Abstract

Computerized accounting has become a vital tool for better financial reporting in many organizations today. Computers are now smaller, faster, and easier to use leading to computerization of the accounting system.

This study was therefore structured to examine the Influence of Computerized Accounting on the Quality of Financial Reporting and Performance of Microfinance Institutions in Buea Municipality. The study was divided into five chapters explaining the variable and outcomes of the research.

Data was gathered through the distribution of 25 questionnaires to 10 microfinance institutions in Buea and the responses were then analyzed to test the hypothesis. Descriptive statistical tables of frequency and regression analysis were used for data analysis with the help of SPSS.

The findings revealed that there is a significant positive relationship between computerized accounting and financial reporting. However, in the case of microfinance institutions in Buea, it was concluded that computerized accounting factoring in its speed, timeliness, accuracy, and the possibility of producing quality information affects the quality of financial reports and financial performance of microfinance institutions in Buea.

It is along with this finding that it was recommended Microfinance Institutions invest in computerized accounting as it affects financial reports to a great extent and transparency should continue being stable for better performance.

CHAPTER ONE

INTRODUCTION

This study was carried out to assess the influence of computerized accounting on the quality of financial reporting in microfinance institutions in Cameroon.

This chapter presents knowledge on the background of the study, statement of the problem, research questions, research objectives, hypothesis, scope, limitations, significance, and organization of work of the research.

1.1 Background to the study

Accounting is a system that has existed thousands of years ago. The system records financial information about a person or business, businesses use it in other to keep and track their financial accounts and other financial information in a safe and efficient way.

Thousands of years ago this information was engraved in rocks, books and other ways, but it was very had to keep record and access the accounts as the system becomes complex. Before, people had to look for financial records in rooms or places where they stored this information, it was time-consuming and not efficient.

Notwithstanding, In the area of accounting and finance, the use of the hand in financial reporting has been replaced by the use of computer software to enable quick reporting and easy processing and storage of financial information, hence due to facilitation by accounting software, preparation and access of financial statements and use of accounting procedures have been made easy (Kharuddin et al, 2010). In the current business world, failure to use computer software almost implies that financial information may not be accurate, delays in financial reporting and that financial information may not be stored for a long time.

Nowadays, businesses use computers with a computerized accounting system in order to perform many other new activities than what they were able to do in the past. Businesses can have access to financial information from different departments in the organization, assess the information through computers, and find financial data very fast, being more efficient.

A computerized accounting system involves the use of computers in processing accounting data into information to facilitate quick decision-making through timely preparations of financial reports. Financial reporting in this case refers to the way in which financial information is recorded, processed, and conveyed to the end-users of this information in particular (Weber, 2011).

As managers perform their stewardship obligations to owners, there is a need for accountability in the preparation of financial reports. Koga (1986), defines accountability as a condition under which a role holder renders account to another so that judgment may be made about the adequacy of performance. Lemer and Tetlock (1999), equate accountability not only to reporting but also to the justification of performance, they continue to describe accountability as the implicit and explicit expectations that anyone may be called.

Financial reporting is the process of supplying financial information which is reliable, accurate, and complete to the various stakeholders for making economic decisions (Saleemi, 1981). This is always in form of financial statements such as a statement of comprehensive income, statement of financial position and cash flow statement, and other financial annual reports which provide an overview of the company’s financial strength.

Today, there is a range of computerized systems in the market that businesses can use to keep track of their finances; a few of the most recognized for their performance are Sage, Microsoft Excel, Dynamics, Oracle, QuickBooks, Gescom, Alpha Bank.

Microfinance institutions as institutions that render financial services to the poor in rural areas are also expected to keep up-to-date financial records of their transactions to be used by customers and stakeholders. They can perform this responsibility by implementing an adequate system for recording day-to-day transactions of the institution. Thus, this research seeks to find out the impact of computerized accounting systems implemented by microfinance institutions on the quality of their financial statements and financial performance in Molyko, Buea.

1.2 Statement of the problem

Business managers need accounting information to plan, control, and make both short and long-term decisions. Since the 1950s, when technology started to be applied in business (Otieno and Oima, 2013), most developing countries have moved away from the use of a pen and a paper and have implemented the use of accounting software to facilitate the generation of quality, quick and accurate financial reports.

Computerized accounting has been a useful tool in increasing the quality of financial statements in microfinance institutions, as such increasing the confidence of stakeholders and encouraging them to invest more in microfinance institutions.

Microfinance institutions increase the quality of financial reports by preparing and presenting on financial statements information which is timely, accurate, and useful to users. Information presented on financial statements must allow for quick comparison between current and previous years’ data, offer financial statements for use by both managers and stakeholders. Thus, a computerized accounting system is needed to improve accuracy; speediness and reduce the cost of running of microfinance institutions.

However, due to insufficient resources and other poverty-related issues, there is a lack of consistency coupled with irregularities registered in the field of technology which handicaps the regular use of computerized accounting systems, leading to delays and inefficiencies in the presentation of financial reports.

This has cast doubts in the minds of individuals, institutions, and other corporate bodies on whether computerized accounting has an impact on the quality of financial reports. Several studies have been conducted to evaluate the impact of using this technology to generate financial reports in banks and other institutions. But this study intends to assess the impact of computerized accounting on the quality of financial reporting and performance of microfinance institutions in Molyko, Buea.

1.3 Research Questions

This study, therefore, intends to address the research question: What is the impact of computerized accounting systems on the quality of financial reporting and performance of microfinance institutions in Molyko?

There are some specific questions that help us answer this general question which includes:

1. How has computerized accounting influenced the quality and usage of financial reports in microfinance institutions in Molyko?
2. What is the financial performance of microfinance institutions with respect to the implementation of the computerized accounting system Molyko?
3. What are the challenges encountered by microfinance institutions in Molyko in the use of computerized accounting?

1.4 Research Objectives

1.4.1 Main Objective

The main objective of this study is to investigate the impact of computerized accounting system on the quality of financial reporting and performance in microfinance institutions in Molyko, Buea. 1.4.2 Specific objectives include

1. To examine how computerized accounting has influenced the quality and usage of financial reports produced by microfinance institutions in Molyko.
2. To assess the financial performance of microfinance institutions in Molyko with respect to the implementation of a computerized accounting system.
3. To assess the challenges encountered with the use of computerized accounting systems in microfinance institutions in Molyko.

1.5 Research Hypothesis

H0: Computerized accounting does not have a significant impact on the quality of financial reporting and performance.

H1: Computerized accounting has a significant impact on the quality of financial reporting and performance.