The system is fast and flexible ……………………………………………….…..….40
Table 23: IT team provide adequate support for the use of AIS ……………………………..…41
Table 24: IT department has technically competent employees to support AIS ……………....41
Table 25: IT departments is responsive and reliable ………………………………………..…42
Table 26: Staff utilizes the full capabilities of the companies AIS …………………………...42

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 CHAPTER ONE

1. Introduction
1.1. Background of the study
As we all know, accounting is the language of business as it records all transactions of an
individual, firms or other bodies that can be run their business. Accounting is the scheme and art
of collecting, classifying, summarizing and communicating data of financial nature required to
make economic decisions. The rising 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, had brought to the fore the crucial
role of accounting information in economic and business discourse especially in relation to
administrative effectiveness.
Accounting Information System deals with financial information’s of an organizations which is
the most valuable asset. Financial information is very important to pass financial decisions and to
determine ongoing process/success of an organization. It uses computer to collect, store and
process the accounting transactions and financial data which was used by the internal users of the
company in order to give report regarding various information to the stakeholders of the
company such as creditors, investors, tax authorities, etc. it was a system to collect and store all
information related to financial transactions and events in such a way that they can be retrieved
for decision making by the internal management, accounts, auditors, etc. There may be a very
simple ledger to various accounting, costing, financial reports like Statement of profit and loss,
balance sheet, etc.

The earliest "intelligence techniques" in accounting were characterized by recorded transactions

in clay and papyrus and systems of checks and balances to ensure that the records were accurate
and could be verified. Early records indicate that ancient Romans were developed their own
system of recording transactions and balances sheet to account for receipt and payment of
money. Internal Controls were very important for every business organization. These were tools,
checks, procedures, systems adopted by an organization to ensure the integrity of financial
information, prevention of frauds, errors, safeguarding of assets, etc. Accountants within any
organization must use the accounting information system to generate qualified accounting and
financial reports. Accountants were usually part of a multiple-discipline team that designs or
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implements accounting information systems. When an organization considers a change to its AIS
practice for accounting and auditing reports, accountants must be involved in decisions related to
such matters to determine preferable software package to be purchased.
Computer integrated operational information system that fully integrates manufacturing with
marketing and accounting data increasing both the quantity and timeliness of the information.
Technological tools work to promote efficiency in the transferring of data between corporations
and their different decisions, offices, customers, and even their accounting firms.
Communications technology utilizes a combination of technologies to transmit data in a variety
of forms to each of these recipients. This particular form of technology was of considerable
importance for large firms, because it enhances communication capabilities to allow easier
expansion into the worldwide market. This speeds up the transfer of information between an
entity and its firm. For accountants, this means getting the most current information to work
with.

Awash Insurance Company was the first private Insurance Company in Ethiopia. In the
Insurance industry, it dominates the market in terms of Assets, Capital, and customer. It has
more than 50 branches that were expanded across the country. It has also more than 650
employees which creates job opportunity for the nation. According to the annual report of June
30,2020 and for fiscal year of 2019/2020, the total asset and capital of Awash insurance
company reached Birr 3.41 billion and Birr 1.3 billion respectively. It contributes economic
development of the country.

1.2. Statement of the problem

The quality of delivering service is one of managements most complicated, but important duties
simultaneously. Awash Insurance Company was one of the insurance companies in the country
that provide insurance service through its branches disbursed all over the country. These
branches were connected and operated by using integrated networking system. The activities of
the company were controlled using this system and used as internal control mechanism.
Based on the evidence of internal and external audit report there were a gap of accountant and
managers to control all over the transactions of the company especially, on collection and
payment undertaken by different branches of the company. As well as In the Company, all
directorate and branches were passing their daily collection and payment through general

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 insurance information system (GIIS), furthermore they were not effective to know the
appropriateness and correctness of the ledger done by different branches, and this makes the
problem of erroneous financial statement preparation. The internal auditors controls and verifies
the activity of each directorate and branches once in a year. As it’s mentioned on their report,
there was a problem of the knowhow of the designed and accessible of the available system.
Therefore the researcher was investigated to full fill the gap already mentioned above with in this
organization.
Financial managers need the financial and accounting data provided by AIS to evaluate the
firm’s past performance and to map future plans. Therefore, the organizational performance was
measured in terms of return on assets and return on equity (ROE). These ratios were financial
performance measuring ratios (Majeed, 2011). ROE was a key to provide useful information
about the performance of debt in the capital structure that the general manager must try to
influence in order to improve and manage the overall organizational performance (Miller et al.,
2001). Performance management has a key role to play in improving the overall value of an
organization (Armstrong and Baron, 1998). Largely, the quality of information depends on the
reliability, form of reporting, timeliness and relevance to the decisions. Effectiveness of AIS also
depends on the perception of decision makers on the usefulness of information generated by the
system to satisfy informational needs for operation processes, managerial reports, budgeting and
control within the organization (Nwinee et al., 2016).

1.3. Objectives of the study

1.3.1. General Objective
The general objective of the study was to assess the AIS practice in order to increase the quality
of financial and audit reports in Awash Insurance Company.

1.3.2. Specific Objective

Based on the aforementioned general objective, this study will specifically address the following
specific objectives.
❖ To assess the AIS practice of the AIC.
❖ To identify the role of AIS on internal control over financial accounting and audit report quality.
❖ To examine impact of AIS on accounting transaction and audit reporting quality
❖ To investigate the effect of AIS on financial and audit reporting quality.

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1.4. Research Questions
The main research questions raised under this study were:-

❖ How AIS practice assess and evaluate on an internal audit report and comments done on
financial transactions in accounting process and financial report of the company?

❖ What is the role of AIS to minimize the transaction posting problem that has its own
dilemma on the report generated by the Accounting system of the company?

❖ Did AIS Practice have the ability to examine the quality of accounting transactions and
financial reports of the company?

❖ Did the External Auditor reports, comments and questions have its own role to
investigate and evaluate the accuracy of financial report of a company?

1.5. Scope and Limitation of the study

This study was limited to assess the AIS practices and its impact on AIC’s accounting and
auditing practices and reporting quality. In terms of geographic coverage, the study will be
conducted at head office and some selected branches at Addis Ababa. Based on the time
constraints and covid 19 disease the sample of the research was limited to cover small number of
branches exist in the Addis Ababa.

1.6. Significance of the study

The significance of this research were to draw significant change of financial and audit report
quality in Awash Insurance company and to recommend another person who will investigate
over the same case of study for improving the impact of the accounting information system by
modifying the control system. The finding of this research will provide a knowledge that will aid
in decision making for manager and help recognize internal control faults to prevent any negative
consequence. The study will also help other researchers as a source of reference and as a
stepping stone for those who want to make further study on the area afterward. Finally, the study
provides for the stake holders an opportunity to gain deep knowledge about the impact of
accounting information system on internal control. It will provide information to the
management how they can assess and prepare qualified financial and audit reports to keep up
service quality exercised in the organization. Also it helps the company not to incur any
unnecessary cost in relation to the impact of accounting information system.

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1.7. Ethical Considerations of the study

All the evidence and sourced of data and materials used in conducting the research were done
from genuine sources. And there was no plagiarism in this work. The searcher will like to
promise that everything that was going to be worked out in this research were the researcher’s
own work and not from other sources steal or copied.

Research participants should not be subjected to harm in any ways what so ever, Their Respect
for the dignity of research participants should be prioritized. The research give confident on the
protection of the privacy of research participants has to be ensured and as well adequate level of
confidentiality of the research data should be ensured. Any deception or exaggeration about the
aims and objectives of the research must be avoided. The research steer clear of Affiliations in
any forms, sources of funding, as well as any possible conflicts of interests have to be declared.
Any type of communication in relation to the research should be done with honesty and
transparency. Any type of misleading information, as well as representation of primary data
findings in a biased way not exist. Informed consent was important for the research that means
that a person knowingly, voluntarily and intelligently, and in a clear and manifest way, gives his
consent.

1.8. Organization of the study

The research paper organized into five chapters: Chapter one deals with the introduction part
consisting of background of the study, statement of the problem, research objectives,
significance of the study, and scope and limitation of the study. The second chapter discussed
about the review of related literatures about the subject matter; chapter three focuses on research
methodologies; chapter four contained data analysis interpretation and discussions of the result.
Finally chapter five conclusions and recommendations will be presented.

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 CHAPTER TWO

2. Literature Review
2.1. Review of Theoretical literature

2.2. Definition and concept of Accounting Information System

In managing an organization and implementing an internal control system the role of accounting
information system (AIS) was crucial. An important question in the field of accounting and
management decision-making concerns the fit of AIS with organizational requirements for
information communication and control. Although the information generated from an accounting
information system can be effective in decision-making process, purchase, installation and usage
of such a system were beneficial when the benefits exceed its costs. Huber, (1990) agrees that
automated accounting information system aids decision making for management of
organizations. Benefits of accounting information system can be evaluated by its impacts on
improvement of decision-making process, quality of accounting information, performance
evaluation, internal controls and facilitating company’s transactions.

The relationship between reporting quality and organizational performance has been studied by
several researchers, for example: (Biddle et al.: 2009, pp. 112-131). Muda et al. state that
accounting plays an important role in encouraging accountability, efficiency, and effectiveness
of public services. The quality of information will improve the quality of management in seeing
changes around the organization so that it can quickly and accurately respond to these changes.
The same thing is known from the IPSASB statement (2013), which states that the allocation of
resources by the government is inadequate if it is supported by poor quality financial
information. The same view is conveyed by several researchers who concluded that the quality
of financial reporting is closely related to company performance (Pneman & Zhang: 2002, pp.
22-37; Richardson et al.: 2001). Furthermore, Bell et al. document that the audit opinion and the
timeliness of the submission of local government financial reports have a significant positive
effect on the financial performance of local governments (Muda et al.: 2018; Bell et al.: 2018).

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The accounting information systems (AIS) describe the accounting information, which are
intended to collect financial data to reach the information needed for internal or external
decision-makers (Bodnar and Hopwood, 2010). The use of accounting information is vital in the
management activities of a company, given its quantitative information on various activities.
Accounting information is primarily intended to be useful in economic decision-making.
Accounting information is needed not only by management in the direction of cooperation but
also by shareholders, who need periodic financial data in order to assess the performance of the
company's management (Nnenna, 2012).

Accounting Information System Quality

Accounting information systems play crucial and important role, providing information that
could help the organization’s management perform its duties to the fullest. Many researchers
have pointed out that the success or failure of an organization in achieving its objectives depends
on the quality of the accounting information systems. The development of accounting
information systems has a significant impact on the performance and effectiveness of operations
in the organization, as the management of organization needs information that is characterized by
consistency and confidence in decision –making. Further, the success of decisions and increasing
their effectiveness depends heavily on the success accounting information systems presented to
the decision makers at the right time (Al-Ali, 2014). In this regard, Al-Samaerraie, and Al-Zoubi
(2004) stated that good and successful systems must be characterized by integrity, simplicity,
flow of information, multiplicity of elements, in addition to excellence, correlation and correct
outputs. In the same context, in order for the accounting information system to be of high
quality, and should be distinguished from other systems, identified by Al-Sibaei (2010) as
follow:

Information by Romney and Steinbart (2015) is the data has been organized and processed to
give meaning to the user. Users need the information to the make decisions or improve the
decision making process. Gelinas and Dull (2008) describe the notion of information as follows:
Information is the data is presented in a form that is useful in decision making activates. In line
with various previous opinions (Laudon and Laudon, 2014) states the information is the data that
has been shaped into something that has meaning and useful for users. Likewise with the views
expressed by Susanto (2013). The information is the result the data processing that gives
meaning and benefits for the user. Based on various definitions that have been presented, it can
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be concluded that has meaning and useful for variety of users. Valuable information/Quality and
can be used in decision making should have the characteristic/traits of certain (Stair and
Reynolds, 2011). A high quality product information own characteristics, attributes or quality
that makes information through the information timely, easily understood and can be verified
Valuable information /quality accounting to Stair and Reynolds (2011) must have the
characteristics: easily accessible, accurate/precise, complete, economical, flexible, relevant,
reliable, safe, sample, available timely and verifiable.

One indicator of a skill importance was the ability of that skill to leverage other areas of
knowledge and create the ability to solve semi-structured and unstructured questions. In the U.S.
those accounting functions that were highly structured and require the least amount of individual
decision-making have been outsourced (Ramakrwashnan and Frangulescu, 2007). Skills that
were unique provide competitive advantage and require company specific knowledge should be
retained in house (Alvwerez et. al, 2007). For this reason it was imperative that accounting
educators shift the focus away from structured skills to ones that cannot be highly automated and
were enabled by technologies such as spread sheets, databases and computer assisted audit tools
and techniques.

Many researchers have highlighted the role of accounting information can play in companies to
achieve their goals, for example Patel (2015) emphasizes on the important of accounting
information in making decisions. He added that the accounting information always plays an
essential role in decision making of the managers related to the financial and economic issues
and affects to the survival of an organization. In addition, accounting tools such as cost
accounting system, management accounting system, price and profitability provide the useful
information to the manager to make the financial and economic decisions also. Similarly, Hafij,
Ahmed, and Tamanna (2014) evaluated the usage of accounting information by the decision
makers in practices in five strategic decisions were as such as basic strategic decision,
manufacturing decision; human resource decision, long term investment decision and marketing
decision were considered for his study.

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Government Financial Reports can be said to be of quality if they contain predetermined
characteristics so that the information generated can become the basis for decision-making for its
users. The internal control system is an integral process that is carried out continuously. This is
supported by previous research, namely Kewo & Afiah, which states that understanding of the
financial accounting system affects the quality of financial report information (Kewo & Afiah:
2017, pp. 568-572). This means that employees of the accounting/finance section of the
Government Work Unit have understood the accounting process to become financial reports so
that the goal of making quality financial reports can be achieved. The research results of
McDonald explain that the financial accounting system has a positive and significant effect on
the quality of financial reports (McDonald: 1999, pp. 11-22; Bordeleau et al.: 2020, pp. 173-
185). This means that the higher the level of application of the regional financial accounting
system will improve the quality of financial reports. The ministry's performance will increase if
the quality of government financial reporting increases, as well as this, can be seen from the
objective of measuring financial performance according to Chohan, namely as a report on the
operation of government activities aimed at assessing the organization's financial performance in
terms of efficiency and effectiveness as well as monitoring actual costs and costs, which is
budgeted (Chohan: 2019; Bordeleau et al.: 2020, pp. 173-185). The efficiency ratio is a ratio that
describes the comparison between output and input or realized expenditure and realized regional
revenue.

Other qualitative characteristics of accounting information can also be maintained if there was a
sound internal control system in an organization (Toposh, 2014). Internal controls procedures
were set up to protect assets, ensure reliable accounting reports, promote efficiency and
encourage adherence to company policies as essential to achieve objective such as the efficient
and orderly conduct of accounting transactions, safeguarding the assets in adherence to
management policy, prevention and detection of error, prevention of fraud and detection of fraud
and ensuring accuracy, completeness, reliability and timely preparation of accounting data.

Azhar Susanto (2008: 6) states that for a company, accounting information system built with the
main purpose to process accounting data coming from various sources into accounting
information required by various users to reduce risk when making decisions. This is confirmed
by Romney & Steinbart (2006: 238) that the basic function of accounting information systems is
to provide useful information for decision making. Further Romney & Steinbart (2006: 238), in
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order to be useful, accounting information generated by accounting information systems, such as
financial statements and various types of reports should present an accurate, complete, and
timely description of company activity. Meanwhile, according to Pompandejwittaja and Pairat
(2012) that the effectiveness of information systems related to the collection, entry (entering),
processing, data storage, management, control reporting accounting information so that
organizations can obtain quality financial reports.

AIS can overcome the weaknesses in financial reporting. Research conducted by Zulkanian
(2009), concluded that the AIS can accelerate the process of financial reporting and address the
weaknesses of human resources in the process of financial statements into the financial
statements. Another case rose by Ricchiute (334: 2006), states that the weak internal controls
will cause an error misstatements in the financial statements cannot be prevented. Al-Qudah and
Ahmed (2011) suggested a significant impact on the company's internal control AIS in creating
accuracy, updated, comprehensive and comparative data.

The study of Patel (2015) examined the impact of accounting information systems on
companies’ profitability. The study was based on the theoretical analytical approach to reach the
results by reviewing the previous studies and concept of accounting information systems, the
quality of accounting information systems, and the nature of the relationship between accounting
information systems and profitability of companies and decision making. The result showed that
there is an impact of accounting information systems on the profitability of companies and
decision –making , also it was found that the accounting information systems contribute to
provide the necessary information to take financial and economic decision

Confidentiality was about internal auditors respecting the information they receive while
competence means they should be able to apply their knowledge, skills, and experience in
performing their role. Further, AIS were vital for internal auditors because they process the
transactions that was, they maintain financial records. Such systems identify, assemble, analyze,
classify record, summarize, and report transactions and other events Journal on the impact of AIS
on internal auditors in Turkey.

As an organization, information systems can also help organizations achieve organizational

goals, control internally and improve accountability and corporate governance in public

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institutions. This shows that an information system has a positive impact on various fields, such
as financial management, public governance, and fiduciary risk management (ACCA, 2010).
In the government sector, the use of Information Technology (IT) has helped the government in
Modernizing administration in the areas of accounting, finance, project management, inventory
control, and counter service operations. Service quality in the public sector is still low; therefore,
the widespread use of IT is expected to improve service quality. And the productivity of the
government sector. The implementation of the government accounting system provides benefits
and benefits to the government in realizing transparency and accountability in financial
management so that the implementation of program activities is well recorded and has clear
dimensions in the presentation of financial reports.

Karthikeyan. (2010), argued that those users were expecting the information was a high quality
and useful. In addition, the accounting information quality was expected to play a crucial role in
enhancing the objectives of cost accounting through planning, controlling, performance
evaluation and decision making. Horngren (2014) explains how accounting aids decision
making, planning and controlling through the five-steps decision, namely: making process:
planning which consist of four steps, identify the problem & uncertainties, obtain information,
make predictions about the future, and make decisions by choosing among alternatives. And the
last step was controlling, implement the decision, evaluate performance and learn. Jawabreh and
Alrabei (2012) stated that information should be collected in high quality of data to make it more
successfully that will be lead to high quality of information about this enterprise, this information
will be the way to planning, controlling and making right decisions.

Dellon & McLean (2003) use the term "success" of information systems to measure the
technically successful system of information systems. Similarly, Pornpandejwittaya and Pairat
(2012) use the term "success" to explain the successful application of accounting information
systems in the areas of the organization's attention, widely used by one or more satisfied users
and improve the quality of their performance. The term "quality" of the accounting information
system is used by Sacer et al (2006: 62) to show the integration of various components of
accounting information systems-quality hardware, software, brain ware, telecommunication
network and data base, and quality of work and satisfaction of users. Thus, in this study the

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quality of accounting information systems means the functioning of information systems as a
provider of quality accounting information

Scott (2001) states that the accounting information system aims to present financial statements
designed for external users and internal users. Similarly, Hall (2011: 14) states that
fundamentally, the purpose of the Accounting Information System is: (1) to provide information
on the organizational resources used, (2) to present information related to management decision
making, and (3) to provide information for personnel- Operating personnel to assist the personnel
perform their duties efficiently and effectively.

Computer integrated operational information system that fully integrates manufacturing with
marketing and accounting data increasing both the quantity and timeliness of the information
(Hansen & Mowen, 2007). Technological tools work to promote efficiency in the transferring of
data between corporations and their different decisions, offices, customers, and even their
accounting firms. Communications technology utilizes a combination of technologies to transmit
data in a variety of forms to each of these recipients. This particular form of technology was of
considerable importance for large accounting firms, because its enhanced communications
capabilities allow for easier expansion into the worldwide market. This speeds up the transfer of
information between an entity and its accounting firm. For accountants, this means getting the
most current information to work with.

Servicing involves collecting payments due from issuers and paying the collected funds to
claimants. In addition, a servicer maintains payment records, monitors contracts, and pursues
action in defaults. In less developed economies, this aspect of financial service provision was
relatively invisible. Most assets were originated and held by the same institution, particularly in
the fixed income area. Intermediating involves the simultaneous issuance and purchase of
different financial claims by a single financial entity. It occurs when an institution purchases one
type of financial instrument for its own account and finances the transaction by issuing a claim
against its own balance sheet.

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 Three types of such financial intermediation activity were common.

These were:-

(i) insurance underwriting whereby the issuer assumes the policy's contingent liability,
(ii) Loan underwriting, whereby the intermediary uses its own resources in extending credit to a
borrower, through buying insurance for the assert obtained by loan and
(iii) Security underwriting which involves buying securities as principal to distribute to investors.

Accounting information system (AIS) was acknowledged as an effective tool to deal with the
exterior and interior changes (Shagari, Abdullah, & Saat, 2017) through processing data and
transaction to generating useful information for planning, controlling, and operating the
organizational activities (Romney, Steinbart, & Cushing, 1997) as well as facilitating and
gaining organizational performance (Saganuwan, Wasmail, & Ahmad, 2013). This issue has
directed the scholars’ attention on AIS effectiveness since such useful accounting information
will contribute to the organizational efficiency improvement and accountability accomplishment
(Mellemvik, Monsen, & Olson, 1988).

Company accounting information system can be classified in 2 (two) subsystem, that is financial
accounting information system and management accounting information system (Wilkinson,
2007: 15; Azhar Susanto, 2013: 84; Meiryani, 2016), while the management accounting
information system is intended for internal corporate users, such as managers, executives and
employees in decision making Hansen & Mowen, 2007: 7). Information system is a tool (tools)
used by management to perform analysis in decision-making related to corporate transactions
(Mc Leod & Schell, 2007; Romli and Ismail, 2014; Ekpung, 2014; Sarwar and Mubarik, 2014 ;
Okon and Monday, 2017; Kimengsi and Gwan, 2017; Bollazzi and Risalvato, 2018; Meiryani,
2018).

Accounting information system (AIS) was a tool that can help organizational management to
improve its control on the firm’s operations and to develop its performance. AIS involve
Identifying, collecting, processing and delivering the accounting information to employees and
decision makers throughout all organizational levels. AIS were also seen as a system that was
used to record the financial transactions of a business or organization. This system combines the
methodologies, controls and accounting techniques to track financial transactions and to provide

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internal and external reporting data as well as helping the preparation of financial statements
with capabilities to improve organizational performance (Pérez et al., 2010).

Borthick and Clark (1990) believe that accounting exists because it satisfies a need - primarily a
need for information. In order to be relevant, accounting data must among others, be quick to
respond to users’ (particularly the investors) needs. Generally, investors are not in a situation to
directly access the performance of companies in which they intend to invest. They usually
depend on financial reports prepared by the management of such organizations. Financial report
is one of the best sources of accounting information about a company. Financial reporting is an
essential part of disclosure and helps investor to discover investment opportunities. The primary
purpose of financial statements is to provide information concerning the financial situation of the
company, its operational results, any changes of control in the company and cash flow.

Accounting information system (AIS) just like any other information system was perceived to
play a great role in the management of day to day operations in corporate organizations.
Accounting information systems were regarded as one of the supporting information systems
used in carrying out managerial functions such as planning, organizing, controlling and decision-
making, for the better exploitation of the available resources (Samer, 2016). According to
Borhan and Bader (2018) accounting information system (AIS) was a formal system for
identifying, measuring, accumulating, analyzing, preparing, interpreting and communicating
accounting information about a particular entity to a particular group. Accounting information
system represents a range of sources (persons and equipment), which were designed to collect
financial data to reach the information needed for different decision-makers at a particular period
of time (Bodnar and Hopwood, 2010).

Donelson et al. revealed that companies would only achieve high performance when they are
able to carry out technology development (Donelson et al.: 2017, pp. 45-69). Trofimova et al.
implement the implementation of the government accounting system, and regional management
affects the internal control function (Trofimova et al.: 2019, pp. 416-424).
Good quality financial reporting can reduce the risk of imperfect information among users of
financial statements or information asymmetry (Copeland & Galai: 1983, pp. 1457-1469). In the
context of government, the government, which acts as an agent, certainly has more information
than the general public, who acts as a principal. So, to reduce information asymmetry and

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increase agency accountability, government agencies are required to submit accountability
reports that contain performance achievement of activities.

Financial institutions provide more efficient discovery, evaluation, and dissemination of

information about legitimate investment opportunities, which presumably reduces monopoly
positions and inefficient risk taking. At the same time, such institutions may bring some
production efficiency to the market. The institutions reduce transactions cost through efficient
processing cost structures or information cost sharing. This was a kind of economy of scale that
was part and parcel of the financial sector, and an important service that it performs. Managers
have limited ability to diversify their investment in their own firm, due to limited wealth and the
concentration of human capital returns in the firm they manage. This fosters risk aversion and a
preference for stability. Internal control was process that guides an organization towards
achieving its objectives. These objectives include operational efficiency and effectiveness,
reliability of financial reporting, and compliance with relevant laws and regulations (Committee
of Sponsoring Organization, 1992). Absence of these variables often results in organizational
failure.

According to the International Organization of the Supreme Audit Institutions (INTOSA is,
2001), internal control was an integral process that was affected by an entity’s management and
personnel and was designed to address risks and to provide reasonable assurance in pursuit of the
entity’s mission. In addition, services were generally internally produced and frequently
bundled with the investment management activities of the firm. Reasons will be offered for the
emergence of such institutions and for the development of management techniques that limit the
risk contained in their portfolios. Relevant information was particularly useful to investors,
creditors and others for investment, credit and similar decisions. Such information must have the
ability to impact on a decision by facilitating the formulation or prediction about the results of
events occurring in the past, present and future. Noteworthy was the fact relevant information
must help the decision maker to confirm or reject expectations. Usually, information facilitates
both functions simultaneously because the knowledge of the results of the past actions will
normally improve the outcome of similar future actions. It was not easy to make a forecast
without a sound historical background.

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The study conducted by Sajadi et al (2008) also shows the result that the implementation of
accounting information system in the company, can lead to the improvement of the quality of
financial statements and to speed up the transaction process of the company. Xu & et al (2003)
study in Australia related to the key issues of accounting information quality management
concluded also that issues related to accounting information systems are seen as the most critical
issue of high information quality. The studies related to the influence of the quality of SIA on the
quality of accounting information empirically show the following results: Sajadi et al. (2008) on
the assessment of the effectiveness of accounting information systems also shows the result that
the implementation of accounting information systems in the company, can lead to
improvements in the quality of financial statements and speed up the process of corporate
transactions (Jermsittiparsert, Trimek & Vivatthanaporn, 2015)

The results of this study answer the various problems of the quality of accounting information
systems in Indonesia, which can occur in business and non-business institutions resulting in
information that is not qualified. As happened in the Director General of Mining, that there was
no integration of accounting information systems resulting in inaccurate and aggregate
information (dimensions of quality of accounting information), this was revealed.

Other problems regarding the low quality of the accounting information system led to the
emergence of potential loss of tax revenue from the mining sector in 2012, where data on coal
production differed between Dirjen Minerba and the Central Statistics Agency. The essence of
the problem of the low quality of accounting information systems is the lack of integration of
accounting information systems. Integration is a key dimension in improving the quality of
accounting information systems. The dimension of integration is the main dimension of the basic
concept of accounting information systems, the quality of accounting information systems has
the first dimension, namely the extent to which the system is able to facilitate information from
various different sources, in other words integration it integrates all functions and components to
help management make decisions. Based on the phenomenon, the formulation of the problem,
the hypothesis and the results of the study, then the conclusions of the study are as follows: the
quality of accounting information is influenced by the quality of accounting information systems.
Accounting information is not fully qualified because it is caused by the system used by the
organization not yet fully efficient. The integration between components and between
subsystems has not been fully harmonized. Accounting Information System has not been able to

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adjust to changes in both internal and external environment and Accounting Information system
has not been easily accessed.

Accounting information system was very vital to all organizations. It was designed to help in the
management and collection of information, raw data or ordinary data and transform them into
financial data for the purpose of reporting them to decision makers (Dandago and Rufai, 2014;
Harash, Al-Timimi and Alsaadi, 2014). AIS were a system that assists in the collection and
recording of data and information regarding events that have an economic impact on
organizations. It also helps in the maintenance, processing and communication of such
information to both internal and external stakeholders (Olusola, Olugbenga, Zacchaeus and
Oluwag bemiga, 2013). AIS greatly help to provide internal and external reporting data, financial
statements and trend analysis capabilities to affect an organizational performance. IOSR Journal
of Business and Management (IOSR-JBM) Technology was progressively working to eliminate
paper work almost entirely. Paper work slows down transaction time and burdens entities with
maintenance needs. Image processing was voted by the Journal of Accountancy as the top
technology affecting accountants in 1996. This process uses scanning to convert important paper
images into electronic documents. These electronic documents were easier to transfer both
internally and externally, resulting in more efficient, timely information.

Ponemon and Nagida (1990) also assert that the main reason for which accounting information is
generated is to facilitate decision making. However, for financial reporting to be effective,
among other requirements, it is relevant, complete and reliable. These qualitative characteristics
require that the information must not be unfair nor has predisposition of favoring one party over
the others. Accounting information should give a decision maker the capacity to predict future
actions. It should also increase the knowledge of the users to identify similarities and differences
in two type of information (Bolon, (1998). Therefore, reliable accounting information can be
described as an essential pre-requisite for stock market growth. Based on the “engine of
economic growth” potential of the stock market, developed nations do not toy with their Stock
Markets and relevance of financial reporting.

The main function of Accounting Information System (AIS) is to assign quantitative value of the
past, present and future economics events. AIS through its computerized accounting system
(Contract Plus) produce the financial statements namely income statements, balance sheets and
cash flow statement. The system will process the data and transform them into accounting
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information during input, processing and output stages that will be used by a wide variety of
users such as internal and external users (Wilkinson, 2000). Wilkinson noted that an effective
Accounting Information System (AIS) performs several key functions throughout these three
stages such as data collection, data maintenance, data Accounting Information Systems (AIS)
and Knowledge Management; data control (including security) and information generation.

That notwithstanding, financial information will only be useful, or relevant to business decision-
makers or others if it was available when required, thus at the time a decision was to be made,
and it has that capacity to influence decisions. Information that comes too long after the reported
events have taken place was superseded by events and has no value for a decision and it's
therefore irrelevant. However, under ideal conditions, financial accounting information should be
available soon after the end of the period to which it relates. The significance or timeliness
depends a great deal on the nature of the information to be communicated to influence decision
making.

Components of Accounting Information System (AIS)

Stakeholders The starting and ending of every accounting aspects. There was a stakeholder,
who feeds information into the system, collects, analyses, reports, etc., and there was another
person (stakeholder) who needs information

Data It was all about various accounting transactions, events, and other monetary items. AIS will
not record any information which does not have a monetary base. Data can be anything like sales
ledger, customer account, vendor’s ledgers, financial reports like P&L and Balance sheet, cash
flow statement, etc.

Established Procedures To perform various functions, as stated in the definition, AIS follows
predefined steps, procedures. To ensure consistency, this was one of the most basic needs of
AIS. AIS may perform an action either with manual intervention or automatically. This action
needs to be instructed to the person processing data or coded in the system in case of automatic
systems.

Software A software or, in broader terms, software was a computer-based program that performs
the stated functions. Software can be described as a database software package system that
supports business processes and operations, including manufacturing, marketing, and financial,

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human resources, etc. It forms one of the main components of the Accounting Information
System (AIS).

Information System Infrastructure In simple terms, IT Infrastructure can be said a consortium

of various IT & WAS hardware, tools, accessories.

Currently, the world and human life has been transformed from information age to a knowledge
age (Curtwas, 1995), and knowledge has been recognized as the most valuable asset. In fact,
knowledge was not impersonal like money and does not reside in a book, a data bank or a
software program (Choe, 1996). Choe believed that knowledge was always embodied in a
person, taught and learned by a person, used or misused by a person. Accounting information
was an unbiased tool for an effective administration. Poor accounting information jeopardizes
administrative effectiveness, which makes managers malnourished administratively especially in
Nigerian construction industry. The consequence of this has been the current distressed
syndrome that Nigerian construction industries were facing. Huber (1999) stressed that
companies must learn to manage their intellectual assets (i.e. knowledge) in order to survive and
compete in the ‘knowledge society’. Indeed, knowledge management was concerned with the
exploitation and development of the knowledge assets

Concepts of insurance services

Insurance was the pooling of fortuitous losses by transfer of such risks to insurers, who agree to
indemnify insured’s for such losses, to provide other pecuniary benefits on their occurrence, or to
render services connected with the risk. Insurance contracts were technical, legal documents that
contain complex clauses and provisions. Without regulation, an unscrupulous insurer could draft
a contract so restrictive and legalistic that it would be insignificant. Also, most consumers do not
have sufficient information for comparing and determining the monetary value of different
insurance contracts. It was difficult to compare dissimilar policies with different premiums
because the necessary price and policy information was not readily available.

Accounting Information system have an impact on internal control as a combined plan, method
and procedures used to safeguard asset, promote efficiency of operation and adherence to
prescribed policies and directives. Insurance Underwriting refers to the process of selecting,
classifying, and pricing applicants for insurance. The underwriter was the person who decides to

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accept or reject an application. Underwriting starts with a clear statement of underwriting policy.
An insurer must establish an underwriting policy that was consistent with company objectives.
The objective may be a large volume of business with a low profit margin or a smaller volume
with a larger margin of profit. Classes of business that were acceptable, borderline, or prohibited
must be clearly stated. The amounts of insurance that can be written on acceptable and borderline
business must also be determined. The insurer’s underwriting policy was determinedly top-level
management in charge of underwriting. The underwriting policy was stated in detail in an
underwriting guide that specifies the lines of insurance to be written; territories to be developed;
forms and rating plans to be used; acceptable, borderline, and Prohibited business; amounts of
insurance to be written; business that requires approval by a senior underwriter; and other
underwriting details.

The United Kingdom Auditing practice Committee (UKAPC,1979) defined internal control as
the whole system of control, financial and operational in order to carry on business of any
enterprise to safe guard asset, ensure the completeness, accuracy of records , detect errors and
fraud and ensure timely report of financial information. A sound internal control system helps an
organization to prevent fraud, errors and minimize wastage. Custody of asset was strengthened;
it provides assurance to the management on dependability of accounting data eliminates
unnecessary suspicion and helps in maintenance of adequate and reliability data.

Claim Settlement was the payment transaction performed by claim directorate and the system
was deducted the claim amount paid to customer from the premium collected and show the exact
net amount exist after a claim payment was compensated on each policy. The first objective in
settling claims was to verify that a covered loss has occurred. This step involves determining
whether a specific person or property was covered under the policy, and the extent of the
coverage.
The second objective was the fair and prompts payment of claims. If a valid claim was denied,
the fundamental social and contractual purpose of protecting the insured was defeated. Also, the
insurer’s reputation may be harmed, and the sales of new policies may be adversely affected.
Fair payment means that the insurer should avoid excessive claim settlements and should resist
the payment of fraudulent claims, because they will ultimately result in higher premiums.
The states have passed laws that prohibit unfair claims practices. These laws were patterned after
the National Association of Insurance Commissioners a third objective was to provide personal
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assistance to the insured after a covered loss occurs. Aside from any contractual obligations, the
insurer should also provide personal assistance after a loss occurs.

According to Siayor (2010),Internal control systems refers to all the policies and procedures
internal controls adopted by the directors and management of an entity to assist them in
achieving their objectives of ensuring, as far as practicable, the orderly and efficient conduct of a
business, including adherence to internal policies, the safeguarding of assets, the prevention and
detection of fraud and error, the accuracy and completeness of the accounting records, and the
timely preparation of reliable financial information.

Financial statements contain information about the performance and prospects of an enterprise or
organization. Generally, users of financial statements include stakeholders, investors, auditors,
employees, customers, governments and general public etc. Among the uses of this information
provided were facilitation of investment decision-making, assessment of the quantity, timing and
risk on returns on investment; and the evaluation of economic resources of enterprises and results
of operations of the enterprise (David, 2003).

According to Wilkinson (2007:7) states that accounting information system is a structure that
integrated in an entity, which consists of a collection of human resources and equipment, used to
transform data into information useful for users in making decisions. Romney & Steinbart (2006)
Accounting Information System is a system that collects, records, stores, and processes data to
produce information used in decision making. Accounting Information System is basically an
integration of various subsystems processing or accounting sub accounting information systems
because each transaction processing system has a transaction processing cycle so that accounting
information system can also be said as the integration of various transaction processing cycles
then each transaction processing done by the system of processing transactions Or sub-
accounting information systems have various components such as hardware, software, brain
ware, procedures, databases and communication networks (Azhar Susanto, 2008). Integration is
a critical factor for determining success in the application of Brown & Ross (1995) information
systems.

Interim reports also provide information for periods less than one year. These provide users with
timely information about enterprises to avoid the time lag between the annual reports. This has
important implications for monitoring and control. If accounting information was not made
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available early enough, it was not possible to monitor the performance of management and to
detect other financial misconduct by employees of the enterprise. Indeed information can be
delayed deliberately for that very purpose (Luo, 1996).It was thus imperative that delayed
information should be analyzed more carefully.

2.2. Conceptual Framework

Inadequate financial resources have also accelerated to their inefficiency, reflected by irregular
audit activities as well as absence of regular reports. The objective of this study was to establish
the relationship between internal control activities and financial performance in institutions. The
data for the study was collected using questioner and interview. The study revealed that all
activities of the College were initiated by the top management, there was clear separation of role
in the institutions’ finance and account department and that superior officer in the College
supervised regularly work done by their subordinate, the institution financial statements were
audited annually by external. However, there was a possibility for a single staff to have access to
all valuable financial information without the consent of other staff. On the budgetary control,
the study revealed that the institution adheres strictly to the provisions of annual departmental
budget and that controls were in place to exclude incurring expenditure in excess of allocated
fund. Also, there was poor security network in the College. The result further shows that, there
was no significant relationship between internal control activities and financial performance.
Internal controls were looked at from the perspective of Control Environment, Control Activities,
Rask Assessment, Information and Communication system, and Monitoring .Thus this study
focused on assessment of the effectiveness of the internal control system in the AIC to identify
the possible areas of deficiencies in the system. Based on the data analyzed the result indicates
that internal control in the AIC was not effective. Particularly the risk assessment component of
internal control was not practiced in the universities. Though monitoring was better in the
universities, there was in adequate control environment, control activities and inadequate flow of
information and communication in AIC. Hence, it needs commitment from both universities
management and responsible government authorities to improve those specific areas of
deficiencies’ in internal control indicated.
The objectives that internal controls must meet to prevent errors and to be efficient so as to
provide reasonable assurance were that:

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Recorded transactions were valid. The system should not permit the inclusion of fictitious or non
- existent transactions in accounting records.
The transactions were properly authorized. The system should ensure that transactions were
properly authorized.
Transactions were recorded. The procedures must provide controls to prevent omissions of
transactions from the records.
Transactions were properly valued. An adequate system must include procedures to avoid errors
in calculating and recording transactions at various stages in the recording process.
Transactions were properly classified. Proper account classification accounting to appropriate
categories or divisions must be ensured by the system.
Transactions were recorded at the proper time. The recording of transactions either before or
after the time they took place increases the likelihood of failing to record transactions or
recording them at the wrong amount. Therefore, effective control system should ensure timely
recording of transactions.

Awash Insurance Company was using the GIIS (General Insurance Information System) that
organized and designed by foreigners and managed by Management Information system
therefore, this makes there was a knowledge gap on every conception and linkage of the ledger
of the system by the department such as finance, Audit and branches of the company. Even
though they were doing their daily activity they have some limitation on the system to
distinguish financial report practice prepared by the system, this makes there was I gap between
the finance and each directorate and branches because all transaction was summarized under
Finance directorate as a financial statement report, therefore the knowledge gap on each
transaction passed by other comes to finance as a report wrongly. Financial statements still
remain the most important source of externally feasible information on companies. In spite of
their widespread use and continuing advance, there was some concern that accounting practice
has not kept pace with rapid economic and high technology changes which invariably affects the
value relevance of accounting information. The importance of Chang’s assertion was reinforced
by massive accounting fraud in developed countries especially United States of America (USA),
rapidly changing business environment and reports by some researchers that value relevance of
accounting information has declined. However, a number of researchers claim that accounting
information has not lost its value relevance.

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 CHAPTER THREE

3. Research Methodology
3.1. Introduction

This chapter presents about the study research methodology. The first section presents the
research design and approach. The second section presents data source and data collection. The
third section presents about sample selection and determination. The fourth section of the chapter
presents about method of data analysis. Finally, ethical consideration was presented.

3.1. Research Design

According to Kothari (2008), there were 3 types of research design; Descriptive, Exploratory and
Explanatory research design. Descriptive research design/statistical research/: research that
describes phenomena as they exist. It can be used to identify and classify the element or
characteristics of the subject. It would include techniques like case studies, observation and
review of previous related studies and data and also it involves with collecting data in order to
test hypotheses or answer questions concerning the current status of the subjects of the study.

Exploratory research design: type of research conducted for a problem that has not been clearly
defined. It helps determine the best research design, data collection method and selection of
subjects. It should draw definitive conclusions only with extreme caution. Given it was flexible
and fundamental nature. Exploratory research often concludes that a perceived problem does not
actually exist and the results were not usually useful for decision-making by themselves, but they
can provide significant insight into a given situation.

Explanatory research design: the first type of correlational design and conducted when
researchers want to explore the extents to which two or more variables co-vary, that was, where
changes in one variable were reflected in changes in the other (Creswell, 2008). The purpose of
the study was to explore a new universe, one that has not been studied earlier and research was
mainly concerned with causes (why) or factor about some phenomenon.

As explained previously main objective of this research was to identify the correlation among
two variables namely accounting information system and practice of accounting and auditing
report quality of the company empirically. The central issues of conducting the research was to

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show the impact of accounting information system and provide remedies to deal with problems
which arises on practice of accounting information system in descriptive manner that will make
it explanatory for it deals with the relation of two variables. Thus, this study used a descriptive
research design to achieve its objectives.

3.2. Research Method

According to Creswell (2003), there were three type of research; qualitative, quantitative, and
mixed research approach. Qualitative Research Approach was the type by which were depending
on human observations and descriptions. It was descriptive, no facts, highly subjective and
designed to look beyond the percentages to gain an understanding of feelings, impressions and
viewpoints.. This kind of method was used to assess knowledge’s, attitudes, behaviours, opinions
of people depending on the topic of research and experiences which were not allowed to be used
in quantitative method at all. Qualitative research implies an emphasis on the qualities of entities
and on processes and meanings that were not experimentally examined or measured (Denzin &
Lincoln, 2005).

Quantitative research Approach was a research approach aimed at testing theories, determining
facts, demonstrating relationships between variables, and predicting outcomes. Quantitative
research uses methods from the natural sciences that were designed to ensure objectivity, general
ability, reliability and reality that exists independent of human perception, the investigator and
investigated were independent entities.Therefore, the investigator was capable of studying a
phenomenon without influencing it or being influenced by it and concerned with the collection
&analysis of data in numeric form (Guba and Lincoln, 1994). Mixed research approach has the
characteristics of both qualitative and quantitative research. This study will employ qualitative
research approach because it describes the characteristics of an observed data from the source.

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3.3. Data Sources and Collection Methods
In order to gatherer data in relation to the intention of the research, both primary and secondary
data sources were used.

Primary data obtained through questionnaire with relevant variable which contains both open
ended and closed ended questions. Questions are developed by the researcher and distributed to
the respective accountant, internal auditor, and other users of the AIS including, underwriter,
manager and cashier were conducted at the selected main branch of the company who have
accountant at a branch level to understand daily cash collection and payment done by accountant,
underwriter and cashier by the help of accounting information system. The main objective of the
questions was to further support the data obtained using questioners.

Secondary data was obtained from company annual report, internal and external auditor’s
feedback report and other relevant documents will be used to gather secondary data related to
AIS practices and its impact on accounting reporting and auditing practices and reporting. The
study will specifically used structured documentary review method will be reviewed regarding
on the impact of accounting information system and the internal auditors reports on financial
report, internal auditors comments on branch operation, internal auditors reports on the analysis
of accountants was reviewed and external auditors reports was also examined toward the internal
control of the company.

This study used questionnaire which was a widely used and useful instrument for collecting
survey information. The questionnaire was developed in two sections. The first one was on the
general aspect of the respondent and the second one was developed based on standard of internal
control. The first section was aimed to evaluate whether the status and experience of the
respondents has an effect on internal control system. The second section was used to evaluate the
effect of the standards of the controls were in those samples of AIC. This section uses questions
to internal audit, finance and accountant and cashier of selected branches with response ranging
from strongly agree to strongly disagree.

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3.4. Sample and Population

To gather data in relation to the intention of the research, the first task of the researcher was to
know the population under the study. Population also called the space refers to any collection of
specified group of human or non-human elements. The population for this research was defined
as finance directorate and branches that have accountants at branch level and internal auditors’
directorate of AIC. Those provide the specified accounting transaction by the help of the system
of the company, employees engaged in this service and annual external auditors report that were
occupied of the service. Others have no accountant at branch and their activities were controlled
and operated by Finance directorate accountant.

All branches and department of the company are used AIS, therefore the study was performed in
the both of AIC directorate and branches the total population was 40 employees working at head
offices 22 employees from finance directorate, 5 staffs from audit directorate, 1 Employee from
Risk and Compliance Department, AIC have 55 branches in the country and 31 branches are
found in Addis Ababa city from this four branches randomly selected in the study for data
collection that are found in Addis Ababa city administration based on their production and
employee that have accountant at branch level this are 3 employees from Addis Ababa Main
Branch, 3 from Bole Main Branch, 3 from Finfine Main Branch and 3 from Life Main branch.

Based on the assumptions and method of Yamane’s (1967) formula for sample selection was
adopted to determine the sample size.

The formula: n=N/1+N (e) 2

Where; n - designates sample size for the study
N- Designates Number of employees in the region
e= designates maximum variability or margin of standard error at 95%
Confidence Interval 1= designates the probability of the event occurring.
Therefore, n=N/1+N (e) 2
n= [40/ 1+40*(0.05)2]
n= 40/ 1.1 = 36; and 5% (non- response) made the sample size of 36. The
Sample side will be determined based on population proportion to size to the AIC. Based on
sampling frame of staff; individual researcher participants will identify using proportionate

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 stratified simple random sampling technique. Since, the sample size for the quantitative aspect of
the study will be obtained from a known population of the number of workers in the targeted
operational units, with the basic population parameters.

Table 1: Summarizes the population selected sample

No Selected Sample
Location Population Proportion of Sample Questionnaire
total population Taken collected

1 Finance Directorate 22 0.55 20 19

2 Audit and Inspection Directorate 5 0.13 5 5
3 Bole Main Branch 3 0.08 2 1
4 Addis Ababa Main Branch 3 0.15 2 1
5 Finfine Main Branch 3 0.15 3 2
6 Life Main Branch 3 0.15 3 2
7 Risk and Compliance Dep. 1 0.03 1 1
Total 40 100.00 36 31

Beside this sample of the population

➢ The samples taken become form a 40 total population of 36 employees were selected. The reason
behind selecting the sample based on Yamane’s (1967) Sample selection formula is as follows:-
➢ Finance Directorate was selected based on purposive sampling since this office was the place
where practice of accounting and auditing report was performing their daily transaction and
report was prepared by the help of information generated from the system and documents
delivered to finance from the branches of the insurance to perform various transactions activity at
centrally at head office.
➢ The other four branches were selected based on the Yamane’s (1967) sample selection and
proportionate ratio of their accountant existence at branch level. Organizational structure of the
company employee accountant for branches based on their business volume or in terms of
transaction and report prepared by the accountant and managers at their branch unit and submits
to finance directorate for cash transaction, bank reconciliation and purpose.

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3.5. Data analysis technique
After data collection, questions were coded and entered into Statistical Package for Social
Sciences (SPSS version 17) then analysis run. Data was analyzed using descriptive statistics for
quantitative data and content analysis for the qualitative data. Descriptive statistics involve the
use of frequencies, mean and standard deviation. Quantitative data was presented in tables, and
chart, while explanations to the same were presented in prose. The data analysis was conducted
to determine whether the impact of accounting information system has force on internal control
of the companies. The data collected was measured in interval measurements whereby ratio was
possible to clarify the variables. Generally data was analyzed by using statistical tools known as
tabulation method.

3.6. Data Reliability and Validity Test

The data collection tools were reliable and valid the data was based on the accountant system
based report preparation and internal and external auditors accounting generated report and
adjust problems occurred during transaction time on this particular manpower questionnaire were
done based on the evidences available.

The study was accurately reflects or assesses the specific concept that the researcher was
attempting to measure. And the accuracy of the actual measuring instrument or procedure, was
based on the objective of the study External validity of the results of a study was generalized or
transferable. The study has taken into account alternative explanations for causal relationships of
accountant with the companies system available.

There was the internal consistency of the questioner answered by the participants and the
research result obtained. This based on the consistency of people’s responses across the items on
a multiple-item measure. In general, all the items on research measures were supposed to reflect
the same underlying construct, so people’s scores on those items should be correlated with each
other. Validity explains how well the collected data covers the actual area of investigation
(Ghauri and Gronhaug, 2005). Validity basically means “measure what was intended to be
measured” (Field, 2005).Reliability concerns the extent to which a measurement of a
phenomenon provides stable and consist result (Carmines and Zeller, 1979). Reliability was also
concerned with repeatability.

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 CHAPTER FOUR

DATA ANALYSIS, RESULTS AND DISCUSSION

4.1 Introduction

This chapter involves data analysis, results & discussions of findings. This chapter is structured
into many sections; Section the first part involves summary of the statistics, the second section
analysis the empirical model, chapter discussions and conclusion given are discussed in another
chapter.

4.2 Research Questions Discussion and Findings

The Questionnaires response rate was administered to 36 respondents and from this sample
selected 31 respondents returned the questionnaires. This translates to a response rate of 86.11%.
The high response rate was attributed to the fact that most of the questions were structured and
semi-structured making it easy for the respondents to fill in the questionnaires. Additionally, the
questionnaires were delivered and collected by hand and hence there was a close contact and go
behind up with the respondents. The high response rate is an indication that the results of this
study are consistent.

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Table 2: Respondents profile

Gender Frequency Percent

Male 16 51.6
Female 15 48.4
Total 31 100
Age Frequency Percent
20-25 1 3.2
26-32 14 45.2
33-38 12 38.7
>45 4 12.9
Total 31 100
Position Frequency Percent
Accountant 8 25.8
Senior Accountant 11 38.7
Manager 1 3.2
Auditor 5 12.9
Under writer 5 16.1
Other 1 3.2
Total 31 100
Education Frequency Percent
Degree 19 61.3
Masters 12 38.7
Total 31 100

51.61% and 48.4% of male and female respondents are participated in the questionnaire
respectively in the study to collect the data. Almost the total number of male and female that was
involved in this research were equal, it show the company emphasize to employee n the equality
of both gender because of it is the more productive for the validity of this investigation.

As the study shows that the percentage of the age of the response of the respondent were 3.2%
from the age of 20-25, 45.20% from 26-32 age, 38.7% were at the age of 33-38 and the rest of

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12.9% were more than 45 age, as this information shows that the most participated of this
research to give or put their response of the questionnaire given to them were from the age of 26-
33 at matured enough to give the valuable information and feed back of the question stated on
the questionnaire given to them.

As the above table shows from respondents profile senior accountant are the major experts of the
company that cover 38.70%, there are 25.80% accountant, 16.10% of the employees are
underwriter that perform customer service, 12.90% of them are auditor and 3.20% of the
employees are manager of the company at finance and branches that are included in the sample
covered by the thesis.

The company is hiring more than first degree and majority of the employee are 61.30% hold first
degree this makes that educated employee have the ability to solve the problem of accounting
and audit report quality of the company.

Table 3: Is there AIS practice in Awash Insurance Company

Percent
Yes 80.6
No 19.4
Total 100.0

AIS Practice in Awash Insurance Company, as AIC has its own software package that where
good to run its production and base for controlling its own asset and properties that were located
in different parts of the country through its branches. Each and Every employment of this
organization assesses this application to execute or run the daily operations. The company uses
this application for controlling mechanism of financial management.
The respondents are practicing the AIS of the company to enhance the quality of audit report
performed by internal and external auditor they cover 80.60% of the respondents have the same
opinion that the impact of internal auditor have sound and important on the accuracy and
integrity of financial report, the remaining 19.40% are not think they have effect on the company
report.

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Table 4: Did AIS play role for financial reporting quality

Frequency Percent
Yes 26 83.9
No 5 16.1
Total 31 100.0

The above table shows that 83.9% of the participant says yes and 16.1% of the remaining says
no; from this AIS have play a significant role on the financial preparation and quality of the
report prepared by internal and external auditor.

Table 5: Did AIS have a role in internal audit report quality

Frequency Percent
Yes 19 61.3
No 12 38.7
Total 31 100.0

Based on the table above 61.3% respondents says yes and 38.70% says no to determine the role
plaid by AIS for audit quality of the company, the thesis concluded that for resources utilization
effectively and efficiently to overcome the audit report quality the system that company use have
a great role to enhance on the resource utilization wisely for report of the company.

Table 6: The role of AIS for management is for decision making and controlling financial data

Frequency Percent
Yes 21 67.7
No 10 32.3
Total 31 100.0

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The table present that 67.30% of the respondents says yes and the remaining employees do not
think. Therefore the AIS of the company uses have an important role for check and balance of
the proposed plan settled at the beginning of the year and there were also examination and
verification of the plan toward achieved or not by using the designed system. The management
of the company uses the report of AIS for decision making purpose.
Table 7: The role of IT department for AIS practices is to control the asses of necessary data

Frequency Percent
Yes 23 74.2
No 8 25.8
Total 31 100.0

74.2% of the employs of the company says yes on the question organized for the thesis and
25.80% do not agree and says no. From this that the IT department of the company practice used
and designed by the company was play a great role to show the exact position of the company’s
financial performance.

Table 8: Did you get and necessary training on AIS

Frequency Percent
Yes 13 41.9
No 18 58.1
Total 31 100.0

The below table shows that 58.10 of the respondents answer the question by saying no, the
remaining sample of the respondents 41.90% of them says yes. The study concluded that as
employees are hired or in a job by human resource management of the company for different
department and branches they not equipped them by providing training on the AIS of the
company in collaboration with MIS directorate and other concerned body. For this reason they
not well deal with accounting and auditing report prepared by the system and not examine
reports of external auditor in relation to their daily activity.

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Table 9: Do you familiar with new technologies such as ERP, GIIS

Frequency Percent
Yes 25 80.6
No 6 19.4
Total 31 100.0

80.60% says yes and 19.4% of them are not familiar with new technology update performed by
the company. Large number of the employee of the company are updated themselves with new
technology that the companies uses such as GIIS and ERP system available by the company.

Table 10: Do you think financial reports generated by auditors are consistent

Frequency Percent
Yes 20 64.5
No 11 35.5
Total 31 100.0

The above table shows that 64.50% employer says yes and the remaining participants were
35.50% who says no. From this implication the management of the company more depend on
system generated report and it is consistence with report generated by other users of the system
this enhance the quality of the report prepared by external and comments given by internal
auditor.

Table 11: The accounting information system contributes to construct its information
outputs more capable for understanding by decision makers or stakeholder.

Frequency Percent Mean Std. Deviation

Neutral 5 16.1
Agree 12 38.7
Strongly Agree 14 45.2
Total 31 100.0 4.29 .739

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From the above table 45.20% were strongly agree, 38.70% were Agree and 16.10% were neutral
on the contribution of AIS on decision making purpose. Therefore as 45.20% of the employees
were strongly Agree that AIS used by the company was capable to generate valuable output
information to pass decisions that profits the company and stakeholders available around the
companies.
Table 12: Internal auditors give valuable comments by understanding the AIS of the
company.

Frequency Percent Mean Std. Deviation

Strongly Disagree 1 3.2

Disagree 5 16.1
Neutral 7 22.6
Agree 12 38.7
Strongly Agree 6 19.4
Total 31 100.0 3.55 1.091

Above table put that 38.70% were Agree, 22.60% Neutral, 16.10% disagree. For this reason the
internal auditor of the company are not well understand the system of the company to provide
their valuable comments and to verify the transaction performed by each accountant and
underwriter of the company. This shows that there is knowledge gap exists between the internal
auditor of the company to follow up daily posting ledger transaction and AIS of the company
used.

Table 13: AIS are integrated with other management information systems and helps them
to control frauds occurred.

Frequency Percent Mean Std. Deviation

Neutral 1 3.2

Agree 19 61.3
Strongly Agree 11 35.5
Total 31 100.0 4.32 .541

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Descriptive statics of the respondents show that 61.30% were Agree, 35.5% respondents were
Strongly Agree on the integrated of AIS with MIS of the company. Therefore there were a
cooperation of MIS on the designed system of AIS to control and prevent fraud exist because of
uninterrupted of the two variables. The respondents also agree that if there was the problem of
the system not to work they give quick response on the issue concerning on the system.

Table 14: AIS contribute to the reliability of financial reporting

Frequency Percent Mean Std. Deviation

Neutral 2 6.5
Agree 17 54.8
Strongly Agree 12 38.7
Total 31 100.0 4.32 .599

The table present that 54.80% were Agree, 38.70% of them were Strongly Agree, 6.50% neutral
on the AIS reliability of financial reporting. Therefore, financial statement of the company
arranged was based on the AIS generated report that has its own contribution on the
trustworthiness of the data available for decision making purpose.

Table 15: AIS encourage efficient and effective use of resources and operations based on
the policy of the company.

Frequency Percent Mean Std. Deviation

Disagree 1 3.2
Neutral 5 16.1
Agree 16 51.6
Strongly Agree 9 29.0
Total 31 100.0 4.06 .772

51.60% Agree, 29.00% strongly agree, 16.10 Neutral and 3.20% were disagree on resource
allocation based on the policy of the company. From this the study wind up that AIS of the
company is the base for resources effect and efficient allocation as well as to plan administrative,
premium collection, claim payment and other income generating and expense incurring of the

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company. Additionally the AIS have positive impact on the policy of the company to control
activities not go out of the planned strategies.

Table 16: AIS improve controls by limiting access to company data

Frequency Percent Mean Std. Deviation

Neutral 7 22.6
Agree 15 48.4
Strongly Agree 9 29.0
Total 31 100.0 4.06 .727

The table put down that 48.40% Agree, 29.0% strongly agree, 22.60% neutral that improve the
controls of the company activity. AIS of the company are limited on the data of the company to
overcome and enhance controlling mechanism of the company on the daily activity.

Table 17: AIS comprise detective controls, which are designed to identify errors or
irregularities after they have occurred

Frequency Percent Mean Std. Deviation

Disagree 1 3.2
Neutral 4 12.9
Agree 22 71.0
Strongly Agree 4 12.9
Total 31 100.0 3.94 .629

Based on the above table 71.0% Agree, 12.90% both Agree and Neutral therefore AIS of the
company have major role to prevent irregularities of payment, because all user of the system can
see any payment at the time of payment or finally as a report of the statement. These develop
control of activities because manager and other authorized body have the opportunity to verify
and control all payments and collection on the system.

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Table 18: There is knowledge and skills gap on transaction posting ledger on AIS for
specific accounting

Frequency Percent Mean Std. Deviation

Strongly Disagree 3 9.7

Disagree 2 6.5
Neutral 7 22.6
Agree 13 41.9
Strongly Agree 6 19.4
Total 31 100.0 3.55 1.179

The table shows that 41.90% were agree, 22.60% neutral, 19.40% strongly agree, 9.70% strongly
disagree and 6.50% disagree. As it is known that practice of accounting and auditing report are
depend on the transaction posted daily that determine accuracy of the financial report of the
company. The result shows that respondents that there is knowledge and skill gap exist by the
employee on transaction posting to exact ledger to hold the expense to its appropriate ledger.

Table 19: how do you rate your AIS towards organizational effectiveness?

Frequency Percent Mean Std. Deviation

Neutral 9 29.0
Agree 13 41.9
Strongly Agree 9 29.0
Total 31 100.0 4.00 .775

There were 41.90% Agree and 29.0% neutral and strongly agree. The companies system has
great space and close relation toward the company’s success. Therefore the Organization should
give great attention to develop and create conducive environment for the employee to equip them
to practice with AIS on accounting and auditing report of the company.

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Table 20: The AIS system is reliable

Frequency Percent Mean Std. Deviation

Disagree 1 3.2
Neutral 6 19.4
Agree 17 54.8
Strongly Agree 7 22.6
Total 31 100.0 3.97 .752

The table shows that 54.80%, Agree, 22.60% strongly agree, 19.40% neutral and 3.20% and
disagree. This result identify that the system used by the company was more reliable on the
company data consistency.
Table 21: It is easily understandable

Frequency Percent Mean Std. Deviation

Disagree 1 8.4
Neutral 6 21.7
Agree 17 50.5
Strong Agree 7 19.4
Total 31 100.0 2.98 .852

The table shows that 50.50%, Agree, 19.40% strongly agree, 21.70% neutral and 8.40% was
disagree. This result identify that the system used by the company is understandable on the data
of the company.

Table 22: The system is fast and flexible

Frequency Percent Mean Std. Deviation

Disagree 1 5.7
Neutral 6 17.2
Agree 17 56.6
Strongly Agree 7 20.5
Total 31 100.0 3.99 .755

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The following table shows that 56.60%, Agree, 20.50% strongly agree, 17.20% neutral and
5.70% disagree. This result identify that the system used by the company is fast and flexible on
the data of the company and it was easy to generate the report for different kind of statement
preparation such Trial balance, cash flow it was also help to identify the premium collected and
claim insured during the fiscal year.

Table 23: IT team provide adequate support for the use of AIS

Mean Std. Deviation

Frequency Percent
Neutral 7 22.6
Agree 16 51.6
Strongly Agree 8 25.8
Total 31 100.0 4.03 .706

The ratio of the frequency of the system shows that 51.60% agree, 25.80% strongly agree,
22.60% are neutral. Therefore the result from questionnaire shows that AIS cannot use without
the support of the MIS the company, this gives the employees were satisfied with support and
responsive given by the management information system of the company.

Table 24: IT department has technically competent employees to support AIS

Mean Std. Deviation
Frequency Percent
Neutral 7 23.1
Agree 16 49.3
Strongly Agree 8 27.6
Total 31 100.0 4.00 .703

The ratio of the frequency of the system shows that 49.30% agree, 27.60% strongly agree,
23.10% are neutral. The result shows that the It department of the company or the MIS have
competent employees to solve technical problem occurred against the use of the system.

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 Table 25: IT departments is responsive and reliable
Mean Std. Deviation
Frequency Percent
Neutral 7 24.1
Agree 16 48.5
Strongly Agree 8 27.4
Total 31 100.0 4.06 .702

The ratio of the frequency of the system shows that 48.50% agree, 27.40% strongly agree,
24.10% are neutral. Based on the table MIS of the company are doing their activity especially on
the AIS of the company through responsive and reliable manner.

Table 26: Staff utilizes the full capabilities of the companies AIS?

Frequency Percent Mean Std. Deviation

Disagree 1 3.2
Neutral 5 16.1
Agree 17 54.8
Strongly Agree 8 25.8
Total 31 100.0 4.03 .752

Based on table above 54.80% agree, 25.80% strongly disagree, 16.10% neutral and 3.20%
disagree from this percentage the employees of the companies are doing and utilizes the
capabilities of the system as it needed, especially on accounting and auditing practice of the
company. This Make AIS have the capabilities to show the exact picture of financial position of
the company based on report generated by the company and approved and commented by
internal and external auditor.

4.3. Result and Discussion for Open - ended questions

Respondents explain that the AIS had the problem on bank reconciliation because of wrong entry
posting and recording. In addition to this doing it by the help of the system on report preparation
especially on cheque clearance was the difficult that cashier are wrongly clear the bank on the
system differently from its deposit account. There is lack of training given by the concerned

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body when the system of the company was upgraded. The respondents also publicize that there
was the problem of duplicate ledger and wrong account balance. Sometimes the system of the
company is stuck for more than a day, especially there report generate part of the system. As a
whole there is the problem of delegation of work within one department, according to the
respondent accountant are doing different activity in the finance directorate therefore there were
no well practiced job rotation among the employee that offer the accountants to understand
different activity performed in the company. There was no clear discussion between the MIS and
users of the system or system developers before implementing the new system, because the
previous system should not phase out for report preparation.

Sometimes system manipulation was found, the balance on the system and physically existence
of the materials especially on fixed asset is not match each other and transaction is not recorded
in place. Trial balance mismatch of found some times specially on fixed asset. According to the
participants there was different amount of inventory found on the AIS and audit report or
misbalance.

Quality of Financial Reporting has a positive effect on the Organizational Performance of the
Institutions. Based on the results of hypothesis testing, the Quality of Financial Reporting has a
positive and significant effect on the Organizational Performance of the company. The results of
this study provide empirical evidence that the better the quality of financial reporting, the better
the organizational performance of the companies.
The relationship between reporting quality and organizational performance has been studied by
several researchers, for example: (Biddle et al.: 2009, pp. 112-131). Muda et al. state that
accounting plays an important role in encouraging accountability, efficiency, and effectiveness
of public services. The quality of information will improve the quality of management in seeing
changes around the organization so that it can quickly and accurately respond to these changes
(Muda et al.: 2018). The same thing is known from the IPSASB statement (2013), which states
that the allocation of resources by the government is inadequate if it is supported by poor quality
financial information. The same view is conveyed by several researchers who concluded that the
quality of financial reporting is closely related to company performance (Pneman & Zhang:
2002, pp. 22-37; Richardson et al.: 2001).

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Financial reporting plays an important role in promoting accountability, efficiency, and
effectiveness of public services. The quality of reporting will improve the quality of management
in seeing changes around the organization so that it can quickly and accurately respond to these
changes. A resulting report is a form of accountability of government agencies for the
implementation of government implemented. Effect of Accounting Information System
Implementation directly has effect on Organizational Performance through the Quality of
Financial Reporting.

The quality of good information is generated by a quality accounting information system as

well. Laudon and Laudon (2007: 14) also mentioned that by implementing a quality accounting
information system can produce quality accounting information, which can be used by users in
making decisions (With the implementation of quality of accounting information system Which
was also used by the user in making decisions). The amount of influence of accounting
information quality system to the quality of accounting information is (0,629 ×0,629×100%) =
49, 5%. The results showed that the quality of accounting information systems affect the quality
of accounting information with the influence of 49.5%. This result indicates that the quality of
the information referred to the quality of output generated by the information system, thus the
better quality of accounting information system can lead to the achievement of accounting
information quality optimally.

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 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMENDATION

5.1 Introduction

Chapter five consists of a brief summary of findings that were obtained. It also presents the
deduced conclusions and offers recommendations on how to improve the present circumstances
of the companies. The research implications are discussed and suggestions of opportunities for
further research presented.

5.2 Summary of the Study

The thesis intended to find out the impact and practice of Accounting Information Systems on
the accounting and auditing report of the companies. The study measured impact and practice of
Accounting Information Systems on the accounting and auditing report of the companies based
on the various descriptive mode of evaluation, including, frequency, percent, mean and standard
deviation and additionally information quality, service quality, system use, user satisfaction and
net benefits of the AIS are also seen as qualitative data presentation and evaluation.

5.3. Findings of the thesis

The finding obtained from the analysis was when the company’s system is upgraded there were
the problem of accurate data migration by MIS therefore internal auditor of the company is not
participating to solving this problem. There is no adequate training for internal auditor or there is
no on job training how to find faults exists and the way of understand problem area occurred.
The new system developed is called ERP, this system is not allow modifying of the transaction
by accountant or underwriter if the problem occurred rather you report to MIS directorate to
modify your transaction, Therefore it takes a few days to correct it as the respondents gave me
the interview.

Few number of the respondents cited that there was lack of proper training and lack of proper
system documentation as some of the challenges they face. Other respondents also noted that
high staff turnover was another challenges of using the AIS. They indicated that when the staff

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turnover was high, some of super trained staff leaves the company and they happen to be having
more information about the AIS than the normal users of the AIS.

5.4 Conclusion

The thesis was conducting through data gathering by using questionnaire distributed among
employees of AIC based on the formula of Yamane sample selection, and secondary data of
internal and external annual report also used as the evidence of the research. The respondents
have explained their opinion on the impact of internal auditor on the accuracy and integrity of
financial report. As their consistency of the management report and AIS there is check and
balance of the proposed plan settled at the beginning of the year and there is also examination
and verification of the plan toward achieved or not by using the designed system.

AIS of the company have major role to prevent irregularities of payment, because all user of the
system can see any payment at the time of payment or finally as a report of the statement. These
develop control of activities because manager and other authorized body have the opportunity to
verify and control all payments and collection on the system. Large number of the employee of
the company are updated themselves with new technology that the companies uses such as GIIS
and ERP system available by the company.

This study showed that there is strong relationship among the AIS and accounting and auditing
report of the company, which means right to use to accounting information, will lead to
contribute the efficiency and accuracy of the report prepared. Therefore, I can be concluded that
accounting information systems have an impact on the quality of accounting and auditing report
of the company.

A good accounting information system, institution, or organization can increase its value through
increasing quality and efficiency, especially in terms of supply chain efficiency and
effectiveness, improving internal control structures, and improving decision making. this is
because the existence of an accounting information system can make the financial reporting
process of an agency easier and faster because the management of data into accounting
information can be done through the system so that it can reduce the risk of recording errors
which will then result in the information presented and disclosed in the Ministry's financial
statements. The company becomes more qualified and reduces the possibility of material

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misstatement of the organization. The Government Agency Accountability System will
specifically regulate how government agencies report their performance in accordance with the
provisions of the prevailing laws and regulations. With this regulation, the measurement and
reporting of government finances can be a starting point in assessing the performance of the
company in a more systematic and structured manner. The implementation of accounting
information systems can also help reduce errors caused by negligence and the inability of a
person to prepare financial reports so that they can present information in financial reports more
accurately and validly. Valid information will result in unbiased decision-making and make
optimal performance. In the context of governance, the government, which acts as an agent,
certainly has more information than the general public, who acts as a principal. us, to reduce
information asymmetry and increase agency accountability, government agencies are required to
submit accountability reports containing performance achievements on management activities
carried out; this will also have an impact on financial reporting which encourages accountability,
efficiency, and effectiveness of public services. The quality of reporting will improve the quality
of management in seeing changes around the organization so that it responds quickly and
appropriately to changes.

5.5 Recommendations of the Study

The thesis summarize that as employees was hired or in a job by human resource management
directorate of the company for different department and branches they not equipped them by
providing training on the AIS of the company in collaboration with MIS directorate and other
concerned body. For this reason they not well deal with accounting and auditing report prepared
by the system and not examine reports of external auditor in relation to their daily activity.
Therefore, trainer facilitator of the company should plan the budget to provide the training for
those employees who have access to use the system of the company and they should focus
especially on new employee of the company.

As it was known that practice of accounting and auditing report are depend on the transaction
posted daily that determine accuracy of the financial report of the company. The study
understand from the respondents that there is knowledge and skill gap exist by the employee on
transaction posting to exact ledger to hold the expense to its appropriate ledger. As report of the

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company shows the performance of the company, accountant and other user of the company
should try to upgrade themselves to solve this problem by asking the concerned body.

The respondents also publicize that there is the problem of duplicate ledger and wrong account
balance. Sometimes the system of the company is stuck for more than a day, especially the report
generate part of the system. More about the system stacking problem is the concern of MIS
directorate therefore they should equip themselves on such like problem not occur because as the
system become disturbed the company was losing its customer.

As a whole there was the problem of delegation of work within one department, according to the
respondent accountant were doing similar activity in the finance directorate therefore there was
no well practiced job rotation among the employee that offer the accountants to understand
different activity performed in the company. The finance directorate of the company should give
the opportunity to the employee to practice every activity undertaken in the finance directorate.

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4. Freeman, 1987, 1994 study on the basic properties of accounting numbers, and predictive
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5. Hansen & Mowen, 2007. Computer-integrated manufacturing, Communication Technology

6. AIC. (2019/20) Annual Report

7. Kinney, 2000. The implementation, assessment, and monitoring of effective internal control

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12.Hafij, Ahmed, and Tamanna (2014) evaluated the usage of accounting information on
decwasion.

14. Computer-integrated operational information system (Hansen & Mowen, 2007

15. (Nwinee et al., 2016). Effectiveness of AIS depends on the perception of dissuasion makers

16. (AIS) was acknowledged as an effective tool to deal with the exterior and interior changes
(Shagari, Abdullah, & Saat, 2017)

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17. Periodic financial data in order to assess the performance of the company's management
(Nnenna, 2012).

18. Success of decisions and increasing their effectiveness depends heavily on the success
accounting information systems presented to the decision makers at the right time (Al-Ali, 2014).

19. Information by Romney and Steinbart (2015) is the data has been organized and processed to
give meaning to the user

20. McDonald explains that the financial accounting system has a positive and significant effect
on the quality of financial reports (McDonald: 1999, pp. 11-22; Bordeleau et al.: 2020, pp. 173-
185).

21. Patel (2015) examined the impact of accounting information systems on companies’
profitability

22. Karthikeyan. (2010), argued that those users were expecting the information was a high
quality and useful.

23. Horngren (2014) explains how accounting aids decision making, planning and controlling

24. Borhan and Bader (2018) accounting information system (AIS) was a formal system for
identifying, measuring, and etc.

25. Trofimova et al. implement the implementation of the government accounting system, and
regional management affects the internal control function (Trofimova et al.: 2019, pp. 416-424).

26. The implementation of an accounting information system can help reduce errors caused by
one's negligence and inability to prepare financial reports (Bell et al.: 2018; Altamuro & Beatty:
2010, pp. 58-74).

27. The relationship between reporting quality and organizational performance has been studied
by several researchers, for example: (Biddle et al.: 2009, pp. 112-131).

28. The quality of financial reporting is closely related to company performance (Pneman &
Zhang: 2002, pp. 22-37; Richardson et al.: 2001).

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 SAINT MARY’S UNIVERSITY
SCHOOL OF GRADUATE STUDIES DEPARTMENT OF ACCOUNTING
AND FINANCE

Respondents!
Dear Respondents I am Completing MBA in Accounting and Finance from Saint Mary
University. So I am conducting academic research entitled Accounting Information system practice
and its impact on accounting and audit reporting quality in the case of Awash Insurance Company
S.C. however, I prepare this questionnaire to collect your valuable information’s. I am kindly
inform you that the objective of this questionnaire is to collect relevant information’s only. Your
response has great for the effectiveness and efficiency of this research. The neatness and reality
of your response is very crucial for validity of this research. Your response will be kept in
confidential. Therefore your honesty is both critical and vital. When you respond to the
questionnaire please put tick (√) at appropriate of your response and no need of writing your
name. Finally I would like to thank you in advance for your response and cooperation.

Part I. General Questions (Respondents Profile)

1. Personal Gender:- Male □ Female □

2. Age of the respondents:- 20- 25 □ 26-32 □ 33- 38 □ 39-44□ above 45 □
3. Length of experience in year 0- 2 □ 3-5 □ 6-10 □ 11-15 □ above 16 □
4. Your position in Insurance:- Junior Accountant □ Senior Accountant □ Manger □
Auditor □ Underwriter □ Cashier □ Other □
5. Educational Status: Diploma □ First Degree □
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 Masters □ above Masters □
Part II:-Research Question

1. Is there AIS practice in Awash Insurance Company? Yes □ No □

2. Did AIS play role for financial reporting quality? Yes □ No □
3. Did AIS have a role in internal audit report quality? Yes □ No □
4. The role of AIS for management is for decision making and controlling financial data?

Yes □ No □
5. The role of IT department for AIS practices is to control the asses of necessary data? Yes

□No □
6. Did you get and necessary training on AIS? Yes □ No □
7. Do you familiar with new technologies such as ERP, GIIS? Yes □ No □
8. Do you think financial reports generated by auditors are consistent? Yes □ No □
Part III:- Would you please indicate your agreement or disagreement by putting (√) mark in
the space provided under the five-scale rating questions from 1 to 5 .Where:- 5 = Strongly Agree
(SA) 4=Agree (A) 3 =Neutral (N) 2 =Disagree (DA) 1= Strongly Disagree (SDA)
No Statement of the questionnaire SA(5) A(4) N(3) DA(2) SDA(1)
1 the accounting information system contributes to construct its
information outputs more capable for understanding by decision
makers or stakeholder
2 Internal auditor gives valuable comments by understanding the
AIS of the company.
3 AIS are integrated with other management information systems
and helps them to control frauds occurred.
4 AIS contribute to the reliability of financial reporting.
5 AIS encourage efficient and effective use of resources and

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 operations based on the policy of the company
6 AIS improve controls by limiting access to company data
7 AIS comprise detective controls, which are designed to identify
errors or irregularities after they have occurred
9 There is knowledge and skills gap on transaction posting ledger
on AIS for specific accounting
10 How do you rate your AIS towards organizational effectiveness
11 The AIS system is reliable
12 It is easily understandable

13 The system is fast and flexible

14 IT team provide adequate support for the use of AIS
15 IT department has technically competent employees to support
AIS
16 IT departments is responsive and reliable on accessibility of AIS
17 Staff utilizes the full capabilities of the companies AIS practice
Part IV:-Lists and Discussions
1. Explain shortcomings you come across in the AIS you exercise?
________________________________________________________________________
_______________________________________________________________________.
2. What clarification needed from internal auditor to develop and verify AIS generated
report is clear and accurate?
________________________________________________________________________
_______________________________________________________________________.
3. Please discuss if there is AIS report gap between the audit report prepared by external
auditor and system generated report

______________________________________________________________________________
_________________________________________________________________________.

Mr. Rabira Muzeyen Phone Number: +251 9 20 11 70 58 E-mail:-rebiralovely@gmail.com

THANK YOU FOR YOUR CORPORATION!

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