CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
When banks suddenly collapse, the often resounding
question is “what went wrong”. A breakdown in the internal control system is
the usual cause. Internal control is a process that guides on banks and other
companies towards achieving its objectives. These objectives include
operational efficiency and effectiveness, reliability of financial reporting,
and compliance with relevant laws and regulations. Absence of these variables
often results in banks failures.
Thus, in managing and implementing
an internal control system of a banking industry, computerization of accounting
system is crucial. An important question in the field of accounting and
management decision making concerns the fit of accounting information system
(AIS) with the banking requirements for information , communication and control
(Nicokou, 2000). The strength of accounting information system can be evaluated
by its impact on improvement of banking decision-making, quality of accounting
information, performance evaluation, internal controls and facilitating banks
transactions (Sardy, Dastgir and Negad, 2008). Therefore regarding the above
characteristics, the effectiveness of accounting information system is
important for banking performance.
Computerized accounting used
computer to replace manual, achieve accounting afterwards, reimbursement and
auditing accounts and to replace part of the human brain need to be completed
by the accounting data, statistics analysis as well as provide the decision-making
process. Thus, development of accounting request is to develop requirements
while internal control in the banks is to protect the security of banking
assets, ensure complete and accurate data to facilitate the effective
implementation of management policies, improve operational efficiency, control
operational risks, prevent fraud from occurring and the achievement of
organizational goals and a key management system.
In recent years, Access bank
attaches great importance to internal control and issued a series of
specifications and guidance to promote management decisions, protect the
property, integrity, security and accounting data that will ensure banks
carrying out various policies and implementation in order to improve economic
efficiency by taking all the systems, methods and ensure management procedures
as part of the accounting internal control. In other words, a computerized
accounting directs the management guidelines to ensure the realization of
double entry book keeping accounting and loan balance of the basic principles
and methods.
However, the strengths and
weaknesses of accounting information, processing computer automation has
brought challenges to the banks accounting system. The computerized accounting
system has brought to the bank, faster and efficiency in processing data,
automatic generation of accounting documents like invoices, cheques and
statement of accounts, more timely information, no more manual processing of
the data-all automatically been posted to the various ledger and generate
useful reports for management to make decisions. Equally, weaknesses from the
computerized system has brought power failures, computer viruses, garbage- in
garbage- out, and danger of computer fraud if proper level of control and
security whether internal or external are not properly been instituted.
Furthermore, with the larger
reductions in the cost of hardware, software and availability of user friendly
accounting software package, it is relatively cheaper than maintaining a manual
accounting system. In other words, accounting system not properly set up to
meet the requirement of the business due to badly programmed or inappropriate
software or hardware or personnel problems can cause more havoc.
Indeed, a computerized accounting
system to strengthen the internal control is imperative. Computer use has
changed the banking environment and accounting documents in the form of a
computerized accounting system. Since e-banking, online transactions, the
implementation of paperless transactions as each transactions occurs, the
relevant data relating to the transaction by the banking staff entered into the
computer and the computer automatically records each transaction.
Indeed, Without the authorized
personnel the use of computer and all the files, copy, forgery, destructions of
critical banking data will be rampant in the banking industry. Therefore,
computerized accounting system of internal control is not only difficult,
complex but also a variety of means to control the computer technology.
Prior researches have shown that
accounting information system adoption does increased banks performance,
profitability and operations efficiency in sub-Saharan Africa. In Nigeria,
information society and the new computer tools have allowed the Access bank to
make better use of her accounting system in her relations with customers. In
the same way, the development of electronic banking allows the bank to save a
lot of time in her transaction. Thus, the present study attempts to provide
some clarification of the relationship between banks internal control,
accounting system and performance of accounting information system (AIS)
especially on Access bank performance and performance management. The structure
of section 2 reviews the relevant literature, gap in literature and theoretical
framework of analysis, section 3 describes the empirical methodology, section 4
present results from the statistical analysis of hypotheses, section 5 presents
the discussion of the finding from the statistical analysis and section 6
presents the summary and conclusion of this study, provides limitations of the
current study and points out some recommendations for further research.
1.2 Statement
of the problem
The issue of internal control system
is topical following global fraudulent financial reporting and accounting
scandals in our banking industry. A proactive preventive approach to the
problem requires a critical evaluation of existing internal control structures
in banks to determine their capacity to ensure that the banks activities are
carried out in accordance with established goals, policies and procedures.
The problem of the study emerges
that the used accounting system in Access bank is a very conventional one and
must operate a new computerized system so as to keep abreast of development and
technical progress. (Elaiwi, 2009) confirmed that using information technology
has become the target of Access bank which encouraged competition and
technological progress on the computerization of information system where the
system helps to plan, organize, control and supervise.
The research found through personnel
interviews and previous studies some of the obstacles to include, the
inadequate internal framework of checks and balances to ensure operational
efficiency and effectiveness in Access bank, while some of the studies such as
(Eke, 2009, Madumelu, 2011) took some of the obstacles that leads to power
failure, computer viruses, accounting scandals, in a computerized accounting
system in the Access bank to include human resource and administrative
inefficiency.
If accounting information system
(AIS) design can be linked to financial performance and financial performance
linked to banking performance, the analysis shows that infrastructural affect
on the computerization of accounting system in the Access bank affects the
internal control of the bank.
1.3 Objectives
of the study
The study aims to know the
followings;
1. To
ascertain whether internal controls provide adequate internal framework of
checks and balances to ensure operational efficiency and effectiveness Access
bank.
2. To
ascertain whether internal controls provides adequate documentation and updates
of changes even as computer virus and power failures occur in Access bank.
3. To
ascertain whether accounting scandals is as a result of the incompetence of
human resource in the computer operations Access bank.
4. To
ascertain whether infrastructure affects the administrative efficiency of the
Access bank operations.
1.4
Research Questions
The
following research questions will be used in solving the problems of the study.
They includes,
1. Does
the management of internal control provide adequate internal framework of
checks and balances that ensure operational efficiency and effectiveness in
Access bank?
2. Are
internal control system in the Access bank adequately documented and regularly
updated as changes occur due to computer viruses and power failures?
3. Does
the human resources affect on the computerization of the accounting system in
the Access bank leads to accounting scandals?
4. Does
the infrastructural affect on the computerization of the accounting system
occur as a result of administrative inefficiency in Access bank?
1.5 Statement
of Hypotheses
Based on the questions raised in the problem of the
study the following hypotheses have been formulated.
Ho 1. Internal
control does not provide adequate internal framework of checks and balances
that ensure operational efficiency and effectiveness in Access bank.
Ha 1. Internal control provides adequate internal framework
of checks and balances that ensures operational efficiency and effectiveness in
Access bank.
Ho 2. There is no significant impact of human resource
control on the computerization of the accounting system as regards virus and
power failures in Access bank.
Ha 2. There is a significant impact of human resource
control on the computerization of the accounting system as regards virus and
power failures in the Access bank.
Ho 3. There is no significant impact of infrastructure
in the computerization of the accounting system as a result of administrative
efficiency in Access bank.
Ha 3. There is a significant impact of infrastructure
in the computerization of the accounting system as a result of administrative
efficiency in Access bank.
1.6 Significance
of the study
The significance of the study came
from theoretical and practical contribution through revealing the importance of
using the computerized accounting system of internal control in the banking industry,
so the decision makers keep pace with technological development in the
financial institutions within the global village. The development of
information technology helped banking staff to achieve operational efficiency
and effectiveness, financial reliability and accounting balance. The contribution
of this study is to encourage the decision makers in the banking industry that
using the computerized accounting system will lead to a transition from
scarcity of information to the state of abundance of information, as well as to
the quality of appropriate information that gives objectivity and integrity.
While the theoretical contribution
of this study used new variables that the previous studies didn’t use in
measuring the dependent variables such as time, cost administrative performance
and decision for change. This study will also help in having the possibility to
implement a computerized accounting system in the banking industry because of
the savings of time, effort and cost. It will also help to correct the
obstacles that hinder the computerization of the accounting system in the
banking industry. The importance of this study also is to keep pace with the
technological developments in accounting as considered a system of information
specialized in generating the information data of an economic nature. It will
also serve as a reference point to academia’s and researchers.
1.7 scope
and limitations of study
The scope covers the entire Access
bank plc, Abakaliki branch. It will cover the periods 2001-2011, a period of
ten (10) years.
In the course of the study, the
researcher employed his best to ensure a genuine and accepted research report
that will be generally accepted. However, there were some constraints that are
met along the line, some of which were finance. The researcher hadn’t enough
money to carry on the project and the government and university management was
not willing to provide any assistance.
Time also contributed to the delay
of the work. This is because the time frame required to complete the work was
small, however, in spite of these numerous constraints, I was able to make
reasonable progress.