1.1 Introduction
Computerized accounting systems are technologies that are utilized to enhance the control and communication inside businesses. Accounting data helps with cost control, planning, and profit margin determination. The management accountant's job in an organization is to ensure that the organization maintains accurate records and creates appropriate financial policies. Additionally, management accountants must stay current on advancements in computer technology and system architecture.
Many specialized reports are provided by accountants to management and decision-makers. Compiling projected and historical data is necessary for this function. An effective, efficient, and continuous flow of data from the point of transaction through the many phases of data processing to the final stage, which results in a report, is made possible by the financial accounting information system.
This chapter will address the background information that motivated this study, the challenges that prompted it, its aim, and its objectives as a preface to subsequent sections of the study. Additional factors include the study's significance, scope, limitations, research questions and hypotheses, and the definition of technical terms.
1.2 Background of Study
In ancient days, it was difficult to calculate, safeguard or keep records people were using toes and fingers in counting unite. As information technologies grow more progressive, the manual accounting systems have become gradually inadequate for decision needs. Consequently, computerized accounting systems are viewed by both public and private sector companies in developed and developing nations as an Aid to Efficient Management of an Organisation, providing efficient and effective information flow throughout the collection, processing, and interpretation of financial data. An effective and efficient information flow enhances management decision-making and increases the firm's ability to accomplish corporate and business plan objectives. This might thereby increase the company's chances of enduring (Platt and Platt, 2012).
Accounting history began when individuals discovered how to keep track of their actions. Early scribes left their markings on stone and wax tables; this method of recording information was developed to satisfy the necessity for collection, processing, and preservation. Early company records only had a list of people's names; subsequent records started to include information on venture income and expenses, as well as concerns about profit and losses.
According to Fadzil et al. (2005), the first operational commercial computer was introduced several decades ago, marking the beginning of the growth of information technology in accounting and auditing. Computerized accounting methods are used by several public and commercial organizations, regardless of size. It is also said that careful examination of the controls in a high-tech environment, as well as their impact on the auditor's risk assessment and the ensuing internal audit methodologies, is necessary (Fadzil et al., 2005).
Internal auditing that is based on risk primarily originates from models that acknowledge that inherent risk which is the possibility of a significant misrepresentation in business financial reports resulting from an error or omission caused by circumstances other than a control failure and control risk which is the possibility of a significant misstatement in financial statements resulting from a lack of or an inability to implement adequate controls are two distinct models. Inherent risk arises from audit environment elements that are completely independent of characteristics that regulate the degree of control risk. It has been difficult to operationalise the difference between control risk and inherent risk. Regarding factors that could identify inherent hazards, there appears to be some consensus, and there is some indication that experts take inherent risk into consideration. Additionally, the method prescribed by standard setters to segregate and is not obvious at this time and does not make much rational sense (DeZoort et al., 2002).
Few local studies have examined the effects of risk-based internal auditing on county governments' computerized accounting systems; those that do exist mostly concentrate on the relationship between auditing and governance (Maiteka, 2010). As a value component of the organization, the Risk Based Internal Auditing role in Nigeria, particularly in government departments, state-owned agencies, and county governments, faces a perception and, to some extent, an integrity problem indicating that internal audit in public organizations has not sufficiently implemented its functions as anticipated in financial management due to an increase in the number of financial losses incurred by the public.
Accounting was formerly a manual procedure that processed financial transactions using paper, books, and other papers to gather corporate information. However, in more recent times, accounting has been computerized, meaning that financial transactions are now processed by computers. The sector of company operations has seen significant changes due to advancements in information communication technology (ICT) and accounting software. It has been demonstrated that, in comparison to a manual accounting system, an automated accounting system offers a number of benefits, including speed, precision, and dependability of financial information (Osmond, 2011).
Weber (2011) states that a computerized accounting system (CAS) uses computers to process accounting data into information to facilitate quick decision making through timely preparation of financial reports. Financial reporting in this context refers to the manner in which financial information is recorded, processed, and communicated to the end users of this information specifically. Prior to the introduction of Information Communication Technology into accounting, these bookkeeping procedures were carried out manually. However, a growing number of certified public accountants and data entry clerks increasingly opt to record, report, and evaluate their company's financial data using accounting software. Financial reports are created using this data that is gathered from transactions (Weber, 2011).
Therefore, in Nigeria Manufacturing Industry where the research was carried out, the activities that was conducted is to know the Impact of Computerized Accounting Systems on Risk Based Internal Auditing.
1.3 Statement of Problems
Investigation revealed that there has been an issue with manually run accounting services, which results in lost time for any accounting activities. Additionally, consumers are deterred from utilizing these services due to inefficient administration. Inadequate accounting data compromises the efficacy of administration, rendering managers of commercial enterprises in Nigeria administratively malnourished. This has led to the disturbed condition that many organizations are currently experiencing. To thrive in the knowledge society, many organizations must learn how to manage their intellectual assets, or knowledge.
Furthermore, the arrival of computer services has brought out a host of new issues, ranging from the kind of installation to hiring staff with the necessary skills to run them, as well as the price of software packages and installation and maintenance.
1.4 Aim and Objectives of Study
The aim of the study is to examine the Impact of Computerized Accounting Systems on Risk Based Internal Auditing in Nigeria Manufacturing Industry. In achieving this aim, the following specific objectives were laid out as follows:
- To determine the relationship between the application of the manual accounting system and the computerized accounting system on risk based internal auditing;
- To evaluate the consequence of high-tech accounting systems on risk based internal audit in Nigeria Manufacturing Industry;
- To examine the impact of using computer to keep accounting records in Nigeria Manufacturing Industry; and
- To ascertain whether the effect of computerized accounting system enhances higher turnover profitability in study area.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- What is the relationship between the application of the manual accounting system and the computerized accounting system on risk based internal auditing?
- What is the consequence of high-tech accounting systems on risk based internal audit in Nigeria Manufacturing Industry?
- What is the impact of using computer to keep accounting records in Nigeria Manufacturing Industry?
- What is the effect of computerized accounting system enhances higher turnover profitability in study area?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: There is no significant relationship between the application of the manual accounting system and the computerized accounting system on risk based internal auditing
- H1: There is significant relationship between the application of the manual accounting system and the computerized accounting system on risk based internal auditing
Hypothesis Two
- H0: There is no significant consequence of high-tech accounting systems on risk based internal audit in Nigeria Manufacturing Industry
- H1: There is significant consequence of high-tech accounting systems on risk based internal audit in Nigeria Manufacturing Industry
1.7 Significance of Study
The findings of this research provides significance for policymakers as it will eventually shed light on how advanced accounting systems may be used for audit risk management, therefore enhancing corporate governance and improving the financial performance of county governments.
Additionally, Chief Executives and Management have recognized the value of computerization for risk-based internal audit and have helped them rate their compliance level in comparison to other counties and assess whether audit risk management is impacted by computerized accounting systems in terms of enhancing financial performance.
Furthermore, the study will offer a valuable foundation for future research on risk-based internal auditing in connection with county governments' computerized accounting systems. The academic literature on information technology auditing in Nigeria, where little is known about its implementation and organisation, will be impacted by this research.
Finally, the research findings will offer valuable perspectives to developing nations that compare favourably with Nigeria about the obstacles encountered in implementing Risk Based Internal Auditing within a computerized setting. These perspectives will enable the development of prompt and suitable risk mitigation measures.
1.8 Scope of Study
The scope of the research is focused on the Impact of Computerized Accounting Systems on Risk Based Internal Auditing in Nigeria Manufacturing Industry.
1.9 Limitations of the Study
During the course of this study, there were some problems encountered which stood as limitations to the research work. Some of the limitations include:
- Time Constraint:
The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Establishment Policies:
Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this research work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
- Financial Constraint:
Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
- Initial Cooperation Delay from Respondents:
A particular limitation of this work came as a result of the respondent refusal to offer their cooperation at the initial time they were contacted. This contributed in making the success of this research study difficult.
1.10 Assumption of the Study
The computerized accounting system of an organization stem of the fact that records are used in preparing annual financial statement which are used by the management to know the end of each period. It is therefore essential that computerized of accounting information in a trim helps to ascertain the reliability accountability efficiency and effectiveness of accounting information.
1.11 Definition of Terms
Accounting:
The activity, practice, or profession of maintaining the business records of a person or organization and preparing forms and reports for tax or other financial purposes
Efficiency:
The ability to do something well or achieve a desired result without wasted energy or effort.
Information:
Definite knowledge acquired or supplied about something or somebody.
Organization:
It is a group of people identified by a shared interest or purpose, e.g. a business.
Accounting Information:
It is the collection, storage and processing of financial and accounting data that is used by decision makers.
Computerized Accounting information:
A computer based method for tracking accounting activity in conjunction with information technology resources.
