CHAPTER 1: INTRODUCTION

1.1 Background of the study

Currently, dramatic changes have taken place in information technology field and its impact affects many different industries. In today’s digital age, the companies increasingly used the information technology for the accounting system. It enables high speed data processing, high speed access to information, real time reporting, high accuracy, possibility of electronic exchange of information and also many other superior facilities (Abdelrheem, Hussaien, Mohammed, & Elbokhari, 2021). Considering these factors, use of IT for accounting is essential. Many companies use Accounting Information Systems (AIS) which facilitate the automation of accounting information (Serhan, 2020). Moreover the information system has highly contributed on the enhancing the quality of information provided by the accounting system. Further, the reduction of errors and high accuracy has identified as the main impacts of Accounting Information Systems (Dandago & Rufai, 2014). Thus, developed nations have required infrastructures, resources and processes to optimize the effectiveness of AIS.
However, the role of information technology on improving the productivity and transparency of the accounting system is still questionable in developing nations. Many organizations of developing nations tend to apply AIS which used in developed nations to its processes without any adaptation. However it has been argued that return of investment (ROI) of AIS could be negative in developing countries due to higher implementing cost and poor standardization (Raewf & Jasim, 2020). Further the accountants have to face several challenges in using AIS such as training which creates additional burden on them. Different to developed countries, IT infrastructure and resources are also different in developing countries. Especially in manufacturing organizations, fully fledged AIS are used which includes many different modules such as GRN, PO, GDN, Invoices etc. Thus, initiating and implementing an AIS in manufacturing companies is more complicated. In manufacturing firms, AIS is not just only part of financial sector, it is a part of whole operation which interconnect each other (Adenike, 2017). Hence it is important to identify the issues of Accounting Information System (AIS) in manufacturing companies in developing nations like Sri Lanka.

1.2 Statement of problem

Currently, the larger manufacturing companies of Sri Lanka use AIS for its operation. Medium level manufacturing companies tend to use AIS. The AIS enhances the quality of accounting information through more transparent process (Banker, 2002). However, companies in developing nations face many different issues when using AIS. Success of implementing AIS depends on different factors such as IT infrastructure, human resources, managerial and technical competencies etc. (Serhan, 2020). Thus, it is a challenge to use AIS in developing countries which have many technological and human resources shortages. Initial investment of implementing AIS is very high. Some projects of implementing AIS have ended up as failed projects in Sri Lanka. Thus, it is important to identify the issues of AIS to calculate ROI and identify the feasibility of the project. The research conducted by Salehi & Abdipour (2011) identified issues arising with AIS such as issues of organization structure, issues of organization culture, financial issues, issues of human resource, technological issues, environmental issues etc. According to Salehi & Abdipour (2011), organization structure with 26%, lack of support from middle managers with 26%, human resource issues 25%, environment factors with 21%, organization culture with 19% and financial issues with 16% affect the effectiveness of AIS. Serhan (2020) identified issues such as organization structure, lack of training and development, lack of technological advancement and financial problems in using AIS. Companies of developing nations often experience similar issues. These issues can be categorized as people related issues, policy related issues and system related issues. In manufacturing companies, these issues could be highlighted more since it involves throughout the operation process. In manufacturing firms, difference modules of AIS are interconnected and setting up could be more complicated. These issues affects the effectiveness of the AIS. Thus, aim of this research is to identify the issues of exiting AIS of listed manufacturing companies in Sri Lanka. This study will useful for CFOs and accountants to make decisions regarding setting up AIS and use AIS more effectively.

1.3 Research Questions

The research questions which are planned by this study are;
1. What are the people related issues which affect the effectiveness of AIS in listed manufacturing companies in Sri Lanka?
2. What are the policy related issues which affect the effectiveness of AIS in listed manufacturing companies in Sri Lanka?
3. What are the process related issues which affect the effectiveness of AIS in listed manufacturing companies in Sri Lanka?

1.4 Research gap

There are many researches which focus on how information technology affect the accounting process. Many researchers have identified the impact of AIS on accounting and effectiveness of accounting such as timeliness, accuracy and quality of financial information. Many researches which conducted in developed nations focus on the positive impact of AIS rather than limitations. There are several researchers identify the challenges and risk of AIS but, scope of those researches limited to setting up AIS and implementing. Therefore, issues related to AIS is not an area which is not covered in researchers. Especially, scholars who have considered on risk and challenges did not focus on categorization of issues such as people related, policy related and process related. Thus, there is knowledge gap regarding issues related to AIS which affect the effectiveness. Further, in developing nations, only few studies were conducted related to AIS and those studies focus on effects of AIS. Thus, issues of AIS in listed manufacturing organization in Sri Lanka and how those issues affect the effectiveness of AIS are areas which did not covered in previous researchers.