KUMPULAN JURNAL

INTERNASIONAL SISTEM INFORMASI

AKUNTANSI

Oleh
FITRI SURYANI
1 40420160

PROGRAM STUDI AKUNTANSI

UNIVERSITAS MALIKUSSALEH
LHOKSEUMAWE
2016
DLSU ISSN (Print): 2345-8216 | ISSN (Online): 2350-6814

BUSINESS
NOTES AND BRIEFINGS
Volume 3 | Number 3 May 2015

Accounting information systems

for mSME survivability
Introduction

According to the International Finance Corporation (2012), small and

medium enterprises (SMEs) represent a substantial percentage of
businesses globally (about 90%). Moreover, they are directly
responsible for more than half of employment worldwide. As such,
governments and economists consider the SME sector to be a key
factor in national growth (Pollard & Hayne, 1998). In the Philippines,
micro, small and medium enterprises (MSMEs) already account for
almost all (99.6%) of the businesses in the country (Department of
Trade and Industry, 2011). Furthermore, it provides employment to
63% of the Philippine labor force.

Micro, small and medium enterprises

MSMEs are defined as any business enterprise with an asset size, excluding
land, of no more than P100,000,000 and employing less than 200
Written by: employees (Senate of the Philippines, 2012).
ALGER TANG MSMEs are crucial in the economic development of a country as well as in
Accountancy Department
the overall improvement of the standard quality of life for a vast amount of
De La Salle University
These businesses are responsible for an estimated 35.7% of the countrys
output (Senate of the Philippines, 2012). Moreover, the Asian Development
Bank (ADB) indicated that 50% of innovations were actually attributable to
smaller and newer firms. Smaller firms can facilitate development of
entrepreneurial skills and innovations as well as develop contemporary
products and provide additional supply of ideas, skills and innovations
(DTI, n.d.).

According to the DTI, MSMEs play a huge role in economic development

of the country, especially in more rural areas and in the dispersion of new
industries. With the importance of MSMEs in the economy, it is very
important for society to protect these small firms. One way of protecting
 the welfare of the MSMEs is through research.
Competitive advantages can be generated by a
number of ways. According to the theory of dynamic
capabilities (Teece et al. 1994; Banker et al. 2006),
leveraging on information technology such as
Accounting Information System (AIS) can help a
company develop unique, change-oriented
capabilities. AIS investment is particularly important
for MSMEs in order to be able to obtain the
necessary information required to handle a higher
degree of uncertainty in the competitive market (El
Louadi, as cited in Grande et al. 2011).
Benefits of AIS adoption
In theory, AIS adoption can improve the firm-level
performance of a business. Increased competition in
the market due to globalization and technological
innovations created the need for companies to invest
in different accounting information systems (such as
ERP) in order to meet changing needs of the business
as well as improve on current operations. Grande et
al. (2011) noted that the key benefits for SMEs in
using AIS are: better adaptive capability to changing
conditions, better management of transactions, and a
higher degree of competitiveness.
A positive effect of AIS on performance was
supported by Hamilton & Asundi (2008) who found
that IT adoption resulted to an increase in sales and
inventory turnover after three to six years. This
supported the findings of Devaraj and Kohli (2003)
that there is a positive link between IT usage and
spending of firm-level performance. However, it is
worthy to note that it would take several years for
firms to realize the benefits from adoption of AIS
(Wah, 2000). Moreover, one cannot simply rely
heavily on AIS. As indicated by Akkermans et al.
(2003), AIS (e.g. ERP systems) can still be
insufficient and has several shortcomings that the
company must be able to address. This shows that the
adoption of AIS is not an end in itself but rather, only
part of the means to achieve business objectives. It
can be considered as a subsystem that is heavily
dependent on other subsystems of the business in
achieving the main goals of the company.
However, not all studies focused on the end result of
2 DLSU Business Notes and Briefings
a business (i. e., profit). Sajady et. al. (2008) focused
more on the enhancement of capabilities or
facilitation of processes of the business. In their
study, they found that AIS improved overall
decision-making as well as internal control
mechanisms of the business. Moreover, financial
transaction processes were better facilitated through
the use of AIS. IT can also improve businesses in
terms maintaining and improving their competitive
advantage, as well as, reduction cycle time and
improve collaboration between members of the value
chain (Gunasekaran & Ngai, 2004). Gunasekaran &
Ngai (2004) also noted that IT facilitates the
establishment and development of virtual enterprises
which significantly improved information sharing
between members of a virtual enterprise. Focus on
enhancement of capabilities instead of performance
was further supported by Banker, et al. (2006)
wherein they found that information systems allowed
companies to improve on their firm-level
performance, in terms of quality, efficiency and time-
to-market, through the mediation of firm capabilities.
Challenges for AIS adoption
MSMEs face a huge challenge in adopting or
implementing AIS in their businesses. Despite the
myriad benefits indicated by past researches on IT
and AIS implementation on the business
performance, most MSMEs are unable to take
advantage of this opportunity. Edison et al. (2012)
stated that the AIS adoption among SMEs is low. De
Guinea et al. (2005) noted that this may be
attributable to resource poverty. They noted that IT
and AIS require a large investment, which most
MSMEs do not access to or are not willing to commit
a large proportion of their capital to. According to the
Philippine Institute for Development Studies (PIDS)
(as cited in Lopez, 2014), MSMEs have poor access
to technology mainly because of deprived access to
various sources of finance and capital. PIDS further
noted that higher interest rates, lack of acceptable
collateral and a short repayment period offered by
various financial institutions make it extremely
difficult for MSMEs to tap into the benefits of AIS
(as cited in Lopez, 2014). Moreover, the benefits that
can be derived from IT and AIS would take several
years before materializing (Wah, 2000). By
constraining resources into IT and AIS, working
 capital management of an MSME would become
extremely difficult. Wang (2004) further asserts that
the low adoption rate may be due to the business-
specific reasons such as weak technological
capability, poor credit reputation as well as market-
oriented reasons such as low development and
economic backwardness.
Some authors note that the main reasons for non-
adoption of AIS is not focused on firm-specific and
market-oriented factors but rather on a psychological
level (Edison et al., 2012; Davis, 1989; Legris et al.,
2003). Perception of different users (e.g. perceived
usefulness and perceived ease of use) plays an
important role in determining whether MSMEs adopt
AIS (Davis, 1989). Legris et al. (2003) indicated that
the Technology Acceptance Model (TAM) should be
integrated to a new model which considers both
human and social change processes.
Most small business owners have a particularly
difficult time in determining whether or not to invest
in AIS because of the various uncertainties that they
have with technology (Rogers, 2003). Small
businesses have the tendency to be risk-averse
because they simply do not have enough excess
finances to support them if the risky investment fails.
As noted by Wah (2000), the act of AIS adoption is
not simply an IT change, but rather a business
change. Therefore, Gibson et al. (2000) indicated that
a strong managerial support as well as strategic
competencies is required in order to achieve the best
fitting system for the business. However, Edison et
al. (2012) noted that both factors indicated by Gibson
et al. (2000) were not found in most MSMEs.
Where to go from here
Despite success in the prior years, small business
owners cannot simply rely on their legacy systems
and dinosaur processes to help them survive in the
future. The business landscape is changing at a faster
rate than ever. Increasing globalization, as evidenced
by the looming integration of the members of the
Association of Southeast Asian Nations (ASEAN),
created a bigger need for small businesses to be more
competitive. As indicated earlier, leveraging on IT
and AIS may provide the competitive advantage
these entities need in order to face the increasingly
competitive business environment. However, the
DLSU Business Notes and Briefings
challenges must first be addressed before a
widespread adoption will occur.
In order to address the challenges in adopting AIS,
the government, together with suppliers of AIS,
should be able to create awareness of the different
types of AIS that MSMEs can adopt through
conducting seminars and providing publications. This
will help MSME owners become aware of the
different benefits of AIS, improve their acceptance of
the various innovations in information systems and
have an idea on which AIS will work best for their
respective firms. Existing users of AIS can also
provide their feedback on how AIS affected their
businesses in order to decrease psychological
resistance of non-users. Owners of MSMEs can also
apply the framework of Kapurubandara (2009)
allowing them to identify the requirements in
gradually adopting AIS.
To address the lack of resources of MSMEs, financial
institutions can create and offer better packages to
these MSMEs in order to address the high interest
rates and short repayment periods. Furthermore, the
government can provide subsidies for investing in
AIS. Aldaba (2011) suggested several ways to
improve MSME access to increased finances. She
suggested the implementation of a central credit
system to reduce dependence on secure credit
facitilities, development of a non-traditional
approach by banks to MSME lending as well as
improving the financial literacy of owners. Suppliers
of AIS can also produce AIS that is tailored to the
needs of MSMEs which is cheaper than the AIS
packages used by larger players. Finally, members of
the academe can further research on the topic of
competitiveness and IT of MSMEs.
References
Akkermans, H. B. (2009). The Impact of ERP on a Supply
Chain Management: Exploratory Findings from a
European Delphi Study. European Journal of
Operational Research , 146, 284-301.
Aldaba, R. M. (2012). Small and Medium Enterprises'
(SMEs) Access to Finance: Philippines. Philippine
Institute for Development Studies (No. DP 2012-05).
Banker, R. D., Bardhan, I. R., & Chang, H. (2006). Plant
Information Systems, Manufacturing Capabilities and
Plant Performance. MIS Quarterly , 30 (2), 315-337.
Davis, F. D. (1989). Perceived Usefulness, Perceived Ease
3
 of Use, and User Acceptance of Information
Technology. MIS Quarterly , 13 (3), 319-340.
de Guinea, A. O., Kelley, H., & Hunter, M. G. (2005).
Information Systems Effectiveness in Small
Businesses: Extending a Singaporean Model in
Canada. Journal of Global Information Management ,
13 (3), 55-70.
Department of Trade and Industry. (2011). Micro, Small
and Medium Enterprises. Retrieved February 24,
2014, from Department of Trade and Industry Web
site: http://www.dti.gov.ph/dti/index.php?p=321
Devaraj, S., & Kohli, R. (2003). Performance Impacts of
Information Technology: Is Actual Usage the Missing
Link? Management Science , 49 (3), 273-289.
Edison, G., Manuere, F., & Joseph, M. (2012). Evaluation
of Factors Influencing Adoption of Accounting
Information System By Small to Medium Enterprises
in Chinhoyi. Interdisciplinary Journal of
Contemporary Research in Business , 4 (6), 1126-
1141.
Gibson, N., Holland, C. P., & Light, B. (1999). Enterprise
Resource Planning: A Business Approach to Systems
Development. 32nd Hawaii International Conference
on System Sciences (pp. 1-9). Maui: IEEE Computer
Society Press.
Grande, E. U., Estebanez, R. P., & Colomina, C. M.
(2011). The impact of Accounting Information
Systems (AIS) on Performance Measures: Empirical
Evidence in Spanish SMEs. International Journal of
Digital Accounting Research , 11, 25-43.
Gunasekaran, A., & Ngai, E. (2004). Information Systems
in a Supply Chain Integration and Management.
European Journal of Operational Research , 159, 269-
295.
International Finance Corporation. (2012). IFC Issue Brief
/ Small and Medium Enterprises. International
Finance Corporation.
Kapurubandara, M. (2009). A framework to e-transform
SMEs in developing countries. The Electronic
Journal of Information Systems in Developing
Countries , 39.
Legris, P., Ingham, J., & Collerette, P. (2003). Why Do
People Use Information Technology? A Critical
Review of the Technology Acceptance Model.
Information and Management , 40 (3), 191-204.
Lopez, E. (2014, February 9). Priority Measures to
Address Competitiveness - PIDS. Retrieved February
25, 2014, from Manila Bulletin:
http://www.mb.com.ph/priority-measures-to-address-
competitiveness-pids/
Rogers, E. M. (2003). Diffusion of Innovations (5th Edition
ed.). New York: NY: Free Press.
Sajady, H., Dastgir, M., & Nejad, H. H. (2008). Evaluation
4 DLSU Business Notes and Briefings
of the Effectiveness of Accounting Information
Systems. International Journal of Information Science
and Technology , 6 (2), 49-59.
Senate of the Philippines. (2012, March). The MSME
Sector at a Glance. Retrieved June 2015, from Senate
of the Philippines Web Site:
http://www.senate.gov.ph/publications/AG%202012-
03%20-%20MSME.pdf
Teece, D. J., & Pisano, G. (1994). The Dynamic
Capabilities of Firms: An Introduction. Industrial and
Corporate Change , 3 (3), 537-556.
Wah, L. (2000). Give ERP a Chance. Management
Review, 89 (3), 20-24.
Wang. (2004). Determinants of the Adoption of E-
Business Technologies. Telematics and Informatics ,
22.
Published by the De La Salle University Ramon V.
del Rosario - College of Business, Center for
Business Research and Development (CBRD)
Volume 3 No.3 May 2015
EDITORIAL BOARD
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email: raymund.habaradas@dlsu.edu.ph
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email: crescane@gmail.com
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For comments and suggestions,
call (+632) 303 0869
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searchAndDevelopment
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Accounting Information System: The Need of

Modernisation
Hajera Fatima Khan
Supervisor Accounting Department, College of Business Administration, University of Hail, Hail, Kingdom of Saudi
Arabia

Abstract: The primary purpose of this paper is to present the need of accounting information system in the
modernization. This paper provides an overview of the main objective of an accounting information system (AIS),
a pre-eminently user-oriented system; it is the collection, recording of data and information regarding events that
have an economic impact upon organizations, maintenance, processing and communication of information to
internal and external stakeholders. Accounting information System has a great potential to influence business
performance. After the description of the theoretical background I state the main objectives of Accounting
Information system, its uses, importance, and role of accounting information system in modernization. The results
of the paper indicates that Accounting information systems plays an important role in our economic and social
systems especially in management decision making process by providing information to make proper and effective
decision for the success and prosperity of the business in the modern world.
Keywords: Accounting; Information system; Accounting Information system; Subsystems of Accounting Information
System; Research model of AIS.

I. INTRODUCTION OF ACCOUNTING

The purpose of accounting is to provide a means of recording, reporting, summarizing, and interpreting economic data. In
order to do this, an accounting system must be designed a system which serves the needs of users of accounting
information. Once a system has been designed, reports can be issued and decisions based upon these reports are made for
various departments. Since accounting is used by everyone in one or another form, a good understanding of accounting
principles is beneficial to all.
INTRODUCTION OF INFORMATION SYSTEM:
A computer Information System (IS) is a system composed of people and computers that processes or interprets
information. The term is also sometimes used in more restricted senses to refer to only the software used to run a
computerized database or to refer to only a computer system. More specifically, it is the study of complementary
networks of hardware and software that people and organizations use to collect, filters, and process, create and distribute
data. Every information system is designed to accomplish one or more goals or objectives. For example, an information
system may be designed to collect and process the data about employees which helps managers in preparing payroll
reports etc.

INTRODUCTION OF ACCOUNTING INFORMATION SYSTEM:

An accounting information system (AIS) is a system of collecting, storing and processing financial and accounting data
that is used by decision makers. It is generally a computer-based method for tracking accounting activities in conjunction
with information technology resources. It combines the study and practice of accounting with the design, implementation,

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and monitoring of information systems. Such systems use modern information technology resources together with
traditional accounting controls and methods to provide users the financial information necessary to manage their
organizations. The advent of the computer and the Worldwide Web technological changes has reshaped financial
management and accounting. Workstations running applications can now instantly provide standardized data entry,
inventory accounting, and financial worksheet inputs. Accounting information systems provide a great deal of information
and a real time control environment. They now change the way internal controls are implemented and the type of audit
trails that exist within a modern organization. The lack of traditional forensic evidence, such as paper and journal entries
is now replaced with a more accurate and updated form of accounting. For example, some systems allow direct journal
posting to the various ledgers and others do not. The resulting financial reports can be used internally by management or
externally by other interested parties including investors, creditors and tax authorities.

OBJECTIVES OF ACCOUNTING INFORMATION SYSTEM:

It provides accurate and timely information to a business management, internal and external users.

It makes information about the financial position and performance available while it also furnishes the information
about the changes in financial position of the enterprise.

It possesses the characteristics of reliability, relevance, understandability and comparability in order to facilitate
management indecision making process.

Thus, a well-designed and well- managed accounting information system can improve the work performance and it leads
to improve efficiency and effectiveness of a business enterprise.

USES OF ACCOUNTING INFORMATION SYSTEM:

AIS are useful for companies and businesses entities want to make the accounting process easier by utilizing a computer
program or other system that will perform payroll and other functions. These systems, commonly including accounting
software, make it easier to compile financial data for use in taxes, payroll, and other bookkeeping requirements.

Producing external reports

Supporting and fasting routine activities

Decision support

Budgeting

Financial Control

Implementing internal control

II. RESEARCH METHODOLOGY

The present study has been completed with the help of secondary data only. The data is collected from various sources
related to the subject of study which are: books, research articles, scientific journals, websites, and some accounting and
e-accounting books. The secondary data were sourced from the review of related literature basically to create a theoretical
background for the study.

OBJECTIVES OF THE STUDY:

The main purpose of this paper is to provide a conceptual view about Accounting Information System.

1. To provide a structural framework of Accounting Information System.

2. To study the role of Accounting Information System in modernisation.

3. To study and examine the major subsystems, importance and role of accounting information systems in modernisation.

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RESEARCH MODEL OF ACCOUNTING INFORMATION SYSTEM:

MAJOR SUBSYSTEMS OF ACCOUNTING INFORMATION SYSTEMS:

Transaction Processing System (TPS) that supports daily Business operations.

General Ledger System and Financial Reporting System (GLS/FRS).

The Management Reporting System (MRS).

TPS is responsible for supporting daily business operations or transactions. These transactions can be grouped together in
three transaction cycles: the revenue cycle, the expenditure cycle and the conversion cycle. The purpose of the first
information systems was to automate business processes, which shows that the accounting domain was one of the very
first to use information systems to support its activities .Indeed the Era of computer accounting launched with the
appearance of the first computers, in particular, with the IBM 702 which became available for accounting use in 1953.
The GLS/FRS are two closely related systems, with the first one dedicated to summarization of transaction cycle activity
and the second one to the measurement and reporting of the status of financial resources, generally outputted in the form

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of financial statements or tax returns to external entities. MRS, usually in the scope of Management Information Systems
(MIS), offers internal management with special purpose financial reports and information needed for decision-making
such as budgets, variance reports, and responsibility reports.
For almost all professionals from the accounting domain, the main idea about the information system of an organization
and particularly AIS is embraced by the Enterprise Resource Planning (ERP), which encompasses all the essential
functions to support an organization and is implemented in almost all large organizations.
FIVE LEVEL PYRAMID MODELS OF INFORMATION SYSTEM TYPES:

III. DEVELOPMENT OF ACCOUNTING INFORMATION SYSTEM

The development of Accounting Information Systems (AIS) includes five basic steps which are discussed below:
1. Planning project management objectives and techniques: The very first phase of an Accounting Information
System Development is planning the project. This involves determination of the scope and objectives of the project, the
definition of project responsibilities, control requirements, project phases, budgets, and final products.
2. Analysis: The analysis phase is used to determine and document the accounting and business processes used by the
company. These accounting processes are usually redesigned to take advantage of the operating characteristics of modern
system solutions.
3. Data Analysis: It is a review of the accounting information that is currently being collected by a company. Current
data are then compared to the data that the organization should be using for managerial purposes. This method is used
primarily when designing accounting transaction processing systems.
4. Decision Analysis: It is a review of the decisions that a manager is responsible for making. The primary decisions that
managers are responsible for are identified on an individual basis. Then models are created to support the manager in
gathering financial and related information to develop and design alternatives, and to make actionable choices. This
method is valuable when the primary objective of the system is decision support.
5. Process Analysis: It is a review of the company business processes. The organizational processes are identified and
segmented into a series of events that are able to either add or change data. These processes can then be modified or
reengineered to improve the organizations operations in terms of lowering cost, improving service, quality, or
management information. This accounting method is used when automation or reengineering is the systems primary
objective.
IMPORTANCE OF ACCOUNTING INFORMATION SYSTEM IN AN ORGANIZATION:
Generally, information system is the whole of the related components that are working together to collect, store and
disseminate data for the purpose of planning, control, coordination, analysis and decision making. On the other hand, an
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AIS is the whole of the related components that are put together to collect information, Raw data or ordinary data and
transform them into financial data for the purpose of reporting them to decision makers. The most important and oldest of
the present systems in business is certainly the Management Information System. Management and information are
two inseparable concepts and show the impossibility of the rational execution of management activities without
information. The accounting information system that is created in a business is directly related to the organizational
culture, level of strategic planning and the information technologies that this specific business has. It is possible to obtain
healthier information about the financial structures of the business that have set up a good accounting information system.
Accounting information plays an important role in the process of managing an enterprises activity. In the last ten years,
there has been an intensive process of implementing AIS in the world. These systems were implemented in large
industrial and small trade enterprises. Later, implementation of AIS started in other enterprises and state institutions.
According to the survey conducted by the Institute of Management Accountant (IMA) indicates that work relating to
accounting system was the single most important activity performed by corporate accountant. The use of information
systems is very important in recording vital financial data that will be used in the future. Major corporations, especially in
the retail industry, will keep such data as sales, profits, expenses, and many other items for future use in financial reports.
Recording will be done often on a daily basis, if not on a minute-by-minute basis with more complex and detailed
accounting software. This is very important also because it will not only be used for daily practices, but will be necessary
for tax purposes for the remainder of the year. Also, much of this data has to be kept on file for a number of years, in the
event of an audit or other financial issues that may arise. Legal issues can cause severe problems and even end in the
destruction of a company. By using computerized accounting information systems to organize and retain this data,
companies have a much better chance to survive and succeed.
After the process of recording information with software, the next step that is taken is processing. With most accounting
software or programs, there are different files and categories where records can be stored. This filing or storage can be
done manually by the individual or group of people who works with the accounting information systems. Programs can
also be set to do this automatically as information is entered into the system. Certain criteria can be set up in the program
to allow the program to place files and data in the places or areas where it is supposed to go. There will usually be
different categories for different data and some of the categories may include accounts payable, accounts receivable,
payroll, purchasing, and other information that needs to be recorded and retained.
In short we can understand that

It speeds the bookkeeping process and increases accuracy thereby reducing labor costs.

A computerized accounting system is a powerful tool, allowing you easily extract data in order to prepare reports
and analyze the information.

Reviewing and acting upon a well designed, comprehensive set of reports (in addition to the Financial Statements)
will help keep the company on the right financial path.

A business entity will require accounting information so as to enable it manage and control its finances and resources.
ROLE OF ACCOUNITNG INFORMATION SYSTEM IN MODERNIZATION:
Accounting information systems works towards success of the organization when there is incorporation of information
and communication technologies, which is important role. Therefore, it will be driving towards innovation of accounting
practices. Some of the responsibilities relatively are process management and operational activities, internal reporting and
external reporting .In most of the modern organizations, it has become essential that accounting information systems
produce information that is aligned with strategic perspective. This is one the major roles that accounting information
systems are into. Therefore, accounts department will not just review internal operations but they will be working
towards producing information that will benefit making external decisions. This will be related to the external
environment of the organization and competition.
1. Role by Accountants in General:
An important role that accountants are playing is data processing in accounting information systems. It will be answering
the below questions.
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What are the data to be stored and entered?

Who are the employees to access these data?

How are the data supposed to be retrieved, accessed, stored, updated and organized?

What are means for meeting information needs that are unanticipated or scheduled?

2. Role by Specific Accounting Professions:

General accounting in accounting information systems varies from specific accounting professions. Therefore, the
discussion related to role by specific accounting professions is mentioned and all the following should be prepared by
using accounting information systems showing roles of each accountant.

Financial accountants are preparing financial information that is for external decision-making.

Managerial accountants are preparing financial information that is for internal decision-making.

Auditors are evaluating controls and attesting financial statements to the fairness.

Accounting managers are controlling all accounting related activities.

Consultants are devising accounting information systems specifications.

IV. CONCLUSION
1. From the review of the implication of this study it's concluded that accounting information systems is focused on the
recording, summarizing and validating of data about business financial transactions. These functions were performed for
the various groups within the organization that were concerned about the respective decisions associated with financial
accounting, managerial accounting, and tax compliance issues.
2. The result of this study also showed the use of AIS which improves financial statements and reporting correctness in
the business.
3. Managerial decision making normally relies upon an effective information system which was being done by the
managers through Accounting Reports facilitated by financial, Cost and Management Accounting Departments, which is
considered in terms of Accounting Information System.
4. In the present era AIS is metamorphic ally changed as MIS with greater improvement of different elements. Hence, AIS
is a perfect tool of information provisioning the environment for decision making and also eliminates the paper work as
well as reduces the cost very significantly. However it can be asserted that AIS can help the business enterprises in the
global context to make rational decisions in a swift manner for the betterment of the businesses.
5. The purpose of an accounting information system is closely linked to the purpose of accounting itself. At the most
fundamental level, the purpose of accounting is to provide information for economic decision making. As business events
transpire, the accounting information system to collect and store data about all aspects of those events, particularly the
financial aspects.
6. Data should be stored at the most elemental level, with all aggregation and summarization being left to individual users.
Given the virtually unlimited storage capabilities of modern day computer systems, the data stored in the "accounting"
information system should not be limited to financial data. Non-financial data such as customer feedback, product quality
ratings, and even images, audio, and video clips could potentially be stored. Most importantly, however, all data should be
stored in a single integrated enterprise-wide repository.
The study also reveals that accounting information systems can play a vital role in the modern organizations until and
unless there are proper resources and good effectively working system. The only reason for an accounting department to
be modern in the organisation is the adaption of information systems in the business. The role of the accounting
information systems is to meet the needs of the accounts department as aligned with modern organizational needs.
Modern organization will fail to make decisions when there is an absence of effective accounting information systems.

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 International Journal of Management and Commerce Innovations ISSN 2348-7585 (Online)
Vol. 4, Issue 1, pp: (4-10), Month: April 2016 - September 2016, Available at: www.researchpublish.com

REFERENCES
[1] Mahdi Salehi, Vahab Rostami, Abdolkarim Mogadam "Usefulness of Accounting Information System in Emerging
Economy: Empirical Evidence of Iran" ,International Journal of Economics and Finance, Vol. 2, No. 2; May 2010.
[2] Rama Rani, Ruchi Singhal" Need of Accounting Information System in Present Market Scenario" ,International
Journal of Management and Social Sciences Research (IJMSSR) Volume 3, No. 6, June 2014.
[3] Augustine Muhindo,Maureen kapute mzuza,Jian zhou,"Impact of accounting information system on profitability of
small scale business: a case of kampala city in Uganda "International Journal of Academic Research and
Management,(IJARM)Vol.3,No.2,2014.
[4] ZSUZSANNA TTH "The Current Role of Accounting Information Systems" Club of Economics in Miskolc' TMP
Vol. 8, Nr. 1. pp. 91-95. 2012.
[5] websites: [1] http://www.accountinginformationsystems.org/development-of-accounting-information-systems
[6] http://www.scribd.com/doc/82026653/Role-of-the-Accounting-Information-Systems-in-Modern-Organizations
[7] http://fareedsiddiqui.com/index.php/tag/importance-of-accounting-information-system-in-business
[8] F:\RPAPERS\AIS\Accounting information system - Wikipedia, the free encyclopedia.html
[9] International Journal of Economics and Finance www.ccsenet.org/ijef
[10] https://en.wikipedia.org/wiki/Information_system

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2013. All rights reserved.

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Accounting Information System of Tunisian SMEs: Complexity,

Determinants and Impact on Financial Performance
1
Yosra Noui, 2 Sami Mensi
1
Department of Finance, Institute for Advanced Business Studies of Tunis (IHEC Tunis), Carthage University,
2
Department of Economics, Graduate College of Business of Tunis (ESC Tunis), University of Manouba, ECSTRA laboratory,

ABSTRACT
This research is twofold. The first is to identify potential determinants of Accounting Information System (CIS)
characteristics for Small and Medium Enterprises (SMEs). The second is to prove whether an AIS whose characteristics
meet the needs of SMEs and their managers is associated with increased financial performance of these companies. The
analysis of data collected by questionnaires administered by direct interviews with 107 Tunisian SMEs belonging to
different sectors reveals mainly that 1) the complexity of the AIS is associated with factors related both to structural and
behavioural contingency and 2) increasing the complexity of the AIC is negatively and significantly related to financial
performance.

Keywords: Accounting Information Systems, SMEs, structural contingency factors, behavioural contingency factors, financial
performance.

1. INTRODUCTION All of these studies were conducted in developed

In the current economic environment
characterized by increased competition generated by
opening of markets and combined with an increasing
degree of very demanding customers, companies compete
very aggressively to market their products in a market
where only well organized companies can capture a good
market share. In contrast, firms whose organization is
poor are marginalized and even doomed to disappear.
The survival of such companies push their
managers to face the challenge to follow rapid changes, in
particular flow of information, through adopting effective
management tools that enable them to manage them
properly. Some studies focused on one of these
management tools, including accounting information
systems (AIS). But this field of enquiry is still less
explored, particularly with regard to small and medium
size companies. This lack of interest is, perhaps, in part,
that in Small and Medium Enterprises (SMEs), the main
stakeholder is often the owner-manager (Jennings and
Beaver, 1997). He is involved in all aspects of
management (Julien and Marchesnay, 1988) and he is
often taken to be the company (Julien, 1990).
Consequently he tries to give minimum information about
his company which displays a greater information
asymmetry with respect to any party external to it.
Rarely explored in Tunisia, AIS theme arises
interests of both theory and practice. On a theoretical
level, the results of our study can be compared with those
of previous studies. The results of this research led to
mixed findings. Some argue that many SMEs have only
embryonic management tools geared mainly towards
production of accounting data required primarily to satisfy
tax authorities (Dapuy 1987; Bajan-Banazak, 1993).
Others however, claim that this vision does not capture all
SMEs reality and suggest that AIS of SMEs is well
developed (Chapellier 1994; Lavigne, 1999; Nobre,
2001).
countries in Europe, Australia and North America where
accounting practices were invented. Our study should
contribute to the debate on the complexity of AIS of
SMEs in developing countries, including Tunisia. In
Tunisia, the transition from a heavy state-controlled
economy to a more free market requires managers of
Tunisian SMEs to change their attitude towards the role
given to accounting in order to cope with turbulences
which characterize this new business environment.
This research therefore examines the complexity
of AIS of Tunisian SMEs and the factors that may
influence the degree of complexity. First, we aim at
identifying the variables that significantly influence
degree of complexity of adopted accounting practices.
The literature indicates that researchers have used
contingency theory to answer this question (Raymond,
1985; Holmes and Nicholls, 1988; Chanhall, 2003; Abdel-
Kader and Luther, 2008). In our study, we chose to
examine the influence of contingency factors of structural
contextual nature on AIS complexity. These factors relate
to age of the business, its size, sector, ownership structure,
its indebtedness and exports.
However, the literature indicates that structural
contingency factors are not enough to explain
heterogeneity of AIS complexity because they ignore
autonomy of human constructs (Chapellier 1994; Lavigne,
1999; Affes and Chabchoub, 2007). They offer other
behavioural factors relating not only to SMEs managers
but also to professional accountants including
accountants-employees and expert-accountants. We
choose as behavioural contingency factors: age,
experience, level and type of training. As for the
accountant-employees, we choose as factors their mission
in the company, level and type of training and also
courses or training undertaken. We also study the impact
of the involvement of the accountant in the management
of the company on AIS complexity. Second, we propose

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to check our exploratory hypothesis that seeks to examine
the impact of AIS complexity on financial performance.
SMEs managers need to develop information
systems that enable them to make the best decision and
then to effectively run their businesses. In line with these
ideas, we propose to treat the dual problem that which (1)
relates to factors determining SMEs AIS complexity and
(2) tries to prove that AIS complexity is associated with
SMEs financial performance.
Our paper is structured as follows: Section 2
presents the conceptual framework and research
hypotheses. In Section 3, we present the research
methodology. Section 4 is devoted to displaying,
interpreting and discussing the results. Finally, we draw a
conclusion from the research.
2. CONCEPTUAL FRAMEWORK AND
RESEARCH HYPOTHESES
2.1 Determinants of AIS complexity of SMEs
Studies on the relationship between
organizational specificities of a company and its
characteristics allow us to note that in the context of large
public companies, all studies adopted as a theoretical
foundation the "positive theory" of Watts and Zimmerman
(1978) . For SMEs, the theoretical underpinnings are not
the same because the authors interested in this type of
accounting firms (Chapellier 1994; Saboley-Lacombe,
1994; Lavigne, 1999, 2002, Orser et al. (2000); Affes and
Chabchoub, 2007) take as the basis of their research, on
the one hand, the subjective and objective contingency
theory according to which AIS, which is part of
organizational structure, is conditioned by the
characteristics of the context in which the company
operates and on the other hand, agency theory.
In his study, Chapellier (1994) notes that in
relation to SMEs; structural contingency factors can be
reduced to a few basic characteristics that refer to
concepts of complexity and uncertainty. Indeed, the size
and age of the company, the level of computerization of
management, nature of business, ownership structure and
debt are determinants of AIS complexity. However, the
results confirm only the relationship between size and
accounting practices. Lavigne (1999) meanwhile
demonstrates, through a questionnaire survey, that
medium-sized companies have more complex AIS than
those small and very small-sized companies. Likewise,
ownership structure is an important determinant of
general accounting practices for SMEs due to the presence
of shareholders who are not members of the family of the
manager. This is likely to encourage greater formalization
in the preparation of financial information in order to
solve agency problems and asymmetric information where
AIS is a mechanism of monitoring tools.
The structural approach to contingency theory is
instructive but some authors stress that it is insufficient to
explain all accounting practices of SMEs (Gordon and
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Miller 1976; Lavigne 1999; Chapellier 1994; Affes and
Chabchoub 2007, Santin and Van Caillie 2008) and it is
necessary to broaden the approach by integrating an
objective analysis of variables related to the type of the
profile of each accounting player of SMEs: This is the
behavioural approach of contingency theory. This most
often revolves around the central player in the SME; the
manager. The entire literature agrees to emphasize that the
managers profile (competence, history, culture, family,
etc..) plays a very special role which justifies the
specificity of this type of organization as the manager as
both producer and user of accounting information. Three
other players, however, were identified as likely to
influence accounting practices of SMEs: the internal
accountant (Chapellier 1994, Lavigne 1999), the external
accountant (Chapellier 1994, Lavigne 1999) and the main
external actor which is often a financial institution
(Lavigne 1999; Saint Pierre and Bahri 2000).
Chapellier (1994) shows associations between
accounting practices and the following behavioural
determinants: formation and goals of the manager, the
mission and training of internal accountant and
involvement of the external accountant. Lavigne (1999)
identifies linkages between general accounting practices
and the following behavioural contingency factors:
information preferences of the manager, the mission and
training of internal accountants and demands of external
actors in relation to financial statements. Based on the
results of research and studies outlined above, we propose
to test the hypothesis:
H1: AIS complexity depends on structural and
behavioural contingency factors.
2.2 Association between the Complexity of the Ais
and the Financial Performance of SMEs
Many studies have examined the link between
performance and some features of the organization. They
are interested in the impact of the organizational structure
on the performance (Nkongolo et al., 1994; Roper, 1998;
Rue and Ibrahim, 1998, Smith, 1999; Schindehutte and
Stoica, 1999; D'Amboise et al., 2000; Pelham, 2000).
However, few studies have focused on the potential
relationship between the AIS and the SME performance
((McMahon and Davies, 1994; Gorton, 1999, Orser et al.,
2000; Lavigne, 1999, 2002; Affes and Chabchoub, 2007).
The study of Lavigne (2002) indicates that
congruence between different contingency factors and
AIS complexity index, as a tool for measuring AIS
characteristics, is associated with increased financial
performance of SMEs. He noted that there is a positive
relationship between size of SMEs and AIS complexity
which would generate high performance. Moreover, the
study of Affes and Chabchoub (2007) shows that AIS
complexity, measured in terms of general accounting
practices, management control and financial analysis, is
positively associated with increased financial performance
basing themselves on the argument that accounting
information provides managers with an evolutionary state
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of the company and therefore allows them to quantify and
monitor the achievement of business objectives, insofar as
it is possible to translate them into accounting terms.
Thus, management control tools allow managers to obtain
results consistent with the objectives defined on the basis
of the best possible management of resources and abilities
in relation to these results and financial analysis practices.
Practices assessed through the use of tools of investment
choices, profitability evaluation tools and risk evaluation
tools allow a better allocation of resources and respect for
the fundamental constraint of solvency. Basing ourselves
on the features documented above, we propose to test the
hypothesis:
H2: There is a significant relationship between
AIS complexity and financial performance of SMEs.
3. RESEARCH METHODOLOGY
To reach the objectives of this research, i.e.
identifying structural and behavioural contingency factors
likely to influence AIS complexity and highlight a
potential relationship between AIS complexity and
financial performance, a survey administered through
direct interviews was conducted with managers of
Tunisian SMEs.
By referring to the definition of SMEs according
to Bulletin No. 2588 of the Financial Market Council
(2006): " SMEs are considered small and medium
enterprises, in accordance with the recommendations of
the ministerial council held on Monday, March 13, 2006,
companies whose net and real fixed assets doe not reach
the following thresholds: Four million dinars with regard
to the amount of net fixed assets and 300 people regarding
total workforce". Our sample consists of 107 legally
independent companies belonging to a large range of
economic activities as defined by the National Institute of
Statistics. They have as number of employees between 10
and 300 employees, while the amount of net fixed assets
is less than four million dinars.
Operationalizing the variables in this research is
based especially on studies by Lavigne (2002, 1999)
Chapellier (1994) and Lacombe-Saboly (1994). Among
the structural contingency factors, we used the following
variables: size, age, industry, ownership structure, debt
and export of the company.
With regard to behavioural contingency factors,
we selected the following variables for each of the three
accounting players considered: 1) the manager: age, level
of education, the nature of training and experience, 2) the
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internal accountant: mission, level of education, training
and nature of in-company courses and training, 3) the
expert accountant: degree of involvement in the
management of the company.
Operationalizing AIS complexity is based on
studies by Chapellier (1994) and Lavigne (2002). Because
accounting rules and tradition are the main sources of
accounting practices in Tunisia, we are interested in the
main accounting practices used by SME managers in
managing their businesses which are defined in relation to
the following three accounting fields: general accounting
practices (Computerization of accounting, preparation of
interim financial statements), management control
practices (using a cost-computing system, budgeting,
holding a dashboard) and financial analysis practices
(using investment choice tools, use of profitability
evaluation tools, using risk measurement tools). AIS
complexity of SMEs will be measured by a complexity
index that considers the defined components of the AIS, it
is therefore about assigning 1 to one component of the
AIS if it exists in the company, and 0 if not. Ultimately,
the AIS has a total score on a scale of 0-8 according to the
managers degree of using the eight components of the
AIS already listed.
Finally, with reference to a broad theory on
financial performance of SMEs, we opted for accounting
measures like the return on assets (ROA) ratio and the
return on equity (ROE) ratio. First, the ROA ratio is
determined by the ratio of profit before taxes, interests,
depreciation; and then total assets. This ratio measures the
efficiency with which the company uses its assets.
However, return on equity (ROE) ratio is determined by
the ratio of, profit before taxes, interest, depreciation and
provisions and then equity. This ratio measures the
efficiency with which the company uses capital.
3.1 Bivariate Analyses
The aim of the first phase of our work done on
SPSS is to highlight the potential significant relationships
between characteristics of the AIS and contingency
factors and identify the nature of the significant
relationships between the different variables. We adopted
the chi-square test to examine potential significant
relationships between the six structural variables and the
seven characteristics of AIS (see Appendix 1). Worth
noting that in this section we consider the variables size
and age of the firm as qualitative variables, they are
stratified. Table 1 presents a summary of these
relationships:
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Table 1: Relationships between AIS characteristics and structural contingency variables

Structural V Ownersh
Size Age Sector In debt. Exports
AIS charact. structure
Value ,263 1,478 4,450 7,804* 0,104 3,213
Interim F.S
P.Value ,637 ,382 ,918 ,006 0,570 0,076
Value 1,917 3,246* 5,257 7,869** 0,426 9,972
Budg Sys.
P.Value ,202 ,074 ,235 ,011 0,518 0,002
Cost-Com.Sys Value 2,917 1,291 7,531 2,731 0,058 3,213
P.Value ,115 ,607 ,918 ,257 0,811 0,076
Dash.Bord Value 3,902* 7,335* 6,322 4,485 0,002 9,814
P.Value ,053 ,009 ,963 ,127 0,968 0,002
Invest Ratio Value ,467 4,882* 7,765 6,338** 0,236 2,030
P.Value ,950 ,067 ,523 ,034 0,630 0,158
Prof. Ratio Value 3,426 9,150 1,628 1,552 0,044 0,090
P.Value ,236 ,403 ,238 ,694 0,835 0,766
Risk Ratio. Value 7,185** 5,283 5,975** 4,548* 1,323 1,516
P.Value ,028 ,525 ,024 ,061 0,254 0,222
Significant at 10% ; ** Significant at 5% ; ***Significant at 1%

The results presented above in Table 1 provide a number of employees.

description of some accounting practices of SMEs. These
characteristics can be divided into the following three
dimensions of an AIS: 1) general accounting practices
(preparation of interim financial statements), 2)
management accounting and management control
practices (budgeting system, cost-computing system,
dashboard) and 3) financial analysis practices (investment
ratios, profitability ratios, risk ratios).
The test indicates a relationship between
company size and dashboard establishment, on the one
hand, and the use of risk ratios; the larger the company is,
the more it tends to set up dashboards that should form a
set adapted to individual needs and consistent with their
general organization and content, providing a common
management language for the various stakeholders of the
company, allowing for a rich and regular dialogue
between hierarchical levels and other relevant entities.
Similarly, the large company made recourse to risk ratios,
which are intended to highlight the strengths and
weaknesses of the company, like those of small ones,
mainly the debts and receivables rotating ratio which
expresses the retention of liquidity through payables and
receivables. Thus, SMEs which establish dashboards and
make use of risk evaluation ratios have a fairly large
As for the age of the company, the chi-square test
pointed to its association with three accounting practices,
the establishment of dashboards, cost-computing and the
use of investment ratios. Then, the older the company sets
dashboards and is more cautious about choosing a new
investment.
Regarding industry sector as the third structural
contingency variable, the test shows that the use of risk
ratios is the only feature of the AIS which depends on the
type of industry.
Regarding ownership structure variable, it is
significantly associated with the following accounting
practices: establishment of interim financial statements, a
budgeting system and use of investment and risk ratios; it
is the family-owned SME with related shareholders that
uses investment and risk ratios as well as a budgeting
system and interim financial statements.
The results of the nine behavioural contingency
variables are shown in Table 2. We find that their
influence on the characteristics of the AIS is remarkable.

Table 2: Relationships between AIS characteristics and behavioural contingency variables of the manager
(Chi-square test)

Behavioral V
Man. Age Man. Exp. Man.Edu Man.Edu.Nat
AIS Charact
Val 1,780 8,921*** 14,832*** 8,319***
Interim F.S
P.Val 0,803 0,003 0,000 0,004
Vale 11,249 5,499** 18,586*** 9,009***
Budg. Sys.
P.Val 0,849 0,021 0,000 0,003
Cost-Com.Sys Vale 5,669 1,452 12,092*** 3,214*

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P.Val 0,211 0,243 0,002 0,076
Dash.Board Val 9,929 3,592* 14,670*** 3,185
P.Val 0,975 0,061 0,001 0,077*
Invest. Ratio Val 6,391 ,634 14,068*** 4,278
P.Val 0,651 0,624 0,006 0,040**
Prof. Ratio Val 7,123 1,378 1,359 1,171
P.Val 0,481 0,597 0,663 0,283
Risk Ratio. Val 4,542 ,630 3,174 1,117
P.Val 0,450 0,577 0,937 0,734
* Significant at 10% ; ** Significant at 5% ; *** Significant at 1%

We interpret the associations that have been
given by the chi-square test between the seven
characteristics of the AIS and the behavioural contingency
variables. The test carried out shows that managers age is
the only behavioural variable that shows no significant
relationship with any of the features of the AIS.
Regarding the variable "managers experience", it is
closely related to interim financial statements, the
budgeting system and dashboard. Thus, managers with
experience between 10 and 20 years conduct these three
accounting practices. However, there is a negative
relationship between managers experience and these
three features of the AIS; the more the manager is
experienced, the rarer the presence of these latter features.
The third behavioural variable that has been adopted is the
managers education level. Our results show that this
variable is significantly related to five components of the
AIS, namely interim financial statements, the budgeting
system, costing-computing system, the dashboard and
investment ratios. The more the level of education
increases, the denser the preparation of interim financial
statements is. Among the nine interviewed self-made
managers who have not received their baccalaurat,
only one answered yes for the presence of this feature.
However, three quarters of the executives (BAC+4 and
more) establish Interim. FS. It should be noted that the
same trend exists for the other four AIS characteristics,
namely the budgeting system, the cost-computing system,
the dashboard and investment ratios.
In table 3, the results show that the mission of
internal accountant is strongly and significantly related to
the five components of the AIS, namely IFS, budgeting
system, cost-computing system, the dashboard,
investment and risk ratios. The extent of producing
budgets by the manager assisted by an employed
accountant, "Management Controller", is significantly
higher compared to level of producing budgets by a
manager assisted by an internal accountant, "accountant"
or "bookkeeper." However, the use of investment and
profitability ratios is more common for a manager assisted
by an internal accountant "accounting" than by a
"management controller."

Table 3: Relationships between AIS characteristics and behavioural contingency factors related to professional accountants
(Chi-square test)

Behavioural. V Miss.Acc Edu.Lev Edu.Nat In.Com.Courses INV-expert

Value 4,002 17,263*** 3,309 6,624 8,216***
Interim F.S
P.Value 0,127 0,006 0,152 0,011 0,005
Value 13,812*** 20,745*** 9,442*** 9,580 11,876**
Budg. Sys.
P.Value 0,002 0,000 0,005 0,002 0,012
Value 7,133** 4,354 1,497 2,966 3,083
Cost-Com.Sys
P.Value 0,018 0,299 0,230 0,088 0,238
Value 14,007*** 8,520*** 10,314*** 1,411 3,693
Dash.Board
P.Value 0,001 0,004 0,002 0,239 0,125
Value 5,935* 8,304** 7,828*** 2,057 8,920***
Invest. Ratio
P.Value 0,053 0,030 0,006 0,156 0,003
Value 2,552 1,658 1,009 0,134 6,640
Prof. Ratio
P.Value 0,117 0,585 0,347 0,717 0,141
Value 6,911** 5,695* ,321 0,786 3,592
Risk Ratio.
P.Value 0,015 0,091 0,595 0,380 0,833

*Significant at 10% ; ** Significant at 5% ; *** Significant at 1%

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Concerning training of internal accountant, it
follows that of the manager and is strongly and
significantly related to accounting practices, namely IFS,
budgeting system, dashboard, investment and risk ratios.
The more the level of training of internal accountant
increases, the more all the five AIS characteristics are
frequent; all surveyed accountant employees with post-
graduate education level answered yes to the presence
of these five AIS components. The third behavioural
variable related to the profile of internal accountants is the
nature of their training. It is significantly related to the
budgeting system, the dashboard and financial analysis
practice through investment ratios, then the accountant-
employee who holds a degree in accounting proceeds to
budgeting more often than an accountant who holds a
degree in finance or other. The same trend exists for two
other AIS features. The last behavioural contingency
variable studied relates to the involvement of the expert-
accountant in managing the company.
The results allow us to establish a significant link
between the mission of the accountant and the three
characteristics of the AIS, namely IFS, the budgeting
system and practice of investment ratios; a manager
assisted by an expert accountant heavily involved in
managing the firm has a more complex AIS than a
manager assisted by an expert-accountant weakly
involved in management (involved only in the tax
reporting) or a manager with no expert-accountant. SMEs
seek more and more advice on AIS, taxation, management
control and law.
In what follows, we will try to examine the
relationship between AIS complexity and structural and
behavioural contingency factors in Tunisian SMEs. We
will therefore work with the mean difference test by
breaking the sample into two groups namely SMEs with
complex AIS and is composed of at least five
characteristics and SMEs with simple AIS which is made
of a maximum of 4 features out of 8.
In the first part of this study, the review of the
literature gives the link structural factors relating the
company to AIS complexity. The two tables below show
the effect of six structural contingency variables on the
AIS complexity of Tunisian SMEs. The variables used in
this study are company size, its age, its business, its
ownership structure, its indebtedness and finally its
exports.
We conducted two statistical tests to check the
robustness of our results; the chi-square test and the
means difference test across the sample of firms with
complex AIS and those with simple AIS. (See tables 4 and
5)

Table 4: Effect of structural contingency variables on AIS complexity (Mean Difference test)

Mean
Structural variables Mean G1 (complex) Mean G2 (non complex) T-test P.Value
difference
Ages 2,35 2,00 0,349 1,484 ,144
Size 1,44 1,38 0,057 0,244 ,808
Sector 2,54 2,14 ,399 1,120 ,268
Ownership structure 2,242 1,850 0,572 2,823*** ,007
Indebtedness 0,670 0,540 0,136 0,887 ,379
Exports 0,420 0,08 0,342 2,351** ,022
*Significant at 10% ; ** Significant at 5% ;
*** Significant at 1%

Table 5: Effect of structural contingency variables on AIS complexity (Chi-square test)

Independent variables Value P-Value hypothesis Validation

size 11,847 0,352 H1 Non significant
Age 22,732 0,038 H2 significant
Sector 30,249 0,359 H3 Non significant
Ownership structure 23,853 0,028 H4 significant
Indebtedness 6,679 0,689 H5 Non significant
Exports 11,582 0,009 H6 significant

The tests indicate that company size and type of
industry have no effect on the AIS degree of complexity
of observed SMEs. This result is consistent with previous
research. As for age of company, the results of means
differences failed to conclude that there is any relationship
between age of company and AIS complexity. This is
consistent with the results of Chapellier (1994), Lacombe-
Saboly (1994), Lavigne (1999.2000) and Affes and
Chabchoub (2007).
As for the chi-square test, it shows that there is a
relationship between age of company and AIS complexity
at 5% significance level. This result is consistent with the
study of Ben.Hamadi and Chapellier (2010). Similarly, for

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type of business, no significant relationship between this
characteristic and AIS complexity is found. Treating the
variable "indebtedness", we asked whether the presence of
a foreign creditor may influence degree of complexity of
an AIS and then followed the same line of thinking
studied by Lavigne in 2002, but in our case, statistical
results yielded no significant results.
However, the tests show that AIS complexity
significantly depends on the companys ownership
structure. Indeed, it is the companies that have one or
more members that are not part of the managers family
which have more complex AIS than companies family
members. This result may relate to the presence of
shareholders who are not part of the managers family
which creates agency conflicts of information asymmetry
where the AIS is a potential source of monitoring tools.
This result is consistent with that of Affes and Chabchoub
(2007).
Table 6: Effect of behavioural contingency variables related to the manager on AIS complexity
Mean G1 Mean G2
Behavioural variables
(complex) (non complex)
Age 3,15 3,12
Experience 2,51 2,15
Education level 4,74 2,62
Nature of education 0,51 0,15
*Significant at 10% ; ** Significant at 5% ;
*** Significant at 1%
The results confirm the studies by Chapellier
(1994), those of Lavigne (2002) and those of Affes and
Chabchoub (2007) and indicate that training
characteristics of the manager determine accounting
practices of SME managers and lack of training harms the
degree of using accounting information in the
management of this type of company. Thus, AIS
complexity increases when educational level of the
manager is better.
The results confirm those studies of Chapellier
(1994), those of Lacombe-Saboly (1994) and those of
Affes and Chabchoub (2007) for industrial SMEs in
Tunisia examining the impact of the nature of training on
accounting practices of SMEs. It is the manager who
develops complex AIS inside his company. This may be
explained by his mastery of financial and accounting
tools. Accordingly, managers who have a background in
accounting, finance and / or management have an AIS
more complex than others.
Until now, the literature has allowed us to
formulate the following hypothesis; the more the manager
is inexperienced, the greater is his request for information.
Years of work in the business provide the manager with
greater knowledge of markets functioning, customer needs
and abilities of the company. His experience refines
gradually his intuitions. He trusts his perceptions more
than 'the figures given by the accounting department.
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Finally, the test shows that AIS complexity of
SMEs depends on exports. Indeed, openness to
international markets encourages exporters to track
changes at all levels and thus adopt a developed AIS in
order to have information on time and thus act in a timely
manner.
At this stage of the study, we will study not only
the effect of the characteristics of SMEs managers on AIS
complexity, but we will try to highlight the effect of
behaviour of professional accountants on AIS complexity
of Tunisian SMEs.
According to this study, we expect that level of
education of the manager is significantly related to AIS
complexity. The mean difference test shows a significant
relationship between level of training of the manager and
AIS complexity; the more the manager is trained, the
more the AIS is complex.
Mean
T-test P.Value
difference
,038 ,109 ,914
0,358 1,506 ,138
2,129 4,045*** ,000
0,358 2,355** ,022
However, the results obtained by the bivariate
analysis could not confirm this finding since there is no
significant relationship between the experience of the
manager and AIS complexity. Our results on this point are
less surprising, while results of the different studies
conducted until now on the relationship between
experience of the manager and the complexity of SMEs
are "mixed". Finally, we studied the age of the manager as
did Begon (1990) and Affes and Chabchoub (2007) to see
whether there is a relationship between age and AIS
complexity. The results yielded no significant relationship
between AIS complexity and the variable "age of the
manager".
Consistent with the first hypothesis we expect
that the mission of the accountant employee significantly
correlates with AIS complexity of SMEs. The mission of
the 50% of the 46 accountants in the sample is to ensure
bookkeeping but also to produce, occasionally, some
accounting data for "accounting" management. The
mission of 16% of them is limited to bookkeeping, that is
to say, preparing for establishing annual filings by the
expert accountant; "aid accountants". Finally, the mission
of 16% of them is to ensure accounting, but also to
produce regularly accounting data for management
purposes, "management controllers". The results show
that the task of the accountant employee is significantly
related to AIS complexity in the studied SMEs; Our
results are consistent with those of Chapellier (1994). (See
table 7).
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Table 7: Impact of characteristics of accounting professionals and AIS complexity

Mean G1 Mean G2 Means

Independent variables T-Test P.Value
(complex) (non complex) difference
Mission of internal accounting 2,79 2,15 0,637 2,161** ,035
Accountants education level 4,83 3,90 0,933 2,891*** ,006
Nature of education of internal
1,90 1,25 ,650 2,592** ,013
accountant
In-company course and training 0 ,530 0,10 0,428 -2,526** ,015
Involvement of the expert
accountant in managing the 2,530 2,000 0,535 2,730*** ,009
company
*Significant at 10% ; ** Significant at 5% ;
*** Significant at 1% capacity constraints and skills of the accountant itself.
Failure to attend seminars, courses and / or training
The analysis of the effect of the accountants generally leads to a lack of training for the accountant
level of training on AIS complexity of SMEs shows a preventing him from providing useful management
significant relationship between these two variables. This models. This leads to a rejection of the entire accounting
result corroborates that of Lavigne (2002) who found that language by the latter. Such a situation reduces the use of
managers of SMEs assisted by an internal accountant with accounting data by the leader. It limits the influence of the
a university education have a more complex AIS. Thus, accountant on strategic decisions and reduces its scope to
the higher the level of training of the internal accountant, simple bookkeeping. This explains the fact that managers
the better is AIS complexity. The tests also show that AIS assisted by internal accounting who attend courses and /
complexity significantly depends on the nature of training or training have a more complex AIS than others.
of the internal accountant. Thus, a manager assisted by an
internal accountant trained in accounting or in finance and The hypothesis that we have already formulated
accounting has more complex AIS. assumes that AIS complexity increases with the degree of
the expert-accountants involvement in managing the
The above results point to a significant impact of company. Our results confirm this hypothesis. Indeed,
in-company courses and / or training for the accounting half of the expert-accountants of SMEs of our sample are
staff on AIS complexity. This result is not surprising involved in managing the company in terms of advice of
because the accountant employee should have the ability and relation with customers. Then, the manager assisted
to design and implement differentiated information by an expert-accountant strongly involved in managing
models tailored to the needs of the company and more the company has a more complex AIS than a manager
specifically of its manager. Thus, the key position of the assisted by an expert-accountant weakly involved in
accountant employee is not without risks. Its limits are managing the company or a manager with no expert-
accountant.

Table 8: Effect of behavioural contingency variables on AIS complexity (Chi-square)

Independent variables Value P-Value Validation

Managers age 34,161 0,601 Non significant
Experience 14,483 0,037 significant
Education level 48,611 0,000 significant
Nature of education 12,678 0, 002 significant
Mission of internal accountant 33,520 0,000 significant
Internal Accountants education level 34,611 0,001 significant
Internal Accountants education nature 23,330 0,008 significant
In-company courses or training of the internal accountant 10,261 0,009 significant
Involvement of expert-accountant 23,904 0,003 significant

3.2 The Multivariate Analysis
The second step of our study consists of a
multivariate analysis to complete the bivariate analysis.
This analysis will study the interactions that may exist
between variables and their effects, all together, on the
previously made conclusions.
Because the dependent variable "AIS complexity
" is dichotomous, which takes the value of 0 if the AIS is
not complex and 1 if the AIS is developed, the binary
logistic regression model is the most appropriate to study
the impact of the structural and behavioural contingency
factors on complexity of AIS. We will then make use of
the classical regression model to study, in an exploratory

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way, the relationship between AIS complexity and the twelve models that will be discussed later. (See
financial performance of SMEs. Appendix1).

First, we try to avoid the problem of dependence
between variables which will bias the quality of results.
We submitted fifteen contingency variables to different
correlation tests according to their nature (Qualitative /
Quantitative). We therefore performed the chi-square test
between qualitative / qualitative variables and qualitative /
quantitative variables. For quantitative / quantitative
variables the Spearman statistical test is used.
After avoiding the risk of dependency between
variables, it seems that in order to study the effect of
fifteen contingency factors on the degree of AIS
complexity of SMEs, it is necessary to classify them in
We will first test the quality of the research
model. This is performed automatically by the binary logit
at SPSS. We will therefore follow two steps to check the
quality of the model as follows:
The significance of the model by a chi-square
test and by the two pseudo R2 and adjusted R2
The classification table to verify that the
variables are classified correctly by the forecast.
In table 9, we combine together the results of the
research model in a table in order to clearly identify its
explanatory power.

Table 9: Model summary

Step Chi-square -2log-likelihood R-2 of Cox & Snell R-2 of Nagelkerke

1 2,152 58,536 0,038 0,057
2 2,235 58,453 0,038 0,057
3 3,203 57,485 0,056 0,084
4 12,529 48,158 0,2 0,303
5 12,695 47,992 0,203 0,307
6 15,775 44,913 0,245 0,371
7 15,175 44,512 0,257 0,379
8 17,418 43,270 0,267 0,404
9 23,495 37,192 0,343 0,518
10 23,954 36,734 0,348 0,526
11 24,001 36,686 0,349 0,527
12 27,458 20,712 0,449 0,693
13 27,570 20,600 0,451 0,695
14 28,032 20,138 0,456 0,703
15 48,17 0,000 0,649 1,000

We notice that as we add a variable the value of
chi-square increases from one step to another, which
means that the model is improved by the introduction of a
new variable.
On the other hand, the value of-2log-likelihood
says nothing by itself, but its decrease from one step to
another also tells us that the model is improved by the
introduction of the second variable. A perfect model
would have a -2 Log likelihood of zero. Then, the model
is improved by the gradual introduction of variables. Both
the pseudo R2 allow us to explain the percentage of the
binary dependent variable that is explained by the
variables. The Nagelkerke is an adjusted version of the
Cox & Snell and is therefore more accurate. Thus, 100%
of the variation in the complexity could be explained by
the significant variables.
After checking for quality of the Logit model, we
discuss in the following tables the results of the estimation
of the regression coefficients according to the twelve
models used previously. In the tables below, each factor is
associated with a value which is the coefficient
estimated by maximum likelihood. (See table 10).
We note in the first three regression models the
variable "export" always has a positive and significant
relation at the 10% level with AIS complexity. Indeed, if
the company is small and medium sized and exporting it
sets up a complex AIS to monitor changes at foreign
markets through the use and production of reliable
accounting data and in a timely manner. It should be noted
that the results on this topic are mixed.
We also observe that experience of manager is
negatively and significantly related with AIS complexity.
Indeed, the manager who has a little experience has a
complex AIS. This result is in line with that of Chapellier
(1994) and that of Holmes and Nicolls (1988) who explain
this relationship claiming that the newly installed
managers are trying to overcome their lack of experience
in developing more complex AIS, and this to have a clear
idea about the situation of their businesses and their future
prospects. The managers need for quantitative
information disappears gradually with experience. When

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an SME is exporting, its AIS is complex. When decreases.
experience of the manager increases, AIS complexity

Table 10: Estimation of the impact of contingency variables on AIS complexity according to the three models

Model 1 Model 2 Model 3

Variables Modalities
P-Value P-Value P-Value
Size ------ ------ -0,236 0,664 ----- ------
Age 0,399 0,363 ------- ------- ------ -------
Sector Industrial ------- ------ -20,247 0,998 -21,023 0,998
Individual ------ ----- ----- ------ ------ -----
Ownership structure
Family-owned ----- ------ ------- ------- ------ -------
Indebtedness 0,586 0,400 0,784 0,312 0,396 0,634
Exports 2,074* 0,058 1,927* 0,096 2,406* 0,084
Less than 5 years ------ ----- ---- ----- -0,231 0,801
Experience of manager
between 5 and 10 years ------ ------ ------ ------- -2,483** 0,042
R-2 of Cox & Snell 13,3% 26,5% 33,2%
R-2 of Nagelkerke 20,1% 40,1% 50,1%
*Significant at 10% ; ** Significant at 5% ;
*** Significant at 1% Next, the tests indicate that the level of training
of the manager has a positive and significant effect on the
According to table 11, we notice in the fourth degree of AIS complexity. Thus, it is the managers who
model that ownership structure of "private company have the highest levels of education display a more
having only family-related shareholders" has a negative complex AIS. The results confirm those studies by
and significant impact on AIS complexity. Thus, the Chapellier (1994), Lavigne (2002) and Affes and
company whose shareholders have a relationship with the Chabchoub (2007)) on the impact of the level of training
manager (spouse, child ...) has a less complex AIS. This of the manager on AIS complexity. Thus, AIS complexity
result may be explained by the fact that the presence of increases when the educational level of the manager is
shareholders who are not part of the family of the better. These results indicate that the characteristics of the
manager creates agency conflicts of information managers training determine accounting practices of
asymmetry, enough reason to push the manager to set up a managers of SMEs and lack of training of these harms the
complex AIS as a source of potential monitoring tool degree of their use of accounting information in the
(Lavigne and St Pierre, 2002; Affes and Chabchoub, management of this type of company. When the SME is a
2007). private company with one or more unrelated shareholders,
it has a complex AIS. When the level of training of the
manager is high, the AIS is complex.

Table 11: Estimation of the impact of contingency variables on AIS complexity (binary logit)

Model 4 Model 5 Model 6

Variables Modalities P-
P-Value P-Value
Value
Age ----- ------- ----- ------
Sector Industry ------- ------- 20,461 0,998 22,877 0,998
Family-owned -2,896** 0,042 ------ -------
Ownership structure Non family-
-1,463 0,220 ------- --------
owned
Indebtedness -0,452 0,662 1,461 0,146 1,933 0,159
In-company courses 2,196* 0,074 ----- ------
between 20 and
1,542 0,434 2,452 0,323
29 years
between 30 and
-0,249 0,857 1,782 0,324
39 years
Age of manager
between 40 and
1,287 0,376 2,167 0,233
49 years
between 50 and
0,429 0,763 0,899 0,579
59 years
Education level of Bac+4 and
2,792** 0,013 3,894** 0,019
manager more

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Experience of Less than 5
manager years
between 5 and
10 years
R-2 of Cox & Snell
R-2 of Nagelkerke
*Significant at 10% ; ** Significant at 5% ;
*** Significant at 1%
Tests from table 12 indicate that the nature of
training of the manager positively and significantly affects
AIS complexity. Indeed, AIS is more complicated when
the manager has a background in management science.
This latter controls financial tools, his training encourages
him to use accounting numbers as he is aware of their
importance. Thus, the mission of internal accounting is
positively and significantly associated with AIS
complexity. The manager who is assisted by an internal
accountant, "accounting" or "Management Controller",
-0,288 0,838
-4,328** 0,026
21,5% 36,6% 45,1%
33,9% 55,3% 68,1%
has a more complex AIS than a manager assisted by an
internal accounting "bookkeeper" or a manager who is not
assisted by an internal accounting. This result, which
corroborates that of Chapellier (1994), confirms the
relationship between the mission of internal accounting
and accounting practices. He noted that the link is even
more important than when the employee is an accountant
controller. A manager with a background in management
science has a complex AIS. The manager who is assisted
by an internal accountant "accounting" or management
controller" disposes of a complex AIS.

Table 12: Estimation of the impact of contingency variables on AIS complexity according to the following three models
(binary logit)

Model 7 Model 8 Model 9

Variables Modalities
P-Value P-Value P-Value
Sector Industry 23,098 0,998 20,566 0,998
Indebtedness 1,925 0,167 1,283 0,164
between 20 and 29 years 2,622 0,297 0,230 0,899 0,221 0,898
Between 30 and 39 years 1,880 0,299 -0,021 0,987 -0,254 0,842
Age of manager
between 40 and 49 years 2,573 0,206 0,877 0,540 1,997 0,160
Between 50 and 59 years 1,033 0,536 -0,453 0,716 1,171 0,399
Experience of Less than 5 years 0,342 0,803
manager Between 5 and 10 years -4,568** 0,024
Education level of
Bac+4 and more 4,362** 0,030 1,970** 0,028
manager
Nature of
education of Manager -0,811 0,651 1,795* 0,078
manager
Mission of internal Accountant and
2,218** 0,015
accountant management
R-2 of Cox & Snell 45,3% 31,4% 28,2%
R-2 of Nagelkerke 68,4% 47,4% 42,6%
*Significant at 10% ; ** Significant at 5% ;
*** Significant at 1% We can justify the absence of a significant
relationship between company size and age and AIS
The results of model 10 and 11 indicate that level complexity in that these two variables were not introduced
and nature of internal accountants training are positively only in two models out of the twelve because of the strong
and significantly related to AIS complexity in that the correlation between them on the one hand, and with other
manager assisted by an employee-accountant with a variables, on the other hand. We also believe that the
higher training in accounting or accounting and finance limited size of the sample or the difference between the
has a more complex AIS. Results on this topic are mixed. Tunisian context and that of other studies may be the
The manager assisted by an internal accountant with Bac cause of this non-significant link with AIS complexity.
+4 level of training in accounting and / or finance has a
complex AIS. (See table 13). The third variable that has no significant
relationship with AIS complexity is indebtedness. This
It should be noted that among structural non-significant relationship can be justified by the non
contingency factors, we have not found a significant link effectiveness of our method while approaching this
between company size, age, sector and indedebtedness. concept. As was the case of the study of Lavigne (2002),

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we could have included in the questionnaires another
section to fill by the financial institution to have an idea
about the requirement of financial statements, bonds
required, institutional involvement, the involvement of
officers and trust relationships (Lavigne and St-Pierre,
2002). Approaching indebtedness in greater depth could
have given more accurate findings.
The final structural variable "industry" has no
significant relationship with AIS complexity. In other
words, industry does not explain the observed variations
in the degree of use of the AIS. Four types of activities
have been identified: industry, trade, construction and
others which include the remaining categories. Because
the distribution of firms in our sample is not fair, the
results may be biased. To limit the size effect, we grouped
the companies into two groups of equal size: industrial /
non-industrial, but the result is still not significant.
As for the behavioural contingency variables, we
expected a better result of the effect of courses or training
of the internal accountant on AIS complexity. This
relationship has not been confirmed since this variable
was not present in a single model because of its strong
relationship with other explanatory variables. We can also
justify this non-significance by the limited size of the
sample of internal accountants who responded to the
profile section of the internal accountant (many SMEs do
not have internal accountants).
The second behavioural variable which has no
significant relationship with AIS complexity is
involvement of the expert-accountant in company
management. This non-significance may be justified, as is
the case with the previous variable. This variable is not
presented in only a single model because of its high
correlation with other variables.

Table 13: Estimation of the impact of contingency variables on AIS complexity according to the following three models
(binary logit)

Model 10 Model 11 Model 12

Variables Modalities
P-Value P-Value P-Value
Indebtedness 0,740 0,507 1,072 0,364
Sector Industry 21,648 0,998 -53,273 0,996 20,973 0,998
Less than 5
-1,784 0,149 -,740 0,621
Experience of years
manager Entre 5 et 10
-1,565 0,236 -0,221 0,881
ans
Education level of
Bac+4 and
internal 3,222** 0,025
more
accountant
Nature of
Accounting 2,424* 0,094
education of
internal
Finance -15,220 0,997
accountant
No expert-
-53,851 0,996
Involvement of the accountant
expert-accountant Weak
-34,551 0,997
involvement
between 20 and
0,570 0,757
29 years
between 30 and
1,333 0,390
39 years
Age of manager
between 40 and
2,422 0,128
49 years
between 50 and
-0,859 0,526
59 years
In-company coures
1,814 0,164
or training
R-2 of Cox & Snell 33,9% 44,8% 34,5%
R-2 of Nagelkerke 53,7% 70,8% 54,6%
*Significant at 10% ; ** Significant at 5% ;
*** Significant at 1%

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3.3 Relationship between AIS Complexity of SMEs
and their Financial Performance
The last expected result in this research comes
from an exploratory study. We check the presence of a
potential relationship between AIS complexity and
financial performance in Tunisian SMEs. To investigate
this relationship, we decided to work on the STATA
software.
To explore this relationship in depth, we use the
classical regression model (linear). Therefore, we have the
following two regression models:
ROA= 0+ 1 C.SIC+ 2 SA + 3 ENDT+
ROE= 0+ 1 C.SIC+ 2 SA + 3 ENDT+
ROA = turnover before taxes, interest, depreciation
and provisions / Total Assets
ROE = turnover before taxes, interest, depreciation
and provisions / Equity
C.SIC = AIS complexity
SA = sector
DEBT = indebtedness
0 = The constant term of the model
i = regression coefficient of the variable (i ranging
from 1to 8)
= error term
We chose as control variables sector and
indebtedness. We selected these two variables because
after correlation tests performed in the framework of the
binary logistic regression models, they are not correlated.
In addition, they showed no significant relationship with
AIS complexity, and we avoid any problem of
multicolinearity between the three variables.
We want to check whether this function can be
studied using a linear regression. To do this, we submit
our equation to linear regression terms:
Normality of residuals
Homoskedasticity of residuals
Absence of multicolinearity between explanatory
variables
We check normality of residuals by a chi-square
test with two degrees of freedom. Our null hypothesis
assumes normality of residuals. The following table gives
the results of the test:
Table 14: Results of normality of residuals
ROA ROE
Chi-square 56,13 - with a larger sample, we could have had a better result. As
P-Value 0,000 0,000
The results indicate that residuals of these two
models are normally distributed at a significance level
= 1%, then the null hypothesis of normality of residuals
is accepted. Next we use the Cook Weisberg
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homoskedasticity test on STATA. The hypothesis of
absence of problems of heteroskedasticity of residuals is
confirmed (P-value null). (See table 15).
Table 15: Homoskedasticity test
ROA ROE
Chi-square 25,53 27,48
P-Value 0,000 0,000
We have already checked absence of correlation
between the three variables (AIS complexity,
indebtedness and industry).
We presented the results of the linear regression
of ROA and ROE approached mainly by AIS complexity
and two control variables which are industry and company
indebtedness.
The table 16 summarizes the relationships that
may exist between financial performance approached by
two different ratios (ROA, ROE), and three variables
which are namely AIS complexity, indebtedness and
industry. The results show that both models are weakly
significant with R2 not exceeding 13.21%. The first
model shows no correlation between AIS complexity,
indebtedness and financial performance approached by
ROA. The second model shows a negative and a
significant relationship at the 5% level between the
variable "AIS complexity' and financial performance as
approached by ROE. Thus, there is a negative and
significant relationship between AIS complexity and
financial performance, the more complex AIS is, the more
the SME becomes less efficient.
It is noteworthy that the first model is not
significant, while the second is significant at the 10%
level. Thus, the results of this exploratory study are not
robust because R2 is not very important. We expected a
better result on the effect of AIS complexity on financial
performance when approached by ROE. This relationship
is significantly negative. If AIS is able to improve
financial performance, it is through its determinants. Only
three contingency variables among the seven variables
which have a significant effect on AIS complexity and
also have the same effect on financial performance.
However, when we tested the direct effect of these
contingency variables, which have a significant effect on
AIS complexity, we were able to show that ownership
structure and managers experience have a negative and
significant impact on financial performance. This result
may be the reason for which AIS complexity has a
negative impact on financial performance. We believe that
a reminder we have accounting figures of only 107 SMEs.
In addition, limiting ourselves to financial performance is
reductionist, we could have added to it organizational
performance by focusing on market share, customer
satisfaction and innovation.
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Table 16: Estimation of the impact of AIS complexity on financial performance using ROA and ROE

Variables ROA ROE

Coef. P-Value Coef. P-Value
AIS complexity
-0,012 0,560 -0,862 0,021
Sector 0,177 0,049 0,140 0,924
Indebtedness 0,005 0,952 -1,691 0,229
R2 1,92% 13,21%
Fishers F 1,36 2,64
Significance 0,265 0,059

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Appendix 1: Models Summary

Model 1 Model 2 Model 3

Company age Company size Sector
Indebtedness Sector Indebtedness
Exports Indebtedness Exports
Exports Experience of manager

Model 4 Model 5 Model 6

Ownership structure Age of manager Age of manager
Indebtedness Sector Sector
In-company courses and training Indebtedness Indebtedness
by internal accountant Education level of manager Education level of manager
Experience of manager
Model 7 Model 8 Model 9
Experience of manager Sector Education nature of manager Mission of internal accountant
Indebtedness Sector Sector
Age of manager Indebtedness Age of manager
Education level of manager Age of manager Education level of manager
Education nature of manager

Model 10 Model 11 Model 12

Education level of internal Education nature of internal In-company courses and training by
accountant accountant internal accountant
Sector Sector Sector
Indebtedness Experience of manager Indebtedness
Experience of manager Involvement of the expert- Age of manager
accountant in managing the
company

Appendix 2: Summary of Results

Studied relationships Bivariate analysis Multivariate analysis

Company age/AIS complexity Non significant Non significant
Company size/ AIS complexity Non significant Non significant
Sector/ AIS complexity Non significant Non significant
Ownership structure/ AIS complexity Positive and significant Negative and significant
indebtedness/ AIS complexity Non significant Non significant
Exports/ AIS complexity Positive and significant Positive and significant
Age of manager/ AIS complexity Non significant Non significant
Experience of manager/ AIS complexity Positive and significant Negative and significant

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Education level of manager/ AIS complexity Positive and significant Positive and significant
Education nature of manager/ AIS complexity Positive and significant Positive and significant
Education level of internal accountant/ AIS complexity Positive and significant Positive and significant
Education nature of internal accountant/ AIS complexity Positive and significant Positive and significant
Mission of internal accountant/ AIS complexity Positive and significant Positive and significant
In-company courses and training/ AIS complexity Positive and significant Non significant
Involvement of expert-accountant/ AIS complexity Positive and significant Non significant
AIS complexity /financial performance (ROA) Non significant Non significant
AIS complexity /financial performance (ROE) Non significant Non significant

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Usefulness of Accounting Information System in Emerging Economy:

Empirical Evidence of Iran
Mahdi Salehi (Corresponding author)
Assistant Prof. Accounting and Management Department, Zanjan University, Iran
Tel: 98-912-142-5323 E-mail: Salehimahdi_ir@yahoo.com

Vahab Rostami
Faculty Member of Pyame Noor University, Zanjan Branch, Iran

Abdolkarim Mogadam
Faculty member of Pyame Noor University, Gharmsar Branch
Accountancy at Allamehtababtabi University, Tehran, Iran
Abstract
The main objective of an accounting information system (AIS), a pre-eminently user-oriented system, is the
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. The results of this study show that although AIS is very useful to Iranian corporation, it is a gap
between what AIS is and what should be.
Keywords: Information system, Accounting Information System, Iran
Introduction
AIS of the past focused on the recording, summarizing and validating of data about business financial
transactions. Accounting systems that were previously performed manually can now be performed with the help
of computers. Therefore, improvements in the information technology have facilitated the use of cost and
management accounting procedures. Developments in IT have been paramount in recent decades, and they have
been leading developments in the globalization of markets and societies (Castells, 1996). In the view of the fact,
it is widely acknowledged that IT plays an important role in the field of accounting; IT can be strategic weapons
to support the object and strategy organizations. Some business organizations get competitive advantage by
equipping new information systems. Therefore organizations tend to increase the money for IT, which makes the
ratio of IT investment to their total budget higher.
In an era of global competition, the key to a firms survival is the continuous improvement of its performances.
AIS of the past focused on the recording, summarizing and validating of data about business financial
transactions. These functions were performed for the various groups within the organization that were concerned
about the respective decisions associated with financial accounting, managerial accounting, and tax compliance
issues (Hollander et al. 1996).
The need to integrate these often diverse systems led to the accountants appreciation of shared databases that
provide a cohesive picture of the organizations data, eliminating duplications and reducing data conflicts
(Moscoveet al. 1999).
The bold claims that technology has had the most important impact as accounting has been transformed into a
knowledge services profession have in general been poorly reflected in recent accounting research. Furthermore,
the research tradition in the AIS field, concentrating on, for example, transaction processing, data structure
modeling, computer fraud and security as well as system development methodologies, seems not to have
produced a useful understanding of the interplay between modern IT and accounting/management control
(Granlund & Mouritsen, 2003). According to Flynn (1992), the effectiveness of accounting information systems
can be received providing management information to assist concerned decisions. By Corner (1989) the
effectiveness of AIS can be evaluated as added value of benefits. Gelinas (1990) considers the effectiveness of
AIS as a measure of success to meet the established goals. The success of AIS implementation can be defined as
profitably applied to area of major concern to the organization, is widely used by one or more satisfied users, and
improves the quality of their performance. According to the above benefits which drives from AIS to corporate

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sector, in this paper the authors try to illustrate this importance as well in developing country namely, Iran. Here
before explaining AIS, the authors briefly going to explain on information system.
Information Systems
An information system is an organized means of collecting, entering, and processing data and storing, managing,
controlling, and reporting information so that an organization can achieve its objectives and goals (Romney et al.,
1997:18). This definition of information system shows that an information system has following components.
Every information system is designed to accomplish one or more goals or objectives. For example, an
information system may be designed to collect and process data about employees to help managers prepare
payroll reports.
Inputs: Data must be entered into the information system to be processed.
Data are the facts that are collected and processed by the information system. Data are meaningless and useless,
which, therefore, should be processed and transformed to meaningful, organized, and useful form that is called
information.
Outputs: Output is the meaningful and useful information produced by the information system. For example,
weekly payroll report produced by the information system is an output.
Data storage: In addition to the external data entered into the information system, there should be internally
stored data used for processing.
Processors: In order to produce useful and meaningful information, data must be processed. Most companies
process data by using computers.
Instructions and Procedures: An information system produces data by the following instructions and
procedures. In computerized information systems, software includes procedures and instructions that direct
computers to process the data.
Users: Users are people who use the information produced by the system and who interacts with the system. For
example, managers who use financial statements that are produced by an accounting information system are the
users of the information system.
Control Measures: In order to make the information system produce correct, and error free information,
necessary measures should be taken to protect and control the information system.
Any system that includes the above components is known as an information system. The following section will
show how accounting systems are established using these components.
AIS
Accounting is the service function that seeks to provide the users with quantitative information. On the other
hand, AIS is an information system that is designed to make the accomplishment of accounting function possible.
AIS processes data and transactions to provide users with the information they need to plan, control, and operate
their businesses (Romney et al., 1997:2).
AIS can be a manual system, or a computerized system using computers. Regardless of the type, AIS is designed
to collect, enter, process, store, and report data and information.
Importance of AIS
Generally, information system is the whole of the related components that are working together to collect, store
and disseminate data for the purpose of planning, control, coordination, analysis and decision making.
On the other hand, an AIS is the whole of the related components that are put together to collect information,
raw data or ordinary data and transform them into financial data for the purpose of reporting them to decision
makers.
The most important and oldest of the present systems in businesses is certainly the Management Information
System. Management and information are two inseparable concepts and show the impossibility of the
rational execution of management activities without information. Management Information System consists of
many subsystems. Accounting Information System is one of these subsystems and the oldest one.
The accounting information system that is created in a business is directly related to the organizational culture,
level of strategic planning and the information technologies that this specific business has. It is possible to obtain
healthier information about the financial structures of the businesses that have set up a good accounting
information system. Some of the important functions that an accounting information system perform in a

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business are: collecting and recording data about the activities and transactions; planning; processing the data
and turning it into information to be used in decision-making for planning, application and control activities; and
carrying out the necessary controls in order to protect the business assets.
Accounting information plays an important role in the process of managing an enterprises activity. In the last
ten years, there has been an intensive process of implementing AIS in the world. These systems were
implemented in large industrial and small trade enterprises. Later, implementation of AIS started in other
enterprises and state institutions. The implementation of AIS is quite an expensive investment project for most
enterprises. However, in practice, the decision on which AIS to actually implement is, in most cases, based on
advertisement or the suggestions of associates. Flynn (1992) has found that only 20% information systems were
used successfully, while other installation effect was neutral or negative. These arguments show an importance
for evaluating the AIS effectiveness.
According to Flynn (1992), the effectiveness of AIS can be received providing management information to assist
concerned decisions with regard to the successfully managing of corporations. By Corner (1989) the
effectiveness of AIS can be evaluated as added value of benefits. Gelinas (1990) considers the effectiveness of
AIS as a measure of success to meet the established goals. The success of AIS implementation can be defined as
profitably applied to area of major concern to the organization, is widely used by one or more satisfied users, and
improves the quality of their performance. On the basis of made research authors come to conclusion, AIS
effectiveness can be considered as successful use of system, which ensures users needs.
The effectiveness of AIS can be evaluated using one or several models. Usage of several models increase
reliability of evaluation.
Features of AIS
Information system is perceived as an entirety of information processing system and resources of an enterprise
meant to form and disseminate information. Lucey (1991) has established that the system of information is a set
of unanimously operating people, data and procedures for the purpose of providing useful information.
Contemporary IS cannot function without computers and other technical means to measure primary information,
gather and register it in carriers, process and transmit it to consumers. For this reason computerized information
systems (CIS) are designed and implemented.
Some other researchers (Domeika, 2005) consider software an important element of computerized IS with which
technical equipment is able to arrange information in an automated way, create accounting CDB and is available
to users according to their needs. CIS of an enterprise accounting help to automate the processes of enterprise
performance accounting and arrangement of analytical information. Accounting, being a special information
system, should reveal the real picture of enterprise capital increase, sources of income and added value formation,
approaches for revenue and profit distribution, scope of consumption and storage.
Under the development of market economics the requirements for accounting information are changing and there
should be a significant step towards the improvement of methodology of its preparation, processing and issue to
users. When Lithuanian accounting is integrating into the system of European accounting it is not sufficient to
have good law regulating accounting, forms of financial reports, plan of accounts, standards of business
accounting. Other elements are also important for the system of accounting including profession of accounting
and code of its ethics, training and retraining of specialists of accounting, scientific research of accounting, etc.
(Mackevicius, 2007, Bruzauskas et al, 2005). The quality of accounting information is also determined by other
factors such as the level of primary information automation, functionality of computer software, integration of
accounting and other types of economic information, etc. Accounting information is closely related to other
types of economic information such as normative and target information and, especially, analytical information
(or results of analysis). Accounting in its broad sense includes not only accounting itself but also the analysis of
economic performance, management control and internal audit.
For a long time the analysis of an enterprise economic performance in western countries used to be restricted to
the analysis of the financial state, that is, the research of an enterprise cost-effectiveness, solvency. In the 2nd part
of the 20th century a contemporary system of accounting evolved whose core elements were as follows: financial
accounting and accountability, management accounting and control, financial analysis on the basis of financial
accountability. Economic analysis should definitely not limit itself to the analysis of financial performance
merely; rather, it should encompass all conjunctions of economic performance. The object of economic analysis
is economic performance of enterprises. Economic analysis occupies the intermediate position between the
selection of information and processing functions and the functions of decision making. Creating and
implementing the accounting IS the objectives of economic analysis and their solutions should become an

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inseparable part of AIS. In sum, it arises to help managers at every position, according to Mitchell et al. (2000)
argued that accounting information could help manage short-term problems in areas such as costing, expenditure
and cash flow by providing information to support monitoring and control.
However, the existing literature provides little evidence of AIS development within corporations. Many studies
suggest that corporations have little management information and poor control, and that decision-making is
mostly ad hoc (Marriot & Marriot 2000). McMahon (2001), for example, suggested that financial accounting has
remained the principle source of information for internal management in corporations. Marriot & Marriot (2000)
also suggested that financial awareness among managers of corporations varies considerably and that the use of
computers for the preparation of management accounting information is not at its full potential.
Advantages of AIS
According to the several researchers, AIS have a lot of benefits to any company and corporation as follow:
1. Good cooperation
Any thing is always linked to certain environment, exists and develops third-party logistics enterprises in the
supply chain linking play a role of a bridge. Although the third-party logistics business as a separate entity exist
in the market, it and other enterprises still have to maintain a close relationship. This is because the consumers in
order to ensure normal operation of their production, they must understand and control the flow and the keeping
of materials timely, which calls that third-party logistics enterprises accounting information systems cooperate
with up-downstream enterprises, together control and manage the value-added activities occurred in the whole
supply chain, and achieve really supply chain competition. In addition, in the traditional enterprise organization
mode, the enterprise's business activities are divided in accordance with the functions and implement, so the lack
of co-ordination between departments the "islands of information" inevitably come into being. The new system
really record and reflect the economic business activities, do not require accountants note into the system
according to the pre-format, consequently avoid duplication of information collection and shortcomings; and
accountant no longer were limited to the accounting departments, but to participate in the enterprises operational
activities to coordinate other departments do well accounting information records and analytical work. In
addition, other companies could line on a third party logistics enterprises accounting information system through
the Internet, timely query and know the flow situation of logistics, do well their production plans.
2. To meet the needs of multi-users
With the change of the environment, the use objects of accounting information become expansion, including all
levels of enterprise management, all investment bodies outside, government agencies, intermediary organizations,
and so on, among them there are accountant and non-accountant. Traditional accounting information system can
only generate financial statements afforded to financial executive and fewer accounting information, which make
the use objects become narrow. But in the new system entity DB record all resources and economic business
activities, users through event-driven buttons on interactive interface can get the information they want.
According to the value chain management, any of the activities should be the value-added process, and account
is a measure means of the value of economic activity, therefore, any economic activity through the accounting
information system can be measured and reflected. However, as part of the current business activities can not be
measured by money, and we are currently unable to find suitable means of measuring the value, which caused
some economic activities not reflected through accounting information system.
3. To control afterwards, and control in advance and in concurrent
Account has the functions of supervision and control of the economic activities of the enterprise. And the
traditional manual account and of the computer accounting system for "accounting" can only do inspection
afterwards, the mistakes could not be avoided. New accounting information system integrate of real-time
processing, the standard cost, authorized the approval process control, budget management, and so on, so that
employees based on the standard budget, change from passive to active to manage their own activities, do
Real-time check, control, and timely identify problems, correct deviations and do truly Control afterwards, in
advance and in concurrent.
Brynjolfsson and Hitt (2003) estimated a production function for a panel of 600 large US firms, finding that the
contribution of IT investments to output growth significantly exceeds its factor share, implying a positive effect
of computers on productivity growth in the long-run. The results also suggest that IT capital deepening is
associated with far-reaching organizational changes within the firm.
OECD (2004) gathers a set of empirical papers that offers a comprehensive overview of the impacts of IT on
economic performance in advanced countries. The nine studies based on micro-data show significant impacts of

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digital technologies on firm-level performance. In most cases there is also evidence that IT investment is
associated with more rapid TFP growth and that this effect differs across industries. Firms in the financial sector
are among those that have benefited more from the new technologies.
Research Problem
The developments in information technologies, together with globalization and international legal arrangements,
have generated such notions as new economy, e-commerce and new accounting. In addition, these
developments have been useful in saving time and money and reducing the costs by accelerating transactions and
communication. The developments in information technologies have caused all or some of the financial
transactions in a business to be carried out in such different forms in electronic environments as electronic
commerce and electronic data exchange. This, as a result, caused the financial transactions to be removed from
the traditional paper-based activity environment to the electronic environment in the accounting information
system, which is described as the language of a business, and therefore, resulted in changes in all processes such
as recording, classification, reporting and analysis. At the same time, this change has also affected such
accounting applications as keeping the books, preparing financial statements and tax statements, auditing
activities and, therefore, the activities of the members of the accounting profession.
The above-mentioned developments in information technologies, which made the changes in accounting
information system, applications and profession inevitable, also created a change in the demands of the society
and an increase in the expectations from the members of accounting profession. So, in this paper the authors try
to shows the significance of accounting information system in developing country, namely Iran.
Related literature
Computers are now a key resource in accounting and financial information processing. Furthermore, major
advances in information technology (Seligman, 2000) as well as the existence of observable and tangible
economic benefits (Botosan, 1997 and Seligman, 2000) have driven traditional auditing and financial reporting
ever closer to being real-time tasks. Companies like Cisco Systems have made significant progress in making
real-time financial reporting a reality (Seligman, 2000). Seligman (2000, p.148) reports that Cisco Systems is
one of the rare companies today in which the boss can clap his hands and get the books closed within an hour.
Real-time financial reporting
Although real-time financial reporting provides benefits to investors and financial analysts, prior discussion
regarding the use of technologies that would bring the business community closer to real-time financial reporting
has raised several concerns. For instance, when Cushing (1989) wrote about the emergence of the Securities and
Exchange Commissions EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system (SEC, 2000 a), he
examined the feasibility and consequences of using a database approach to corporate financial reporting. The
database approach is a precursor to the current Internet client/server based portal approach. At the time of
Cushings work, the World Wide Web did not exist, and Bernard-Lees HTML (W3, 2000) was not yet invented.
Nonetheless, the issues addressed by Cushing are still relevant and point to a need for reexamination of the
content of accounting information systems education. In his work, Cushing found that the database approach
would be feasible for financial reporting. Yet, he also recognized that this approach would have varying
economic effects on several players in the economy. One of his observations dealt with which players might
support the database approach and which ones might oppose it. Cushing (1989) conjectured that the most likely
supporters of the database approach would be governmental agencies involved in regulatory enforcement,
accounting scholars, and the data processing industry. On the other hand, the most likely opponents might be
corporate management, corporate accountants, financial analysts, and investors with private access to inside
information. Cushing (1989) argued that corporate management might object to the database approach because it
would hinder their ability to manipulate financial information in a manner that best serves their self-interest.
Cushing believed that the database approach would enable meticulous monitoring and appraisal of
managements accounting choices. As a result, he reasoned that this approach would almost certainly lead to
restrictions in these choices, and that corporate management might experience a significant reduction in their
ability to manage earnings. Similar arguments could be made about real-time financial reporting in the context of
today's environment as it could lead to greater transparency in financial reporting and enable more efficient
monitoring of managements accounting method choices. Since 1989, technological advancements and the
World Wide Web have transformed the way users of financial reports seek financial information and how
corporations have supported (albeit selectively), through their web pages, users' demand for timely information.
The emergence of the World Wide Web has also made the nearly real-time financial reporting convenient and
economical for individual investors. Constantly updated World Wide Web pages have shown investors that they

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may have the opportunity to acquire financial information on a real-time basis. It might be argued that the cost of
disclosing information real-time and/or the fear of passing on proprietary information to competitors might
discourage companies from disclosing their financial information in a real-time manner. However, these
disadvantages might be offset by the impact of timely disclosures on the cost of capital. Botosan (1997) found
that the cost of capital is lower for companies (particularly smaller entities) that provide more thorough and
timely financial disclosure than those companies that do not. Botosans findings provide some insight into the
potential benefits that might accrue from real-time financial reporting.
Assurance services for real-time reporting
The quality and effectiveness of real-time financial reporting is contingent upon the ability to provide real-time,
continuous financial auditing. Continuous auditing has been defined as "a methodology that enables independent
auditors to provide written assurance on a subject matter using a series of auditors' reports issued simultaneously
with, or a short period of time after, the occurrence of events underlying the subject matter" (CICA/AICPA,
1999). Continuous auditing requires a high degree of automation. It is also dependent upon (a) precise
definitions of the data underlying the items to be audited, (b) use of real-time controls to signal errors and
irregularities, and (c) automated integrated audit agents and other technologies that enable collection, analysis,
summarization, and reporting of audit evidence and opinions. Like real-time financial reporting, real-time,
continuous auditing also creates a need for a new breed of accounting information systems professionals, who
are not only well-versed in traditional audit and accounting methods, but also information technology (IT).
Changing nature of financial information systems and enabling technologies
The possibility of sharing very timely financial data and information on the Web has accelerated many new
developments in financial reporting that have the active support of the corporate community. One such
significant breakthrough is XBRL (Extensible Business Reporting Language, 2000), a variation of XML
(Extensible Markup Language), for financial reporting. XBRL is expected to make it easier to locate, retrieve,
and use financial data that are published on the Web. Moreover, by establishing penalties for private, preemptive
disclosure of financial information to exclusive groups such as financial analysts, the recent SEC fair disclosure
ruling provides additional impetus for advances in real-time reporting to the entire business and investing
community (Seligman, 2000). Corporations may now attempt to make timely (including real-time) information
available to all market participants rather than select groups of analysts and investment bankers. In order to reach
a distributed audience, real-time financial reporting and auditing require sophisticated network technology and
Web-based systems. As advances in real-time financial reporting and auditing continue, a new breed of
accounting practitioners and accounting scholars may question and subsequently reexamine some of the
fundamental assumptions made under the guise of manual systems usage during most of the last century. As
demonstrated by EDGAR (SEC, 2000 a) and other media available via the World Wide Web, the fundamental
assumptions underlying modern accounting may need to be thoroughly reexamined in this post-modern age in
which the media for financial communication is no longer confined to a linear time frame, but rather is capable
of accommodating spatial data points within dynamic financial transactions.
Hypotheses development
According to Huber (1990, p.65), use of advanced IT leads to more available and more quickly retrieved
information, including external information, internal information, and previously encountered information, and
thus leads to increased information accessibility. Firms with extensive resources may gain a competitive edge
by deploying IT in support of or to strengthen their business (King et al. 1989). Chan et al. (1997) and Hussin et
al. (2002) found that an appropriate level of IT sophistication was associated with the capability to align IT
strategy and business strategy. Hence, it is expected in well developed country used higher level IT and visa
versa.
According to the benefits and advantages of IT and research problem the below hypotheses is postulated to give
clear answer to the researchers:
First hypothesis: utilizing of accounting information counseling cause to increases accounting and financial
performance.
Second hypothesis: Accounting information system cause subtle predict of company future.
Third hypothesis: Accounting information system cause to more correctness of financial reporting.
Forth hypothesis: Accounting information software improves accounting standards in Iran.
Fifth hypothesis: Accounting information software confirms with other financial and managerial systems.

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Sixth hypothesis: Accounting information system covers all information needs of company.
Seventh hypothesis: Accounting information system covers all management levels information in Iran.
Research methodology
So far accurate answer to the research question, the authors design and developed a questionnaire which it is the
most suitable for this study. A survey questionnaire was completed by the financial managers of Iranian
corporations. The questionnaire contains two parts namely (A) bio-data and (B) this section includes several
deep questions related to AIS application and usefulness in Iranian corporations. The questionnaire was based on
Five-Point Likert,s Scale questionnaire. The Five-Point Likerts scale having the ratings of strongly disagree (1)
and strongly agree (5) were used. Totally 600 questionnaire were distributed among the financial managers in
Iran. Out of 600 questionnaires, 498 useable questionnaires were returned in first Feb to end of April 2009.
Table 1 shows more details of participants regarding gender, academic degree, experience, and background of
study of 498 participants. According to Table 1, 75.50% of participants were male and 24.10% were female. In
sum, majority of participants were male. Majority of participants had bachelor degree (240 numbers, 48.20%),
followed by 46.78% master degrees. Minority of participants had diploma degree (2.61%). The least number of
participants had PhD degrees (2.41%). To conclude, majority of Iranian financial managers in this study had
bachelor degrees.
Regarding to experience, 258 participants had more than 10 years experience, followed by 23.70% more than 15
years experience. Least number of participants had lee than 4 years experience (0.80%).
Regarding to the academicals background, 67.27% had accountancy background. More than 25% of participants
had management background.
Insert Table 1 Here
Testing of hypotheses
For the purposes of testing hypotheses the suitable test was adapted in this study. Chi Square Test was employed
in this study and the results of hypotheses are shown in Table 2.
First hypothesis: utilizing of accounting information counseling cause to increases accounting and financial
performance.
According to Table 2 the mean value, S.D, and D.f are 3.965, 1.434, and 2 respectively. The results of above
mentioned table shows that the first hypothesis is accepted. It means the utilizing of accounting information
counseling cause to increase accounting and financial performance. Hence null hypothesis is rejected. To
conclude, for improving accounting and financial performance sophisticate AIS should be adapt in Iranian
corporations.
Second hypothesis: Accounting information system cause subtle predict of company future.
With reference to Table 2, this hypothesis also accepted and null hypothesis rejected. In other words,
implementation of high AIS leads to better future prediction of corporations in Iran.
Insert Table 2 Here
Third hypothesis: Accounting information system cause to more correctness of financial reporting.
Table 2 shows that this hypothesis also strongly accepted in Iranian corporate sector. It means, any company
which adapted high AIS it has more correct financial statements as well as reliable financial reporting.
Forth hypothesis: Accounting information software improves accounting standards in Iran.
With regard to Table 2 this hypothesis rejected and null hypothesis accepted, in other words, accounting
information software does not harmonize with Iranian accounting standards.
Fifth hypothesis: Accounting information software confirms with other financial and managerial systems.
According to Table 2 this hypothesis also rejected and null hypothesis accepted, in other words Iranian AIS does
not confirms with other financial and managerial systems, so there is a gap between AIS and financial and
managerial systems. In reality it causes very weakness to Iranian corporations because if all systems fit each
others then company will take off to any target.
Sixth hypothesis: Accounting information system covers all information needs of company.
As Table 2 shows the sixth hypothesis also rejected and null hypothesis accepted, in other words, Iranian AIS
does not provide suitable information to company, so those companies can not make decision with reliable data.

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According to the authors view points, the major weakness of Iranian corporations is that they are implementing
AIS but it is not very useful to corporations, so there is also gap so called AIS gap.
Seventh hypothesis: Accounting information system covers all management levels information in Iran.
The seventh hypothesis also rejected by Table 2. It means that AIS in Iran does not covers and provide
management levels information. It is another weakness of Iranian corporations which available AIS do not
provide managements information needs.
Conclusion
Accounting information systems of the past focused on the recording, summarizing and validating of data about
business financial transactions. These functions were performed for the various groups within the organization
that were concerned about the respective decisions associated with financial accounting, managerial accounting,
and tax compliance issues (Hollanderet al.1996). The need to integrate these often diverse systems led to the
accountants appreciation of shared databases that provide a cohesive picture of the organizations data,
eliminating duplications and reducing data conflicts (Moscove, et al. 1999). The results of this study showed that
AIS improve financial statements and reporting correctness in Iran. However, the results also revealed that there
is hug gap between what AIS and what should be. The major weakness of AIS in Iran as follow: in is not
affected to Iranian accounting standards, it is not confirms with other financial and managerial systems, it is not
covers all information needs have company and financial information and it is not covers all management levels
information in Iran. So, to this situation, the managers which are aware of AIS benefits should take more as well
as academicals action for reducing such gaps in Iranian corporate sectors.
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Table 1. General information of participants

Variable Number Percent
Male 378 75.90
Gender
Female 120 24.10
Diploma 13 2.61
Academic B.S 240 48.20
degree M.A 233 46.78
PhD 12 2.41
Less than 4 4 0.80
5-9 118 23.69
Experience
10-14 258 51.81
More than 15 118 23.70
Accountancy 335 67.27
Background of Business management 128 25.70
the study Financial management 22 4.42
Other 13 2.61

Table 2. Results of testing hypotheses

Chi
Hypotheses Mean S.D d.f Asymp. Sig Results
Square
First hypothesis 3.965 1.434 2 8.600 0.014 Accepted
Second hypothesis 2.123 0.527 3 13.868 0.003 Accepted
Third hypothesis 2.297 0.786 3 10.140 0.017 Accepted
Fourth hypothesis 2.485 0.649 1 4.118 0.981 Rejected
Fifth hypothesis 2.316 0.635 3 3.972 0.624 Rejected
Sixth hypothesis 2.461 0.792 2 0.160 0.923 Rejected
Seventh hypothesis 2.438 0.758 2 1.920 0.383 Rejected

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49 Evaluation of the Effectiveness of Accounting Information Systems

International Journal of Information Science and Technology

EVALUATION OF THE EFFECTIVENESS OF ACCOUNTING

INFORMATION SYSTEMS

H. Sajady, Ph.D. M. Dastgir, Ph.D.

Department of Economics and Social Sciences Department of Economics and Social Sciences
Shahid Chamran University Shahid Chamran University
Ahvaz, I. R. of Iran Ahvaz, I. R. of Iran
Corresponding Author: dastmw@yahoo.com

H. Hashem Nejad, M. S.
Department of Economics and Social Sciences
Shahid Chamran University
Ahvaz, I. R. of Iran

Abstract - In this study the effectiveness of accounting information systems

of finance managers of listed companies at Tehran Stock Exchange is
evaluated. The results indicate that implementation of accounting
information systems at these companies caused the improvement of
managers decision-making process, internal controls, and the quality of the
financial reports and facilitated the process of the companys transactions.
The results did not show any indication that performance evaluation process
had been improved.

Keywords: Accounting Information Systems, Quality of Financial Reports, Internal

Controls, Decision Making, Performance Evaluation.

INTRODUCTION

In managing an organization and implementing an internal control system the role of

accounting information system (AIS) is 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 [19].
Although the information generated from an accounting information system can be
effective in decision-making process, purchase, installation and usage of such a system
are beneficial when the benefits exceed its costs. 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 companys transactions. Regarding the above five characteristics, the
effectiveness of AIS is highly important for all the firms.

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 H. SAJADY, Ph.D. / M. DASTGIR, Ph.D. / H. HASHEM NEJAD 50

AIS is defined as a computer-based system that processes financial information and

supports decision tasks in the context of coordination and control of organizational
activities [19].

LITERATURE REVIEW

Accounting information system is considered as a subsystem of management

information system (MIS). To regard accounting as an information system, perhaps, is
the latest definition of accounting. For the first time in 1966, the American Institute of
Certified Public Accountants (AICPA) [1] stated that:
Accounting actually is information system and if we be more precise, accounting
is the practice of general theories of information in the field of effective economic
activities and consists of a major part of the information which is presented in the
quantitative form.
In the above definition, accounting is a part of general information system of an
economic entity. Boochholdt [2] defines accounting information systems as systems that
operate functions of data gathering, processing, categorizing and reporting financial
events with the aim of providing relevant information for the purpose of score keeping,
attention directing and decision-making.
Accounting information systems are considered as important organizational
mechanisms that are critical for effectiveness of decision management and control in
organizations.
Studies have shown that successful implementation of accounting systems requires
a fit between three factors [17]. A fit must be achieved with dominant view in the
organization or perception of the situation. Second, the accounting system must fit when
problems are normally solved, i.e. the technology of the organization. Finally, the
accounting system must fit with the culture, i.e. the norms and value system that
characterize the organization [7]. Systems will be useful when information provided by
them is used effectively in decision-making process by users. Otley [20] argues that
Accounting Systems are important parts of the fabric of organizational life and need to
be evaluated in their wider managerial, organizational and environmental context.
Therefore, the effectiveness of accounting information systems not only depends on the
purposes of such systems but also depends on contingency factors of each organization.
Accounting information systems are said to be effective when the information provided
by them serves widely the requirements of the system users. Effective systems should
systematically provide information which has potential effects on decision-making
process [12]. The effectiveness of accounting information systems has long been a
subject of many researches [4,6,14,18]. Accounting information usually is categorized

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51 Evaluation of the Effectiveness of Accounting Information Systems

under two groups; 1) information that influences decision-making and mainly used for
the purpose controlling the organization and 2) information that facilitates decision-
making process and mostly used for coordination within an organization [15,17]. Huber
[11] argues that, integration of accounting information systems leads to coordination in
organization which, in turn, increases the quality of the decisions. Some researches in
accounting show that the effectiveness of accounting information systems depend upon
the quality of the output of the information system that can satisfy the users' needs
[3,8,13,16,21].
Generally, accounting information systems; 1) provide financial reports on a daily
and weekly basis and; 2) provide useful information for monitoring decision-making
process and performance of the organization. Simon [22] in his study used the first part
of the above statement as measure of control for management and the second part for
evaluating the effectiveness of the accounting information systems via continuous
monitoring.
By reviewing research studies during 1987-1999, one finds out that 57 researches
have been conducted on the issue of accounting information systems and decision-
making the number of which shows the importance of the research in this area.
Accounting information systems provide primary data for decision-making.
Information technology has caused many changes in reporting information. Thus, the
characteristics of information currently prepared can help decision-makers seek more
alternatives to the solution of the problem in hand. Accessibility to information related
to the main transactions of an organization leads to a categorized detailed information
which facilitates decision making in any difficult situation [18].
Accounting information system is a computer-based system that Nicoloau [19]
defines as a system that increases the control and enhances the corporation inside the
organization. Management is engaged with different types of activities which require
good quality and reliable information. They also need non-financial information such as
production statistics, quality of production and so on. However, quality of information
generated from AIS is very important for management [10].
Kim [13] argues that usage of AIS depends on the perception of the quality of
information by the users. Generally the quality of information depends on reliability,
form of reporting, timeliness and relevance to the decisions.
Effectiveness of accounting information system 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 organization.
Effectiveness of accounting information systems can be analyzed on three bases: 1)
information scope, 2) timeliness, 3) aggregation. Information scope is considered as

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 H. SAJADY, Ph.D. / M. DASTGIR, Ph.D. / H. HASHEM NEJAD 52

financial and non-financial information, internal and external information that is useful
in prediction of future events. Timeliness quality is related to the ability of accounting
information system to satisfy information needs by providing systematic reports to the
user. Aggregation of information is considered as means of collecting and summarizing
information within a given time period [5].
Doll and Torkzadeh [9] for studying the satisfaction of users use some concepts to
measure the effectiveness of the accounting information systems. These concepts are
information content, accuracy, format, ease of use and timeliness.

HYPOTHESES

After reviewing relevant literature, five main variables and three moderator variables
were hypothesized.
Hypothesis 1: Accounting information systems lead to better decision-making by
managers.
Hypothesis 2: Accounting information systems lead to more effective internal
control systems.
Hypothesis 3: Accounting information systems enhance the quality of financial
reports.
Hypothesis 4: Accounting information systems improve performance measures.
Hypothesis 5: Accounting information systems facilitate financial transaction
processes.

MODERATOR VARIABLES

Hypotheses based on moderator variables are set up to see whether such variables have
any impact on the respondents responses to the research questions. One expects that
such variables do not influence the way that respondents reply to the questions in the
questionnaire.
Hypothesis 1: There is a relationship between the levels of respondents' education
and evaluation of the effectiveness of accounting information system.
Hypothesis 2: There is a relationship between the job experience of the respondents
and evaluation of the effectiveness of accounting information system.
Hypothesis 3: There is a relationship between the field of respondents' education
and evaluation of the effectiveness of accounting information system.

RESEARCH METHOD
- SAMPLE AND DATA COLLECTION

This study is based on the companies listed at Tehran's stock exchange. No specific time

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53 Evaluation of the Effectiveness of Accounting Information Systems

period is considered since it is not a time series study. A questionnaire was designed
and after pilot study was sent to the sample firms.
A population of 347 companies has been listed at Tehran's stock exchange up to
1383. These companies are distributed along fifteen industries. Our sample has been
randomly selected using sampling with no replacement process. For this, the below
formula was supposed:

N (Z2 /2) (2)

n =
2 (N-1) + (Z2 /2) (2)

347 (1.96)2 (0.29)2

n = = 95
(0.05)2 (347-1) + (1.96)2 (0.29)2

Based on the ratio of the companies in each industry to the total number of
companies in the population, the number of companies in each industry for the firms
sampled was determined.
The main data collection instrument in this study is questionnaire. For this purpose,
a questionnaire was designed after reviewing the relevant literature. The questions were
on the five point Likert-type questions, with a choice of very little to very much.
The questionnaire consisted of twenty questions, which were carefully designed to
collect relevant data. The research instrument was pilot studied, by expert panels
including faculty members. The revised instrument and a cover letter were mailed to the
specific individuals who were listed as the financial managers of the firms sampled. A
reminder was sent and non-respondents were followed up with two additional mailings.
During the first questionnaire launching, 54 questionnaires were completed and
returned. In the second and third mailings, a total of 33 more completed questionnaires
were returned. Altogether 87 questionnaires were available for data analysis.

- STATISTICAL TESTS

To test the hypotheses of this research, we used z and 2 statistics at confidence level of
95%. The research hypotheses were put in the form of statistical hypotheses such as H0
and H1. With regards to the nature of five-point scale questions, therefore, we tested
whether the mean value of each question was less than or greater than 3. Number 3 was
the average number of the five choices in each question:

1+2+3+4+5
= = 3
5

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 H. SAJADY, Ph.D. / M. DASTGIR, Ph.D. / H. HASHEM NEJAD 54

Thus, statistical hypotheses were set up as follows:

H0: 3
H1: > 3

- TESTING MODERATOR VARIABLES

To test the moderator variables and see whether they had any impact on the main
variables, in this research 2 tests were conducted.

TESTING HYPOTHESES AND ANALYZING THE RESULTS

To study the research hypotheses, eighty seven finance directors (financial managers)
were selected as final sample in this study to answer the questions put forward to them
in the questionnaire. The data collected in this way was edited and some questions
merged to measure each hypothesis. Average number of 3 was taken as the mean of the
five-point questions in the questionnaire. Table 1 shows a descriptive statistics of five
hypotheses.

Table 1: Descriptive statistics.

Std. Error from

Std. Error of

Std.Error of
Hypotheses

Skewness

Skewness
Variance

Kurtosis

Kurtosis
Mean

Mean

Mode

Max
Ave.

Std.

in
H1 3.227 0.345 3.25 3.5 0.322 0.104 -1.087 0.258 0.094 0.511 3.5 2.5

H2 3.244 0.045 3 3 0.422 0.178 0.568 0.258 -0.799 0.511 4 2.5

H3 3.75 0.549 3.75 4 0.512 0.263 -0.364 0.258 -0.252 0.511 4.75 2.5

H4 2.80 0.399 2.75 2.5 0.372 0.138 0.825 0.258 -0. 890 0.511 3.5 2.5

H5 3.58 0.474 3.5 3.5 0.442 0.195 -0.175 0.258 -0.419 0.511 4.5 2.75

- RESULTS OF THE FIRST HYPOTHESIS

Accounting information systems lead to better decision-making by managers. Z statistic

concerning the test of first hypothesis is equal to 6.47 (Table 2). By comparing this
value with the critical value of 1.645, we accept H1 and reject H0. Therefore, the first
hypothesis is accepted indicating that implementation of an accounting information

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55 Evaluation of the Effectiveness of Accounting Information Systems

system in an organization could improve decision making by managers. The average of

the questions measuring this hypothesis is 3.227 and with the skewness of -1.087. The
kurtosis of 0.094 indicates that the distribution of our data is slightly taller than normal
distribution with 0.322 standard deviation. Thus, we could conclude that our
respondents on average and slightly above the average believe that accounting
information systems lead to better decision-making by managers.

Table 2: Results of testing the hypotheses.

Standard
Hypotheses Average Z - value Conclusions
Deviation
H1 3.227 0.322 6.470 Accept
H2 3.244 0.422 5.389 Accept
H3 3.75 0.512 13.639 Accept
H4 2.80 0.372 -4.894 Reject
H5 3.58 0.442 12.298 Accept

- RESULTS OF THE SECOND HYPOTHESIS

Accounting information systems lead to more effective internal control systems. Table 2
shows the Z value of testing the second hypothesis equal to 5.389. Again, comparing
this value with the critical value of 1.645, we accept H1 and reject H0. This indicates
that from the respondents point of view accounting information systems would lead to
better internal control systems. Descriptive statistics shown in Table 1 gives the average
of 3.224 to the questions measuring the second hypothesis, skewness of 0.568, kurtosis
of -0.799 and standard deviation of 0.442. This information indicates that the
distribution of our data is slightly shorter than normal distribution.

- RESULTS OF THE THIRD HYPOTHESIS

Accounting information systems enhance the quality of financial reports. For this
hypothesis, the z value is equal to 13.639 (Table 2), which is again above the critical
value of 1.645 at the 95% confidence interval, therefore, H1 is accepted and H0 is
rejected. Thus, we may conclude that according to the respondents in this study,
accounting information systems enhance the quality of financial reports.
Table 1 reports some descriptive statistics related to this hypothesis. It shows that
the average mark for the questions measuring the third hypothesis is 3.75, with
skewness of -0.364, kurtosis of -0.252 and standard deviation of 0.512. The distribution
of our data is slightly taller than the normal distribution. Thus, we may conclude that

International Journal of Information Science & Technology, Volume 6, Number 2 July / December, 2008
 H. SAJADY, Ph.D. / M. DASTGIR, Ph.D. / H. HASHEM NEJAD 56

respondents highly believe that accounting information systems enhance the quality of
financial reports.

- RESULTS OF THE FORTH HYPOTHESIS

Accounting information systems improve performance measures. Table 2 reports the

results of testing the forth hypothesis. The z-value is equal to -4.894 which when we
compare it to critical value of 1.645, we find the H1 in the rejection area. In other
words, H0 is accepted. Descriptive statistics shown in Table 1 gives the average of 2.80
to the questions measuring the forth hypothesis, skewness of 0.852, kurtosis of -0.890
and standard deviation of 0.258. The data indicates that the distribution of our data is
slightly shorter than normal distribution. All together, we may conclude that the
respondents on average do not believe that accounting information systems improve
performance measures.

- RESULTS OF THE FIFTH HYPOTHESIS

Accounting information systems facilitate financial transaction processes. Z statistic

concerning the test of the fifth hypothesis is equal to 6.47 (Table 2). By comparing this
value with the critical value of 1.645, we accept H1 and reject H0. Therefore, the fifth
hypothesis is also accepted indicating that implementation of an accounting information
system in an organization could facilitate financial transaction processes. Descriptive
statistics shown in Table 1 gives the average of 3.58 to the questions measuring the fifth
hypothesis, skewness of -0.175, kurtosis of -0.419 and standard deviation of 0.442. This
information indicates that the distribution of our data is slightly shorter than normal
distribution. We conclude that our respondents highly believe that using accounting
information system would facilitate financial data processing.

- RESULTS OF TESTING HYPOTHESES BASED ON THE MODERATOR VARIABLES

Table 3, reveals the results of testing three hypotheses based on three moderator
variables, like the level of education, job experience and field of respondents' studies.
All the three hypotheses are rejected at 95% confidences interval indicating that
moderator variables have no meaningful effects on the perception of the respondents'
answers to the research questions. In other words, these variables have no impact on the
results of this research.

July / December, 2008 International Journal of Information Science & Technology, Volume 6, Number 2
57 Evaluation of the Effectiveness of Accounting Information Systems

Table 3: Results of testing hypotheses based on moderator variables.

Degree
Moderator 2 Critical Critical
Variables of Conclusion
hypotheses Level value
Freedom
1 Education 0.4559 2 0.05 5.99 Reject
2 Experience 4.632 4 0.05 9.488 Reject
Field of
3 2.508 2 0.05 5.99 Reject
study

DISCUSSION, LIMITATIONS AND CONCLUSIONS

This study examined the effectiveness of accounting information systems (AIS) in five
different extents: better decision-making by managers, more effective internal control
systems, enhancement of the quality of financial reports, improvement of performance
measures, facilitating financial transaction processes.
The findings of the research indicated that implementation of accounting
information systems could lead to better decision-making by managers, more effective
internal control systems, enhancement of the quality of financial reports and facilitating
financial transaction processes. We did not find evidence to support the fourth
hypothesis, which indicates that according to the respondents of this study, the
implementation of AIS would not improve performance measures. Lack of significant
results to support the forth hypothesis might be due to the choices of the questions
which measured this hypothesis.
Like all empirical studies, the present research also has its own limitations due to
the methodology employed. Use of questionnaire to collect data always has also its own
limitations, since responses could be biased because of the common method used for the
collection of all data. Although extensive care has been taking when designing the
questionnaire and the pilot study refined the questions, still the criticism of the survey
method can never be completely ignored and should be taken into account.
From generalization of the results point of view, measuring research questions
based on the opinion of the respondents would limit our generalization of the findings.
Despite the above limitations, this research has provided useful results in paving the
way for future research in this area. Since in Iran, only recently increasing demand for
AIS, as an effective tool in managing the Iranian organizations, has prevailed, this
research could provide a supportive evidence for the implementation of AIS.
Avenues for future research could be:
1. Analysis of the effectiveness of AIS with corporation of AIS designer companies,
2. Analysis of the effectiveness of AIS as a part of MIS,
3. Study of the extent to which factors such as inflation, human resource accounting

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 H. SAJADY, Ph.D. / M. DASTGIR, Ph.D. / H. HASHEM NEJAD 58

etc. would be taken into account when designing an AIS, and

4. The effects of user participation on the design of AIS.

REFERENCES

[1] American Institute of Certified Public Accountants, Statement of Basic Accounting

Theory. New York: AICPA publication, 1966.
[2] Boockholdt, J., Accounting Information Systems Transaction Processing and
Control. The Mac-Graw-Hill companies, 1999.
[3] Cameron, K. S., A Study of Organizational Effectiveness and Its Predictors.
Management Science, Vol. 32, pp. 84-112, 1986.
[4] Chenhall, R. H. and Morris, D., The Impact of Structure, Environment, and
Interdependence on the Perceived Usefulness of Management Accounting System.
The Accounting Review, Vol. 61, pp. 16-35, 1986.
[5] Choe, J. M., The Effects of User Participation on Design of Accounting
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[6] Chong, V., Management Accounting Systems, Task Uncertainty and Managerial
Performance: A Research Note. Accounting Organization Society, Vol. 21,
pp. 430-514, 1996.
[7] Christiansen, J. K. and Mouritsen, J., Information Resource Management: A
Critical Analysis of New Intellectual Technology. Proceedings from The Second
European Conference on Information Systems, 30-31 May, Breukelen, the
Netherlands: Nijenrode University Press, 1994.
[8] Delone, W. H. and Mclean, E. R., Information Systems Success: the Quest of the
Dependent Variable. Information Systems Research, Vol. 3, pp. 60-95, 1992.
[9] Doll, W. J. and Torkzadeh, G., The Measurement of End-User Computing
Satisfaction. MIS Quarterly, June, pp. 259-274, 1988.
[10] Essex, P. A. and Magal, S. R., Determinants of Information Centre Success.
Journal of Management Information Systems, Vol. 15, No. 2, pp. 95-117, 1998.
[11] Huber, G., A Theory of the Effects of Advanced Information Technologies on
Organizational Design, Intelligence and Decision-Making. Academy Management
Review, Vol. 15, pp. 47-71, 1990.
[12] Ives, B., et al., The Measurement of User Information Satisfaction.
Communications of the ACM, Vol. 26, No. 10, pp. 785-793, 1983.
[13] Kim, K., User Satisfaction: A Synthesis of Three Different Perspectives.
International Journal of Accounting Information Systems, Vol. 4, pp. 1-12, 1989.

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[14] Kim, K., Organizational Coordination and Performance in Hospital Accounting

Information Systems: An Empirical Investigation. The Accounting Review, Vol. 6,
pp. 85-99, 1988.
[15] Kren, L., Budgetary Participation and Managerial Performance: The Impact of
Information and Environmental Volatility. The Accounting Review, Vol. 67,
pp. 511-525, 1992.
[16] Lewin, A. and Minton, J., Determining Organizational Effectiveness: Another
Look, and an Agenda for Research. Management Science, Vol. 32, pp. 14-38,
1986.
[17] Markus, M. L. and Pfeffer, J., Power, and the Design and Implementation of
Accounting and Controlling Systems. Accounting, Organization and Society, Vol.
8, No. 2-3, pp. 205-218, 1983.
[18] Mia, L. and Chenhall, R. H., The Usefulness of Management Accounting
Systems, Functional Differentiation and Managerial Effectiveness. Accounting
Organization Society, Vol. 19, pp. 1-13, 1994.
[19] Nicolaou, A., A Contingency Model of Perceived Effectiveness in Accounting
Information Systems: Organizational Coordination and Control Effects.
International Journal of Accounting Information Systems, Vol. 1, pp. 91-105, 2000.
[20] Otley, D., The Contingency Theory of Management Accounting: Achievement
and Prognosis. Accounting, Organization and Society, Vol. 5, pp. 194-208, 1980.
[21] Quinn, R. and Rohrbaugh, J., A Spatial Model of Effectiveness Criteria: Towards
a Competing Values Approach to Organizational Analysis. Management Society,
Vol. 29, pp. 77-91, 1986.
[22] Simon, R., Accounting Control Systems and Business Strategy: An Empirical
Analysis. Accounting Organization Society, Vol. 12, pp. 61-74, 1987.
[23] Sutton, S., Can We Research a Field We Can not Define? Toward an
Understanding of the AIS Discipline. Advance Accounting Information Systems,
Vol. 1, pp. 1-20, 1992.

International Journal of Information Science & Technology, Volume 6, Number 2 July / December, 2008
 Journal of Business & Management
Volume 3, Issue 4 (2014), 48-57
ISSN 2291-1995 E-ISSN 2291-2002
Published by Science and Education Centre of North America

The Influence of Accounting Information Systems (AIS) on

Performance of Small and Medium Enterprises (SMEs) in Iraq
Emad Harash1*, Suhail Al-Timimi2, and Ahmed Hussein Radhi3
1
Department of Accounting, Madenat Alelem University College, Baghdad, Iraq
2
College of Administration and Economics, University of Basra, Iraq
3
Department of Accounting, College of Engineering, University of Baghdad, Baghdad, Iraq
*Correspondence: Emad Harash, Department of Accounting, Madenat Alelem University College,
Baghdad, Iraq. E-mail: emadharesh@yahoo.com.
DOI: 10.12735/jbm.v3i4p48 URL: http://dx.doi.org/10.12735/jbm.v3i4p48

Abstract
The objective of this paper is to investigate the influence use of Accounting Information System
(AIS) performance in Small and Medium Enterprises (SMEs) in Iraq. The study discusses and
explores the effects of the use of AIS on the performance of SMEs. The result of this study is
expected to help the owners and manager of SMEs to understand the importance of the use of AIS
to achieve performance. The use of AIS is influenced by several characteristics enjoyed by the
accounting information such as: reliability, relevance, and timeliness that effect on SMEs'
performance. The result of this study and modern literature shows that AIS characteristics enjoyed
by the accounting information such as: reliability, relevance, and timeliness have significant effects
on the use of AIS and SMEs' performance. Prior researches have shown that is crucial for SMEs to
use AIS to ensure business continuity and survival in the increasingly competitive environment and
to enhance their business operations capability and efficiency. The study is one of few that shed
light on how the use of AIS affects the performance of SMEs. In this study, the authors propose that
dimensions of using AIS are important for improve the performance of SMEs.
JEL Classifications: D21, L21, M41
Keywords: accounting information system (AIS), performance of small and medium enterprises
(SMEs)

1. Introduction
Small and Medium Enterprises (SMEs) are responsible for most net job creation and they make an
important contribution to productivity and economic growth. They play a significant role in all
economies and are the key drivers of innovation and growth (Ali, Rahman, & Ismail, 2012; Harash,
Al-Tamimi, & Al-Timimi, 2014a; Harash, Al-Timimi, & Alsaadi, 2014c & d). According to the
Organization for Economic Cooperation and Development (2006:21) SMEs are now recognized
worldwide to be a key source of dynamism, innovation and flexibility. In the Iraq, they account for
over 99 % of all companies. Furthermore, the available data from the Central Organization for
Statistics (COS) indicates that 91 % of these enterprises are micro-firms with less than 10 workers.
Given their importance in all economies, they are essential for the economic recovery (Harash,
Alsaad, & Ahmed, 2013, Harash et al., 2014a, c, & d). In addition, SMEs are very important to the

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social-economic development of Iraq (Harash et al., 2013).

SMEs are expected to be an important vehicle to address the challenges of job creation,
sustainable economic growth, equitable distribution of income and the overall stimulation of
economic development in Iraq (Harash et al., 2014a, c, & d). But despite their significance, SMEs
are faced with the threat of failure with past statistics indicating that three out five fail within the
first few months (Bowen, Morara, & Mureithi, 2009; Mazanai & Fatoki, 2011). Because the
availability of reliable data on SMEs is in general difficult, a private survey is was needed to get the
data on the use of accounting information system (AIS) (Amidu, Effah, & Abor, 2011; Ali et al.,
2012; Ismail, 2007; Ismail & King, 2005; Grande, Estbanez, & Colomina, 2011).
Iraq as the one of the less developed country, witnessed many changes during the last three
decades, such as, the chaos of political and economic transformations that followed the invasion by
the U.S. In addition, the recent unprecedented changes have affected the country significantly in all
segments of Iraqi society (Harash et al., 2013; 2014a, c, & d; Harash, Al-Timimi, Alsaad, Al-
Badran, & Ahmed, 2014b) and sector of SMEs in particular. These events changed the basic
features of sector of SMEs and the instability and constants changes have become a dominant
feature of the sector of SMEs in the Iraqi environment as reflected in the use of AIS which affected
the performance of SMEs in the Iraq. We find that the use of AIS is a more significant determinant
of company performance in Iraq (Lallo & Selamat, 2013). The review of SMEs literature reveals
limited research has attempted to investigate the effect of the use of AIS in SMEs, particularly in the
Iraqi context.
This study examined the use of AIS effect on the performance of SMEs. Therefore this study is
aimed, based on previous literature, at measuring the relationship between the use of AIS by the
SMEs in Iraq and Performance these Enterprises. This study provides value added in accounting
literature given the scarcity of works dealing with the relationship between the application and the
use of AIS and performance indicators in SMEs in Iraq. It is common knowledge that the main
objective of a business is to maximize profit either in terms of improve performance and increases
in business productivity or by achieving rapid expansion in market shares domination. To achieve
this goal, SMEs need to be responsive to the changes in the environments, in particular to the use of
AIS. Nowadays, using AIS is a must in many businesses. It is difficult to gain competitive
advantage and survive without some adoption or implementation of this advancement in
technological products. Studies have shown that the most widely use of AIS, specifically in
financial reporting aspects (Marriott & Marriott, 2000; Riemenschneider & Mykytyn Jr., 2000;
Ismail, 2007).
In the previous literature also the use of AIS can play a dominant role in assisting SMEs to
performance small and medium enterprises better and stronger. Where, that many researchers
(Amidu et al., 2011; Ismail, 2007; Grande et al., 2011) are of the opinion that the role of using AIS
is important to enable SMEs to develop performance there (Ali et al., 2012; Lallo & Selamat,
2013). To achieve this goal, SMEs need to be responsive to the changes in the environments, in
particular to the information technology revolution. Nowadays, information technology is a must in
many SMEs. It is difficult to gain competitive advantage and survive without some adoption or
implementation of this advancement in technological products. Studies have shown that the most
widely use of information system is to use AIS, specifically in financial reporting aspects (Amidu et
al., 2011; Ismail, 2007; Grande et al., 2011). Therefore, this study examines the relationship
between use accounting information system and the performance of SMEs.
Previous studies (Amidu et al., 2011; Ali et al., 2012; Ismail, 2007; Ismail & King, 2005; Grande
et al., 2011) show that large companies were more likely to use AIS than SMEs, although most of
the literature was not specific to SMEs. Large companies are more likely to perform well and are
more likely to use accounting information system than SMEs because companies with greater sales
and higher revenue from using AIS are better able to cover the costs. These literatures offer scant
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evidence of the relationship between these AISs and performance measures; though it is important
to highlight the previous studies which discovered a positive association between using AIS and
SMEs and SMEs performance.

2. Accounting Information System (AIS)

As it is known, in the business world there is an increasing dependency on Information technology
(IT). This is because of the need to improve business efficiency (Lallo & Selamat, 2013). Al-Jalily
and Taha (2010), Lallo and Selamat (2013; 2014), Pathak, (2004), and Salehi, Rostami, and
Mogadam (2010) revealed that AIS is interdisciplinary in nature and seems to integrate the fields of
accounting and Information Systems (IS). This opinion is supported by Lallo and Selamat (2013,
2014), and Saira, Zariyawati, and Annuar (2010). The authors explained that AISs have been
perceived as a means of providing financial information to organization (Mia, 1993). There has
been considerable evidence that within SMEs financial accounting has remained the principle
source of information for managers (Saira et al., 2010). These studies have also found out that
SMEs are still having ineffective information management, poor system control, and most decision
making is on ad hoc basis despite having used AIS. Previous literature above reason that this
situation could be attributed to the initial objectives of Information Technology (IT) adoption
(Salehi et al., 2010). The accounting system original role of replacing manual accounting process
(Al-Jalily & Taha, 2010; Lallo & Selamat, 2013 & 2014; Pathak, 2004) has hindered further usage
and exploration on the system benefits.
Marriott and Marriott (2000) further concluded that financial awareness among SMEs managers
vary considerably and the use of computers for the preparation of management accounting
information is not at its full potential. Research in information systems is well aware that the use of
AIS does not directly affect SMEs performance (Ismail & King, 2005; Saira et al., 2010). The AIS
must be used and exploited to achieve its intended objectives. Therefore, before moving towards
adopting more sophisticated and advanced AIS; it is important to determine SMEs current usage of
existing accounting information system (Lallo & Selamat, 2013, 2014; Pathak, 2004). In this
context, Amidu et al. (2011), underscoring the strategic importance of using AIS, noted that the use
of accounting information could be linked to the success or failure of a small or medium enterprise.
In order to survive, SMEs owners and managers need updated, accurate and timely accounting
information (Amidu, 2005).
Accounting systems are responsible for analyzing and monitoring the financial condition of
companies, preparation of documents necessary for tax purposes, providing information to support
the many other organizational functions such as production, marketing, human resource
management, and strategic planning. Without such a system it will be very difficult for SMEs to
determine performance, identify customer and supplier account balances and forecast future
performance of the organization (Amidu, 2005; Amidu et al., 2011; Ismail & King, 2005; Saira et
al., 2010). Using standardized guidelines, the transactions are recorded, summarized, and presented
in a financial report or financial statement such as an income statement or a balance sheet. Here,
using AISs is viewed as a system that helps management in planning and controlling processes by
providing relevant and reliable information for decision making (Gordon & Miller, 1976). It
suggests that AISs functions are not solely for the purpose of producing financial reports. It role
goes beyond this traditional perspective. Generally literature on accounting in the AIS shows that
several scholars have investigated the adoption of the system among large companies only. Very
little knowledge is known about the evolution of computing in SMEs (Grande et al., 2011).
SMEs AIS implementation and success have been extensively researched. Recent research
development focuses on the relationship between SMEs performance of with the sue of AIS
(Amidu et al., 2011; Ismail, 2007). These studies suggested that there are positive relationship

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between AIS and SMEs performance. A studies conducted by Ismail (2007), Ismail and King
(2005), and Saira et al. (2010) discovered that the use of AIS will be more efficient if the systems
implementation is new information systems with the SMEs performance.
This argument is supported by Grande et al. (2011) asserting that the use of AIS proves to have
positive impact on SMEs performance. In addition, Ali et al. (2012) highlighted the importance of
having a good fit between the use of AIS and efficient of the SMEs performance. The mismatch
between what is needed by the firms and service offered by the AIS will yield poor performance.
Nevertheless, Ismail and King (2005) also added that sophisticated the use of AIS aligned with
ineffective performance measure will yield lower performance outcome. This raises the need for
careful planning and strong justification process to be undertaken before firm reaches the decision
to implement an AIS. This issue is more profound within SMEs due to their limited resources and
experience in using AIS (Amidu et al., 2011; Ismail, 2007; Grande et al., 2011).
AISs definition is a system that processes data and transactions to provide users with
information. They need to plan, control and operate their businesses (Saira et al., 2010). According
to Lallo and Selamat (2014) and Saira et al. (2010), they define an AIS as a system that processes
data and transactions to provide users with information. They need to plan, control and operate their
businesses. Here, AIS is viewed as a system that helps management in planning and controlling
processes by providing relevant and reliable information for decision making. It suggests that AISs
functions are not solely for the purpose of producing financial reports. It role goes beyond this
traditional perspective. AIS should be utilized to include planning and managing business activities.
It could also be used as a controlling mechanism such as budgeting. Therefore, full adoption of the
system is essential to fully attain the systems benefits.
Prior researches have shown that information system adoption did increase companies
performances and operations efficiency especially in big company (Saira et al., 2010). AIS is a tool
which, when incorporated into the field of Information and Technology systems (IT), were designed
to help in the management and control of topics related to companies economic-financial area
(Salehi et al., 2010). AISs also provide information on both actual and budget data which would
help company to establish, plan, and control operation (Grande et al., 2011). Good management of
resources and better control of expenditure, budgeting and forecasting enhance the wellbeing of
company (Saira et al., 2010).
AIS refers to collection, storage and processing of financial and accounting data to help
managers to make planning, controlling and evaluating (Emeka-Nwokeji, 2012; Saira et al., 2010).
AIS also refers to perceiving of user information satisfaction to decision making and monitoring
when company has coordination and control with information that is produced from AIS (Islam,
Khan, Obaidullah, & Alam, 2011). AIS is one of an important component of modern information
system (IS) (Abdallah, 2014).
The use of AIS is certainly played an important role that contributes to companys value added
by providing internally generated input i.e. financial statements, such into should help company
made better strategic plan (Sori, 2009). Developments in the areas of accounting and information
system (IS) over the last decades of twentieth century have widened the range and roles of AIS
(Abdallah, 2014; Emeka-Nwokeji, 2012). One issue that remains is whether adopters of the use of
AIS make maximum use of the system. Marriott and Marriott (2000), Amidu et al., (2011), and
Grande et al. (2011) noted that SMEs used AIS for the preparation of management accounting
information, but usually not to their full potential. It is therefore important that the research in the
use of AIS is not limited to adopters and non-adopters, but that for even adopters the extent to
which AIS is used to the maximum be studied.
In short, AIS is one of information systems that produce many amounts of data for use by
decision makers both within and outside organizations. SMEs managers need to exploit accounting

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information for job success of their organizations (Ismail, 2009; Dastgir, Jamshidian, & Jadidi,
2003). Therefore, job success must be obtaining reliable, relevant and timely accounting
information for decision making (Saira et al., 2010). In other words, effectiveness of AIS is
reliability, relevance, and timeliness. In measuring AIS the study suggests that no one measure of
the use of AIS should be taken on its own and to obtain a true measure of how a company is using
AIS, different measures should be used together on the basis of previous studies (Ismail & King,
2005; Salehi et al., 2010; Sori, 2009; Grande et al., 2011). Therefore, in this study the use of AIS in
SMEs is measured by Characteristics enjoyed by the accounting information (reliability, relevance,
and timeliness) items as profitably applied to area of major concern to the SMEs, is widely used.

3. Performance of Small and Medium Enterprises (SMEs)

In recent years, firm performance has received considerable attention as a substantial academic
subject for investigating SMEs in the financial and management literature. Researchers and
academicians have chosen different approaches for the exploration of this issue. In the previous
studies, the effects of using AIS have analyzed on SMEs performance by financially and non-
financially.
According to literature defining performance is a challenge across the world. Performance and
success have been defined in various ways in the literature, and in any business, the related parties
always want to see good performance in their business (Harash et al., 2014a, b, c, & d). A wide
variety of definitions of company performance have been proposed in literature (Ajanthan,
Balaputhiran, & Nimalathashan, 2013; Korir & Imbaya, 2013; Uadiale & Fagbemi, 2012).
literatures (Anderson & Reeb, 2003; Ittner & Larcker, 2003; Juhl, Kristensen, & stergaard, 2002;
Petersen & Schoeman, 2008; zer, 2012; Sacristn-Navarro, Gmez-Ansn, & Cabeza-Garca,
2011; Selvarajan et al., 2007; Thrikawala, 2011; Watson, 2007) defines performance as a measure
of how well a company can use its assets from its primary mode of business and generate revenues.
On the other hand, in the modern literature defines performance as the results of the activities of a
company or investment over a given period. Performance can also be defined as the
accomplishment of specified business objectives measured against known standards, completeness
and cost (Davis & Cobb, 2010; zer, 2012; Sacristn-Navarro et al., 2011; Thrikawala, 2011).
Performance is so common in research about SMEs management that its structure and definition
is rarely explicitly justified; instead its appropriateness, in no matter what form, is unquestionably
assumed (March & Sutton 1997). Performance can also be defined as the accomplishment of
specified business objectives measured against known standards, completeness and cost (Davis &
Cobb, 2010; zer, 2012; Sacristn-Navarro et al., 2011; Thrikawala, 2011).
The performance is the result of strategies the company employs to achieve market-oriented and
financial goals (Harash et al., 2014a, b, c, & d). The level of success of a company within the SMEs
sector is measured through its performance based on a selected period of time. In business studies,
the concept of success is sometimes used to refer to a companys performance (Islam et al., 2011).
Given that SMEs often play a significant role in improving the economy of a country and leads to
economy development globally, this puts performance as one of the key issues for SMEs where
management is concerned. Usually a company's performance is seen from the extent it manages to
achieve its purposes and goals (Harash et al., 2013).
Various scholars have attempted to provide a clear definition of performance, but they had yet to
come to an agreement over a common definition, particularly regarding some aspects of
terminology issues, analytical levels, and the conceptual basis for assessment (Harash et al., 2013).
Performance of a company can be defined in various ways depending on the questions in mind
when we inquire about a companys performance. The findings of many studies have not managed

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to provide a common definition to indicate or ascertain performance (Harash et al., 2014 a, b, c, &
d).
Regardless of the differences among researchers on what the definition of performance is, they
agree that it is generally associated with expectations for success (Davis & Cobb, 2010; Harash et
al., 2014 a, b, c, & d; Islam et al., 2011). According to Richard, Devinney, Yip, and Johnson (2009)
performance encompasses three specific areas of company outcomes: (i) financial performance
(profits, return on assets, return on investment, etc.); (ii) market performance (sales, market share,
etc.); and (iii) shareholder return (total shareholder return, economic value added, etc.).
SMEs performance may be measured using objective, subjective, or operational measures.
According to Previous studies Ittner and Larcker (2003), Juhl et al., 2002, Petersen and Schoeman,
(2008), and Selvarajan et al., (2007), the study suggest the goal approach as a composite measure of
SME performance. The goal approach measures performance using financial (objective) and non-
financial measures (subjective) measures (Dowling & Helm, 2006; Thrikawala, 2011; Watson,
2007). According to these literatures financial measures of performance can be referred to as the
results of a companys operations in monetary terms. Financial measures of performance are
derived from the accounts of a company or can be found in the companys profit and loss statement
or the balance sheet. In addition, financial measures are also referred to as objective measures
because they can be individually measured and verified. However, it is essential to introduce non-
financial measures of performance in conjunction with financial measures in order to fully measure
performance (Ittner & Larcker, 2003; Juhl et al., 2002; Petersen & Schoeman, 2008; Selvarajan et
al., 2007). The non-financial measures are also known as the subjective performance measures of
performance (Petersen & Schoeman, 2008). Non-financial measures are measures not found in
charts of accounts of a company (Ittner & Larcker, 2003; Selvarajan et al., 2007). The use of non-
financial measures of performance supplements accounting measures and gives data on progress
relative to customer requirements or competitors and other non-financial objectives that may be
important in achieving profitability (Ittner & Larcker, 2003; Juhl et al., 2002; Selvarajan et al.,
2007).
In the modern literature, researchers have utilized measures financial and non-financial, as the
most important this measures in the measurement of SMEs performance. The study suggests that
no one measure of performance should be taken on its own and to obtain a true measure of how a
company is performing, different measures (financial and non-financial) should be used together on
the basis of previous studies (Anderson & Reeb, 2003; Bhagat & Bolton, 2008; Davis & Cobb,
2010; Dowling & Helm, 2006; Ittner & Larcker, 2003; Juhl et al., 2002; Petersen & Schoeman,
2008; Sacristn-Navarro et al., 2011; Selvarajan et al., 2007; Thrikawala, 2011; Watson, 2007).
Therefore, in this study Performance measuring SMEs is measured by financial measures (Return
on Assets (ROA), Return on Equity (ROE), Sales growth, and Profitability growth) and non-
financial measures (Employee growth, Customer satisfaction, Satisfaction with performance
compared to competitors, and Overall satisfaction) items as profitably applied to area of major
concern to the measuring SMEs, is widely used by one or more users, and improves the quality of
their performance.

4. Contingency Framework
This study investigates the impact of using AIS on performance of small and medium enterprises
(SMEs) in the Iraq. The conceptual framework of this study below shows the relationship between
the variables under study. The independent variable is the use of AIS and the dependent variable is
the performance of SMEs. The model describes the effective mechanism of the use of AIS on
performance of SMEs. It shows how the dimensions of the use of AIS impact the aspects of
performance SMEs. Based on their underlying rationale, the following sections present the detailed

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 E. Harash, S. Al-Timimi, & A. H. Radhi Submitted on August 15, 2014

proposition related to these relationships.

Many researches stress the importance of the use of AIS as a strategy to improve performance of
SMEs and sustainable competitive advantage for SMEs (Ismail & King, 2005; Lallo & Selamat,
2013; Lallo & Selamat, 2014; Pathak, 2004; Saira et al., 2010). In Figure 1, the conceptual model
proposes how the use of AIS impacts on the performance of SMEs. In order to exam the proposed
relationships between the use of AIS and the performance of SMEs. Therefore, this paper posits the
hypothesis as follows:
The performance of small and medium enterprises (SMEs) will vary with the choice
of accounting information system (AIS) adopted.

Figure 1. Proposed theoretical framework

5. Conclusion
The most common form of business organization is SMEs in the world. SMEs have different
characteristics which separate them from the large, companies by diverse shareholders, and these
characteristics may result greater efficiency and higher profitability than other companies. The use
of AIS is one of the most important indicators for SMEs sustainability. In the literature, there is no
study focusing on relationship between the use of AIS and the performance of SMEs in Iraq, and
this article is an example to fill this gap. The objective of this study is to investigate the effect of the
use of AIS and the performance of SMEs in Iraq. Most previous studies on the AIS and the
performance were focus on the data of large companies. Our study is one of the few that shed light
on how companies use AIS to affect the performance of SMEs.
Conceptually, the study indicate the performance of SMEs vary with the choice of the AIS they
adopted. The study indicates also that the previous literature investigated factors that influence the
use of AIS in SMEs. Both authors generally agreed that SMEs using AIS were mainly influenced by
the perceived benefits of implementing the systems and stems from the pressures received from
competitors, customers, and suppliers to ensure business continuity and survival in the increasingly
competitive environment. Many SMEs use AIS aiming at collecting more information to assist
decision making performance which will eventually lead to improve efficiency and SMEs
profitability and performance there. Studies showed that SMEs that acquire extensive AIS
resources are able to create competitive advantage. Nevertheless, prior researches have difficulty
providing evidence on positive relationship between the use of AIS and SMEs performance.

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Copyrights
Copyright for this article is retained by the author(s), with first publication rights
granted to the journal. This is an open-access article distributed under the terms
and conditions of the Creative Commons Attribution 4.0 International License.

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Dekeng Setyo Budiarto

Accounting Information System (AIS) Alignment

And Non-Financial Performance In Small Firms

Dekeng Setyo Budiarto dekengsb@gmail.com

PGRI University Yogyakarta

Abstract

The objective of this research is to investigate the effect of Accounting Information System (AIS)
alignments on non-financial performance in Small and Medium Enterprises (SMEs). The result of
this research is expected to help the owners of SMEs to understand the importance of AIS
alignment to achieve non-financial performance. AIS alignment is influenced by several factors
such as: organizational characteristics, owner commitment, and organizational strategies that
effect on SMEs performance. The effect of AIS alignment on performance is explored using data
collected from SMEs owners in the Special Administrative Region of Yogyakarta (DIY). The result
of this research shows that AIS sophistication, owner commitment, and external IT expertise have
significant effects on AIS alignment. AIS alignment also has significant effect on non-financial
performance.

Keywords: Accounting Information System, Alignment, Non-Financial Performance, SMEs.

1. INTRODUCTION
Accounting systems play a critical role in the success of the business organization, as they
provide information that supports the efforts of the organization in achieving the expected goals
[1]. It is asserted that AIS produce useful information, in which they serve as a basis for the
management for strategic decision making [27] and exercise control of organizational activities in
order to achieve organizational objectives [13]. Modern AIS, however generate various types of
information, including accounting and non-accounting information to assist the management to
cope and integrate short term and long term strategic planning [2]. Nevertheless, AIS is part of
information technology as it is based on information and communication technology [1].1
According to the information processing theory, alignment of AIS is needed to have significant
impact on the organization performance [17]. Fit between AIS strategy with firm strategy will
provide managers with better information to make quality decision and increase efficiency to
achieve organizational goals.

The objective of this study is to identify owner commitment, AIS sophisticated and external IT
expertise that might lead to AIS alignment on performance in small firms (SMEs). Many studies
have examined issues surrounding the provision and use of accounting information systems in
the context of small and medium sized enterprises (SMEs). Sharma and Rajat [29] aim to develop
a framework for information system (IS) performance; Lee, Sang, Jinhan, Yeonog, and Sang [21]
examine the effect of information technology (IT) knowledge on process performance and
financial performance; Dibrell, Peter, and Justin [10] investigated the effect of IT investment on
performance. In previous research, financial performance measures have many problems or
shortcomings. Financial performance evaluation systems tend to report historical short term
performance [20], which could not predict future performance, lack relevance to advanced
technologies, and are inconsistent with quality and flexibility strategy, but have now become
important to a firms success [7]. Financial performance, such as cost efficiency, may increase
the pressure on managers to undertake moral hazard into maximizing short term results [32].

1
AIS is similar term to Management Information System (MIS) and Management Accounting System (MAS) [26].

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Dekeng Setyo Budiarto

Therefore, Choe [7] proposed that non-financial performance information is required. Non-
financial performance measurement systems are more appropriate than financial measurement
systems. Miller [25] and Bledsoe [3] suggested that non-financial performance provides various
strategic benefits such as quality improvement and shorter delivery times. Non-financial
performance can be measured by quality, cycle time, productivity, and customer satisfaction. It is
describing the strategy and is developing a unique set of performance measures that clearly
communicate the strategy [20]; [30].

Although research on the IS-performance is more abundant in large firms, it becomes particularly
important in small firms to give competitive advantage [13]. The use of AIS within small firms has
been developing similar to that in large firms [17]. However, IS adoption, development in the large
firm context, cannot be equally applied to small firms [34]. The main problem faced by SMEs is
the lack of capital and technology obsolescence [36]; limited financial resources and little
management information [22]; access to scale economies is more difficult and management
attitude is not IT-oriented [12]; [24]; and a lack of funds to acquire skill [9].

Many previous studies have struggled to show a direct impact of AIS on financial performance.
However, very little studies examined the relationship between AIS alignment and non-financial
performance. Hussin, King, and Cragg [16] focused on the alignment of business strategy and IT
strategy. The study suggests that IT maturity and the level of the CEOs software knowledge has
an effect on the IT alignment, but external IT expertise doesnt have a significant effect. Ismail
and Malcolm [17] suggest that aligning information improves a firms performance of SMEs in
developing its economies. There is no literature that combines AIS alignment and non-financial
performance, so this is an open empirical equation. This study is based on previous research, to
explore the direct relationship between AIS sophistication, owner commitment to AIS, external
AIS expertise on alignment of AIS and non-financial performance.

In a rapidly changing environment, firms must develop new technologies to adapt with the new
environment [19]. Investment in IT is one of the possibilities to achive a stronger and more flexible
business culture. In contrast, firms are not only using IT intensively for accounting issues but also
very interested in more sophisticated IT [11]. The IT sophistication embraces a wide landscape
and has important implications for the management of organizations, create or revolutionize
markets and demands [5]; supplied relevant information to managers [4]; [2]. Different types of
application such as budget variance, production variance, and production planning will be
integrated in large firms [2]. Nevertheless, the lack of skill in small firms became a problem, so a
sophisticated technology was needed.

Lim [23] reveal that large firms have more budget to design, test, and implement new technology.
The strength of financial resources in large firms with IT departments will accelerate the
development of new technology. Therefore, IT knowledge of owner is unnecessary importance in
large firm, that different from small firm. The result of a lack of financial resources in small firms is
that the implementation of technology depends on the owner. According to Delone [9], the owner
is a key to the implementation of IT. In a firm where the owner is familiar and involved with IT, the
IT implementation is more successful. Thong [34] shows that one of the main factors contributing
to the adoption of technology is the IT knowledge of the owners. In order to survive, SMEs
owners need updates, accurate, and timely accounting information for decision making purposes.
The adoption of accounting information would ensure proper accounting practices, as good
accounting practices have several implications for SMEs managers [1]. Chu [8] reported that
most family firms are SMEs that have more than 5% family shareholding and at least one family
member on the board of directors, who plays a significant role on the technology innovation more
than non-family firm. In small firms, the owners responsibility is more immediate in the
development of information and technology to achieve organizational performance.

Lim [23] state that IT labor expenditure is part of the IT investment and requires to develop
technology. Large firms can improve the human resources in technological ability by providing
specialized training, which is difficult for small firms. The IT training for employees will reduce the

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Dekeng Setyo Budiarto

dependence on technology implementation with external IT expertise. The main problem faced by
small firms are less technical knowledge or skills and oblivious to the benefits that IT can bring,
because of the limitation of human resources they have. Hence, managers who have an aptitude
for technology will take less help from external consultants, which makes the implementation of
AIS quicker and less costly [28].Thong [34] argues that IT success was most likely to occur when
external IT experts worked as a team with the senior manager to integrate information in the firm.
This cooperation could improve business efficiency and increase a better return on investment
and business performance [37]. Another finding of his is that external expertise is not associated
with IT success [9]. Small firms in Ghana usually process financial information by chartered
accountants to handle their accounting information [1], hence, technical support, training, and a
harmonious working relationship with consultants can reduce the risk of IT failure in small
businesses.

This study is undertaken to examine AIS alignment in small firms, and investigate the
determinants that influence the alignment. Other authors have used the term IT alignment with a
variety of different aspects. Ismail [18] measured alignment by matching AIS requirements and
AIS capacity. In this study, IT alignment refers to the fit of small firm IT strategies with a business
strategy according to the moderation model. The moderation model was less ambiguous and
more widely applicable, compared with the matching. The moderation model could explain
variations in performance by examining business strategies and IT strategies. IT alignment and
business strategy are the main components that contribute towards growth among small firms,
and their alignment with IT can be used as a strategic weapon to maintain their competitiveness
[16].

A recent study has pointed out that the challenges of successful development in the information
system depend on the availability of technological infrastructure that could improve the business
performance [13]. According to several authors, it is of great interest to analyze the impact of AIS
alignment on non-financial performance. This paper attempts to contribute to the accounting
information literature in several ways. First, this research provides empirical evidence on how the
alignment of AIS relates to performance. Second, this research provides evidence in favor of
contingency approach, through a more integral explanation between AIS and performance, and
the determinant of the alignment of AIS. Finally, previous researches suggest that IT maturity and
the CEO software knowledge are determinant factors of AIS alignment [16]. The AIS alignment
has an impact on the performance of a firm [18]. This research directly tests the presence of the
relationship between AIS alignment and determinant factors on small business performance. The
structure of this article is as follows: the first part involves a brief bibliographic overview of
alignments of AIS on performance, the second part presents a statistical analysis, the third part
presents the results, discussion, and the draw of the main conclusions.

2. RESEARCH MODEL & HYPOTHESIS

2.1 AIS and SME Performance
The AIS provides management with financial information to examine, plan, evaluate, and
diagnose the impact of operating activities and identify the financial position of the organization
[26]. Accounting information can help businesses, particularly SMEs to manage short term
problems in areas such as costing, expenditure, and cash flow, by providing information to
support monitoring and control [17].

Performance measurement in SMEs is the measurement of the expected improvement in

business activities by implementing an information system. Moreover, the implementation of
information systems helps SMEs to improve the performance by integrating various functional
areas of day to day business, both in terms of material and information flow [29].

The conceptual and empirical research is addressed on a wide variety of accounting and IT
issues in SMEs, however, there is a lack of understanding of alignment in accounting information
systems. To overcome this issue, this study will: first, investigate an antecedent factors that

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Dekeng Setyo Budiarto

influence the AIS alignment, then explore the fit between the business strategy and AIS strategy
as represented by the AIS alignment, and finally examine the impact of AIS alignment on the non-
financial performance of SMEs. The conceptual model of this research is depicted in figure
1.

AIS sophisticated

Non-financial
Owner commitment AIS alignment
performance

External
IT expertise

2.2 AIS Sophisticated and AIS Alignment

IT sophisticated is the moderating effect between strategy and performance. A firm that faces
uncertainty on the market demand and complexity in the environmental questions, needs more
sophisticated technology [27]. A high sophisticated of AIS design provides information, which
integrates among different organizational functions, to cope with the uncertainty, and optimizes
the decision making process [14]. Another finding, [37]; [2] reveals that the sophistication internal
IT infrastructure within SMEs will provide AIS sophisticated. When companies have technology,
AIS will be designed by taking into consideration these technologies, to achieve organization
effectiveness.

IT sophistication covers a wide field and has important implications for the management of an
organization. Firms need to face a number of challenges in order to be categorized as
technologically sophisticated; first, the business requires a strong scientific-technical base;
second, new technology can quickly make existing technologies obsolete; and third, as new
technologies come on stream, their applications should create or revolutionize markets and
demands [5]. Organizations with more sophisticated IS tend to perform more successful than
those with less sophisticated system, the greatest alignment will improve efficiency to achieve
high performance [22]. Al-Egab [2] found a positive relationship between AIS sophistication and
AIS design. A direct linkage between IT sophisticated and IT alignment was established by [16].
That study suggests a relationship between alignment and aspects of both IT sophistication and
IT management, through the variable types of technology. This provided evidence of the
sophistication of AIS having greater effect on AIS alignment. Based upon the arguments above,
the hypothesis 1 can be proposed as follows:

H1: There are significant positive effect of AIS sophistication on AIS alignment.

2.3 Owner Commitment and AIS Alignment

In small business, the CEO is usually the owner-manager [34]. The owner-managers interest is in
the enthusiasm being the prime of IS adoption to support SMEs successful. The owner invests in
information systems to control business expenses and revenue with word processing and
accounting spreadsheets [22]. Managers should increase their knowledge and understanding
about IT to implement their firms strategies and they must be cognizant of the necessity to create
systems and processes to most effectively optimize the IT usage [10]. In SMEs, characteristic of
the owner are crucial in determining the technological innovation. Hence, small business changes
depend not only on factors such as the business size but also on the IT abilities of the owner [34].
Ismail [18] suggests that in many cases, the firms information systems, the processing capacities
were insufficient to match their AIS requirement, which has important consequences for future

International Journal of Computer Networks (IJCN), Volume (6) : Issue (2) : 2014 18
Dekeng Setyo Budiarto

investments in IT. This mismatch also indicates that managers in SMEs must clearly be able to
distinguish between AIS requirements and the AIS capacity for the chosen information
characteristics. It is important to assess the alignment of AIS. A direct linkage between owner
commitment and IT alignment was established by Hussin [16]. The study shows a relationship
between the owner commitment to IT and IT alignment. The owner knowledge of software would
affect in the firm technology alignment. The evidence suggests that software knowledge is
important for the IT alignment. Based upon the arguments above, hypothesis 2 can be proposed
as follows:

H2: There are significant positive effect of owner commitments on AIS alignment.

2.4 External IT Expertise and AIS Alignment

A direct linkage between external IT expertise and IT alignment was established by Hussin [16].
Nevertheless, these study does not find any significant relationship between external IT expertise
and internal IT alignment. Other research Chang [6] shows that the right choice of an external
provider of IT has a positive impact on the productivity and performance. SMEs require more
often external IT/IS service providers than large enterprises. Therefore, the search for SMEs IT
outsourcing service should comply with their operational model demand. Firms should choose
external IT expertise carefully as excellent service quality is a crucial factor in making a
successful selection. Amidu [1] observe in Ghana that SMEs use accounting information to
generate their financial information. Ismail & Malcolm [17] found positive relationships between
external IT expertise and internal AIS alignment. The study revealed that almost all the sampled
SMEs employ external accountants to handle their accounting information. This is exercised
because SMEs have limited human resources. Based upon the arguments above, the hypothesis
3 can be proposed as follows:

H3: There are significant positive effect of external IT expertise and AIS alignment.

2.5 AIS Alignment and Performance

A firms performance will increase when there are synergies among the elements of a system. To
achieve this, SMEs need an AIS requirement that is aligned to their AIS capacity. An alignment
will occur when there are synergies between the strategy, structure, management process,
technology, and skill [22]. Dibrell [10] suggest that owners who are able to integrate either a
product or process oriented innovation strategy with investment in IT/IS would enhance the firms
performance.

Ismail [17] found in his study of SMEs that a significant proportion of Malaysian SMEs achieved
high AIS alignments. Furthermore, the group of SMEs with high AIS alignment achieved better
organizational performance than firms with low AIS alignment. Ismail [18] suggests that aligning
the information processing capacity with the perceived information requirement has contributed to
improve the firm performances of SMEs in developing economies. Choe [7] suggests that there
are significant positive relationships between the level of information provided by AIS on non-
financial performance. Through his theoretical examination, the author argues that AIS alignment
directly influences a firms performance. Based upon the arguments above, the hypothesis 4 can
be proposed as follows:

H4: There are significant positive effect of AIS alignment on non-financial performance.

3. METHOD
A positivist view was adopted in this study based on its assumptions on particular social reality,
such as attitudes of AIS used and their performance. Quantitative strategy adopted in the
questionnaires is always associated with positivist research [26]. SMEs definition refers to criteria
of the legislation (UU no 9/1995) with owned enterprises, maximum turnover of 1 billion rupiah,
maximum net assets of 200 million rupiah, with a number of employees between 5 and 19 for
small firms and 20-99 for medium firms.

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Dekeng Setyo Budiarto

The research model is described in four constructs; AIS requirement, AIS capacity, AIS
alignment, and non-financial performance. AIS alignment will be described as a derived construct
but each of the other to be measured directly, and they were operationalized on the research
instrument as follow:

3.1 AIS Requirement and AIS Capacity

Since the business strategy was measured by using 10 items, and 10 matching items were used
to measure AIS alignment, it was possible to explore how important a specific accounting
information item was to a firm and how well this information was supported by their computer
based information systems [16]. In this study, the responses for point 4 and point 5 of the five
point scale for the business strategy and AIS strategy items are treated as one category called
strongly agree. Similarly, point 1 and point 2 are treated as one category called strongly
disagree. The point 3 is called a neutral category. The questionnaire developed by Ismail and
Malcolm [16] with 10 questions about: focus, orientation, time horizon, aggregation, timeliness,
financial, non-financial, quantitative, and qualitative [17].

3.2 AIS Sophisticated

Naranjo [27] states that organizations operating in uncertain environments, more than other
organizations, will need high information technology sophistication. AIS sophistication was
measured by using questions proposed by Ismail and Malcolm [18]. Using a 5 point scale (1= no
sophistication; 5= high sophistication), respondents were asked to indicate their level of
participation in the following 2 areas: office support system, and accounting application.

3.3 Owner Commitment

The owner is an entrepreneur figure who is crucial in determining the innovative attitude of SMEs
[33]. The owner commitment was measured by using questions proposed by Hussin [16]; Ismail,
Malcolm [17]. Using a 5 point scale (1= no participation; 5 = high participation), respondents were
asked to indicate their level of participation in the following four areas: definition of needs
(information requirements), selection of hardware and software, implementation of systems, and
planning for future IT development.

3.4 External IT Expertise

Small firm would use external IT expertise, such as consultant and vendor [34]. The questionnaire
were asked to respondents to measure depend on external IT advice used by their firms [16];
[17].

3.5 AIS Alignment

The previous research shows that alignment can be examined from several approaches. Ismail
[17] measures accounting information requirements as processing capacity as represented by
AIS requirement, and measure of accounting information systems processing capacity as
represented by AIS capacity, fit between AIS requirement and the effect of AIS capacity on AIS
alignment. Ismail [18] explores AIS alignment using the matching approach, the fit between AIS
requirement and AIS capacity referred to as AIS alignment. Hussin [16] developed a survey to
measure IT alignment, the fit between business strategy and IT strategy as represented by IT
alignment.

The matching and moderation perspectives have been used by a number of researchers, and
other perspectives are still in their exploratory stages and require further development [17]. In this
research, the moderation perspective of measuring fit was adopted to measure the alignment
between AIS requirement and AIS capacity. The AIS alignment using the moderation approach
was measured by multiplying the rating for AIS requirement items with the corresponding AIS
capacity items. In this case, high alignment results from high ratings for an AIS requirement and
high rating for AIS capacity. Low alignment scores result from low rating AIS requirements and
low AIS capacity items.

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Dekeng Setyo Budiarto

3.6 Non-Financial Performance

Based on previous research [7] four non-financial performance of information produced by AIS
were specifically selected. They are; incidences of product defects, improvement of product
quality, number of product return, and rate of material scrap loss. Respondents were asked to
indicate on five point Likert scale, anchored on no amount of information and very large
information.

4. DATA ANALYSIS & DISCUSSION

4.1 Data Collection
The data collection in this study employed a purposive sampling technique where the author
selects particular elements using particular criteria. The criteria are as follows: 1) the objects of
the study are SMEs located in Yogyakarta; 2) the respondents are owners/managers of SMEs.
The survey conducted generates 86 returning questionnaires. Of the 86, only 53 questionnaires
can be further analyzed, since the remaining 33 are incomplete.

4.2 Respondent Demography

The analysis generated the following respondent demography: 4 (7,5%) enterprises have been in
operation for less than 3 years; 20 (37,7%) enterprises for 3-5 years; 29 (54,8%) enterprises for
more than 5 years; 51 (41%) enterprises have less than 10 employees; 76 (59%) enterprises
have more than 10 employees. The majority of enterprises (70,2%) are in the initiation level,
18,3% in diffusion level, and the remaining 11,5% are in the integration level.

4.3 Validity and Reliability Testing

Validity testing in this study was conducted using product-moment correlation at the 5%
probability level. The results indicate that all questionnaire items were valid with p < 0,05 (see the
table in Attachment 1). Reliability testing in this study used Cronbachs Alpha with a minimum
acceptable limit of 0.6. The results of validity testing demonstrated the Cronbachs Alpha value of
0.730 for AIS sophistication variable; 0.621 for owner commitment; 0.638 for external IT
expertise; 0.790 for AIS requirement; 0.881 for AIS capacity; and 0.715 for non-financial
performance. Those results indicate that all variables have a reliability above the predetermined
value.

4.4 Hypothesis Testing

Hypotheses testing in the current study employed two regression models. Model 1 is used to test
hypothesis 1, 2, and 3, and model 2 for hypothesis 4. The results of hypothesis tests are
presented in the table below:

Relationship T value P value R2

AIS sophistication AIS alignment 3,315 0,003 0,374
Owner commitment AIS alignment 2,687 0,010
External IT expertise AIS alignment 2,166 0,035
AIS alignment non-financial performance 15,079 0,000 0,813

TABLE 1: Results of Hypothesis Testing.

Based on Table 1 above, AIS sophistication was found to have a positive and significant effect on
AIS alignment with p value of 0,003 (hypothesis 1 is supported). The results of this study confirm
the previous studies by Hussin [16]; Al-Egab & Noor AI [2]. Owner commitment has a positive and
significant effect on AIS alignment with a p value of 0,010 (hypothesis 2 is supported). The results
also corroborate other works by Hussin [16]; [17]; [22]. IT expertise, the external variable in this
study, has significant effect on AIS alignment, with p value of 0,035 (hypothesis 3 is supported).
While the results confirm the study of [16]. AIS alignment have a positive and significant effect on
non-financial performance with p value of 0,000 (hypothesis 4 is supported). The results confirm
previous works by Choe [7]; Ismail & Malcolm [18]. They indicate that the average AIS

International Journal of Computer Networks (IJCN), Volume (6) : Issue (2) : 2014 21
Dekeng Setyo Budiarto

requirement by 3,65 and AIS capacity by 3,77 are in the same interval2.This indicates that there
is a correspondence between needs and capacities of the SMEsAIS.

4.5 Discussion
The results demonstrate that hypothesis 1 is supported; that AIS sophistication has a positive and
significant effect on AIS alignment. The results also indicate that SMEs have been using AIS
either for daily transactions (sales and receivables) or monthly transaction (employees salary and
inventory calculations). Both daily and monthly capacities of accounting information capacity have
been in conformity with the information requirement. Based in the developing countries, this
research consistent with similar result about the IT sophistication and alignment of AIS [16]; [2] it
argue that IT sophistication has significant effect on AIS alignment.

The results indicate that hypothesis 2 is supported; that is, owner commitment has a positive and
significant effect on AIS alignment. Owner commitment to technological sophistication greatly
influences the development of SMEs in terms of technological implementation, particularly that of
AIS. SME owners who are familiar with technology can perform the planning and evaluation of
the usefulness of technology to pave the way to the technological implementation in their
enterprises. SMEs owners need more fit information to support the decision with higher
uncertainties, Ismail [17] the right information that selected by the owners can reduce uncertainty
and expenses of the organization. Owner participation in the problem solving stage was found to
be significantly greater in the aligned firm [18]. The result also supports the findings of Hussin [16]
where an appreciations of the owner influence with IT alignment.

The test of hypothesis 3 indicates that external IT expertise has significant influence on AIS
alignment. The results provide the evidence that the use of AIS remains highly dependent on the
owners will, sophistication & IT consultant. Some of the SME owners stated that the AIS (or the
technology) they have bought can be properly used for a relatively long period. External IT
expertise will be used in case of disruption. Importantly, at the development stage of IT, the use
of IT consultants is still needed, nevertheless the development of information system (technology)
still not optimal. The owners assume that the technology they are using still run well with having to
upgrade the software by external IT expertise. Ismail [18] for example, argued that gaining expert
advice and assistance from relevant government agencies and accounting firm can help SMEs
achieve better alignment. But, this result did not support Hussin [16] argument that external It
expertise have little influence on IT alignment.

The test of hypothesis 4 demonstrates that AIS alignment has a positive and significant influence
on the non-financial performance. AIS compliance could be realized with the fit between the
capacity and the information required. Available information on the products manufactured will be
related to the information on the sales, production level, and the profit obtained. Information on
the supply will be related to the information on the defected raw materials. Those interrelated
information may improve the SMEs non-financial performance. The result of this research
consistent with Ismail, [17]; [18] argue that Malaysian SMEs with high AIS alignment had
achieved better organizational performance. Other relevant result is Choe [7] which proves that
management information systems can improve the non-financial performance, even though the
studies was conducted in large organization, but the result can be uses as SMEs research
references.

4.6 Implication
This study generates implications for future researches that the SMEs non-financial performance
may complement the financial performance, thus both performance measurements are equally
important and useful. Performance measurements, both financial and non-financial, are expected
to contribute to better SMEs development. The results indicate that owners commitment to
information technology sophistication has a significant influence on the proper use of accounting
information system. Therefore, the development of SMEs necessitates the government role in

2
Five-point scale measurement (1-1,8=poor; 1,81-2,6=fair; 2,61-3,4=good;3,41 -4,2= very good; 4,2-5=excellent)

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Dekeng Setyo Budiarto

providing the training on information technology for SME owners. Many past studies have tries to
find the effect of AIS alignment on financial performance, so if a link between AIS alignment on
non-financial performance it will suggest a gap for future study.

4.7 Limitation
Some of limitations of this study can be seen as fruitful feedbacks for future researchers: 1) this
study did not divide the SMEs business types. The results would be much better if the study
classified SMEs into service, manufacture, and trade categories because the type of business
affects the use of information technology; 2) the majority of SMEs are in the initiation level, which
means that their planning and control of accounting systems are lacking. For future researches, it
would be better if they assess each of the level (initiation, diffusion, integration) to determine the
effect they have on AIS compliance; 3) this study did not analyze the size of enterprise. The
larger the enterprise, the easier is the use of information technology; and 4) this study did not
examine the frequency of technology replacement (upgrading), and therefore is undecided as to
whether they are using the latest technology or the obsolete one.

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[30] Sousa Sergio, Elaine M, A. Guimaraes (2006) Performance Measures in English Small
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 International Journal of Advanced Computer Research (ISSN (print): 2249-7277 ISSN (online): 2277-7970)
The Effect of Accounting Information Systems in Accounting
Awosejo, O.J1, Kekwaletswe, R, M2, Pretorius, P3 and Zuva, T4
Abstracts
Generally, ICT have improved the quality of
professional services in the accounting
organization. The study have achieved the level of
accounting information systems usage, and the
perceptions of TAM factors such perceived ease of
use, perceived usefulness, attitudes towards use, and
behaviors intention were determine. The usage of
AIS performance of organization factors and social
factors was also used to determined computerized
accounting information systems in different
financial institutions in South Africa. To attain this
objective, a total of 104 were participated by survey
questionnaires, usage of accounting information
systems were majorities staffs mainly. Hypothesis
was tested; using paired sampled T-test and multiple
regression analysis. Authors have found that all
four TAM factors have significant influence in
using computerized Accounting Information
Systems in South Africa context.
Keywords
Accounting, Accounting information systems,
Professional Practice, Accounting Organization, South
Africa
1. Introduction
ICT has become a majorly tools for rendering or
providing a competitive advantage for companies,
most especially banking industries, financial
institutions and the accounting professions, in terms
of the number of computers in use and the level of
information technology infrastructure (Odubanjo,
2009). Communication technology deals with the
physical devices and software that link various
computer hardware components and transfer data
from one physical location to another.
Awosejo, O.J, Department of Business Informatics, Tshwane
University of Technology, Pretoria, South Africa.
Kekwaletswe, R, M, Department of Business Informatics,
Tshwane University of Technology, Pretoria, South Africa.
Pretorius, P, Department of Business Informatics, Tshwane
University of Technology, Pretoria, South Africa.
Zuva, T Department of Computer System Engineering,
Tshwane University of Technology, Pretoria, South Africa.
142
Volume-3 Number-3 Issue-12 September-2013
(Romney, 2009) AIS helps business units and solve
long-term problems of managers in the areas of final
price, costs and cash flow through providing
information to support and supervise companies in
the dynamic and competitive environment, and to
help the integration of companies and the operational
considerations in a profit way. Ismail (2009)
examined accounting information systems (AIS)
effectiveness and their influence factors in a specific
context of small and medium manufacturing
enterprises (SMEs) in Malaysia. He used a proposed
model to examine the impact of AIS sophistication,
manager participation in AIS implementation,
manager AIS knowledge, and effectiveness of
external experts such as vendors, consultants,
government agencies and accounting firms in AIS
effectiveness. The result shows that manager
accounting knowledge, effectiveness of vendors and
accounting firms make no significant contribution to
AIS effectiveness. Overall, the study encourages the
managers of SMEs to acquire sufficient accounting
information systems knowledge for a better
understanding about the business information
requirement. By doing this, it will enable SMEs to
learn from AIS implementation so that opportunities
can be recognized, with initiative to support
information needs. Abdullah (2009) investigated AIS
based on the usefulness and ease of use only. He,
Furthermore term the behavioral and performance
change of technology acceptance are expected to
occur through performance application to business
functions of public sector organizations in Tripoli,
Libya. The change was measured through the level of
acceptance of technology. The research confirmed
that the relationship between perceived usefulness
and ease of use contributes positively to AIS
adoption among public sector organizations. Sori
(2009) also examined the use of accounting
information systems (AIS) and their contribution to
knowledge management and the strategic role of an
organization. He used a construction company as a
case study to examine the use of AIS. The company
used automated AIS as contract plus financial and a
project accounting package commercially developed
by a private company. The users of this automated
system are the people operating within and outside
the company, and they generate the systems for
decision-making. The role played by AIS enhances
an organizations accounting functions and adds
 International Journal of Advanced Computer Research (ISSN (print): 2249-7277 ISSN (online): 2277-7970)
value. Using these automated systems helps to
overcome weaknesses in data processing. The study
involves upgrading human skills and developing
accounting software to speed up accounting work in
the construction firms. AIS is an important
mechanism of an organization that is vital for
effective management decision making in controlling
organization (Zymrmm, 1995). Generally, benefits of
AIS has impacted decision making process, purchase,
software applications, performance evolution,
internal control, external control and this have
facilitate companies transaction in South Africa
organization.
2. The role of Accounting
Information System
The role of accounting information systems was
summaries according (Sealehi, 2011) is a system that
operate functions of data gathering, processing,
categorizing, and reporting financial events with the
aims of providing relevant information for the
purpose of storing information keeping inventories
records and decision making, and also provides
financial report on a daily and weekly basis. This
study have shown that successful implementation of
accounting information systems has benefits,
improvement in work qualities, improved flow of
product, improved flexibility, multifunctional ability,
motivation of using software application, problem
solving capability of employees, increased
productivity and performance in terms of production
cost, and finally increased emphasis on suppliers
integration. All these mentions make accounting
information systems so unique and advantageous in
use.
3. Objectives of the study
To achieve this aim, the following use research
objectives:
To investigate of the social factors
influencing the use of AIS.
To investigate of the organizational factors
influencing the use of AIS.
To investigate TAM variable influencing the
role of AIS
To determine the role of AIS is used by
accounting firm to achieve their intended
purpose
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Volume-3 Number-3 Issue-12 September-2013
4. Theoretical framework and
Background
A review of the literature on AIS and the advantage
of AIS were discussed in the previous study, in order
to establish the theoretical frame work of the research
model and to derive the hypotheses that can explain
accountant behavior towards the role of AIS in an
organizations setting. This study have examines
some theories in the domain of the information
systems environment, and explored social factors and
organizational behavior and the technology
acceptance model (TAM) variables.
In the past, technology acceptance model (TAM)
represents an important theoretical contribution
towards the understanding of AIS (Davis, 1989). The
focus on the theory-based model of TAM by (Davis,
1989) explains computer usage behavior towards the
role of accounting information systems. The goals of
TAM also provided an explanation of the
determinants of computer acceptance that are
generally capable of explaining user behavior across
a broad range of end-user computer technology and
user populations. (Davis, 1993) predicting human
behavior and suggests how users come to accept and
use a technology and proposes that when a person is
adopting a new technology, a number of factors such
as the perceived usefulness, perceived ease of use,
attitude towards use and behavior intention can
influence their decision about how and when he or
she will use it. Also (Bergeron, 1995) implies TAM
framework, as a theory from social psychology,
explicitly shows the social, cultural, individual and
organizational factors that influence the behavior.
Davis developed TAM framework, while under
contract to IBM Canada Limited to evaluate the
market potential for a variety of the then-emerging
PC-based applications in the area of multimedia,
image processing, and pen-based computer in order
to guide investment in a new development.
Dalci (2009) study of social influence was motivated
by his interest in understanding the change brought
about in individual attitude by external input, in such
as information communicated to easy them.
Specifically, his research attempted to understand
whether the change in attitude resulting from external
stimuli was a temporary superficial change or a more
lasting change that became integrated in the persons
value systems. He suggested that change in attitude
and action is produced by social influence. His study
employs a theory-based model to investigate and
examine the social, individual, organizational and
 International Journal of Advanced Computer Research (ISSN (print): 2249-7277 ISSN (online): 2277-7970)
critical success factors that might explain
accountants behavior and role of AIS (Bagozzi
1992). These theories are in the AIS domain because
they enable researchers to gain a useful insight into
the reactions of people towards computer technology
and factors affecting their reactions (Davis et al
1989). A brief discussion of each of the TAM
variables was presented for this study.
Perceived Usefulness: Davis et al (1989) define PU
as the user probability that using a specific
application system will increase his or her job
performance within an organizational context.
Perceived Ease of Use: Davis defines PEOU as the
degree to which an individual believes that using a
particular system would be free of physical and
mental effort (Davis 1993). While PEOU relates to
the assessment of the intrinsic characteristic of IT
such as ease of use, ease of learning, flexibility and
clarity of IT interface, PU on the other hand is a
response to user assessment of the extrinsic, ie.task-
oriented outcome: how IT helps the user achieve
task-related objectives, such as task efficiency and
effectiveness. These two beliefs can create a
favorable disposition or intention towards using the
AIS.
Behaviour Intention: according to the TRA, an
individual behavior intention (BI) is a function of two
basic determinants: one is a personal factor in nature
and the other reflects the social influences. The
former refers to an individuals positive or negative
evaluation of performing the behavior. This is termed
as attitude towards the behavior. The latter reflects an
individuals perception of the social pressure put on
him or her to perform or not to perform the behavior
in question. These are termed subjective norms. In
other words, BI is determined by an individual
perception of personal factors such as attitude
towards the behavior and subjective norms, which are
the social pressure on the behavior in question (Azjen
and Fishbein 1991).
Attitudes towards use: TAM is based on the TRA
attitude paradigm which specifies how the behavior-
relevant component of attitudes can be measured. It
distinguishes between belief and attitudes and
specifically how external stimuli such as objective
features of the attitudes to the object are casually
linked to belief, attitudes and behavior (Davis 1989).
In TAM, an attitude towards usage is referred to as
the evaluative effect of positive or negative feeling of
individual in performing a particular behavior
(Fishbein, 2000).
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Volume-3 Number-3 Issue-12 September-2013
5. The important of TAM in the
research study
Since its original development, TAM has been the
focus of considerable academic attention (Venkatesh,
2003). TAM had received, adapted and extended by
numerous researchers (Johnson et al 2003). These
adaptations have variously explored TAMs
constructs and variables (Davis, 1993), issue of social
influence, the temporal dimension of IT adoption
behavior (Johnson, 2003), the degree of voluntary
attitudes in IT adoption and usage (Davis, 1989),
usage self-measurement bias and the case of object-
oriented systems development (Johnson 2003).
Furthermore, the theoretical importance of TAM as a
determinant of user behavior is revealed by various
kinds of research studies including the adoption of
innovations, the cost-benefit paradigm, expectancy
theory and self-efficacy theory (Davis 1989). An
overview of scholar research studies (Davis 1989;
Johnson 2003) on IS acceptance and usage suggests
that TAM has emerged as one of the most influential
models in this stream of research, including e-
commerce and the adoption of internet technology
(Johnson, 2003). TAM with its original emphasis on
system design characteristics represented an essential
theoretical contribution in understanding IS usage
and acceptance behavior. For instance, Davis (1989)
originally examined an email system and file-editor
used at the time at IBM Canada and found the PEOU
and PU to be significantly correlated with self-
reported use of the system.
Moreover, evidence of the research communitys
growing acceptance of TAM is more or less reflected
in the fact that the Institute for Scientific
Informations social science citation index, as
referenced in Money and Turner (2004), recently
listed 335 journal citations since 1999 of the initial
research paper published by Davis et al (1989). More
than a decade after its original publication, TAM
continues to play a significant role in social science
research studies (Johnson 2003).
Nevertheless, TAM has been replicated and tested
extensively to provide empirical evidence on the
relationship that exists between PU and PEOU (Davis
et al 1989). The result of the study has confirmed the
validity and reliability of the Davis instrument, and
supports its use with different populations of users
and different software choices.
 International Journal of Advanced Computer Research (ISSN (print): 2249-7277 ISSN (online): 2277-7970)
TAM uses multiple-item scales to operationalize
ATU, PU and PEOU in order to measure these
constructs more reliably than would be possible with
a single-item scale (Davis 1989). The Cronbach
Alpha reliability of TAM scales has been found to
exceed 0.9 across numerous fields (Davis 1993). In
addition, TAM item scales exhibit a high degree of
discriminate, convergent and nomological validity
(Venkatech 2003). The importance of these
psychometric properties and the high proportion of
variance in TAM for studying IS adoption is shown
by (Davis 1993 and Venkatech 2003).
However, there is potential bias in TAM. One of the
major biases is that TAM assumes that when
someone forms an intention to act, that the person
will be free to act without limitation (Bagozzi 1992).
However, in the real world, there will be many
constraints such as limited ability, time limit and
individual freedom to act (Bagozzi, et al 1992). TAM
with its original emphasis on the system design
characteristic does not account for social norms,
subconscious habits and facilitating condition of the
organisational environment in the adoption and
utilisation of new IS including AIS (Venkatesh,
2003).
Further, most of the existing studies on TAM were
conducted in North American countries (Davis et al
1989). When TAM is tested in the other countries
such as Switzerland and Japan, the results vary on
TAMs predictive power, culture, social norms, habit
and facilitation in individual IS, including AIS
adoption.
Davis et al (1989) had observed that the omission of
a subjective norm from TAM represented an
important area that needed further research. They had
noted that the theoretical basis of TRA makes it
difficult to distinguish whether usage behaviour is
caused by the influence of the referent on ones intent
or by ones own attitude (Davis 1989). For instance,
Davis (1986) observed that the subject may want to
do what referent: X thinks he or she should do, not
because of Xs influence, but because the act is
consistent with the subjects own [attitude]. Davis
(1989) not only underscores the importance of social
norms that can explain behaviour in the adoption and
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Volume-3 Number-3 Issue-12 September-2013
use of IS in the real world application of TAM, but
states that they failed to recognise the importance of
habit and other facilitating conditions suggested
above to have an important influence on behaviour.
Davis (1993) encourages future research to consider
the role of additional [external variables] within
TAM. In other words, his study highlighted the
growing importance of developing knowledge from
TAM. This study employs TAM variables and
incorporates selected variables such as social factors,
and organization factors. The theoretical foundation
and research model have explained the role of AIS
and behaviour towards the adoption AIS.
6. Research model and Hypothesis
The technology acceptance model (TAM) was used
in this study, for it does predict ability in the role of
accounting information systems usage. The
relationship between Social factors, Organizational
factors, perceived usefulness, (PU), perceived ease of
use (PEOU), attitudes towards usage (ATU),
behavioral intention (BI) and accounting information
systems (AIS). Technology is specified in the TAM
adoption and it reflects in the organization structures.
Informed by the empirical evidence shown below, is
the modified model showing the Social factors, has
direct influence in organizational factors. Together
with perceived usefulness has direct influence on
attitudes towards use, similarly perceived ease of use
has direct influence attitude towards use, while
behavioral intention is posited to affect (AIS).
Empirically evidence was conducted in justifying
TAM variables and other factors, the below was
conceptualize model that was tested with the prove of
hypotheses.
 International Journal of Advanced Computer Research (ISSN (print): 2249-7277 ISSN (online): 2277-7970)
Perceived
Social factors usefulness
Attitude
towards use
Organizational Perceived ease
factors of use
Figure 1: A conceptual model for Accounting Information system usage
Informed by the theoretical frameworks, the
following hypotheses were tested, in order to achieve
the aim and objectives of this work:
Hypothesis1:
Hi: There is a positive relationship between social
factors and organizational factors in the use of AIS
Ho: There is no positive relationship between social
factors and organizational factors
Organization factors consider the increase
the level of commitment of the end- user by
educating.
Organization factors influence the way of
capturing, processing, storing, and
distributing information in usage of AIS
Organization factors consider the training
sufficient communication and employee
relation in adoption AIS
Organization Factor influence efficient
control to ensure data quality.
Hypothesis 2:
Hi: There is a positive influence between social
factors and perceived usefulness of AIS
Ho: There is no positive influence between social
factors and perceived usefulness
Social Factor influence change about
individual attitude in usage of AIS
Social Factor consider the process that
determine the individual commitment in
usage of AIS
Social Factors influence AIS and they are
compliance, identification and
internalization
Social Factors as Norms, roles and Values at
society can influence an individual in Usage
of AIS.
It shown that Social factors have an indirect
146
Volume-3 Number-3 Issue-12 September-2013
Accounting
Behavioral
Information
Intention
Systems
influence on behavior by mean of PU,
PEOU and ATU
Hypothesis 3:
Hi: There is a positive relationship between
organizational factors and perceived ease of use of
AIS.
Ho: There is no positive relationship between
organizational factor and perceived ease of use AIS
Perceived ease of use ensure that there
would be no error or omission in usage of
AIS
Using AIS in turn is influence by perceived
ease of use
7. Methodology of the study
Sample size
A total 150 respondents have been surveyed from
different types of financial institution on random
sampling.140 employees are majorities, who familiar
with use of AIS. They engaging in using AIS and this
have make AIS to played a vital role in their industry.
Data collection
The study is mainly based on primary data. A
structured survey questionnaire has been used to
carry out the research. While the user of (AIS) were
interested, and fully participated to filling the
questionnaire provided.
Unit of analysis
Unit of analysis was conducted and targeted a set of
people in an organization, mainly usage of AIS
software, and accountants
Data analysis
 International Journal of Advanced Computer Research (ISSN (print): 2249-7277 ISSN (online): 2277-7970)
Volume-3 Number-3 Issue-12 September-2013

Data have been analyzed by using Statistical Package The descriptive statistics of the Social factors,
for the Social Science (SPSS) was used to perform organizational factors, and TAM variables are shown
correlation on the result from the questionnaire. The in the table.
correlation analyses were tailored towards achieving
the set objectives.
Experimental and Result

Table 1: Summary of Descriptive analysis Correlation

Factors PU PEOU ATU IN

** **
1.000 .589 .464 .291**
Organization Factors . .000 .000 .003
104 104 104 104
.589** 1.000 .381** .382**
.000 . .000 .000
Social Factors
104 104 104 104
.464** .381** 1.000 .113
.000 .000 . .255
104 104 104 104
.291** .382** .113 1.000
Intention of
.003 .000 .255 .
Use
104 104 104 104
**. Correlation is significant at the 0.01 level (2-tailed).

The above table 1; indicate TAM construct has
determine the role of AIS, shows correlation between
the organizational factors, social factors and intention
of use of AIS, the correlation coefficient indicates a
positive trend of 0.589 in (PEOU) while (ATU)
determine 0.464 in Social Factors which is significant
at the 0.01 level at 2-tailed. A positive relationship
also exists based on the result and framework.
Between the organizational factors and the intention
of use of AIS with correlation coefficient of 0.291 in
(PU), significant at 0.03 levels at 2-tailed. In
addition, correlation coefficients of 0.382 in (PEOU),
which indicate a positive relationship, also exist
between the social factors and the intention to use
AIS, significant at 0.01 level of 2-tailed test.
Therefore implies that there is a strong relationship in
TAM variables to easily adopted (AIS). This
indicates that between the social factors and the
organizational factors there is a co-orderly
relationship that leads to intention to use AIS.

Table 2: Correlation Analysis between Social factors and Organizational factors

Factors Organizational Social Factors Correlation

Factors Coefficient
1.000 .589** .464**
. .000 .000
Organizational factors
104 104 104
.589** 1.000 .381**
Sig. (2-tailed) .000 . .000
104 104 104
Social Factors .464** .381** 1.000
.000 .000 .
104 104 104
**. Correlation is significant at the 0.01 level (2-tailed).

147
 International Journal of Advanced Computer Research (ISSN (print): 2249-7277 ISSN (online): 2277-7970)
Volume-3 Number-3 Issue-12 September-2013

As shown in table 2; the result of the correlation indicating a positive relationship between
analysis indicate that there is a positive relationship organizational factors and general consideration of
between organizational factors and social factors with the use of AIS in the organization. This is significant
a correlation coefficient of 0.589 and 0.464, at 0.01level of 2 tailed analyses.

Table 3: Correlation co-efficient

Correlation co-efficient Co-efficient Intention of use

**
Sig. (2-tailed) .381 .382**
1000
. . .
000 000
104
104 104
.381** .133
1.000
.
000 .255
Social Factors Correlation Co-efficient
.
104 104 104

.133 1.000
.382**
Intention of use Correlation Co-efficient
Sig (2-tailed) . .255
000

104
104 104
***
Correlation is significant at 0.01 level (2- tailed)

As shown in table 3, the figure consistent with
factors, showing Social factors demonstrated a
significant influence on Intention of use with (.381)
similarly; Intention of use demonstrated a significant
influence on Social influence with (.382). A
correlation of the two factors shows significant at
the.000 level and while the coefficient support the
level of 104.
In summary, the respondents were mostly female
between the ages of 18 to 25 years, their highest
educational level was a diploma and their current
position in the organization they work for is account
manager. The quantitative analysis conducted
revealed that the majority of the respondent have
been privileged to personally use the computer for
about 1 to 4 years, during which their use of AIS was
considered to be equivalent to their use of computers
and they have been aware of AIS ever since. They
make use of AIS more than four times a month on
average. The respondents have used two different
types of AIS packages/ Software.
According to the perceived usefulness of AIS, the
majority of the respondents strongly agreed that their
use of AIS would improve how their data is kept,
facilitate the growth of their organization, enable
them to process accounting work quickly, improve
the process of publishing work and that overall AIS
was very useful. The respondents also strongly
agreed that AIS was easy to use, as it was easy to
learn to operate the system. It was equally easy to
operate AIS within the work schedule, it made work
easy and it was also capable of making the
publication of accounting work easy. Teaming the
different aspects of AIS together was equally strongly
agreed to be easy and, finally, their interaction with
AIS was clear and understandable.
Considering the facilitating condition of the
respondents, the entire group of respondents had
undergone a training section at some point in time
concerning the usage of AIS. They were trained
within five or more days and the majority of them
agreed that the AIS training they received was
satisfactory in terms of its quality. A larger
percentage of the respondents agreed that they were
satisfied with the duration of their training on AIS.
Most of the respondents agreed they were also
satisfied with the pace of the training and the
competence of their trainers. A little above average of
the respondents can operate AIS with confidence.
According to the majority of the respondents it could
be concluded that AIS is always available, reliable
and effective, thus there was a strong agreement to
this effect. AIS was agreed upon to be flexible and

148
 International Journal of Advanced Computer Research (ISSN (print): 2249-7277 ISSN (online): 2277-7970)
also easy to use, but on the overall satisfaction rate,
50% agreed to this.
There is a strong agreement that information required
from AIS is always reliable. It was also agreed that
the information required from AIS has been found to
be accurate, timely, precise, adequate and
meaningful.
From the information extracted from the 104
respondents, they strongly agreed that they usually
get help from IT support personnel in the
organization when difficulties are encountered during
the usage of AIS. Aside from this, help can also be
assessed easily from the Institute of Chartered
Accountants, the AIS manual and from colleagues.
The support services provided by AIS head office
staff were agreed to be always adequate, relevant,
provided within an acceptable time frame, provided
with a positive attitude and overall was regarded as
satisfactory.
Considering the organizational factors, it was agreed
that the encouragement of AIS usage comes from the
support from circuit office, availability of computers
in the organization, follow-ups made after the
implementation of the system, encouragement from
the head office and finally commitment from the
Institute of Chartered Accountants supporting AIS.
Socially, respondents agreed that their use of AIS had
been influenced by their colleagues, circuit office
officials, head of department, accountant, head office
management, head office AIS staff and subordinates.
The use of AIS was generally agreed upon by the
organization of the respondents to be productive,
rational, efficient and effective.
There arose a strong agreement that AISs
introduction was aimed at centralizing the control by
the Institute of Chartered Accountants. It was agreed
that its introduction improves organizational
administration, the work of accountants, the
administrative and management skills of organization
personnel and equally so makes the work of
organization personnel easier.
8. Conclusion
From the results of the statistical analysis, it can be
deduced that the use of AIS is relatively accepted
within accounting firms, which is largely as a result
of the change that comes with the use of such
application. The use of AIS which is a computer-
based application brings a new trend of change from
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Volume-3 Number-3 Issue-12 September-2013
the conventional way of accounting to a
computerized way which most people are not
prepared for or find very difficult to adapt to. It is
seen that its usage is majorly influenced by the
institution. It was also found out that the majorities of
recent users are within the diploma level of education
and have minimal experience with the use of
computers. This therefore creates a level of difficulty
for effective usage of the applications available. The
use of AIS is seen to have improved the productivity
and delivery of the users work, although this was not
quantified in this study. In addition, this study found
out that all three factors influencing the AIS process
were found to have a direct effect on attitude,
although no direct effect of this process on behavioral
intentions were observed. Hence, this emphasis on
innovation adoption and diffusion initiatives should
be focused on developing user attitudes that are
conducive to effective utilization and acceptance
behavior.
9. Recommendation
For proper and effective usage of AIS, there must be
an increased awareness of the usage and of AIS to
facilitate its wide adoption. Therefore, higher levels
of formal education should be encouraged, alongside
workshops, training and re-training of users for
adequate improvement. In addition, further studies
should be conducted to quantify the impact of AIS on
accounting firms, in order to be able to establish its
full potential.
Reference
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[3] BAGOZZI, R. P., DAVIS, F. D. A. & 1992.
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[4] BERGERON, F. & RAYMOND, L. A. R., S.
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[5] DALCI, I. & TANIS, V. N. 2009. Benefits of
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information technology MIS Quart., Vol
11:13(13) 319-339.
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& & WARSHAW, P. R. 1993. User acceptance
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Belief, Attitude, Intention and Behavior: an
introduction to theory and research Reading MA;
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[10] ISMAIL, N., A. 2009. Factors influencing AIS
effectiveness among manufacturing SMEs. The
Electronic Journal on Information systems in
developing countries, Vol, 1 pp 38, 10, 1-19.
[11] JOHNSON, D. G., KING M., R.A., L. & J.A, A.
P. 2003. Studying the impact of information
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[12] ODUBANJO, F. 2009. Effect of information
and communication technology on banking
operations in Nigeria. Journal of Information
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[13] ROMNEY, M. B., MARSHALL B. & AND
STEINBART, P. J. 2009. Accounting
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[14] SEALEHI, M. & ABDIPOUR, A. 2011. A
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[15] SORI, Z. M. 2009. Accounting Information
Systems (AIS) and Knowledge Management: A
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Awosejo Oluwaseun Johnson is a
post-graduate student of Business
Information System at Tshwane
University of Technology and also a
member of Southern Africa and
business Account. His research focuses
on acceptance of accounting
information systems usage.
The International Journal of Digital Accounting Research
Vol. 11, 2011 pp. 25 - 43
ISSN: 1577-8517

The impact of Accounting Information Systems

(AIS) on performance measures: empirical
evidence in Spanish SMEs1

Elena Urqua Grande. Complutense University of Madrid. Spain. eurquiag@ccee.ucm.es

Raquel Prez Estbanez. Complutense University of Madrid. Spain. raquel.perez@ccee.ucm.es
Clara Muoz Colomina. Complutense University of Madrid. Spain. cimunnoz@ccee.ucm.es

Abstract. This research study is aimed, based on empirical evidence, at measuring the relationship
between the use of the Accounting Information Systems (AIS) by the Small and Medium Sized
Enterprises (SMEs) in Spain, and firms improved performance indicators and productivity. This
empirical study is based on a survey carried out among small and medium-sized firms to ascertain
the extent to which development and implementation of accounting information systems had taken
place, and subsequently an analysis was made as to how much this introduction may impact on
improvement in outcome indicators and productivity. As interesting results we have found that there
is a positive relationship among the SMEs that use AIS for fiscal and bank management and better
performance measures. This research provides value added in accounting literature given the
scarcity of works dealing with the relationship between the application and use of AIS and
performance and productivity indicators in SMEs in Spain.

Keywords: Accounting Information Systems (AIS), Small and Medium-Sized Enterprises (SMEs),
performance measures, productivity.

1
We would like to thank Professor Carlos Rivero, from the Statistics Department (UCM), for his valuable
assessment. Also we would like to thank the anonymous reviewers of the journal for their contributions.

Submitted June 2010

DOI: 10.4192/1577-8517-v11_2 Accepted February 2011
26 The International Journal of Digital Accounting Research Vol. 11

1. INTRODUCTION
Accounting Information Systems (AIS) are a tool which, when incorporated into
the field of Information and Technology systems (IT), were designed to help in
the management and control of topics related to firms economic-financial area.
But the stunning advance in technology has opened up the possibility of
generating and using accounting information from a strategic viewpoint. Since
this is important for all firms, it is more important even for medium-sized and
small ones which need this information to deal with a higher degree of uncertainty
in the competitive market (El Louadi, 1998). Thus, they need to improve their
systems and data processing capacity to match their information needs (Van de
Ven and Drazin, 1985). Investing in staff training, improving the quality of
products and internal processes and increasing AIS investment will be the
leverage for achieving a stronger, more flexible corporate culture to face continual
changes in the environment. Innovation is the incentive with which a virtuous
circle will be put in place, leading to better firm performance and a reduction in
the financial and organizational obstacles, while making it possible to access
capital markets.
In order to deploy these strategies, Spanish firms have needed to invest in technology
to promote information and communication in different areas of the organization such as
production, design, innovation, marketing, commercial management or after sales service,
because all of them are very directly identified with gaining or losing market share. This,
in turn, has to be reflected in the results and productivity achieved. Although in
comparative organizational cultures among countries Spain appears as a country with
high resistance to changes that deliver uncertainty such as companies investments in IT
(Hofstede, 2001). Still, in the last years Spanish companies have developed significantly
above all on the tertiary sector and have made great efforts to reorganize and innovate
(Banegas and Myro, 2008). Currently in Spain, in the majority of areas, there is a
common understanding that using information technologies has been crucial to broaden
markets and to spare selling management costs. In Spain information society and the new
computer tools have allowed the companies to make a better use of their accounting
systems in their relations with suppliers and customers. In the same way the development
of the electronic banking allows the companies to save a lot of time in their transactions;
moreover AIS have fastened tax management.
Urqua, Prez & Muoz The impact of AIS in performance measures 27

On the other hand, to what extent this investment in specific technology for the
economic-financial area is related to performance and productivity indicators is a
question as yet insufficiently analyzed. Studies have been made by many authors
regarding the potential IT contribution, in general, to increasing SME productivity. The
latter, even in moments of crisis such as the present time, opt for the need to continue
investing in this type of technology to achieve continuous company improvement
(Cramm, 2008).
As information and communications technologies cover a wide range and include all
the areas in which a firm acts, this research work has focused on a specific part of them,
the accounting information systems (AIS) to show that computerized accounting tools are
directly related to the economic and financial results and productivity in small and
medium-sized business organizations. AIS are systems used to record the financial
transactions of a business or organization. This system combines the methodologies,
controls and accounting techniques with the technology of the IT industry: user interface,
computers and sophisticated software. The software used to track transactions provides
internal reporting data, external reporting data, financial statements, and trend analysis
capabilities.
The research work has focused on SMEs because these firms in Spain account for
more than 90% of the countrys business (Central Companies Directory, 2010). An
optimal implementation of AIS by SMEs means adapting more successfully to a changing
environment and shows a high degree of competitiveness, thus enhancing the dynamic
character of a company (even when a company is small, it must assimilate the use of
AIS). In other words, there are improvements in administrative management regarding
accountancy and finance. By using AIS, it is possible to gauge the risk of some operations
or predict future earnings with sophisticated statistical software applications. All these
benefits have been developed and tested in larger companies and it should be possible to
extend them to SMEs.
Nevertheless, it has also been pointed out that the challenges of successful
development in the information society lay not so much in the availability of good
technological infrastructure as in improving business disposition toward AIS use
(Scapens and Jazayeri, 2003; Scapens, et al., 1998). Thus, and in accordance with several
authors, it is of great interest to analyze the impact of AIS on economic and financial
profitability indicators (Return On Assets (ROA) and Return On Equity (ROE)) and the
productivity of small and medium-sized Spanish firms.
The results obtained in this research work suggest that there is a direct relationship
28 The International Journal of Digital Accounting Research Vol. 11

between using AIS for fiscal and bank management and performance indicators and it
reveals how important it is to implement them in such firms; however, there is no
evidence of the relationship between AIS use and productivity.
The structure of this article is as follows: first, a review of the bibliographic state of
the art in this issue has been done, where the research questions are designed. After the
empirical methodology is described and the ANOVA statistics applied; finally results
discussion is made and main conclusions drawn.

2. STATE OF THE ART

The main advantages of an optimal use of AIS in SMEs are: better adaptation
to a changing environment, better management of arm's length transactions and a
high degree of competitiveness. There is also a boost to the dynamic nature of firms
with a greater flow of information between different staff levels and the
possibility of new business on the network and improved external relationships
for the firm, mainly with foreign customers accessed through the firms web. With
the existence of more intercommunication there are increased chances for
diversification of traditional businesses. Nonetheless, excessive use of these tools
may decouple the quality of interaction between workers and customers with a
consequent reduction in productivity. Therefore, there are authors who defend the
need for a profound change in firms organizational culture to make these
installations productive (Asaro, 2000; Gallivan and Srite, 2005; McGrath, 2006;
Nicolau and Bhattacharya, 2006).
2.1. AIS and performance measures
Existing literature offers scant evidence of the relationship between these AIS
and performance measures; though it is important to highlight the study made by
Ismail and King (2005) which discovered a positive association between AIS
alignment and SME strategy and performance measures. In the Spanish case,
Naranjo-Gil (2004) posits an indirect relationship between AIS and firms
performance via the varying strategies that may be adopted by companies. Thanks
to investment in AIS, the scope for action is expanded, thus providing time saving
in trips to and dealings with banks, the Administration, etc. This reduces firms
costs. Productivity increases when these innovations are properly used. Insofar as
a firms culture is open to the introduction of new accounting information systems
Urqua, Prez & Muoz The impact of AIS in performance measures 29

this will lead to a more holistic view of it and make for greater flexibility and
dynamism in organizational search for improved results.
Despite of some authors who postulate that the direction of the cause-effect
relationship is only that companies achieve a high performance when they can
afford the implementation of certain technological developments (Damanpour and
Gopalakrishnan, 2001). Others indicate that firm performance drops just after the
implementation, taking several years to realize the benefits from IT adoptions
(Wah, 2000). There are several research works, which, in the widest sense, have
studied relationships between performance indicators and IT, and how IT impact
on firm performance achieving inconclusive results.
There are studies which obtain a positive relationship between investment in IT
and economic profitability, financial profitability and value added (Menachemi et
al., 2006; Huang and Liu, 2005; Ravichandran and Lertwongsatien, 2005;
Verhees and Meulenberg, 2004; Brynjolfsson and Hitt, 2003; Santhanam and
Hartono, 2003; Bharawadj, 2000; Li and Ye, 1999; Powell and Dent-Micallef,
1997; Barua et al., 1995; Dos Santos and Peffers, 1995). Other research shows
that no clear relationship exists between this type of investment and the
performance indicators. (Dibrell et al., 2008; Bharadwaj, et al., 1999; Rai et al.,
1996). Their authors argue that, currently, IT are readily available and using them
gives no competitive advantage for achieving improved results (Powell and Dent-
Micallef, 1997).
Similarly, they maintain that many firms have invested in IT but they do not
succeed in attaining the established performance goals. Although research on the
IT-performance ratio is more abundant in large-sized firms, the analysis of the
impact on smaller-sized ones becomes particularly important because investment
in these technologies may give them a competitive advantage and the chance to
position themselves to achieve better results since they are more flexible and have
better response capability (Prez et al., 2010; Tanabe and Watanbe, 2005; Izushi,
2003; Larsen and Lomi, 2002).
In Spain, in most sectors, there is a generalized opinion that using information
technologies has been decisive in expanding the business market and in saving
commercial management costs. Given that AIS are a basic component derived
30 The International Journal of Digital Accounting Research Vol. 11

from technologies in general, the main issue is whether applying accounting

information systems contributes to firms improving their results. For this reason,
and in view of the scarcity of studies on the subject, this article focuses on
analyzing whether there is any relationship between economic and financial
profitability and how much AIS are used in bank and fiscal management in
Spanish SMEs.
In view of the state of affairs the following research question is defined:
RQ1: Do Spanish SMEs which use AIS have better economic and financial
performance indicators?
2.2. AIS and productivity
Once the literature had been reviewed, there is a dearth of articles researching
on the relationship between AIS and productivity. When the search was extended
to publications relating productivity and IT, many studies support the theory that
their proper use increased firms productivity and, thus, had a decisive influence
upon wealth and growth in a country (Hitt and Brynjolfsson, 1996; Lpez-
Snchez, 2004; Dozier and Chang, 2006).
Nevertheless there is a wide range of publications on the relationship between
IT and productivity. There are studies that analyse the IT impact on companys
productivity and obtain results that have led to the so- called productivity
paradox (Brynjolfsson and Hitt, 1996; Hitt and Brynjolfsson, 1996). This
hypothesis states that firms adopting IT innovations do not seem to experiment
significant increases in their financial performance, as productivity gains are
translated into benefits to customers. However, non-adopting firms may suffer
from productivity decreases due to the competition from their IT-adopting
counterparts.
According to the OECD (OECD, 2000) countries which invest the most in
these technologies are also leaders in productivity growth. However, in the case of
Spain, though the role of IT in business productivity is proven, the SME Report
2008 (Maroto, 2008) published by the Industry Minister on supply and use of
information technologies in Spanish SMEs confirms the low performance in this
factor. In recent years, the value and evolution of productivity has been lower than
Urqua, Prez & Muoz The impact of AIS in performance measures 31

that in the rest of the main economies (Maroto et al. 2008). Recently, Santamara
et al. (2010) have demonstrated that IT implementation derived in a decrease of
labour time and therefore a decrease in costs and Badescu and Garcs-Ayerbe
(2009) have analyzed the impact of investments in IT on the productivity of
Spanish firms and have found that although the firms in the sample experienced
some improvement in productivity in the considered period, this improvement
was not significantly derived from IT investment. In view of that the following
research question is defined:
RQ 2: Do Spanish firms which use AIS have higher productivity?
3. EMPIRICAL STUDY
This empirical study is based on a survey carried out among small and
medium-sized firms to ascertain the extent to which development and
implementation of accounting information systems had taken place. Subsequently
an analysis was made as to how much this introduction may impact on
improvement in outcome indicators and productivity. Once the survey had been
prepared it was revised and validated at the conceptual level, by a group of experts
in the subject and compared by having personal interviews with seven managers
belonging to sample firms. In this way we chose the most important questions for
our analysis. Later on, a selected sample was sent to SMEs, obtained from the
SABI database, and bearing in mind size, operating profit, asset volume and how
demanding the revealing of financial information was, following the definition of
national SMEs (Maroto, 2008; Milans, 2007; Nieto and Fernndez, 2006), and
international (Duc Son et al., 2006). Also taken into account were the legal status,
incorporating only those with the highest presence in the business area, the date
when the firm was established, with the most recent being chosen, as well as asset
volume and operating income, plus a favourable auditors report regarding the
rating for the accounts. Specifically the criteria for choosing firms were:
Number of employees: minimum; 10; maximum 250
Legal status: Joint Stock Company, Private Limited Company
Date of establishment: after 1/1/2000
32 The International Journal of Digital Accounting Research Vol. 11

Total assets (thousand Euros); maximum 12,320,000 euros

Operating income (thousand Euros) maximum 24,640,000 euros
Auditors opinion; Audited accounts approved
With these criteria a sample of six hundred and thirty two firms was obtained
and the survey was carried out. A valid rate of response of 12.5% was achieved
(of which five were eliminated because of errors in the replies, leaving a total of
seventy four valid replies). A deeper study was made of the firms which had
replied, following criteria of the European Union based on number of employees:
From 10 to 49 employees: small firms
From 50 to 249 employees: medium-sized firms
In the sample of firms replying to the questionnaire 96% were medium-sized
and 4% small. In graph 1 the values of the sample are revealed with regard to
number of employees, income and total assets.

Segment Magnitudes

Medium sized business

Small business

0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000
Thousands Euros
N of employees

Employees Revenues Assets

Graph 1. Classification of firms according to EU criteria. Source: authors

Urqua, Prez & Muoz The impact of AIS in performance measures 33

Moreover, an analysis of the results by sectors of activity shows that 34% of

the SMEs belonged to the industrial sector, 55% to the service sector, 8% to the
construction sector and 3% to the primary sector, and the average number of years
which the company has been operating is 10.
It is necessary to highlight that three indicators have been chosen to study the
effects of the degree to which computerized accounting systems have been set up.
These indicators are productivity, economic and financial return in accordance
with the studies of Brynjolfsson and Hitt, 2003; Bharadwaj ,2000; Tam, 1998; Rai
et al., 1996 for the ROA and ROE and of Dozier and Chang, 2006; Lpez-
Snchez, 2004; Black and Lynch, 2001 for productivity.
The definitions of the ratios used in accordance with the database used (SABI)
are as follows: ROA (corresponding to the initials of the Anglo-Saxon term
Return on Assets is calculated as the financial year result divided among total
assets, ROE (conforming to the initials of the Anglo-Saxon term Return on
Equity) is calculated as the financial year result divided among own equity and
productivity and equals operating income after deductions for Marketing, Raw
Material consumption and working expenses, all of them divided by staff costs.
In the statistical analysis, in order to delve more deeply into the results the data
were then segmented into four groups taking into account the possibilities of
response regarding the use of AIS for bank and fiscal management.
In this way group one is composed of firms using AIS both for bank and fiscal
management, group two consists of firms using AIS solely for bank management,
group three embraces firms which use AIS merely for fiscal management and,
finally, group four includes firms not using them either in bank or fiscal
management.
In the following stage of the research an ANOVA analysis was made to
compare measures among the four SME samples and examine the results. To
validate the empirical study and given that there were missing data on quantitative
variables (Economic Returns, Financial Profitability and Productivity) the
correlations between the different quantitative variables were analyzed and the
missing values treated with the maximum likelihood method and the EM
34 The International Journal of Digital Accounting Research Vol. 11

algorithm was applied to obtain the estimator. Subsequently, the descriptive

statistics of the sample have been analyzed (Table 1).

N Mean Typical error

Productivity 1,00 51 1,6669 0,09653
2,00 5 1,0880 0,20810
3,00 10 1,4547 0,06871
4,00 8 1,5046 0,09132
Total 74 1,5816 0,07111
ROA 1,00 51 2,2007 0,81742
2,00 5 -2,9240 2,68215
3,00 10 -,6849 0,74263
4,00 8 -4,3011 2,84826
Total 74 ,6491 0,72209
ROE 1,00 51 15,2968 4,03550
2,00 5 -12,2180 12,36923
3,00 10 -12,8340 7,64385
4,00 8 -3,1500 2,21104
Total 74 7,6420 3,33839

Table 1. Summary of relevant variables

In the second stage the normality of the variables has been analyzed by means
of the Kolmogorov-Smirnov test. When the correctness of the normality was
achieved, the next step was to make a parametric analysis of the variables by
checking whether there is homocedasticity with Levenes Test between the three
variables (Productivity, ROA and ROE) (Table 2). Since the principles of
normality and homocedasticity were complied with in the samples studied an
Urqua, Prez & Muoz The impact of AIS in performance measures 35

ANOVA analysis was carried out to compare the hypotheses posited.

Levene Statistic gl1 gl2

Productivity 0,558 3 70
ROA 1,370 3 70
ROE 0,686 3 70
Significant at 95%

Table 2. Variance Homogeneity test

4. RESULTS
The results are statistically significant for the ROA and ROE performance
indicators but not so for productivity (Table 3).

F
Productivity 1,644
ROA 3,964 *
ROE 4,695 **
**Significant at 99% *Significant at 95%
Table 3. Results of (Intergroup) ANOVA

The first research question suggested that in the case of those SMEs which use
AIS for their bank and fiscal management there was a significant relationship with
the performance indicators. On the basis of the results it is indeed shown that not
only is there such a relationship, it is also a positive one because there is a
significant difference in the measures between groups one and four in the ROA
and between groups one and three regarding the ROE (Table 4). With regard to
economic returns this implies that those SMEs using AIS for bank and fiscal
management have higher profitability than those not using it, the group 1 average
is 2.20 and group 4 has -4.30. With regard to financial returns, the same situation
occurs but the significance is established between groups 1 and 3. The group 1
36 The International Journal of Digital Accounting Research Vol. 11

average is 15.29, against 12.83 for group 3 and it even becomes negative for firms
in group 4.
The second research question posed the idea that those SMEs that used AIS for
bank and fiscal management had a significant relationship with productivity.
Bearing in mind the results obtained it is seen that the difference in intergroup
measures is not significant, so it can be said to be a matter of indifference in
productivity terms whether firms use AIS for their bank and fiscal management or
not (Table 4).

Difference of averages
Dependant variable (I) IT (J) IT (I-J) Typical error
Productivity 1,00 2,00 ,57894 ,28294
3,00 ,21226 ,20881
4,00 ,16234 ,22960
ROA 1,00 2,00 5,12469 2,71620
3,00 2,88557 2,00455
4,00 6,50179* 2,20411
ROE 1,00 2,00 27,51482 12,53947
3,00 28,13082 * 9,25412
4,00 18,44682 10,17539
* Significant at 95%

Table 4. Multiple comparisons (Bonferroni)

5. DISCUSSION OF RESULTS AND CONCLUSIONS

Considering the average returns the results indicate that firms which use AIS
for the whole of their management obtain a higher, more positive figure with
regard to the other groups of firms which show a negative average. This means
that the effort made by SMEs to implement, invest and improve their AIS is
related to their economic and financial results, since firms not using AIS or only
Urqua, Prez & Muoz The impact of AIS in performance measures 37

partly using it obtain losses. Similarly, if we go more deeply into an analysis of

financial returns, this has been higher among those firms using AIS globally
compared to firms just using them for fiscal management. This proves that the
latter are wasting resources provided by AIS.
Even though we state that a greater effort in using AIS corresponds to better
financial and economic results; in line with the contingency theory, we are aware
that in the results obtained other complementary variables are combined as an
alignment with organizational culture and companys long-term strategy. In other
words, a well-defined strategy in favor of investing in AIS and favoring their use
needs an organizational culture to accompany it, even if in the short- term
allocating resources to AIS may lessen performance and this factor in times of
crisis may act as an entry barrier for making investments in this type of
technology. Consequently, it is necessary to analyze the correlation between
investments in AIS and certain changes in firms productive organization
(especially greater decentralization in the work process, a change to more
favorable relationships with customers and suppliers and an increase in the
number of skilled workers joining the firm).
Regarding the relationship between a firms productivity and the use of AIS,
results show that there is no significant relationship. The explanation for these
results may lie in the fact that productivity is a more complex concept than the
one using the SABI database-focusing on staff costs- although productivity could
be analyzed from its three components: efficiency, technological change and
change of scale, which has not been part of this study.
A limitation of this work is the ratio of response from SMEs and the fact that
most of them are medium sized rather than small. This could mean sample bias.
Future research trends of this work are to carry out an analysis on the regression
between the performance indicators and productivity and the use of AIS by
introducing the time variable. Likewise, we plan to prepare a survey of a more
qualitative nature geared to managers to relate investment in AIS, strategy and
long-term performance indicators.
Finally, this research provides value added for practitioners and academics in
accounting given the scarcity of works dealing with the relationship between the
38 The International Journal of Digital Accounting Research Vol. 11

application and use of AIS and performance and productivity indicators in SMEs
in Spain. This opens up the possibility of further studies on this topic.

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Urqua, Prez & Muoz The impact of AIS in performance measures 43

Appendix A. Survey items used in this study

TRADE NAME

PERSON INTERVIEWED

POST

FIRMS LEGAL STATUS

WEB PAGE

E-MAIL

YEAR FOUNDED

NUMBER OF PARTNERS

ACTIVITY

COMPANY REGISTRATION NUMBER

INFORMATION TECHNOLOGIES
1. Does AIS play an important role in planning the firms strategies?
2. Does your firm use any AIS for its financial and economic management?
3. What shortcomings do you find in the AIS you use?
4. Do you use the same computerized accounting program for financial, cost and management accounting?
5. How long have you been doing your accounting with a computer program?
6. Does computerized accounting AIS allow you to manage your cash position with banks?
7. Does AIS allow you to manage your fiscal affairs with Government bodies?
8. Do you think that the organization and administration in your firm have improved since using AIS?

NEW INFORMATION TECHNOLOGIES

9. Are you familiar with new technologies such as ERP, CRM and XML (Extensible Markup Language)?
10. If the answer is yes, would you be interested in using this free language to keep your accounts?