my topic is:how important is technology to the running of and effective accounting practice?how can it improve the business performances of a company?
The Effect of Information Technology on Accounting System's Conformity with Business Environment: A Case Study In Banking Sector Company Procedia Economics and Finance 32 ( 2015 ) 1707 – 1712 Available online at www.sciencedirect.com 2212-5671 © 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Selection and peer-review under responsibility of Asociatia Grupul Roman de Cercetari in Finante Corporatiste doi: 10.1016/S2212-5671(15)01476-8 ScienceDirect 1 The Effect of Information Technology on Accounting System’s Conformity with Business Environment: A Case Study In Banking Sector Company Lina Klovienėa,1, Edita Gimzauskieneb aKaunas University of Technology,Gedimino st.50, Kaunas 44239, Lithuania bKaunas University of Technology,Gedimino st.50, Kaunas 44239, Lithuania Abstract The purpose is to present a case study demonstrating the role of information technology (IT) in conformity between accounting system and business environment. The design of the study is based on literature review and case study. Using a case study approach this paper provides empirical evidence offering a more effective accounting system and its continual improvements for organizations operating in different business environment. The study found that a more effective use of accounting system could be ensured by identifying an external environment of an organization and its reaction as internal environment. This paper highlights the differences between the use of accounting system in static/dynamic external environment and simplistic/absorption internal reaction of an organization. The study adds to the existing literature by undertaking a relatively holistic view of the IT that influence an effective use of accounting system, which may form a starting point for effective decision making process. Keywords: accounting system, information technology, business environment, conformity Introduction Changing requirements of information for modern managers have stimulated a development of measures and methods which promote progress and inform the perspectives and opportunities for current and future performance. Rapid change in present business environment conditions requires agility, flexibility and innovation. Processes of adaptation and reaction to the business environment could be ensured by a fast decision making process, timely information and suitable data flow. According to this, business environment became progressively more turbulent, through more rapid and unpredictable changes, greater diversity, increased complexity, and intensified competitive pressures. Today, organizations are confronting unprecedented radical changes to which they must adapt to survive and prosper. Given the increasing challenges in the competitive environment successful organizations have to constantly adapt to changing conditions. Adaptation and reaction process could be ensured by fast decision making process, useful information and suitable data flow. According to this aspect organizations try to find new methods, alternatives and systems in order to get more useful, actual and timely information in very fast changing environment (Kloviene and Gimzauskiene, 2014). Changing and exclusive requirements of information have stimulated development of accounting methods, functions and applications (Khazanchi, 2005; Khatri, 2006). However, current accounting system has been challenged by major changes in the environment (Sulaiman, Ramli and Mitchell, 2008) and by the rapid development of an information technology (Andersen, 2005). On the other hand, it is important to notice that the purposeful and reasonable usage of accounting system and its information influence the opportunity to choose an appropriate structure and features of an accounting system. Notwithstanding the fact that different aspects of accounting system are widely analyzed in scientific literature, the conformity between accounting system and the environment of an organization is not as broadly analyzed. It is difficult to use the accounting system effectively if organizations are not able to identify the IT instruments which allow to estimate and support decision making process. Gradually, the accounting system could become software and instruction for its usage only and organizations will be forced to look for new opportunities and resources thereby ensuring their fast reaction, decision making, and adequate performance. To fill this gap, this paper seeks to answer the following research question: what is the role of information technology on the conformity between accounting system and business environment? In order to investigate the above research question, we should better understand the gap between the theory and practice in accounting system, and the characteristics of the business environment which may influence this gap. To summarize, the main aim of the research is to present a case study demonstrating the IT role in conformity between accounting system and business environment. The paper reveals the conformity of the accounting system with the business environment which is based on the analysis of different theories. New insights for conformity identification are presented as well. * Corresponding author. Tel.: +37064010863. E-mail address:
[email protected] http://crossmark.crossref.org/dialog/?doi=10.1016/S2212-5671(15)01476-8&domain=pdf http://crossmark.crossref.org/dialog/?doi=10.1016/S2212-5671(15)01476-8&domain=pdf 1708 Lina Klovienė and Edita Gimzauskiene / Procedia Economics and Finance 32 ( 2015 ) 1707 – 1712 2 Theoretical background. According to the open systems theory, an organization interacts with, adapts to and seeks to control its environment in order to survive (Fowler, 2009). In our day and age, we can see that environment pressures have an impact on the behavior of all organizations looking from the decision making, process points of views. All these pressures have created a much more competitive environment for the business world. Making high-quality and timely decisions depends in part on the quality of the data and the existence of on-line and real-time information. In very fast changing times organizations are actively looking for methods to improve the efficiency and profitability of their performance (Kloviene and Gimzauskiene, 2014). Information technologies are used to facilitate their business transactions (Rezaee et al., 2000), the process of decision making for organizations (Gatautis and Vitkauskaite, 2009; Melnikas, 2008; Zavadskas, et al, 2010). The information technology function is responsible for designing, implementing and maintaining many of controls over an organization’s business processes (Cannon and Crowe, 2004; Abu-Musa, 2008; Consoli, 2010 a, b). It could be stated that IT has impact on all business processes and accounting is not an exception (Saban and Efeoglu, 2012). Accounting system is very important with its purpose and functions in organization - collection and recording of data and information regarding events that have an economic impact upon organizations and the maintenance, processing and communication of information to internal and external stakeholders (Christauskas and Martinkus, 2004; Jovarauskiene and Pilinkiene, 2009; Girdzijauskas, et al, 2008; Kundeliene, 2011), providing the financial information for decision making within the organization (Salehi, Rostami and Mogadam, 2010). Hence, accounting procedures have changed when most information exists only in electronic form and different methods were developed. Hyvönen (2003) determined that ERP systems increase the use of advanced managerial accounting techniques, such as ABC and Balanced Scorecard. Saban and Efeoglu (2012) stated that the ERP system causes a change in managerial accounting practices, in terms of providing global information flow and standardization, and that conventional managerial accounting procedures are eliminated after ERP (Caglio, 2003; Jack and Kholeif, 2008; Yeh, Lee and Pai, 2012; Saban and Efeoglu, 2012). Information technology systems cause a change in issues of budgeting and reporting, which are among the managerial accounting applications, and enable the increasing use of advanced managerial accounting techniques (Yeh, Lee and Pai, 2012; Saban and Efeoglu, 2012). According to this aspects could be stated that information technology have changed the roles of accountants in business from information collection, preparation, analysis to the part in the functions of control, interpretation, assessment and decision-making (Yeh, Lee and Pai, 2012; Saban and Efeoglu, 2012; Kloviene and Gimzauskiene, 2014). On the other hand, as information technologies are quickly developing, the accounting systems often do not support the business properly (Christauskas and Miseviciene, 2012) influencing the need to analyze accounting system compatibility with business environment. Theoretical framework. It is difficult to use accounting system effectively, if organizations could not identify the instrumentation which allows estimate an aspect of conformity between all its performance measurement system including accounting system and business environment of organization. Gradually performance measurement system could become a software and instruction for its usage only and organizations constrained to search for a new opportunities and resource for a fast reaction, decision making and adequate performance. According to this aspect the conformity between accounting system and environment of organization was selected for further research, striving to summarize research results of other this field scholars and develop theoretical assumption for further IT usage then unconformity between accounting system and environment of organization is identified. As contingency theory postulates (Gul and Chia, 1994; Chong and Chong, 1997; Garengo and Bititci, 2007; Wickramasinghe and Alawattage, 2007) that different organizations perform in different ways in the same environmental circumstances and provides a methodology for recognition of an external environment of organization and its influence on accounting system. According to this aspect, uncertainty level of external environment could be used for a state identification of external environment. According to limitations of contingency theory, an integration of two theories could be proposed choosing complexity theory, which could help to disclose reaction of organization to environment and its influence on accounting system (Rayburn G. and Rayburn M., 1991; Miller, 1993; Anderson, 1999; Boisot and Child, 1999; Church, 1999; Ashmos, Duchon and McDaniel, 2000; Goulielmos, 2005). Such a reaction could be used to recognize the state of an internal environment of organization. Analyses made let to state, that external environment of organization assumes static or dynamic state to which reaction of organization assumes simplicity or absorption. According to this, external environment of organization could be as x axis in system of axes and reaction to it – internal environment of organization – y axis. According to these two axes the peculiarities of accounting system in different business environment could be disclosed. Accounting system could be analyzed as a set of instrumentations – measures and processes, which information is used for a decision making process. According to this aspect, an accounting system is disclosed as having three variables – process, measures and decision level in different business environment. Information technology