THE IMPACT OF COMPUTER ON AUDITING AND ACCOUNTING SYSTEM IN A DEVELOPING ECONOMY
1.1 GENERAL INTRODUCTION TO THE STUDY
According is the art of measuring, communicating and interpreting financial activity. Every body woks with accounting concepts and information in their daily activities, whether preparing a household budge, balancing Cheque book, preparing income tax return or running on association. According to the Accounting Technology Bulletin Accounting is the art of recording, classifying and Summarizing in terms of money transactions and event which are in parts, at least of a financial character and interpreting the result thereof.
Okpe (1998:107) defined Accounting (Book-Keeping) as the art of recording business transaction in a methodical order, so that the financial position of a business can be clearly shown at all times. hence, it involves collection, recording, evaluating and communication of economic events, quantified in monetary terms. The activity is carried out on different level throughout life. Therefore adequate record keeping system helps to increase the chance of survival and reduces the probability of easy failure in a business and increase the chances of earning desirable profit.
Carbutt (1975:66) Financial Accounting defines accounting as :a discipline concerned with the recording, analysis and forecasting of income and wealth of business and other entities”. Also Accounting has often been called the language of business”. Since a language is a means of social communication, it is logical that a language should change or reflect changes in our envirioment, out life style and social communication in which changes in and improvements are continually being more in order to communicate business information more efficiently. That is as society has become increasingly interested in measuring the profitability of business organisation, accounting concepts and techniques here been changing to make such measurements more meaningful and more reliable.
The major underlying purpose of Accounting is to provide financial information about an economic entity”. In order to provide useful financial information about a business enterprises, ther are needs of keeping track of the daily business activities. The methods used by a business to keep records of its financial activities and to summarize these activities in periodic accounting report comprises the accounting system.
The basic function of an Accounting system is to create a systematic record of the every day business activity in terms of monery. The recording of a transaction may be performed in many ways
- By punching holes or making magnetic impressions on cards tapes.
- By printing with mechanical/electric equipment.
- By writing with pen/pencil
Transactions are classified into related groups. Classification enables and makes a mass of detailed activities to be deduced into useful form”. To organize Accounting information in a useful form, there is need to summarizes the classified information into accounting reports designed to meet the information needs of decision makers. The above described three steeps-recordings, classifying and summarizing are means of creating accounting information. “Accounting information is user-oriented”. The persons receiving accounting reports are called the users fo accounting information. Since the information needs of various users differs, it follows that the accounting system of a business entity must be able to provide various types of accounting reports. The information in these reports must be presented in accordance with certain “ground rules” and assumptions, so that users of the report will be able to interpret the information properly.
Published financial statement have meaning to users of accounting information in so far as an independent audit has give on unqualified report on it. To perform this, the auditor makes a careful study of the accounting system and gathers evidence both from within the business and from outside sources. This evidence enables the independent audit to express his professional opining as to the fairness and reliability of the financial report. Since auditing complements accounting the quality of the information deduced from the accounting procedural methods is being checked from time to time by Auditing. Audition is an independent examination of books of accounts and source documents of business to enable the auditor satisfy himself whether the accounts so prepared exhibit a true and fair view of the financial position of the entity accounting to the best of the information and explanations of which he can avail himself and whether such statement conforms to the necessary legal provisions.
1.2 THE BACKGROUND OF THE STUDY
No single development within the past few decades has had a greater effect on accounting business system than the advent of electronic data processing (EDP) system”. Accounting have always been concerned with the problems associated with the processing of accounting data and from their training and experience they are able to effectively handle these problems. This art of processing accounting and other business data were before the advancement in date processing technology carried out manually and latter the help of accounting machines.
Development in computer technology are changing the art and science of book-keeping and accounting practice of modern business world. Compter is now taking over the traditional functions of accountants, like calculation and data processing within business enterprises while certain aspects such as data capture: accuracy and control remain as accountant responsibilities. To accept this responsibility, accountants must have working knowledge of computer operation. He needs design or be involved in the systems design, systems implementation and systems review and maintenance. In order to be able to function effectively, the new generation of accountants and techniques of data processing in a computer based on accounting environment”. C. S. Olah said “the accountants need not be a computer expert, but he must be computer literate in order to monitor the work flow and appreciate the impact of computer on his activities”. If the accountant is an auditor, he should be able to understand, evaluate and test those aspect of computer through the system. “His understanding of the system will include ability to validate data held on computer”. This ability on the part of an auditor is necessary because conventional manual audit techniques and auditing “round” the computer may be satisfactory in small system in which data are low. This approach may be unsatisfactory in complex integrated computerized system. Whether or not accountants and auditors are receptive to changes in conventional methods of accounting of practice will lead to the consideration problem statement.
1.3 STATEMENT OF THE PROBLEM
It is said that one of the fundamental benefits of computers is that they help speed up the decision making process. Computer are important tools for planning and accuracy is then watchword. But this is in so far as they are fed with right data. Computer being an obedient servant, does whatever it is instructed to do obediently for as the computer saying goes “garbage in garbage out” (GIGO). It is one of accountants responsibilities to make sure that data submitted for decision making process is adequate and timely as well as accurate.
But has the introduction of computer really made accounting job become easier and quicker to perform? What is a computer? How does it relate to the accountant and his work? what is the role of the accountant in paripassue with the technological improvement in EDP sytem? Is the accountants traditional role as book-keeper and reporter threatened by the expansion of clerical automation, if yes, what then for management decision making reduced due to effective use of computer system? Has computer operations effectively beeb utilized in an organisation by accountants? Has computer really reduced or added to the workload of an accountant works? These and other questions constitute the problems that this study has set out to address.
1.4 PURPOSE OF THE STUDY
It is the aim of this research to examine and recommend solution where possible to the following problems.
- What are the responses of accountants in this country to the challenge posed by introduction of computers in accounting system?
- What are the problems encountered in the process to a computer based accounting?
- What are differences in terms of efficiency between the manual and the computerized accounting system.
- To identify the problems that is being encountered when using computer in the accounts department.
- To appreciate the problems encountered by auditors when auditing in a computerized environment.
- What type of computer is relevant for accounting.
1.5 SIGNIFICANCE OF THE STUDY
“Modern society is become increasingly dependent on a machine called the computer”. This is because modern organisations are becoming more complex thus generating volumes of procedure often beyond the capabilities of manual techniques. For how long this dependence will last is not known but judging from the cpuputer itself is fast becoming the industry of the future. The point made here is that the future of all human endeavours will be tied to this machine. As a result of the increasing application of computer in the accounting profession, there is need for accountants to franchasise them the uses and the operations of computer age.
Accountants must be able advice their client or employer on the use of computer, because of this an accountant must have a good knowledge of computer and its operation. The research is significant because it examines how accountants are taking challenges posed to thme by introduction of computers.
The study will also help readers of this project to have useful idea of computerized accounting system and recommend areas for further research in field of computer as related to accountancy. Most especially the problems of computerized accounting system to the accountants and auditors shall be highlighted.
1.6 SCOPE OF THE STUDY
The scope of this study shall be limited to two specialized areas of accounting; financial accounting and auditing. Although there are other areas of accountancy such as management accounting, Financial management and taxation on which the computer has some impact; the impact felt in areas of financial accounting and auditing. Financial accounting involves a lot of historical and transaction record-keeping while auditing involves the examination of these records which are kept manually or in computer system. Also the scope of this study shall be restricted to only one type of computer which is the digital computer.
1.7 STATEMENT OF HYPOTHESIS
Hypothesis refers to the prediction of a research and this is done in advance before the researcher goes out to collect the data which may or may not support the educated guess(hypothesis) the research hypothesis which are subject to test and changes as follows:
(H0): There is a positive correlation between the use of computers by companies and their productivity and efficiency of operations.
(H1): There is no correlation between the use of computer by companies and their productivity and efficiency of operations
(H0):The use of computer is relevant to the accounting profession.
(H1): The use of computer is not relevant to the accountancy profession.
1.8 DEFINITION OF MAJOR TECHNICAL TERMS
Some of the technical terms that would be used in the study are carefully explained below.
DATA: Is the term used to describe basic facts about the activities of a business.
DATA PROCESSING: Meaningful information by collecting all items of data together and required in information from them.
INPUT: Is data entering EDP system output is data or the information produced by an EDP system.
PROGRAMME: Is a set of instructions written in the language of the computer.
MASTER FILES: A file is either relative permanent or that is treated as authority in a particular job.
ACCESS TIME: The interval in time taken to communicate with memory of the digital computer.
ADDRESS: The means whether by names or number, used to describe the location of data in storage or memory device.
MAGNETIC STORAGE: A storage device that utilizes the magnetic properties of material to store data.
BINARY DIGIT: A digit in the binary scale of notion. It is either 0 or 1.
VALIDATION CHECKS/VALIDATION PROGRAMME/: Examination of data for correctness against certain criteria.
CONTROL CIRCUITS: These circuits in a digital computer which control the carrying out of the programme instruction in a correct sequence.
TEST PACK: A quantity of test data designed to test the accuracy of a computer programme.
MACHINE LANGUAGE: Information submitted to the computer in the code appropriate to the machine requirements.
SOFTWARE: The general description for all forms of programme instructions as opposed to the computer hardware.
APPLICATION PROGRAMME/SYSTEM: A programme or suit of programmes which processes data for a particular business function.
RETENTION PERIOD: The period of time for which data on magnetic file are to be protected from inadvertent erasure or overwriting.
CONSOLE: An electronic typewriter or visual/ display unit which is on-line to the computer and which is used by the operator to communicate with the computer.
HARDWARE: Any electronic, electric or mechanical equipment in EDP installation.
CONSOLE-LOG: A record of message and instructions to and from the operator which is printed directly on the console typewriter.