Kabazarwe Maureen

THE EFFECT OF COMPUTERISED ACCOUNTING SYSTEM ON THE
QUALITY OF FiNANCIAL REPORTING IN CORPORATE UTILITIES;

A CASE OF NATIONAL WATER AND SEWERAGE
CORPORATION, MBARARA BRANCH
BY
KABAZARWE MAUREEN
1163-05014-07186
A RESEARCH REPORT SUBMITTED TO THE COLLEGE OF

ECONOMICS AND MANAGEMENT IN PARTIAL FULFILMENT
OF THE REQUIREMENTS FOR THE AWARD OF BACHELORS
DEGREE OF BUSINESS ADMINISTRATION OF
KAMPALA INTERNATIONAL
UNIVERSITY
AUGUST, 2019
DECLARATION
1. Kabazarw e Maureen attest that this Research Report is original. It has never been presented
anywhere in an institution of higher education by any individual for any purpose whatsoever.
Signature: ..
KABAZARWE MAUREEN
1163-05014-07186
I)ate:
APPROVAL
I certify that this research has been carried out entirely by candidate under the supervision and
guidance of my University supervisor and is now ready for submission for examination with
her approval.
Signature: ~
~i~MWEBAZE LYDIA
Date
DEDICATION
I dedicate this research report to my beloved parents, brothers and sisters and the relatives who
has supported me through thick and thin while carrying out this research.
111
ACKNOWLEDGEMENT
I acknowledge the Almighty God for seeing me through the entire research.
I extend my special thanks to my beloved parents, brothers and sisters and the relatives who
has supported me through thick and thin while carrying out this research.
I very heartedly thank my immediate supervisor madam Tumwebaze Lydia for their persistent
guidance and encouragement she accorded to me during the time of the study.
I would also like to appreciate the individual respondents who took part in the interview
process, for their time and patience, without their input this research would have been
impossible.
I thank the entire Kampala International University Administration, the lecturers, the staff, and
the students for making my research bearable and possible.
Lastly. I acknowledge all those who gave me their support during the time I was carrying out
this study.
MAY THE GOOD LORD BLESS YOU ALL.
iv
TABLE OF CONTENTS
DECLARATION
APPROVAL
DEDICATION
ACKNOWLEDGEMENT iv
LIST OF ABBREVIATIONS x
ABSTRACT xi
CHAPTER ONE 1
GENERAL INTRODUCTION 1
1.0 Introduction 1
.1 Background to the Study 1
1 .2 Problem Statement 4
1.3 Objectives of the study 5
1.3.1 Major Objective 5
1 .3.2 Specific Objectives 5
1 .4 Research Questions 6
1.5 Scope of the study 6
1.5.1 ContentScope 6
1.5.2 Geographical Scope 6
1.5.3 TimeScope 6
1.6 Significance of the Study 6
1.7 Justification of the study 7
8 Definition of Key terms 7
1 .9 Conceptual Framework 9
1.10 Conclusion 11
CHAPTER TWO 12
V
LITETRATURE REVTEW .12
2.0 Introduction 12
2.1 Theoretical Review 12
2. 1 .1 The Technology Acceptance Model (TAM) 12
2.1 .2 Agency Theory 13
2.1.3 Unified Technology Acceptance user theory 13
2.2 Computerized Accounting systems 14
2.2.1 Computerized Transaction Processing Systems (TPS) 16
2.2.2 Computerised Reporting Systems 17
2.2.3 System Security 18
2.3 Quality of Financial reporting 19
2.4 Factors that influence the quality of financial reports 21
2.4.1 Timeliness of Reports 21
2.4.2 Comparability of Reports 21
2.4.3 Understandability 22
2.4.4 Verifiability 22
2.5 Specific Objectives 23
2.5.1 The Effect of transaction processing system on quality of financial reports 23
25.2 The Effect of reporting system on quality of financial reports 24
2.5.3 The Effect of system security on quality of financial reports 25
2.6 Other Factors 25
2.6.1 Accuracy of Reports 25
2.7 Conclusion 26
CHAPTER THREE 27
METHODOLOGY 27
3.0 Introduction 27
vi
3.1 R.esearcli 1)esign .27
3.2 Area of Study .27
3.3 Population ofthe Study 27
3.4 Sampling Pr~]tire 28
3.4.1 Sample Size 28
3.4.2 Sampling 1’echiiique 28
3.5 Data Collection ?vfetliods amid Instruitients 29
3.5.1 Data Collection l~4ethocls 29
3.5.2 Data Collection Instruments 29
3.6 Quality Control Ivlethods .. 30
3.6.1 Reliability 30
3.6.2 Validity 31
3.7 Data i~4anagenient and l’rocessing 31
3.8 Data Analysis 32
3.8.1 Quantitative data analysis 32
3.8.2 Qualitative data analysis 32
3.9. Ethica.l Considerations .33
3.10 I..inuitations of the Study .... 33
3.1 1 Conclusion 34
C~ FOU1i 35
PRESENTATION, ANALYSIS AND DISCUSSION OF FINDiNGS 35
4.0 Introduction .35
4.1 Itesponse itate 35
4.2 Background Information of Respondents.
4.2.1 The age of respondents
4.22 Gender of Respondents
vu
4.2.3 Period Worked with NWSC-Mbarara Branch 37
4.2.4 Level of Education 38
4.2.5 Computer Literacy 38
4.3 Computerised Accounting Systems and Quality of Financial Reports 39
4.3.1 Objective one: A descriptive analysis to examine the effect of transaction processing
systems on the quality of financial reporting in NWSC, Mbarara branch 39
4.3.2 Objective Two: A descriptive analysis to examine the effect of computerised

reporting systems on the quality of financial reporting in NWSC, Mbarara branch 42
4.3.3 Objective Three: A descriptive analysis to examine the effect of systems security on
financial reporting in NWSC, Mbarara branch 43
4.3.4 Descriptive Analysis of Quality of Financial Reporting 45
4.4 Correlational analysis 47
4.4.1 Correlation between Transaction Processing Systems and Quality of Financial

Reports 48
4.4.2 Correlations between Reporting Systems and Quality of Financial Reports 48
4.4.3 Correlations between Systems Security and Quality of Financial Reports 49
4.4.4 Correlations between Computerised accounting systems and Quality of Financial

Reports 50
4.6 Regression Analysis 51
4.6.1 Regression Model Summary of Transaction Processing System and Quality of

Financial Reports 51
4.6.2 Regression Model Summary of Computerised Reporting Systemsand Quality of

Financial Reports 52
4.6.3 Regression Model Summary of Systems Security and Quality of Financial

Reports 53
4.7 Conclusion 54
CI-IAPTER FIVE 55
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 55
5.0 Introduction 55
5.1 Summary of findings 55

viii
5.1.1 The effect of Transaction Processing System on the Quality of Financial Reports 55
5.1.2 The effect of Reporting Systems on the Quality of Financial Reports 55
5.1.3 The Effect of Systems Security on the Quality of Financial Reporting 56
5.2 Conclusions 56
5.3 Recommendations 57
5.4 Suggestions for Further Research 58
REFERENCES 59
APPENDICES 66
ix
LIST OF ABBREVIATIONS
ANOVA Analysis of Variance
CAS Computerised Accounting Systems
IT Information Technology
NWSC National Water and Sewerage Cooperation
U.S United States
x
ABSTRACT
The study conceptualised and studied the effect of computerized accounting systems on the
quality of financial reporting in the NWSC Mbarara branch. The study was guided by TAM
theory. Agency theory by Meckling and Jensen (1976) concerned with corporate disclosures
and Unified Technology Acceptance user theory (UTAUT) proposed by (Venkatesh et al.,
2003). A correlational design was used with mixed approach using both quantitative and
qualitative data. Total population of 132 from which a sample of 97 was derived using censer
and simple random sampling. Data was collected using a questionnaire method with a response
rate of 85.6% which was representative enough of the whole population Punch (2003). Findings
revealed moderate positive relationship between computerised accounting systems and quality
of financial reports with correlation coefficient of (R) = 0.426* * * given by Pearson correlation
and adjusted R2 square of 17.1% indicating a total outcome in quality of financial reports is
contributed by transaction processing systems. A significant positive relationship between
reporting systems on the quality of financial reports at a correlation coefficient (R)= 0.536***
given by Pearson correlation and adjusted R2 of 27.9% indicating a total outcome in quality of
Onancial reports is explained by computerised reporting systems. There was a moderate
positive relationship between systems security and quality of financial reports with correlation
coefficient of(R) 0.402*** given by Pearson correlation and adjusted R2 of 15.1% indicating
a total outcome in quality of financial reports is explained by systems security. The results of
the study indicate that there a significant positive association between computerised accounting
systems and quality of financial reports with the total outcome positive effect of 27.8% of
computerised accounting systems towards quality of financial reports. The study
reviewedprevious studies focussing on its timeliness, comparability, understandability and
reliability. Recommendations were, that upgrades should be initiated to integrate the e-billing
system to iScala system in order to reduce errors generated by manual transfer of data from
one system to another, Improvements and versions of accounting systems should be done
regularly to maintain relevance of the system in the current environment, staff should have
constant and continuous training by the authorized dealers of the packages so that they remain
well equipped with the knowledge and experience of the system. Best practice requires that
system audit logs should be reviewed regularly for potential security incidents, security
breaches and a record of the review should be maintained which is centrally to what is being
done. More emphasis should be put internal audit reviews to appraise and check the strength
of the instituted controls within the computerised accounting systems most especially the audit
logs to remove obsolete systems in the NWSC Mbarara branch.
xi
CHAPTER ONE
GENERAL INTRODUCTION
1.0 Introduction
Accounting itself refers to the process of identifying, measuring and communicating economic
information to permit informed and rational decisions, Omonuk (2009), Computerized
accounting is defined by Alan & Frankwood (2005) as a total suit of components that together
comprises all inputs, storage, transactions, processing, collecting and reporting of financial
transaction data.
Computerized accounting system involves the use of computers in processing quality

accounting data into information to facilitate quick decision making through timely preparation
of financial reports and 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. Financial reports are precisely generated by computerized accounting system and it
helps to make business decisions through timely preparation of financial reports and analytical
financial reporting. As information system covers a wide area and include all the areas in which
a firm act, this research work has focused on a specific part of them, the computerized
accounting systems (CAS) to show that computerized accounting tools directly affect the
quality of financial reports.
1.1 Background to the Study

The modern method of accounting is based on the system created by an Italian monk Fra Luca
Pacioli. He developed this system over 500 years ago. This great and scientific system was so
well designed that even modern accounting principles are based on it deSantis(2010).
Mall business sustainability is one of the major challenges in the United States and many other
countries Hamdan(2012). The business owner’s inability to provide the necessary funds or
expertise to implement or acquire computerized systems can overshadow the benefits such
systems provide. The business owner often fails to recognize the value such systems offer, or
chooses to retain a current manual system because of the unknown aspects of ease of use and
usefulness Sam et al. (2012).
Gallagher, Mark (2007), under a transitional administration led by the United Nations Mission
in Kosovo (UNMIK), an administrative structure was put into place, pending establishment of
Kosovarian Government institutions and resolution of the territory’s final political status. An
early step was the establishment of a Central Fiscal Authority (CFA), later renamed the
Ministry of Finance and Economy (MFE), and creation of a basic financial management
1
system. This initial system was a simple tracking mechanism in Microsoft Excel, the purpose
of which was to get an immediate handle on spending and donor funds disbursement. However,
within a few months the need for a more sophisticated, Government-wide IFMIS became
apparent. The objective was to integrate the 30 Municipalities and the future line ministries and
spending agencies under one central system and that’s when the computerised accounting
system was born in that country.
Several studies on computerized accounting systems and financial reporting have been
conducted in banks to investigate the impact of information Technology on preparation and
publishing of financial reports (Imeokparia, 2013); in Small and Medium Enterprises (SMEs)
of Nigeria to provide empirical evidence on the existence of computer-based accounting
systems in SMEs (Oladipupo and Ajape, 2013) in local administrative units like counties in
Kenya to investigate the effect of computerized accounting systems on audit risk management
in public enterprises Otieno and Oima,(2013).
In Uganda, computers are rapidly changing the nature of work of most accountants and auditors
with the aid of special software packages, accountants summarise transactions in standard
format employed in financial analysis. These accounting packages greatly reduce the amount
of tedious manual work associated with data management. Growing number of accountants
and auditors with extensive computer skills are specializing in correcting problems with
software or developing software to unique data management and analytical needs, Horald et al,
(2005). Banking industry in Uganda has continued to witness tremendous changes linked with
the developments in computerisation over the years. Stanbic Bank-Uganda had to re-examine
their service and delivery systems in order to properly position them within the framework of
the dictates of the dynamism of computerization (Woherem, 2000).
National Water and Sewerage corporation — Mbarara Branch in its bid to speed up, maintain
highly accurate and up-to-date accounting, inventory and statutory records, integrate, and
streamline all the business processes, cost-effectively, Computerised Accounting System
(i Scala Accounting) was introduced in 1990 to cover the General Ledger, Purchases and
Supplies, cash book, cheque printing, straight to bank payments for staff. Later on, it was to be
to be extended to suppliers in the near future, E- water payment system to faster transaction
and reconciling of Customer bills, E-procurement solution to handle supplies (Vol. 4, Special
Issue 1 2013, NWSC @ 40 years).
The directors accept responsibility for the annual financial statements, which have been
prepared using appropriate accounting policies supported by reasonable and prudent judgments
2
and estimates, in conformity with International Financial Reporting Standards and in the
manner required by the National Water and Sewerage Corporation Act (Laws of Uganda 2000).
The directors are of the opinion that the financial statements give a true and fair view of the
slate of the financial affairs of the Corporation and of its operating results. The directors further
accept responsibility for the maintenance of accounting records which may be relied upon in
the preparation of financial statements, as well as adequate systems of internal financial control.
Page and Hooper (1992, p. 117) showed the reliance of most businesses surveyed on their
computer systems. The survey showed that 19.6% were “totally dependent” and 65.8% were
“heavily dependent” and 13.9% were “moderately dependent”. The remaining 0.7% were
“slightly dependent”. Moreover, seventy-five percent of the respondents stated that they would
h~ive a critical or total loss of functioning within fourteen days if they lost their computer
support.
1 lowever, the popularity of computer based accounting system has not come without costs that
are inherent with the system itself. They may originate from input stage, process stage, storage
stage and output stage. On input stage quite often entries, not based on source documents, are
directly entered into the computer without any hard copy proof or reference (Arens and Leob
hccke, 1997). unauthorised transactions may be initiated through the computer without any
trace.
At process sliige, computers as machines have nojudgement of their own and sometimes may
do strange things if told to do them rendering data incomplete in case of deletion or irrelevant
if extra data is added, great speed can be misused skipping checks and balances, rare errors that
occur in the application programs and poor designs of either the program or the system can
create undetectable errors. At storage stage, information can be changed without physical trace,
loss of information, theft and lastly at output stage, users completely trust the computer results
which brings reluctance to double check for errors, secondly different reality can be created
because the computer records are wholesomely used to reflect the reality ofthe firm. The results
of the study therefore should help firms overcome the internal control problems that are likely
to arise in computerized accounting systems.
According to ISAB Framework financial statements are usually directed towards the common
information needs of these users and as a result, it serves as their major source of financial
information. Users of these financial statements include shareholders, prospective investors,
employees, customers and government. The act of communicating financial information to
these users is known as financial reporting. Financial Reporting can be defined as the process
3
of presenting financial data about a company’s financial position, the company’s operating
performance. and its flow of funds (Rose & Hudgins, 2008).
Financial Reporting is thus, the presentation of a complete set of financial statements which
consist of a;
Statement of financial position at the end of the period, Statement of comprehensive income
for the period, Statement of changes in equity for the period, Statement of cash flows for the
period, (Elliot and Elliot, 2006), Notes and explanatory notes to the accounting policies used
(Greuning, 2006). In addition to these statements, the Companies Code also outlines other
additional reports such as: A report by the directors and a report by auditors (s. 133).
Theoretically it is expected that a computerised accounting system would result to a quality

financial reports. Through studies done by Carol (2002), it is easy to do accounting functions
using computerized accounting systems. Posting transactions to the ledger, the principle of
double entry can largely be automated when done through the use of computerized accounting
system. Evidence from academic studies suggests that donors respond to accounting
information in making their giving decisions (Parsons, 2007; Buchheit and Parsons, 2006). In
2010, Gordon and colleagues outlined five best practice recommendations for annual reports
in the non-profit sector completeness, accessibility and transparency in financial reporting, full
disclosure and relevance. McBride (2000) stated that managers cannot easily satisfy statutory
and donor reporting requirements such as profit and loss account, balance sheet and customized
reporting without using computerized accounting systems.
1.2 Problem Statement

Raymond and Bergeron( 1992), every business has processes; some simple, others complex like
the multinational companies on global stage. As the business grows, acquires new customers,
enters new markets and keeps pace with constant changes in information technology,
companies need to maintain highly accurate and up-to-date financial reports. Computerised
accounting system is a new innovation geared towards improving the quality of such reports
and NWSC in particular.
lnspite of enormous benefits such as time saving, automaton of routine tasks, provision of
reports in real time to businesses in general, inherent problems still exist at four stages of the
system that is the input stage, process stage, storage stage and output stage. Most are still left
unsolved and new ones seem to have been credited to the use of computers. Despite most high
profile companies having 100% computerized accounting systems; there are still difficulties in
4
tracking down errors and the process is time consuming, Adetayo et al., (1999).UMEME
independent audit (201 5), indicated that when a token is detected in the database as a result of
collusion, the existing customer tokens continue supplying power to the customer instead of
disconnecting both tokens automatically.
Auditor General Report (2014), audit review of 2012/2013 revealed that whereas the iSCALA
system computed the weighted average price whenever there is receipt of inventory, it goes
ahead to value the inventory issued subsequently using the FIFO method. In addition, the
system then calculates a new weighted average price whenever there is an issue of inventory.
This resulted in inaccuracy of cost sales in respect of supplies of UGX.13,973,148,000 and the
closing inventories that were valued at GX.19,223,994,000. Management was tasked to make
necessary adjustments to reverse these anomalies by applying policies of which it fully
complied with.
Auditor general’s report (201 5). audit review of 2013/14 documented review of iSCALA
system revealed that the system can accept issue of inventory even when the balances are nil.
This makes the balances run into negatives, implying that the stores department is issuing what
they don’t have. The practice forces the system to calculate negative price balances and
subsequently adjust the new weighted average price calculated on receipt of a new batch.
Management advised to review this matter and also make appropriate adjustments to the
reported inventory values. Given that computerized accounting systems has been functioning
in NSWC since 1 990’s. one would have assumed that such irregularities should have gradually
been minimised to such levels of negligible effect. Thus, this study intends to address the
following research question: Does the use of Computerized Accounting System affect the
quality of financial reports? And if so to what extent.
1.3 Objectivcs of the study

1.3.1 Major Objective
To study the effect of computerized accounting systems on quality financial reporting in
NWSC.
1.3.2 Specific Objectives

1. To examine the effect of transaction processing systems on the quality of financial
reporting in NWSC.
2. To examine the effect of computerized reporting systems on the quality of financial

reporting in NWSC.
5
3. To examine the effect of systems security on financial reporting in NWSC.
1.4 Research Questions

1. What is the effect transaction processing systems on quality financial reporting in NWSC?
2. What is the effect of computerized reporting systems on financial reporting in NWSC?
3. What is the effect of systems security on financial reporting in NWSC?
1.5 Scope of the study

1.5.1 Content Scope
The research is based on two variables, computerized accounting systems as the independent
variable which is comprised of transaction processing systems, reporting systems and system
security. Quality of financial reports as the dependent variable characterised of timeliness,
reliability, understandability, comparability and verifiability.
1.5.2 Geographical Scope

The research was carried out in National Water and Sewerage Corporation Mbarara Branch.
This was due to availability and convenience of obtaining data about the topic of the study.
The branch is located within Mbarara Municipality, Mbarara District, found in Western part of
Uganda, 300 km from Kampala, the capital city of Uganda.
1.5.3 Time Scope

The study covered financial reports generated within the period of 2014 to 2018. This period
is significant as it is when NWSC redesigned and upgraded its systems to suit the current
demands and its wide enough (5 years) of which it is thought to provide enough information for
this study. And given the limited research time frame, such a task is achievable and within the
researcher’s budgetary means.
1.6 Significance of the Study

This study will help the management and staff of National Water and Sewerage Corporation,
not only for the Mbarara branch, but other branches work on the gaps within, since it will
enable them identify and understand the benefits, risks and problems associated with
computerized accounting and financial reporting.
This information obtained will also be of great importance to other business companies and
bodies that have adopted and those that are yet to adopt the system of computerized accounting
in knowing the pressure points to be emphasized and well managed in order to pursue the
system successfully.
6
[he study will also be of great benefit to the students who will access this information for
guidance them in research and equip them with knowledge as far as computerized accounting
systems is concerned and the importance of computerized accounting as far as financial
reporting is concerned.
1.7 Justification of the study

Osmond (2017). Computerized Accounting Systems have revolutionized the way business is
done on a global perspective. The assertion that computers improve quality of financial
reporting is generally accepted in government, industry and media pronouncements.
Computerization has been credited as a principal cause of rising U.S. prosperity, the source of
low inflation and the engine that drives favorable stock market performance.
The problem with such claims is that there’s very little hard data to conclusively support them.
Some academics have generated a small number of studies trying to show that spending on
computerized systems has been extremely profitable. But the studies are flawed because they
base their findings on questionable government statistics and rely on arcane econometric
formulas. This research is therefore geared towards making a contribution as far as
computerized accounting system’s role in generating quality financial reports.
1.8 Definition of Key terms

Accounting
According to Osmond, (2011). accounting is the way business owners manage their company’s
financial information in orders to make better decision regarding their companies.
As per the researcher, accounting as a systematic process of identifying, recording, measuring,
classifying, verifying, summarizing, interpreting and communicating financial information.
Computerized Accounting
Meigs et al (1998) defined a computerized accounting system as a system that uses computers
to input, process, store and output accounting information inform of financial reports. He adds
that accounting system records all transactions that routinely deal with events that affect the
financial position and performance of an entity.
In my own view computerized accounting refers to using computers for a range of performing
accounting tasks.
Quality of Financial reporting
Saleemi (1981) defined financial reporting as the process of supplying financial information
which is reliable, accurate and complete to the various stakeholders for making economic
decisions. Rose & Hudgins, (2008).Financial Reporting can be defined as the process of
7
presenting financial data about a company’s financial position, the company’s operating
performance, and its flow of funds
The researcher defines quality of financial reporting as a written report for the company?s
managers and nvestors and government agencies. These reports are also most useful to users
iii helping them make decisions about the reporting entity on the basis of information availed.
Reliability
Based on the definition of faithful representationlreliability as emphasized in lAS 10, the
financial statements are said to be reliable when they do not contain any material error or bias
and reliably reflect the economic events that they must present.
Information is reliable if a user can depend upon it to be materially accurate and if it faithfully
represents the nkrmation that it purports to present. Significant misstatements or omissions in
financial statements reduce the reliability of information contained in them.
Comparability
The information must be comparable to the financial information presented for other
accounting periods, so that users can identify trends in the performance and financial position
of the reporting entity.
Timeliness
Bragg (2014) refl~rs to timeliness as provision of information to users quickly enough for them
to take action. The timeliness concept is of particular importance as financial statements cannot
be so delayed that company managers realize too late that there is a serious performance or
liquidity problem that must be rectified. Consequently, the concept of timeliness in this area
means that the controller should use fast close techniques to close the books and distribute
accurate financial statements as quickly as possible.
U ii clersta n d ability
The information must be readily understandable to users of the financial statements. This
means that information must be clearly presented, with additional information supplied in the
supporting footnotes as needed to assist in clarification.
Verifiability
Verifiability means that different knowledgeable and independent observers could reach
consensus, although not necessarily complete agreement, that a particular depiction is a faithful
representation.
Accurate information helps to assure users that information represents faithfully the economic
phenomena it purports to represent.
8
Transaction processing system (TPS)
It is a computerized information system that is developed to process large amount of data for
routine business transaction, run on automatic basis at regular intervals and needs very little
decision making once it is set-up. TPS support day-to-day activities of the system. It captures
and processes the detailed information necessary to update data on the fundamental operations
of an organization
Computerized Reporting Systems

Computerized Reporting Systems also termed as General Ledger is a system that organizes and
codes data from that originates from TPS. If you keep your books by using a computerized
accounting system, posting to the General Ledger is actually done behind the scenes by your
accounting software. Transactions in the program are entered without ever having to make a
General Ledger entry and reports can be retrieved for decision making instantly using reporting
tools in the general ledger.
Security Systems
Computer Security is the protection of computing systems and the data that they store from
unauthorized access. Most of the computer accounting software come within themselves
internal control system (ICS) levels to enable user’s certain rights of access depending on the
level they are in the department. This helps in double checking errors of entry before data is
posted on the central database. It is done to reduces errors in data entry. On the other hand,
computers should be protected from malicious harm and also the positioning in the building
should be looked after and all this is called computer systems security.
1.9 Conceptual Framework

Jabareen (2008), defined a conceptual framework “as a network, or a plan of interlinked
concepts that together provided a comprehensive understanding of a phenomenon or
phenomena” (p.440).
Meigs et al. (1999), specified the basic functions of accounting systems, in developing
information about the financial position of a business and the results of its operations; every
accounting system performs the following basic functions: Interpret and record the effects of
business transactions, Classify the effects of similar transactions in a manner that permits
determination of the various totals and subtotals useful to management and used in accounting
reports and Summarize and communicate the information contained in the system to decision
makers.
9
General purpose linancial reports represent economic phenomena in words and numbers, to be
useful, financial information must not only be relevant, it must also represent faithfully the
phenomena it purports to represent. This fundamental characteristic seeks to maximise the
underlying characteristics of completeness, neutrality and freedom from error. Information
must be both relevant and faithfully represented if it is to be useful. (IFRS Framework, 2015)
Figure 1.1: Conceptual Framework

Independent Variables Dependent Variables
Quality of Financial Reporting
Computerized Accounting System o Comparability
• Transaction Processing(TP S) • Timeliness
Report Preparation • Understandability
o Systems Security o Verifiability
• Reliability
Moderating variables
o Expertise
o Training
o Environmental Context
o Commitment
Source: Meigs, Williams et al (1999), IASB, IFRS (2015)
As the figure above stipulates, the researchers used input, process, output model. The
researcher used computerised accounting systems as an independent variable which were
deemed to play a vital role by helping to capture data through transaction processing system
that is equipped with user friendly feature increase speed of data entry. Process and formulate
reports through reporting system with an aim of producing comparable, understandable and
verifiable reports as an output. While the system security is tasked to apply checks and
balances, increase security features, protect the system from internal and external threats and
ensure data integrity at all times making financial reports reliable for decision making.
However, for these systems to be harmonized effectively, moderating factors such as the level
of expertise to complete the routine tasks, regular and onjob training to ensure that staff reduce
on the input errors. conducive favorable environment in which to operate should be availed for
10
teamwork and computer location should be on the upper side of the building for longevity and
lastly vendor support in form troubleshooting whenever problems with the system arise and
making sure that the system is functioning efficiently to avoid delays in report generation is a
iriust.
Many to one variable method was used to answer the challenging question at hand focusing on
three variables that is the transactional processing system (TPS), computerized reporting
system (CRS) and the Systems Security(SS) as the control features used to produce the Quality
of financial reports.
1.10 Conclusion
In this chapter the researcher explored and overview of the problem- computerized accounting
systems on quality offinancial reporting through sections as background of the study, statement
of the problem, purpose and objectives of the study, the scope, justification and significance of
the study and the conceptual framework that was used to guide the study. Chapter two presents,
in more detail, definitions, measures of depend variable and independent variable.
11
CHAPTER TWO
LITETRATURE REVIEW
2.0 Introduction
The overall goals of this chapter are firstly to establish the significance of the general field of
study, then identify a place where a new contribution could be made. The bulk of the chapter
is on critically evaluating the different methodologies used in this field so as to identify the
appropriate approach for investigating the research question.
Winter (2000), observes that by itself, a computerized system cannot balance your books in
real time, improve your organization’s financial structure, increase your cost-efficiency, or
improve delivery in management reports. It will not solve such problems as unskilled or
unmotivated staff, poor managerial skills, inappropriate operating policies, or unfavourable
external conditions. Computerizing will not improve a problematic accounting system, but it
can improve a well-functioning system.
2.1 Theoretical Review

This section dealt with the theories that were important to the subject of this study. The theories
included the Technology Acceptance Model (TAM), Agency theory and Unified Technology
Acceptance user theory.
2.1.1 The Technology Acceptance Model (TAM)

The Technology Acceptance Model (TAM) is an information systems theory that models how
users come to accept and use a technology. The model suggests that when users are presented
with a new technology, two specific factors influence their decision about how and when they
will use it. [he two factors are; perceived usefulness (PU), and perceived ease-of-use (PEOU)
(Davis, 1989).
TAM has proven to be a useful theoretical model in helping to understand and explain use
behaviour in the information system implementation. It has been tested in many empirical
researches and the tools used with the model have proven to be of quality and to yield
statistically reliable results. However, parsimony has been one of TAM’s strengths but also
major weakness as it is having limited use in explaining users’ behaviour. As a result of the
shortcomings, many authors have extended TAM with additional constructs. Mbogo (2010) for
instance, employed TAM and extended it to include other factors such as perceived ease of
accessibility. perceived low cost, perceived security, perceived convenience, perceived
satisfaction and perceived support to investigate the success factors attributable to use of CAS.
Tobbin (2011) modelled adaptation of CAS expanding TAM to investigate the consumer
12
behaviour towards CAS adaptation in Ghana. Similarly, Odia (2012) applied TAM with
additional factors such as perceived trust, security, and perceived convenience.
Saleh (2011) mentioned that individual’s attitude using the CAS can motivate the actual usage
of it. It is a function of an individual belief when using the technology and the value he or she
was looking for. CAS has been valued by accountants not only for face to face conversation
but also for making interest based decision as they seek any chance to maintain business group
booking on the internet. Moreover, when there is a lot of integration rather than the past
systems, the process will be more efficient and accurate. Analysing the perceived ease of use
(PEOU), perceived usefulness (PU) effects on the intention towards using CAS as dependent
variable, required the basis of TAM in exploring the actual usage of CAS.
2.1.2 Agency Theory

Meckling and Jensen developed the agency theory in 1976 to explain the relationship between
principals (shareholders) and agents (managers) (Mwaniki, 2013). In this context, the principal
delegates an agent to perform work in the best interest of the principal (Oluoch, 2014).
However, this delegation of the decision-making authority can lead to a loss of efficiency and
consequently increased costs (Mwaniki, 2013). In the context of the financial reporting
accuracy, the agency theory is concerned with the corporate disclosures that provide an
enabling environment for the managers to disclose negative information voluntarily. This
corporate disclosure is critical in the context that there is conflict of interest between managers
and shareholders and conflicts between the firm and its creditors (Oluoch, 2014). The firms
make disclosures through regulated financial reports including financial statements, footnotes,
management discussion and analysis, and other regulatory filings (Barako et al., 2013).
However, these corporate disclosures are affected by several factors, which compromise the
quality of financial reporting. The corporate disclosures are shaped by the manager’s reporting
and disclosure, mandated reporting and disclosures regulations, and analyst’s expectations
(Oluoch, 2014). The agency theory is important to this study as it has explained the role of
discretionary financial statement declarations and how they may influence the financial
statements accuracy.
2.1.3 Unified Technology Acceptance user theory

The Unified Technology Acceptance user theory (UTAUT) proposed by (Venkatesh et al.,
2003) was developed through a review and consolidation of eight IT adaptation theories: TAM,
the motivational model, theory of reasoned action, theory of planned behaviour/technology
acceptance model, model of PC utilization, innovation diffusion theory, and social cognitive
theory (Venkatesh et al, 2003). The UTAUT aims to explain user intentions to use an
13
information system and subsequent usage behaviour. The theory suggests that four key
constructs (performance expectancy; refers to the extent to which an individual believes that
using a system will help him or her achieve better results on the task; effort expectancy: refers
to the extent of the ease associated with the use of the system; social influence: refers to when
a person’s emotions, opinions, or behaviours are affected by othersand lastly facilitating
conditions at work places (Vankatesh et al. 2003).
Lee (2006), found that the significant relationship between perceived ease of use and attitudes
can be proven when a system is believed to enhance job performance, instructors will have
positive attitude toward the use of that system for which it may reduce the perceived amount
of mental efforts when learning and using a new technology.
2.2 Computerized Accounting systems

Marivic (2009) described a computerized accounting system as a method or scheme by which
financial information on business transactions are recorded, organized, summarized, analysed,
interpreted and communicated to stakeholders through the use of computers and computer
based systems such as accounting packages. He emphasized that it’s a mechanized process of
facilitating financial information inflows as well as the automation of accounting tasks such as
database recording and report generation. Marivic (2009), adds that keeping accurate
accounting records is a vital part of any organization. Apart from helping it to keep its float
financially and legal, it is a requirement of funding bodies or donors.
Lee (1983), Accounting is purely human invention, having no independent existence in nature.
Hence, it cannot in any true sense have been discovered, but it must have been constructed by
human minds to serve human needs. Computerised Accounting System objectives as follows;
Internal control, including the safeguarding of organization money and other property, the
regular collection and payment of sums of money owed to and by it, and the prevention and
detection of inefficiency, waste, and dishonesty by employees of the organization.
Measurement of financial data, by means of the recording of transactions and events affecting
the financial state of the organization, and their prOcessing in accordance with consistent rules.
Provision of information for planning and decision making to management.
Reporting of financial information to properties, investors, and other interested persons.
Computerized accounting system involves the use of computers to handle large volume of data
with speed. efficiency and accuracy aimed at overcoming fundamental challenges which do
14
not change the principle. The principle of accounting remains the limitations of many
accounting and hence producing quality and reliable work. McRae (1998) adds that
computerized accounting systems are advantageous in consolidating information channels
meaning that files that were previously been duplicated by several departments will now be
consolidated into single file.
Smith and Wiggins (1991) argued that the use of accounting information could be linked to the
success or failure of an Entrepreneur. In order to survive, Entrepreneurs need updated, accurate
and timely accounting information (Lohman, 2000; Amidu and Abor, 2005). Accounting
systems are responsible for analysing and monitoring the financial condition of firms,
preparation of documents necessary for tax purposes, providing information to support
business purposes. Without such a system it will be very difficult for entrepreneurs to determine
performance, identify customer and supplier account balances and forecast future performance
of the business.
To provide accountability is thus an essential feature of an accounting system. However, in the

modern business world, information usefulness is also an important, albeit secondary,
requirement. Thus, the core of any accounting system is to provide accountability with
information usefulness a necessary adjunct. All computerised accounting systems seek five
basic results:
To record an actual, valid transaction, to accurately classify the nature of the transaction, to
record the correct value of the transaction, to place the transaction in the proper accounting
period; and to generate financial statements containing information about the transaction.
Carol (2002) says that computerizing business general ledger, payroll and other accounting
tasks increases office efficiency. Computerized accounting systems have also been credited for
their quick processing speed and large storage capacity. Using computerized accounting
systems ensure up to date account balances are available at any time to aid management in
decision making (Lancouch 2003). Computerization saves time on transaction hence leading
to quality of financial reporting for instance timely, accurate and reliable information can be
generated (Lewis 1999).
Financial reporting is largely an effort to assess financial performance, that is, how well or how
poorly an entity performed with money entrusted to it, (Sacco, 1998). Financial decisions
include raising and spending money as well as making promises that have financial
consequences. Financial reporting is considered a part of accountability for financial decisions.
15
Exactly, the quality of financial reporting depends upon how the financial data is handled right
from the point of data collection to the processing stage that leads to the production of
meaningful financial information in terms of reports. As noted by Sacco, (1998) two major
models are considered in this context, manual or computerized accounting. But computerized
accounting takes a greater lead due to its enormous advantages.
2.2.1 Computerized Transaction Processing Systems (TPS)

Shafique (2007), defines a transaction T is a logical unit of database processing that includes
one or more database access operations embedded within an application program or specified
interactively. Transaction processing may be a single user, multiuser, or concurrency; Ramez,
(2009). TPS can also be defined as an economic event that affects the assets and equities of the
firm, is reflected in its accounts, and is measured in monetary terms. These transactions are
grouped together into three transaction cycles i.e. the expenditure cycle, conversion cycle and
revenue cycle. They are arranged by the use of coding system to easily record, store, classify
and retrieve financial data.
Winter (2000), stresses that, Data-entry mistakes could result in inaccurate calculations and an
inaccurate representation of your organization’s financial picture. When garbage, defined as
errors, is allowed into a system that error is processed and the resultant erroneous (garbage)
data stored The stored data at some point will become output. Thus, the phrase garbage in,
garbage out. Data errors are even more problematic in ERP systems because the error can affect
many more applications than an error in a non-integrated database. Just because your system
is computerized does not mean that it is current or error-free. You should update and check
your data on a regular basis.
In addition to the data used in day-to-day operations (such as financial systems), you should
also consider long-term preservation of data that cannot be recreated (e.g., organization’s
history or vital statistics records). This may include current files, such as those found on your
desktop or server, or other files produced at various locations not linked to a centralized storage
area. Software and application files and settings may also need backup to ensure a fast and
efficient reinstall of your system.
One of the biggest mistakes made with backups is storing them too close to the original sources,
assuming that computer crashes are the only types of incidents an organization may face. To
protect its information, an organization should always store backups in a physically secure
facility far enough from its office not to be affected by the same fire, flood, or storm that might
destroy records in the office. If backup media remains on-site, it should be stored in a non
16
adjoining building if possible and in a location secure from intrusion, fire, flood or other natural
disaster.
Your customers and business partners expect you to keep your organization operating á~t all
times. You cannot prevent natural disasters, human error or even malicious acts by employees
or others; but you can have a plan that will keep you in business if any of these events occur.
Backups of the operating system, applications, database, and support files should be performed
daily, while documentation of these backups should be retained for at least three months. Daily
success or failure notices should be generated as well. Should any of these failures occur, the
major objective is to ensure that the databases are available to users within an acceptable
timeframe, while still ensuring that there is no permanent loss of data.
Indira (2008) pronounced the improvement in business performance as a result computerization

of the accounting systems as it is a highly integrated transaction processes that transforms the
business with the performance enhancing features which encompass accounting, inventory
control. reporting and statutory processes. This helps the company access information faster
and takes quicker decisions as it also enhances communication.
2.2.2 Computerised Reporting Systems
Elliot (2011) stresses that the accountant’s role is to ensure that the information provided is
useful for making decisions. For external users, the accountant achieves this by providing a
general-purpose financial statement that complies with statute and is reliable. For internal
users, this is done by interfacing with the user and establishing exactly what financial
information is relevant to the decision that is to be made.
According to McBride (2000), computerized packages can quickly generate all types of reports
needed by management for instance budget analysis and variance analysis. Data processing
and analysis are faster and more accurate which meets the managers need for accurate and
timely information for decision making. Frank wood (1999) consented to the speed with which
accounting is done and further added that a computerized accounting system can retrieve
balance sheets, income statement or other accounting reports at any moment. He consented that
computerized accounting system allow managers to easily identify and solve problems
instantly.
McBride (2000) stated that managers cannot easily satisfy statutory and donor reporting
requirements such as profit and loss account, balance sheet and customized reporting without
17
using computerized accounting systems. With the system in place, this can be done quickly
and with less effort. Computerized accounting systems ease auditing and have better access to
required information such as cheque numbers, payments, and other transactions which help to
reduce the time needed to provide this type of information and documentation during auditing.
Frank wood (1999), pointed that firms need to ensure that they promote the use of up to date
and complete IFRS in the preparation and presentation of its financial statements and ensure
compliance to the set standards and governing regulations. This was supported by Indira (2008)
who remarked that, firms should also ensure public availability of full sets of financial
statements including notes for public interest entities rather than producing a summary of the
financial reports to the stakeholders.
According to Carol (2002), it is easy to do accounting functions using computerized accounting

systems. Posting transactions to the ledger, the principle of double entry can largely be
automated when done through the use of computerized accounting system.
Magdalene (2010) also argues that computerized accounting can actually handle thousands of
calculations simultaneously and accurately as compared to manual accounting where by
transactions are handled one at a time and even needs much time to do that as well as being
characterized by human errors and mistakes in calculations which may eventually affect the
final output of information and hinder effective decision making.
2.2.3 System Security

Computer security is an attempt to avoid such undesirable events as a loss of confidentiality or
data integrity. Security systems attempt to prevent fraud and other misuse of computer systems,
they act to protect and further legitimize interests of the system constituencies.
Internal controls aim to ensure the reliability of financial information, the effectiveness and
elTiciency of operations and the compliance of laws and regulations. Internal controls are run
to ensure the achievement of operational goals and performance (Boone et al., 2000). The more
enterprise computerization and internal controls are aligned, the more reliable the financial
information, the smoother the operations and the better the legal compliance. This leads to
internal control efficacy and operational performance improvements (Zhang, 2007).
Hardy and Reeve (2000) indicated that a reliable internal control structure aims to ensure
information accuracy in the integration process of the EDI (electronic data interchange) system.
Davis and Weher (1 986) argued that the application of control procedures and methods at the
right time and in the right environment can achieve good cost efficiency.
18
Internal control is a system put in place to ‘keep an organization on course’ towards achieving
their set profitable objectives by minimising sudden surprises from errors, fraud, and theft,
which may result in risks of assets loss and unreliable accounting information (Ratcliffe and
Landes, 2009), Administrative controls (also called procedural controls) should also be
observed consisting of approved written policies, procedures, standards and guidelines. They
inrorm people on how the business is to be run and how day to day operations are to be
conducted. Administrative controls form the basis for the selection and implementation of
physical controls arid logical controls. Administrative controls have several sub-activities
which include: Separation of Duties, Rotation of Job, Need-To-Know or (Least Privilege) and
Mandatory Vacations. (Solworth, & Sloan, 2004).
An effective computer-based system will ensure that there are adequate controls existing at the
point of input, processing and output stages of the computer processing cycle and over standing
data contained in master files. Application controls need to be ascertained, recorded and
evaluated by the auditor as part of the process of determining the risk of material misstatement
in the audit c~ients linancial statements (Research Journal of Finance and Accounting; 2013)
Staff should watch for viruses and other threats to data integrity. Confidentiality of sensitive
information may be an issue, and access to some information may have to be limited to specific
individuals only, (Winston 2000).
2.3 Quality of Financial reporting

The process of financial reporting is intended to help investors and analysts to deeply
understand a firm’s profitability and risk and to use that information to forecast future
profitability and risk and ultimately value the firm, enabling intelligent investment decisions,
James (2011).
Numerous financial reporting abuses by companies such as HealthSouth, AIG, Adelphia,

Enron, WorldCom, Parmalat, Ahold, Satayam, and Global Crossing have raised questions
about the quality of accounting information. Terms such as earnings quality and, less
frequently, balance sheet quality appear in the financial press. However, these terms often are
not defined and are used loosely to capture a myriad of reporting and accountability concerns.
Although accounting quality has many dimensions, the commonality in the aforementioned
(and many other) financial abuses is that accounting was used to misrepresent a firm’s
underlying economics and earnings potential. Further, even correctly applied accounting rules
may, on occasion, fail to indicate future earnings potential.
19
Van (2005) defines financial reporting as the process of presenting financial information or
data about a company’s financial position, operating performance and its flow of funds for an
accounting period. According to Frank Wood (1999), financial reporting is all about presenting
useful information to users so that proper decisions can be made. The implication about
financial reporting is that financial information should aid in the evaluation of amounts, timing
and uncertainties of cash flows. Also, financial reporting should furnish information about the
entity’s economic resources, claims against those resources, owners’ equity and changes in the
resources and claims.
Indira (2008), emphasized that financial reports should provide information about financial
performance during a period management discharge it’s stewardship responsibility to owners.
It should likewise be useful to managers and directors themselves in making decisions on
behalf of the owners. Accounting information is very necessary if decisions are to be made
accurately and rationally by the various interested parties or users of financial information.
These are broadly classified into external and internal users. Where, internal users include
management and employees while the external users include donors, shareholders, creditors,
government, competitors and general public.
According to Carl’s et al (1999) the quality of financial reports depends on the intended users
of the information and should be evaluated with respect to the needs of the users. Federation
of Accounting Standards Board (FASB) defined quality as a hierarchy of accounting qualities
with relevance and reliability considered as the primary characteristics while representing
lhithfulness, verifiability, neutrality, cothparability, consistency and understandability
considered as secondary characteristics. Reliability, information is said to be reliable if it is
free from material errors and bias and represents faithfully that is purports to represent
emphasized Frank wood (1999).
According to Turner (2000), neutrality is the demand that accounting information should not
he selected to benefit one class and neglect to other. Reliable information is verifiable, neutral
and has representative faithfulness. Relevance is also a very important characteristic of quality.
Frankwood indicates that financial information is relevant if it is capable of making a difference
in decisions made by helping users to form predictions about the outcomes of the past, present
and future events either to confirm or correct prior expectations. Comparability is another
characteristic of quality information.
Frankwood (1999) also stresses that users must be able to compare the financial statements of
the enterprise over time in order to identify trends in its financial position and performance.
20
According to Indira (2008), timeliness is also •another important characteristic of quality
financial information. This arises as a result of perishability of accounting information. To
benefit users, financial information must be presented at the right time otherwise it loses
relevance.
According to Pal lai (2007) Understandability as a quality of financial reporting that enables
users to perceive the significance of financial information. He argues that users are assumed to
have reasonable knowledge of business and willingness to study and understand the
information. International Accounting Standards Board adds that information should not be
excluded on grounds that it may be difficult for certain users to understand.
.Tames (2011) High quality accounting information portrays fairly and completely the economic
effects of a firm’s decisions and actions. Paints an accurate economic portrait of the firm’s
financial position, performance, and risk. That is, quality accounting information minimizes
measurement error and bias. A high-quality balance sheet also provides a complete and fair
portrayal of all of the firm’s obligations at a point in time, including the present value of long-
term liabilities for future payments.
2.4 Factors that influence the quality of financial reports

2.4.1 Timeliness of Reports
IASB(2010),timeliness means information available to decision makers before it loses its
capacity to influence decisions. In specific terms, timeliness relates to the decision usefulness
of financial reports. It refers to the time it takes to reveal the information in annual reports. It
is usually measured in terms of the number of days it takes for the auditor to sign the accounts
after book-year end.
2.4.2 Comparability of Reports

TASB (2008). comparability is the quality of information that enables users to identify
similarities in and differences between two sets of economic phenomena. This suggests that
similar situations should be presented likewise, while different situations should be presented
differently. Comparability is often measured using six items, which together measure
consistency in the use of the same accounting policies and procedures and comparability across
companies within the industry. Specifically, these items are: 1) notes to changes in accounting
policies explaining the implications of the change; 2) notes to revisions in accounting estimates
and judgments explaining the implications of the revision; 3) the extent to which the company
adjusts previous accounting period’s figures, for the effect of the implementation of a change
in accounting policy or revisions in accounting estimates; 4) the extent to which the company
21
provides a comparison of the results of current accounting period with previous accounting
periods; 5) the extent to which the information in the annual report is comparable to information
provided by other organizations within the industry; and 6) the extent to which the company
presents financial index numbers and ratios in the annual report (Van Beest et al., 2009).
2.4.3 Understandability
The first enhancing qualitative characteristic, understandability, will increase when
information is classified, characterized, and presented clearly and concisely. Understandability
is referred to, when the quality of information enables users to comprehend their meaning
(IASB, 2008). Understandability is measured using five items that emphasize the transparency
and clearness of the information presented in annual reports (Jonas & Blanchet, 2000; Iu&
Clowes, 2004; Courtis, 2005; IASB, 2006).
First, classified and characterized information refers to how well-organized the information in
the annual report is presented. If the annual report is well-organized it is easier to understand
where to search for specific information (Jonas & Blanchet, 2000) [Ui]. Furthermore,
disclosure information, and in particular the notes to the balance sheet and income statement,
may be valuable in terms of explaining and providing more insight into earnings figures
(Beretta & Bozzolan, 2004). Especially narrative explanations help to increase the
understandability of information (IASB, 2006; lu & Clowes, 2004) [U2].
Additionally, the presence of tabular or graphic formats may improve understandability by

clarifying relationships and ensuring conciseness (IASB, 2006; Jonas & Blanchet, 2000) [U3].
Moreover, if the preparer of the annual report combines words and sentences that are easy to
understand, the reader will be more likely to understand the content as well (Courtis, 2005). If
technical jargon is unavoidable, for instance industry related jargon, an explanation in a
glossary may increase the understandability of the information [U4, U5].
2.4.4 Verifiability
Verifiability is a quality of information that helps assure users that information faithfully
rcpresents economic phenomena that it purports to represent. Verifiability implies that different
knowledgeabic users of financial reporting information reach general consensus, although not
necessarily complete agreement” (IASB, 2008; 39). Since the aim of the measurement tool is
to assess each of the qualitative characteristics and verifiability directly refers to the assessment
of faithful representation, verifiability is included in the measurement tool as a sub notion of
this fundamental qualitative characteristic This view is supported by the preliminary views on
an improved conceptual framework for financial reporting (IASB, 2006) and the concept
22
statements of the FASB (1980), which both include verifiability as a sub notion of faithful
representation.
2.5 Specific Objectives

2.5.1 The Effect of transaction processing system on quality of financial reports
Sasan (2006). Not so long ago, Transaction Processing Systems were the exclusive domain of
mainframe computers. Typical examples of such systems would be Airline Reservation
Systems, Banking Systems, or the Accounting System of almost any large company. Because
of this, Transaction Processing Systems are mostly unknown to the world of personal
computers.
But all of this changed drastically, and it’s all because of the Internet. Today, many small
companies, non-commercial organizations, and even private individuals are discovering
applications that can benefit from a Transaction Processing System.
The main problems addressed by Transaction Processing Systems are: the need to handle
hundreds, even thousands of simultaneous Users, the need to allow many Users to work on the
same set of data, with immediate updating and the need to handle errors in a safe and consistent
manner. Normal time-sharing systems are usually incapable of handling these problems
because of the great number of Users. Spawning a unique process for each User having his own
copy of all the data simply creates too much overhead for the Operating System.
However, achieving one objective may require sacrificing another. For example, ensuring that
information is more complete may reduce its timeliness. Similarly, increased verifiability and
reliability may reduce its timeliness. The decision maker must decide which trade-offs are
warranted in a given situation.
Mark (201 8), in some ways, the main benefit of a transaction processing system can also be a
disadvantage: the handling of several thousand operations at once. The transaction processing
system must simultaneously coordinate thousands, even millions, of purchases, debit
consumers’ bank accounts, hold each person’s private banking and address information and ship
out or process the order to the consumer. This system is helpful for any business that wants to
make selling goods and services easier for consumers. However, this complex system can be
difficult to handle if the business is not large enough to utilize a transaction processing system.
Security breaches are a common place and any hardware malfunction, such as an electrical
outage, could damage a well-integrated system that serves millions of consumers. If a business
has the resources, the business can invest in high-quality computer security to ensure consumer
23
protection and have hardware to back up data or generators for electricity.
Kaufman (2011), Data covering all aspects of the transaction, from product availability to
product pricing and customer credit and payment process, must be accessible at the right time
to be actionable. A system designed to handle these data requirements for a typical sales cycle
may not have enough compute power, memory, or bandwidth to accommodate a surge in
demand due to a special promotion or the introduction of a high-demand product. This system
lack scalability or the ability to expand IT resources as needed to meet the demand for those
resources.
2.5.2 The Effect of reporting system on quality of financial reports

Belfo (2010). Real-time reporting in accounting or simply real-time accounting offers many
benefits when compared to conventional periodic reporting. Traditionally, enterprises require
financial or non-financial reporting based on quarterly and annual periods. Yet, the rapid
change that occurs on market and society causes this periodic reporting to become quickly
outdated. Higher competition among enterprises demands for more updated information to
enable management to rapidly adapt to opportunities and answer problems. Real-time
accounting addresses these needs, but needs new technological answers.
Everyday business transactions are recorded with the help of computer software. Every account
and transactions are assigned a unique code where the grouping of account is done at the first
stage. This process simplifies the work of recording the transaction. Marivic (2009) argued that
computerized packages will minimize human errors in transactions recording as in the system
there is the existence of reference of every transaction. The influence of computerized
accounting systems depends on the end user’s satisfaction.
Mihir (2002) stressed that higher end user’s satisfaction leads to a positive attitude towards
using the satisfaction and in turn increases the voluntary usage of the system. Nash (2003)
noted that the quality of accounting information and performance of the accounting systems is
a great concern to management. A computerized accounting system is a delivery system of
accounting information for purposes such as providing reliable accounting information to
users, protecting the organization from possible risks arising as a result of abuse of accounting
data and system among others
The influence of computerized accounting systems on financial reporting has been linked to
the benefits of applying computer systems while generating financial reports. The presentation
of scheduled reports can be triggered and simplified and prepared at regular interval with ease
24
(McRae, 1998). With the application of computerization, generation of financial reports was
easy since information can be easily generated and updated on a timely basis. With the
substantial increase in the number of transactions and increase in the need for real time
information, maintenance of accounting data on a real-time basis has become essential. This is
achievable using computerized systems hence promoting the quality of financial reporting.
2.5.3 The Effect of system security on quality of financial reports

Knapp (2006), Many organizations today are fully dependent on information technology for
survival. This reality means that information security will remain one of the top challenges
!~iJng mnder~ orgaii7ations for atleast the near future. The increasing variety of threats and
Ibrociousness of attacks has made protecting information a complex challenge.
hall (1989) contends that organization managers have an ethical responsibility to seek a
balance between the risks and benefits to these constituents that result from their decisions.
Management and accountants must recognize the new implications of information technologies
for such historic issues as working conditions, the right to privacy, and the potential for fraud.
They should be concerned about the adequacy of the organization’s internal control structure
as a means of deterring fraud and preventing errors.
2.6 Other Factors

The primary objective of financial reporting is to provide high-quality financial reporting
information concerning economic entities, primarily financial in nature, useful for economic
decision making (FASB, 1999; IASB, 2008).
2.6.1 Accuracy of Reports

Faithful representation is the second fundamental qualitative characteristic as elaborated in the
ED. To faithfully represent economic phenomena that information purports to represent, annual
reports must be complete, neutral, and free from material error (IASB, 2008: 36). Economic
phenomena represented in the annual report are “economic resources and obligations and the
transactions and other events and circumstances that change them” (IASB, 2006: 48).
Consistent with prior literature, faithful representation is measured using five items referring
to neutrality, completeness, freedom from material error, and verifiability (Dechow et al., 1996;
McMullen, 1996; Beasley, 1996; Cohen et al., 2004)
Jonas and Blanchet (2000: 362) state: “neutrality is about objectivity and balance”. Neutrality
refers to the ntent of the preparer; the preparer should strive for an objective presentation of
events rather than focusing solely on the positive events that occur without mentioning negative
25
events.
2.7 Conclusion
A computer-based accounting system eliminates some of the major internal control concerns
associated with manual accounting systems. Page and 1-looper (1992) state that the computer
is more accurate than any person performing the same calculations. Unlike the human clerk,
the computer will not issue invoices incorrectly or accept a journal entry that does not balance
or post an entry to the wrong account. The computer was consistent in its treatment of
transactions (Page and Hooper, 1992). For example, if the program instructs the computer to
check the customer’s credit limit before the sale, the computer will always consistently check
the credit limit. The computer will not have any dishonest or disloyal motivations, since the
machine cannot profit from any misstatement. It is therefore important that we appreciate
computer based systems though come with some inherent problems have greatly improved the
work environment financial reporting thereby improving their quality.
26
CHAPTER THREE
METHODOLOGY
3.0 Introduction
Research is a planned and systematic process of collecting, presenting, analysing and
interpreting data for purpose of arriving at dependable solution to human problem. The
methodology for users on the various method and technique employed by the research in the
course of collecting and analysing data with the view of obtaining solutions to the problems.
This chapter seeks to discuss the population and sample size, the techniques used for sampling
and data collection methods, the various data collection instruments as well as the procedures
used in measuring and analysing the data. This chapter therefore seeks to describe how the
whole research was conducted.
3.1 Research Design

A case study research designs was used for this study as this method is used to narrow down a
very broad held of research into one easily researchable topic. Since this design is quantitative
in nature, it has the advantage of allowing the researcher to study and observe the behaviours
as they occur in current form.
The study approach was descriptive as it present facts concerning the nature and status of a
situation, as it exists at the time of the study (Creswell, 1994). It is also concerned with
relationships and practices that exist, beliefs and processes that are ongoing, effects that are
being felt, or trends that are developing. In addition, such approach tries to describe present
conditions, events or systems based on the impressions or reactions of the respondents of the
research. Survey was used to collect data from the respondents. Quantitative research was
chosen for this study to make results descri~tive and qualitative research to take into account
results that cannot be quantified. It also follows resolutely the original set of research goals,
arriving at more objective conclusions, determining the issues of causality and eliminates or
minimizes subjectivity of judgment.
3.2 Area of Study

This study was conducted in Mbarara District at National Water and Sewerage Corporation,
Mbarara Branch, one of the National Water and Sewerage Corporation Branches in Uganda
found on Plot I -3 Works road, Mbarara Municipality.
3.3 Population of the Study

Pout and Hungler (1999) refer to the population as an aggregate or totality of all the objects,
27
subjects or members that conform to a set of specifications. The study sought for opinions from
the full time Staff and contracted staff of NWSC Mbarara branch. At the time of the study, the
corporation’s staff list comprised of Branch Manager, Supervisors (10) and Departmental Staff
(119) totalling to 132 (one hundred and thirty-two) persons ~NWSC Staff List, Apr, 2017) of
which the study was to choose from.
3.4 Sampling Procedure

3.4.1 Sample Size
Table 3.1: Sample Size
S/n Categories Population Sample Sampling Technique
(N)
1 Managers 1 1 Censor
2 Supervisors 10 10 Censor
3 Departmental staff 1 19 86 Simple random sampling
Total 132 97
Source: NWSC Staff List (2019)
Since the population under review manageable, the researcher chose to include 11 (1 General
Manager and 10 Supervisors) using censor sampling technique and the general staff with
sample size of 86 respondents out of 119 departmental staff using random sampling totalling a
sample size of 97 respondents in all.
3.4.2 Sampling Technique

The study used both probability and non-probability sampling. The study in using non-
probability sampling used censor sampling technique to select all the top management and
middle management staff of NWSC Mbarara Branch and then in using probability simple
random sampling, other respondents were randomly selected from among the field staff.
Purposive sampling was used to focus on particular characteristics of a population that are of
interest, such as managers and supervisors which was to enable the researcher to answer
specific research questions raised. This method was appropriate since it was less restrictive
and satisfactorily meet the study objectives (Amin, 2005).
28
Simple Random sampling techniques were used to select the general staff who participated in
the study. This technique gave equal chance to the departmental staff who were mostly
involved the field. [t was achieved by filling in staff identification numbers of which were
placed in the box and selected at random until the required figure of 86 respondents were
reached. This assisted the researcher to select all the respondents required without bias.
3.5 Data Collection Methods and Instruments

3.5.1 Data Collection Methods
Questionnaire Survey
In this study the researcher specifically issued questionnaires to 97 NWSC staff so as to collect
enough information at their convenience upon appointment.
In this method. a questionnaire was hand delivered to the persons concerned with a request to
answer the questions and return the questionnaire. A questionnaire consisted of a number of
questions printed or typed in a definite order on a form or set of forms. This method is preferred
due to its ease of use, low cost and could collect a lot of information in a short time from very
many respondents (Olle& Katarina, 2005).
Document review
Review of reports mainly focused on the years indicated in the scope. It involved reading
audited reports. NWSC annual reports, web published journal, books, and any archived
information about a given variable in order to ascertain their opinions, ideas and past findings
about certain key characters of the study.
3.5.2 Data Collection Instruments

Questionnaires
Data was collected from the target sample population of 97 NWSC staff using Likert scale
designed questionnaires administered by the researcher. Data was obtained through a closed
and open questionnaire. The questionnaire was divided into two sections. Section A dealt with
Dependent variable and the section B dealt with the independent variable namely, Quality of
Financial Reports. Each question was designed with the aim of acquiring relevant information
that would help in the analysis and answering the study problem. At each end of every variable,
additional lines were left for those who felt needed to add extra information and that was
collected as qualitative information that gave the researcher extra insights into the study.
29
Document Reviews
Secondary data was gathered from Secondary sources such as Journals, Annual Reports,
Books, Websites and NWSC documents in order to extract information that would be used to
augment the study.
Observation
The researcher was able to collect sensitive data by using all of his senses to observe and
examine phenomena in natural settings or naturally occurring situations.
3.6 Quality Control Methods

3.6.1 Reliability
In order to safeguard reliability of the questionnaire data collection instrument, the researcher
used the test-retest technique of testing reliability where the data collection instruments were
administered to NWSC Mbarara branch staff of who were not part of the study sample. The
researcher pre-tested the questionnaire on 13 selected respondents from pilot study. This helped
the researcher to ascertain the reliability of the instruments after coding and running the results
in SPSS using Cronbach’s Alpha test of reliability (Cronbach, 1951). Table 3.2 shows a
Cronbach reliability of 0.784 for transaction processing system, an alpha of 0.858 for reporting
systems and alpha of 0.654 for system security and alpha of 0.795 for quality of financial
reporting. The researcher adopted 0.7 alpha as the adequate reliability as recommended by
Cortina, (1993) even though the overall reliability revealed an alpha of 0.884. The results out
of the final SPSS reliability test were illustrated in table 3.2
Table 3.2 showing Reliability test
SNo. Section Cronbach’s Alpha N of items
I Transaction processing system 0.784 7
2 Reporting Systems 0.858 6
3 System Security 0.654 6
4 Quality of Financial reporting 0.795 9
5 Full Questionnaire 0.884 33
Source: Field data (SPSS v 23.0, 2019)

3.6.2 Validity
The study emphasized face and content validity. To ensure face validity, the instruments were
given to the research supervisors, and peer researchers for further scrutiny and analysis to point
out areas with deficiencies and on the basis of their opinion. Changes were made to the
instruments so as to increase their face validity.
After face validity, content validity was tested. The researcher constructed data collection
instruments with an adequate number of items and ensured that questions were linked to the
objectives of the study so that all items were covered on a full range of issues being measured.
The researcher used content validity index to calculate content validity. The questionnaire
instrument was given to three management consultants for their expert opinion on the validity
items. The content validity index that indicated the extent of expert agreement was calculated
using a formula;
Content validity index = Number of Validity items

Number of total items
By using the formula. the content validity index was scored using three management
consultants as follows (C 1=0.87, C20.88, C3=0.89) giving an average of 0.88. the study
adopted a ratio of 0.87 basing on the recommendation of Cano-Cappellacci, et al, (2015) of 0.8
or higher as a standard for establishing excellence in a scale’s content validity. Therefore, the
tool was deemed valid and used for data collection.
3.7 Data Management and Processing

The study also aimed to make use of various descriptive and inferential statistics. The measures
of the independent variables, using the rating/Likert scales was converted to median values and
then to percentages to permit the application of correlation and linear regression models.
Descriptive statistics is formulated in form of frequencies and crosstab tables presented in
percentages. Hypothesis testing was used to make a decision in the face of uncertainty and to
evaluates two mutually exclusive statements about a population to determine which statement
is best supported by the sample data. If our statistical analysis shows that the significance level
is below the cut-off value 0.05, we reject the null hypothesis and accept the alternative
hypothesis. ANOVAb tables were considered to determine the significance of the hypothesis.
31
Table 3.3: Ranges of Likert Scale
Scale Response Rating Mean Range Interpretation
5 Strongly Agree 4.20 5.00

- Very High
4 Agree 3.40 4.20

- High
3 Not sure 2.60 -3.40 Moderate
2 Disagree 1.80 2.60

- Low
~ 1 Strongly Disagree 1.00 - 1.80 Very Low
Source: Likert, Rensis (1932)
3.8 Data Analysis

Data analysis involved organization and interpretation of information generated into useful
data. The data was collected and analysed using both quantitative and qualitative data analysis
methods. Data from questionnaires were then coded and logged in the computer using
Statistical Package for Social Science (SPSS V 23.0). This involved coding both open and
closed ended items in order to run simple descriptive analyses to get reports on data status.
Descriptive analysis such as frequencies and percentages and inferential analysis suchas
ANOVA and regression analysis were used to present quantitative data in form of tables.
Descriptive statistics involved the use of absolute and relative frequencies.
3.8.1 Quantitative data analysis

Quantitative data collected was scrutinized, cleaned, coded and entered into a computer
program and analysed using the statistical package for social scientists (SPSS) between the
variables. Frequencies and percentages were used in describing responses to question items on
computerized accounting systems and financial reporting. Pearson’s correlation coefficient (r)
was used to examine the relationship between independent and dependent variables. In
addition, regression analysis was used to determine the coefficient of determination and
adjusted R2 was used to show the percentage variance of independent variable on dependent
variable.
3.8.2 Qualitative data analysis

Qualitative data collected was analysed basing on Creswell (2005), recommended steps: The
research with help of computerised software called Atlas.ti, Data was categorized in themes,
32
Information not having direct or indirect bearing on the theme was removed, Themes were
classified into major categories, Major categories were clustered into subcategories with their
concrete meaning and transformed into language of science, categories and subcategories
forming an opinion on the description of computerized accounting towards the quality of
financial reporting of NW & SC, Mbarara area office which was used to supplement the
arguments and findings of the study.
3.9. Ethical Considerations

The researcher obtained a letter of introduction from the Head of Research Unit, Uganda
Martyrs University — Mbale campus detailing the purpose and nature of the study to be
conducted which the researcher used to access data from National Water and Sewerage
Corporation.
Upon presentation of the letter, the study was subjected to ethical clearance of NWSC Mbarara
branch. In order to protect the privacy of the respondents, a brief on the study was given to
each respondent and their verbal consent obtained before gathering data and also their names
were omitted from the data collection instrument for confidentiality purposes and respondents
were informed that this research was for academic purposes only. Initial findings of the
research were presented to NWSC Mbarara branch before any publication was made.
Before each interview, the research assistant first introduced himself to the respondent, the
objectives and the possible outcomes of the study were explained to them. The researcher also
explained how the information provided will be used. After each interview, the questionnaires
were scrutinized for completeness and consistency. Where incomplete, errors and
inconsistencies were observed, necessary corrections were made.
3.10 Limitations of the Study

This study was carried out at National Water and Sewerage Corporation, Mbarara branch of
the National Water and Sewerage Corporation Mbarara thus, the results therefore, may not be
certain due to uniqueness of the operational environment.
Time constraints was handled by doing work in the stated phases and following up on collection
of questionnaires in time so that they could be coded, analysed in a timely manner.
Incomplete data due to tight schedules of respondents was overcome to double checking before
all the questionnaires were collected to ensure their completeness with the help of focal
personnel that the researcher used in to reduce errors.
33
The researcher put in place measures of making questionnaires as short and precise enough to
encourage respondents not be turned off during answering sessions. The researcher also
provided some motivational incentive to those who finished filling in the questionnaire which
gave us an 85.6% fully filed samples where was a good representative. Failure to obtain 100%
response rate was mitigated in this way. Punch (2003), contends that face-to-face interactions
during data collection should be 80%-85% response rate to be considered an accepted response
representative of the sample.
The data collection method was limited to questionnaire and documentary review living other
methods like interview, observation which could have generated some insight on the study.
The researcher tried as much as he could to observe while at the site silently for any information
that could help since it is also stated as a method of data collection.
Finally, this study could have been limited to the proposed research design and methods of
sampling, data collection, data analysis, data representation and data interpretation as well as
reporting. The researcher here did all he could to limit their effects using his experience and
skills available plus the help of the supervisor allocated.
3.11 Conclusion
This chapter set out the methodology that was adopted to undertake the research. A descriptive
design was adopted involving a case study strategy, associated with a mixed research approach.
The sample size was arrived at by the use censor and simple random sampling techniques. The
key method and instrument of data collection used was questionnaires supplemented by
documentary review. Ethical considerations w~re addressed with the key issues being
confidentiality and academic use of the research findings.
34
CHAPTER FOUR
PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS
4.0 Introduction
This chapter presents the findings of the study, interpretation and analysis of both the primary
and secondary data on effect of computerised accounting systems on quality of financial
performance in National Water and Sewerage Corporation-Mbarara.
4.1 Response Rate

Questionnaires were handed to 97 employees of~~ NWSC-Mbarara branch who were randomly
selected and the respondents were requested to return them by 25th June, 2017. Out of 97
questionnaires distributed, only 83 questionnaires were returned fully filled, which represent a
response rate of 85.6% of the sampled population and 62.9% of the total population. Punch
(2003), contends that face-to-face interactions during data collection should be 80%-85%
response rate to be considered an accepted response representative of the sample. Since the
response rate of the collected questionnaires stand at 85.6% then we shall consider it
representative enough to this study.
4.2 Background Information of Respondents

The researcher investigated the background information of respondents including age, gender,
period worked and education levels and computer literacy. This helped the study to generate
more accurate picture of the group of persons at NWSC to see if they were well educated,
experienced, skilled and responsible enough to carry out the operations of the computerised
system in place in order to produce the quality financial reports.
4.2.1 The age of respondents

The age of respondents was captured because it’s a demographic attribute that has importance
through linkages with individual experience and personal accumulated knowledge.
Table 4.1: Age of Respondents
Age of Below 20 Count 0

Respondent Layer Row N % 0.0%
20-29 Count 42
Layer Row N % 5 0.6%
30-39 Count 34
Layer RowN % 41.0%
Count 7
35
40-49 Layer Row N % 8.4%
50-59 Count 0
Layer Row N % 0.0%
Above 59 Count 0
Layer Row N % 0.0%
Source: Primary data (SPSS v. 23.0, 2019)
The findings in table 4.1 shows no respondents below the age of 20 but 42(50.6%) in the age
bracket of 20-29years, 34(41%) between 30-39years of age, 7(8.4%) between the age of 40-
49years of age and none above 50years. This implies that NWSC has youthful employee
population who are vigilant, innovative and robust in operations but are also supported by few
aged group that provide experience, guidance and stability as seen in table 4.2 below as those
who are older have spent more than 8 years with the institution.
Table 4.2 Showing age of Respondent and number of years employee spent at
NWSC-Mbarara branch
How many years have you worked with

~WSC-Mbarara branch
0-3 years 4-7 years 8-11 years fotal
4~ge of Respondent 20-29 19 23 0 I~2
30-39 5 27 2 34
40-49 0 0 7 7
fotal 24 50 9 83
4.2.2 Gender of Respondents

The researcher was interested in capturing the gender in order to establish if there were
discriminatory policies and practices in the recruitment process. This is because such practices
shape individuals attitudes and behaviour in the workplace (Cianni & Romberger 1995),
breeding toxic environment at work reducing productivity and morale.
36
Table 4.3 Showing Gender of Respondents at NWSC-Mbarara Branch
Male Count 54
~ respondent ~yer Row N % 65.1%
~ Female Count 29
~ Layer Row N % 34.9%
L
Findings in Table 4.3 revealed that male respondents contributed to 54(65.1%) of sample and
29(34.9%) were female. Taking into consideration that NWSC workplace needs more physical
manpower, such gender balance is fair.
4.2.3 Period Worked with NWSC-Mbarara Branch

Another demographic study carried out was to find out the period respondents worked with
NWSC-Mbarara branch. This was as Wagner et. ci. (1984), reported that a long-term
experience may influence attitudes and belief systems which can be substantial to quality of
work produced. Also, other Studies suggest that increased tenure in an organisation is
positively related to employee well-being and employee performance (Finkelstein & Hambrick
1990).
Table 4.4 Showing the period worked with NWSC-Mbarara Branch
Flow many years have you worked 0-3 years Count 24

with NWSC-Mbarara branch Layer Row N % 28.9%
4-7 years Count 50

Layer Row N % 60.2%
8-1 1 years Count 9
Layer Row N % 10.8%
12 and Count 0
above Layer Row N %
0.0%
years
Findings in Table 4.4 indicated that 24(28.9%) of the respondents have worked for 3years and
below, 50(60.2%) have worked for 4-7years and 9(10.8%) of the respondents have worked for
8years and above. Taking into consideration that over 70% of respondents have 4years and
above of experience we say that the computerised system is very well used and there is
37
reliability in the financial reports produced.
4.2.4 Level of Education

The researcher was interested in the education of respondents in order to establish whether
employees had the required knowledge, understanding and skill to perform their duties and
understand the guidelines pertaining application of computerised systems to produce quality
financial reports. Education status is illustrated in table 4.5 below.
Table 4.5 Showing the Level of Education

Please state your level of Primary level Count 0
education Layer Row N % 0.0%
0 Level Count 0
Layer Row N % 0.0%
A Level Count 1
Layer RowN% 1.2%
Diploma Level Count 17
Layer Row N % 20.5%
Bachelors Count 59
Degree Level Layer Row N % 71.1%
Post Graduate Count 6

Level Layer Row N % 7.2%
From table 4.5 of the 83 respondents none had stopped at Primary and ‘0’ Level education,
1(1.2%) respondent attained ‘A’ Level education, 17(20.5%) had a diploma, 59(71.1%) were
degree holders at Bachelor level and 6(7.2%) were post graduate holders. This implied that all
the respondents had attained a certain level of education that would assist them in implementing
the guidelines and practices at the work places and that the responses given would reflect a true
and a fair expression of their understanding of computerised accounting system and quality of
financial reports.
4.2.5 Computer Literacy

In the category, the researcher was interested in establishing whether the respondents were
equipped with the knowledge of computer applications since the study involved use of
computers to ascertain their role in producing quality financial reports. Computer literacy is
illustrated in table 4.6 below;
38
Table 4.6 Showing number of respondents on Computer Literacy
Computer Literacy Excellent Count 12
Layer RowN % 14.5%

Good Count 47
Layer Row N % 56.6%
Moderate Count 22
Layer Row N % 26.5%
Fair Count 2
Layer Row N % 2.4%
Poor Count 0
Layer Row N % 0.0%
From table 4.6 out of 83 respondents, 12(14.5%) had excellent knowledge in applying
computer skills. 47(56.6%) had good skills, 22(26.5%) were moderate and 2(2.4%) had fair
skills. This indicates that majority of staff (87%) are equipped with the knowledge of computer
based applications thus helping in production of quality financial reports.
4.3 Computerised Accounting Systems and Quality of Financial Reports

The results of section B of the questionnaire are presented below quantitatively in three
categories inclusive of descriptive analysis, correlation analysis and regression analysis
supported by qualitative analysis designed to address the objectives of and research questions.
4.3.1 Objective one: A descriptive analysis to examine the effect of transaction

processing systems on the quality of financial reporting in NWSC, Mbarara branch.
The subjection focused on the effect of transaction processing systems and how it affects the
quality of financial reporting in NWSC-Mbarara branch. The study intended to find out if the
system is used by many people to carry out different tasks simultaneously, if it has increased
processing speed of producing reports, has local settings adopted by the new system, if the
system is user friendly, has helped the organisation to handle a number for complex and
multiple transactions, imports data from other programs easily and has pull-down menu and
automated fields to speed up data entry and reduce errors.
Table 4.7 presents responses on Transaction Processing Systems below.
Table 4.7 Showing Responses on Transaction Processing Systems at NWSC-Mbarara
Branch
Strongi
~ Strongi N~ot Disagre

y Agree \gree Sure Disagree e
The system is used by many people to Count 26 52 5 0 0
carry out different tasks at the same Row N %
~. 31.3% 62.7% 6.0% 0.0% 0.0%
time
The system has increased processing Count ~6 35 21 0 0
speed of reports RowN% 31.7% ~2.7% 25.6% 0.0% 0.0%
~ Fhe accounting systems are user Count 24 44 13 0 0
friendly RowN% 29.6% 54.3% 16.0% 0.0% 0.0%
The system has enabled the Count 23 34 ~6 0 0
organisation to handle a number of Row N %
27.7% fl.0% 31.3% 0.0% 0.0%
complex and multiple transactions
The system is able to import data from Count 15 48 20 0 0
other programs easily RowN% 18.1% 57.8% 24.1% 0.0% 0.0%
The system pull-down menus and Count 14 43 ~5 1 0

automated fields help to speed up data Row N %
16.9% 51.8% 30.1% 1.2% 0.0%
entry
Local setting formats have been Count 24 36 21 0 0
adapted by the new system i.e dates and RowN %
29.6% 14.4% 25.9% 0.0% 0.0%
currency
On whether NWSC’s system being used by many people to perform different tasks at the same
time, results it table 4.7 indicated that 94% of respondents agreed, while 6% were not sure.
This implies that NWSC’s computerised accounting system is a robust system which allows
multitasking and that is the ability to seemingly run multiple tasks or processes at the same
time leading to quick formulation reports most of the time.
As to whether the system has increased speed of reports overtime, in Table 4.7, shows that
74.4% of respondents agree while 25.6% of respondents are not sure. This means that
40
respondents who use the system on day to day basis have experience the system helping them
to complete their task much faster than before where data can be accessed by click of a button,
thereby quickening the processing of capturing raw data thus reduction in the timeline.
Results from table 4.7 concerning whether the system has enabled the organisation to handle a
number of complex and multiple transactions, 68.7% of the respondents agree while 31.3% are
not sure. This indicates that users do not take a lot of time trying to solve complex problems
which reduces overall delays in processing of final financial reports and also reduces errors
resulting from human error.
On finding whether accounting systems are user friendly, results in Table 4.7 show that 83.9%
of respondents agree while 16.1% are not sure. This means majority of respondents find the
system easy to use and this increases their understandability, desire and morale to learn more
reducing errors.
As to whether the system is able to import and export data from other programs easily, results
from Table 4.7 show 75.9% of respondents agreeing while 24.1% of the respondents are not
sure. This indicates that since the majority say they can import and export data from and to the
computeriscd accounting systems and as we are well aware that some of the systems are not
integrated then it speeds up data transfers and in case there is any analysis to be done in other
applications like Excel. data can be exported and such analysis can be done with easy reducing
data errors and inconsistences. However, one respondent reported “iScala systems and e
hilling systems are not integrated and separate from each other and since the main system used
is iScala accounting system, data from c-billing system has to be transferred manually which
leaves a room for errors during manual data entry “.
On finding whether the system has pull down menus and automated fields, results in Table 4.7
show 68.7% of respondents agree, while 39.1% of respondents are not sure and 1.2% disagrees.
This clear shows that most of the respondents do not have to input in their own raw data most
especially such data which is technical and repetitive in nature. This reduces data entry errors
into the system which increases data quality. Automated fields also speed up data entry
increasing in quick time delivery of report formulation.
Lastly, on whether local setting formats have been adopted by the new system, 74% of
respondents in Table 74% agree, while 25.9 are not sure indicating the system is compatible
with local setting making it easier for the staff to use. Such local settings like the system
reporting in local currency and date formats increases efficiency and understandability.
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4.3.2 Objective Two: A descriptive analysis to examine the effect of computerised
reporting systems on the quality of financial reporting in NWSC, Mbarara branch
In an effort to achieve objective two, the study sought to find out whether the systems allow
different users access data at the same time, whether the system displays detailed analyses to
donors and stakeholders, the system is independent and quick for data retrieval, whether it
exports data to excel, the system gives user friendly interfaces to all and whether it is able to
provide different reports based on user’s requirements and needs. Results are shown in the
Table 4,8 below;
Table 4.8 showing Responses on Computerised Reporting Systems at NWSC-Mbarara

Branch
Strongly
Strongl ~gre ~‘Tot Disagre Disagre
i Agree e Sure e e
The system allows different staff Count 30 45 7 0 0
members to access data reports at the RowN% 54.9
36.6% 8.5% 0.0% 0.0%
same time %
The system helps to display detailed Count 19 40 23 0 0
analyses to donors and projects RowN % 18.8 28.0
.23.2% 0.0% 0.0%
% %
The system database is independent and Count 17 44 20 1 0
quick for data retrieval RowN % 53.7 24.4
20.7% 1.2% 0.0%
% %
The system easily exports accounting Count 26 34 22 0 0
data to other systems like Excel RowN % 11.5 26.8
31.7% 0.0% 0.0%
% %
The system gives user-friendly report Count 24 33 25 0 0
interfaces for the accountant and the RowN % 10.2 30.5
29.3% 0.0% 0.0%
non-accountant alike /0 %
~The system is able to provide reports Count 20 46 16 0 0
based on ditlerent requirements of staff RowN % 56.1 19.5
24.4% 0.0% 0.0%
(eg, closed invoices) % %
Source: Primary data (SPSS v. 23.0, 2019
42
Findings on whether the system allows different staff members to access it simultaneously,
91.5% of respondents agree while 8.5% are not sure. Making it easier for different individuals
to access accounting data in and outside of the office, securely increases flexibility and allows
different staff to help countercheck each other in case of errors increase data accuracy making
financial reports not only comparable but also highly reliable.
On whether the system helps to display detailed analysis to donors and stakeholders, 72% of
respondeilts agree and 28% are not sure. Since the system is able to disseminate relevant
information as concurred by the majority of respondents, stakeholders are able to compare
financial reports to draw useful conclusions. This also has been seen to increase reliability of
such financial reports since they are availed out there for everyone with interest access.
As to whether system database is independent and quick for data retrieval, 74.4% of
respondents agree while 24.4% are not sure and 1.2% disagree. This means data for generation
of reports is separated from the applications programs that are used to access it. This has
contributed to increase in data security since data already entered and verified cannot be deleted
instantly with out further access and verification.
On whether the system gives user friendly report interfaces for accountants and not accountants
alike, 69.5% of respondents agree while 30.5% of respondents are not sure. Since most have
found the Reporting systems to be user friendly, it has increased motivation and desire for most
of respondent’s capacity to learn more and gain experience. This has contributed general
reduction in errors being created in the system and also increased workmanship in contributing
the general processing of financial statements on timely basis.
As to whether the system is able to provide reports based on different user requirements, 80.5%
of’ respondents agree while 19.5% are not sure. Having able to generate relevant reports from
the system, the respondents feel equipped enough to rely on this computerised accounting
system in NWSC Mbarara branch. This has increased reliability on such system, improved data
analysis since different reports can be retrieved for comparison purposes.
4.3.3 Objective Three: A descriptive analysis to examine the effect of systems security
on financial reporting in NWSC, Mbarara branch.
To achieve objective three, the study thought to establish whether there are restrictions of
authorised access using password settings, system enables users to have access to different
levels depending on their position, whether the system rarely breaks down, system schedules
and enables backup and recovery facilities, entries are entered into a temporary state and then
43
posted in batches after checking and lastly whether the system creates an audit trail for future
data checks. Results are shown in the Table 4.9 below;
Table 4.9 Showing the responses on Systems Security in NWSC Mbarara Branch
Strongly
Strongly ~gre ~‘~Tot Disagre Disagre
~gree e Sure e e
There are restrictions of unauthorised Count 29 10 13 0 0
access using password settings RowN % 18.8
35.4% 15.9% 0.0% 0.0%
(passwords expire etc) %
The system enables users to have Count 20 38 23 0 1
access to different levels depending on RowN % 16.3
~ 24.4% 28.0% 0.0% 1.2%
~heir usage and position in organisation %
~-—
The system is reliable (rarely breaks Count 12 57 13 0 0

down) RowN % 69.5
14.6% 15.9% 0.0% 0.0%
yo
The system schedules and enables Count 13 1-5 23 1 0

backup and recovery facilities in case RowN %. 54.9
15.9% 28.0% 1.2% 0.0%
of data loss
Entries are entered into a temporary Count 19 14 22 0 0
state, and then posted in batches after Row N % 50.0
23.2% 26.8% 0.0% 0.0%
checking arising to more security
The system creates an audit trail for Count 16 1-1 25 0 0
future data checks Row N % 50.0
19.5% 30.5% 0.0% 0.0%
Findings on whether there are restrictions on unauthorised access using password settings,
84.2% of respondents agree while 15.9% are not sure. The system has been able to restrict
access to unauthorised users as majority of respondents contend with. This has increased data
integrity and security also leaving the audit trail in case of deletion. Since users are required to
key in the log in details, it is easy to locate the personnel responsible in case errors meaning
that the final reports can be relied on as true and fair value.
On whether the system enables users to have access to different levels depending on their usage
and position in organisation, 70.7% of respondents agree, 28% are not sure. Different levels of
44
access are granted to users depending on the position in the organisation. This has helped in
check and balances thereby reducing errors and increase data accuracy.
As to whether system rarely breaks down, 84.1% of respondents agree while 15.9% are not
sure. Majority of respondents concur that the system is reliable most of the time and does not
break down very often which increases is reliability but for the few times it was down, it created
chaos since there was overlap of unentered data creating delays in processing of financial
reports.
On whether the system schedules and enables backup and recovery facilities in case of data
loss, 70.8% of respondents agree while 28% of respondents are not sure and 1.2% disagree.
Backup data is one of the safest and a must do activity in current information age because data
loss can bring down an organisation. NWSC Mbarara branch’s systems security protects the
valuable data from damaging due to failures to the computer system or application program. It
also schedules and enables backups preventing data loss. This makes users to heavily rely on
the system as they are confident that data losses in future are safeguarded.
As to whethcr the system entries are entered into a temporary state and then posted in batches
after checking, 73.2% of respondents agree while 26.8% are not sure. The billing system is still
using c-billing which is not integrate with the main iSCALA database. This data is first stored
in temporary state and then transferred manually to the main database. Others transactions are
first entered in the temporary state and then posted after checking has been done by personnel
higher in the hierarchy which has been found to increase accuracy.
Finding on to whether system creates an audit trail for future data checks, 69.5% of respondents
agree while 3 0.5% are not sure. Since users are first asked to key in their initials and passwords
created in the database management system, the system is able to track user’s activities. The
system is also automated to create logs for any activities transpiring within the system.
4.3.4 Descriptive Analysis of Quality of Financial Reporting
Financial report qualities were listed as comparability, understandability, timeliness and

verifiability. Table 5,0 presented the following results;
45
Strongi
Table 5.0 Showing the responses on the qualityStrongi ~gre N~ot Disagr Disagre
~of financial reports in NWSC Mbarara Branch Agree e Sure ~e e
Understandability
CAS has enabled NWSC to produced Count 26 52 4 0 0
standard reports Row N 31.7% 63.4 ~ 0.0% 0.0%
% % %
CAS has enabled NWSC to produce Count 19 53 9 0 1
clear reports that are well understood Row N 23.2% 64.6 ~ 0.0% 1.2%
by users % % %
Comparability
CAS has enabled NWSC to compare Count 19 52 11 0 0
current reports with previous reports Row N 23.2% 63.4 13.4 0.0% 0.0%
easily % % %
CAS has enabled NWSC easy Count 18 17 17 0 0
comparison of its reports with other Row N 22.0% ~ o.o~ 0.0%
organisations % % %
The notes to changes in accounting Count 16 16 20 0 0
policies explain the implications of Row N 19.5% 56.1 24.4 0.0% 0.0%
change % % %
Timeliness
There is timely reporting of annual Count 28 14 10 0 0
financial reports Row N 34.1% ~ 12.2 0.0% 0.0%
% % %
The transactional report preparations Count 22 15 15 0 0
are done in timely manner Row N 26.8% 183 0.0% 0.0%
% % %
Verifiability —
CAS has enabled NWSC to provide Count 27 ~5 10 0 0

feedback information on how various Row N
54.9 12.2
market events and significant Yo 32.9% 0 0% 0.0%
% /0
ransactions affect the company
CAS has enabled NWSC to provide Count 21 13 18 0 0
information verified by relevant users Row N 25.6% ~ 0.0% 0.0%
% % %
Findings as to whether CAS has enabled NWSC to produce standard reports, 95.1% of reports
agreed while 4.9% were not sure. This proves that computerised accounting systems are very
well treasured in this organisation as employees overwhelmingly perceive its overall
contribution.
On whether CAS produces clear reports that are understood by user, 89.8% agree that they very
clearly understand reports generated by computerised systems while 11% are not sure or stated
46
that most of these reports are complex and they need more explanations.
Findings on where CAS enables the organisation easy comparisons of its reports with other
organisations 79.3% agree while 20.7% are not sure. Most of the data consumed by users is for
individual purposes and most respondents did not engage themselves into comparisons of
different reports.
On notes of change of accounting policies explaining the implications of change, 75.6% agreed
while 24.4% were not sure and most of the respondents did find that question too technical.
Findings on whether there is timely reporting of financial reports 87.8% agreed while 12.2
were not sure. NWSC reports its annual financial reports on timely basis although there are
small hiccups here and there due to systems failures and power black outs as conferred by one
respondent.
On whether transactional report preparations are done in a timely to facilitate time processing
of final financial reports, 81.7% agreed while 18.3% were not sure. This meant that most ofthe
transactional reports are submitted in early to facilitate processing of the final reports as
reported by one supervisor, though there are some pickpockets ofdata that require clearance
from errors from time to time.
Findings on whether CAS enables NWSC to provide information verified by relevant users,
78.0% agree while 22.0% were not sure. Verification of financial reports is important to
preserve accuracy and completeness. By having the computerised accounting system accessed,
stakeholders have a chance to verify such information as and when it is necessary.
On whether CAS enables NWSC to provide feedback on how market events and significant
transactions affect the company, 87.8% agree while 12.2% were not sure. Since iSC’ALA
systems are integrated systems and are accessed by all~ it has enabled to provide to andfro
information among its users facilitating complete communication cycle and one respondent
simply put ii.
4.4 Correlational analysis

A correlational analysis was sought to find out if the relationship existed between the two
variables and Pearson’s correlational analysis was used.
47
4.4.1 Correlation between Transaction Processing Systems and Quality of Financial
Reports
Correlation between Transaction processing systems and quality of financial reports was
conducted with results presented in Table 5.1 below;
Table 5.1 showing Correlations Transaction Processing Systems and Quality of Financial
Reporting
Transaction
Processing Quality of Financial
System Reports
Transaction Processing Pearson Correlation 1 .426**
System Sig. (2-tailed) .000
N 83 82
Quality of Financial Pearson Correlation .426** 1
Reports Sig. (2-tailed) .000
N 82 82
~. Correlation is significant at the 0.01 level (2-tailed).
Findings in the table 5.1 above revealed that there is a significant moderate positive relation
between Transaction Processing systems on the quality of financial reports with a Pearson
correlation coefficient at R~0.426** at level of significance p0.Ol (2 tailed). This indicates
that for any changes in transaction processing systems leads to a moderate improvement in the
quality of financial reports. The view is that management should enhance better ways of
transaction processing systems if they need to see improvement in the quality of their financial
reports.
4.4.2 Correlations between Reporting Systems and Quality of Financial Reports

Correlation between computerised reporting systems and quality of financial reports was
conducted with results presented in Table 5.2 below;
48
Table 5.2 showing Correlations Computerised Reporting Systems and Quality of
Financial Reporting
Quality of Computerised
Financial Reporting
~ Reports Systems
Quality of Financial Pearson Correlation 1 .536**
Reports Sig. (2-tailed) .000
N 82 82
Computerised Reporting Pearson Correlation .536** 1
Systems Sig. (2-tailed) .000
N 82 82
**~Correlation is significant at the 0.01 level (2-tailed).
Findings in the table 5.2 above revealed that there is a significant positive relation between
computerised reporting systems on the quality of financial reports with a Pearson correlation
coefficient at R=0.536** at level of significance pO.Ol (2 tailed). This indicates that for any
changes in computerised reporting systems leads to significant 53.6% improvement in the
quality of financial reports. The view is that management should enhance better ways of
computerised reporting systems if they need to see improvement in the quality of their financial
reports.
4.4.3 Correlations between Systems Security and Quality of Financial Reports

Correlation between systems security and quality of financial reports was conducted with
results pres~nted in fable 5.3 below;
Table 5.3 showing Correlations Systems Security and Quality of Financial Reporting
Quality of Financial Systems

Reports Security
Quality of Financial Pearson 1 402**
Reports Correlation
Sig. (2-tailed)
.000
N 82 82
System Security Pearson 402** 1
Correlation
Sia. (2-tailed)
~ .000
N 82 82
**~ Correlation is significant at the 0.01 level (2-tailed).
49
Findings in the table 5.3 above revealed that there is a significant moderate positive relation
between Systems Security on the quality of financial reports with a Pearson correlation
coefficient at R=0.402** at level of significance pO.O1 (2 tailed). This indicates that for any
changes in security systems leads to slight 40,2% improvement in the quality of financial
reports. The view is that management has slightly improved systems security and more needs
to be done if they need to see improvement in thequality of their financial reports.
4.4.4 Correlations between Computerised accounting systems and Quality of Financial

Reports
Correlation between systems security and quality of financial reports was conducted with
results presented in Table 5.4 below;
Table 5.4 showing Correlations between computerised accounting systems and Quality of
Financial Reporting in NWSC
Computerised
~ Accountingsys QualityofFinan
tem cialReports
Computerised Pearson Correlation 1 .824**
Accountingsystem Sig. (2-tailed) .000
N 83 83
QualityofFi nanci al Reports Pearson Correlation .824** 1
Sig. (2-tailed) .000
N 83 83
**, Correlation is significant at the 0.01 level (2-tailed).
Findings in the table 5.4 above revealed that there is a very strong positive relation between
computerised accounting systems on the quality of financial reports with a Pearson correlation
coefficient at R0.824** at level of significance pO.Ol (2 tailed). This indicates that for any
changes in security systems leads to 82.4% improvement in the quality of financial reports.
The is a very important indicator to management that computerised accounting systems plays
a major role in the quality of their financial reports. As one respondent contended; “without
these computers, work here would be so slow and I would not imagine with this increase in
number customers how the branch would have handled the situation. Computers have come to
fl/i this burden”.
50
4.6 Regression Analysis
The regression analysis was sought to find out the strength of the relationships between
variables.
4.6.1 Regression Model Summary of Transaction Processing System and Quality of

Financial Reports
Table 5.5 showing Model Summary of Transaction Processing Systems and Quality of
Financial Reports
Model R R Square Adjusted R Square Std. Error of the Estimate
I .426~’ .182 .171 .53760
a. Predictors: (Constant), Transaction Processing Systems
To answer the research question as to what is the effect of Transaction Processing System on
the Quality of Financial Reports, results in table 5.5 revealed the regression coefficient (R)
using Predictor Transaction Processing Systems as 0.426a, and the adjusted (R2) of 0.171
meaning that 17.1% (0,171*100) of the outcome in quality of financial reports is explained by
Transaction processing systems.
Table 5.6 showing ANOVAa

Sum of
Model Squares Df Mean Square F Sig.
I Regression 5.135 1 5.135 17.767 ,000b
Residual 23.121 80 .289
Total 28.256 81
a. Dependent Variable: Quality of Financial Reports
b. Predictors: (Constant), Transaction Processing Systems
The results in table 5.6above shows that the model is statistically significant F (1,80) =17.767,
P<.000 simply because if the p-value is less than the alpha .05 which it is in this case then we
conclude that the model is significant.
51
4.6.2 Regression Model Summary of Computerised Reporting Systemsand Quality of
Financial Reports
Table 5.7 showing Model Summary of Computerised Reporting Systems and Quality of
Financial Reports
Std. Error of the

Model R R Square Adjusted R Square Estimate
1 .536~ .287 .279 .50167
a. Predictors: (Constant). Computerised Reporting Systems
To answer the research question what effect computerised reports systems has on the quality
or financial reports, results in table 5.7 revealed the regression coefficient (R) using Predictor
Transaction Processing Systems as 0.536a, and the adjusted (R2) of 0.279 meaning that 27.9%
(0.279*100) of the outcome in quality of financial reports of NWSC Mbarara Branch is
explained by Computerised Reporting Systems.
Table 5.8 showing ANOVA~’
Sum of
Model Squares df Mean Square F Sig.
1 Regression 8.122 1 8.122 32.272 .000”
Residual 20.134 80 .252
Total 28.256 81
b. Predictors: (Constant). Computerised Reporting Systems
The results in table 5.8 above shows that the model is statistically significant F (1,80) =32.272,
P<.000 simply because if the p-value is less than the alpha .05 which it is in this case then we
conclude that the model is significant.
52
4.6.3 Regression Model Summary of Systems Security and Quality of Financial
Reports
Table 5.9 showing Model Summary of Systems Security and Quality of Financial Reports
Std. Error of the

I .40r .162 .151 .54411
a. Predictors: (Constant), Systems Security
To answer the research question what effect Systems Security has on the quality of financial
reports. results in table 5.9 revealed the regression coefficient (R) using Predictor systems
security as 0402a, and the adjusted (R2) of 0,151 meaning that 15.1% (0.151*100) of the
outcome in quality of financial reports of NWSC Mbarara Branch is explained by Security
Systems.
Table 6.0 showing ANOVA~
Sum of
I Regression 4.572 1 1.572 15.444 •000b
Residual 23.684 80 .296
Total 28.256 81
b. Predictors: (Constant), System Security
The results in table 6.0 show that the model is statistically significant F (1,80) 15.444, P<.000
simply because if the p-value is less than the alpha .05 which it is in this case then we conclude
that the model is significant.
Table 6.1 showing Model Summary of computerised accounting systems and Quality of
Financial Reports
Std. Error of the

1 .552~ .305 .278 .50186
a. Predictors: (Constant), System Security, Transaction Processing System,

Computer Reporting Systems
Simple regression was conducted to investigate how well computerised accounting systems
predict quality of financial reports. In table 6.1 the adjusted R squared value was .278. This
indicates that 27.8% of the variance in the quality of financial reports was explained by the
effect of computerised accounting systems. According to Cohen (1988) this is a large effect.
Table 6.2 Showing ANOVAa
Sum of
I Regression 8611 3 2.870 11.396 •000b
Residual 1 9.645 78 .252
Total 28.256 81
b. Predictors: (Constant), System Security, Transaction Processing System,

Computer Reporting Systems
The results in table 6.2 were statistically significant F (3,78) 11.396, P<.000 simply because
if the p-value is less than the alpha .05 which it is in this case then we conclude that the model
is significant.
4.7Conclusion
Findings revealed that NWSC is undertaking initiatives through transaction processing system,
reporting system and securitY system all of which are positively correlated with quality of
financial reports
54
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.0 Introduction
This chapter presents a summary of findings from the study, conclusions drawn resulting from
the study, recommendations derived from the study, and ends with the suggested areas for
further research.
5.1 Summary of findings

The general objective of the study was to study the effect of computerised accounting systems
on the quality of financial reports at NWSC Mbarara branch. Below are the summary of
findings objective by obj ective.
5.1.1 The effect of Transaction Processing System on the Quality of Financial Reports
The study revealed that and contending with Lawrence & Foster (1982), transaction processing
systems had a moderate positive correlation of 42.6% and with an effect of adjusted R2 17.1%
which is indicates that it allows user to perform multitask at the same increasing speed of data
input and retrieval at the same time which reduces the time lag in processing financial reports.
Statement being generated at a click of button and because of no duplication of data entries
since data stored in a computer can be used for multiple times has also contributed to increase
speed of data entry and retrieval. It was also found that that since the transaction processing
system is equipped with input gadgets and interfaces that solve complex problems helps users
not to spend a lot of time as before in trying to come out with the solution, it was also revealed
to have contributed to the reduction of input errors to the system. The system also allows data
to be imported and exported which increases flexibility in times of data analysis for example
in reconciliations increases accuracy and verifiability and reliability of financial reports.
Automated functions that help input repeated data on their own as a designated period and pull-
down menus that are equipped with auto filling certain fields have been found to increase data
entry speed and contributed to reduction in data input errors. Such tools also help to set a
standard format for the accounting system increasing its verifiability and uses language that
most of the stakeholders would understand. And lastly transaction processing system adopting
the local setting formats make the final financial statements readable increasing in their
understandability to the users alike.
5.1.2 The effect of Reporting Systems on the Quality of Financial Reports

In regard to reporting systems taking into consideration that it has a correlation of 53.6% and
2 7.9% effect on the quality of financial reports which was the highest among the variables, the
55
study discovered that the systems allow access to different users simultaneously in and out of
office increasing flexibility and enables them to countercheck each other reducing data entry
errors thereby increasing the accuracy of financial reports. Also, stakeholders being able to
access detailed analysis of financial reports froñ~ the system helps them in comparison to
different reports allowing them to draw useful conclusions. The study has also found that such
access increase trust and verifiability. Independence of the database helps data integrity and
security in that it cannot be altered once it has been captured since there is a separation between
the database and the applications programs used to access it. Such structures increase reliability
of NWSC Mharara branch’s financial reports. Friendly interfaces increase staffs desire to use
the system thereby reducing human errors as they gain experience. Lastly, reporting system
being able to enable users retrieve different financial reports based on their user requirements
do not only help in increasing morale and motivation of staff to continue using the system but
also helps in letting the staff to increase relying on the system, helps stakeholders to use such
different reports for comparison purposes increasing verifiability of such reports.
5.1.3 The Effect of Systems Security on the Quality of Financial Reporting.

System security had a 40.2% relationship and an effect of 15.l%on the quality of financial
reports, findings revealed that systems security in NWSC’s restricts access blocking
unauthorised users from accessing the systems and asks users to renew their passwords once
every after three months increasing system security and data integrity although some pockets
of users have been found to share passwords with colleagues. There is also lack of cameras on
the server room which increases the risk of an authorised access. Also, NWSC Mbarara branch
grants access on hierarchical basis to increase check and balances but such structures have also
been cause of delays in instances when personnel required to approve is absent. System
breakdowns rarely do occur increasing reliability of user but since the system relies solely on
power, outages have rendered it unreliable sometimes as one respondent lamented. Backups
and backup procedures are instituted in place but the IT department sometimes take long or
sometimes forget to do general backup which puts the whole system at risk of major data loss.
The problem of separate e-billing system from the main database creates a risk of inherent
errors being keyed in manually. This was observed by the two respondents who agreed that
such errors sometimes pass through undetected. Lastly, the system is equipped to automatically
log in the audit trail to enable future data checks and this has been helpful whenever called up
leading to data integrity and reliability.
5.2 Conclusions
Based on the study findings and discussions in chapter four, the following conclusions were
56
made as per specific objective.
Transaction processing systems in NWSC has been applauded to help the user speed up data
entry due to user friendly interfaces that solve complex problems. With automated functions
and puildown menus data entry errors are greatly reduced thereby increasing the accuracy and
timely reporting of financial reports. Over reliance of the system has brought its downside
effect of data overloads rendering the system slow from time to time.

With the highest percentage of 53.6% relationship, reporting systems play a vital role on how
computerised system display the reports to end users for decision making. With its multiuser
settings data checks and balances are enhanced, friendly report interfaces increase staff non
staff’s desire thereby gaining experience although this exposes the system to security risks and
too much inlormation overload ends up a disadvantage in the long-run.

System security plays a balancing act in making sure that data is safe from both internal and
external threats. It ensures data integrity and increases trust to end users alike. But because
computerised accounting system live in an ever-changing world with constant innovations
happening in the computer industry, there is high risk of rendering the current working systems
obsolete. Constant power failures since the system rely solely on power to function and with
no back up power alternative is even a greater challenge to NWSC and integration of the system
into new areas that come up within the organisation needed constant changes that is always
difficult to process to deal with.
5.3 Recommendations
During the study, several inefficiencies were identified that could handicap the smooth running
of the entire computerised accounting system of the organisation. Hence the study recommends
the following;
NWSC Mbarara branch should ensure system upgrade allowing incorporation of e-billing
system to the main iScala system thereby reducing manual prone errors. It is also important
that the employees handling transactions are trained so as to improve on the accuracy and speed
in posting
57
NWSC Mbarara branch needs more internal audit reviews to appraise and check the strength
of the instituted controls within the system. Management to put in place an automated system
to prioritise the system logs that are important in keeping the audit trail to avert wastage of time
and manpower to monitor and review. The computerized accounting system is prone to fraud.
\~thout internal audit reviews, there may arise cases of teaming and lading fraud that may pass
unnoticed. It is therefore important that internal auditors introduce spot audits.

System log report file that prioritises vital log activities should be introduced too. Continuous
scheduled system maintenance and system updates to remove obsolete hardware and software
products, reduce the threat of viruses and also system bugs and fraud among others that may
affect the system operations. This should be done so that the system can operate to the
expectation of management and other users. With increased improvements and versions of
accounting packages, finance and accounting staff need constant and continuous training by
the authorized dealers of the packages so that they remain well equipped with the knowledge
and experience of the package.
CCTV cameras should be installed on the server room with immediate effect to prevent
unauthorised access since this area is so much critical to the entire system and lastly a backup
power system should be installed to prevent instant system crashes leading to data loss in the
process.
5.4 Suggestions for Further Research

Areas that my need further research include:
Further research is required in other government departmental sector, banking sector. This
would broaden the dynamics of the study and provide better understanding of how
computerised accounting systems affect the quality of financial reports. Additionally, there has
been rapid expansion of E-Comrnerce activities in which accountants are expected to play a
significant role in respect of controls. The future research may examine the types of problems
being faced by E-Comrnerce firms and what kind of role the accountants are playing.
58
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APPENDICES
APPENDIX I: RESEARCh QUESTIONNAIRE
Dear Respondent,
My name is Kabazarwe Maureen, a student of Kampala International University pursuing a

Bachelors Degree of Business Administration majoring in Accounting and Finance. You have
been chosen as the respondent and this questionnaire has been designed only for academic
purposes pertaining research on the topic, “The Effect of Computerized Accounting system
on the quality of financial reporting in corporate utilities; A case of National Water and
Sewerage Corporation, Mbarara Branch.” Your opinions are very important to this study
and the information given will be treated with maximum confidentiality and used only for
academic purposes.
Your cooperation is highly appreciated.
Thank you.
INSTRUCTiONS: Please tick orfill your opinions in the blank spaces provided.
Section A: Biographic Information
I. Gender of Respondents
Male Female ~
2. Age of respondents
Below 20 20-29
30-39 40-49
50-59 Above 59
3. Level of Education
Primary level 0 Level
A Level Diploma Level
Bachelor’s Degree Level Post Graduate Level
66
4. Period Worked with NWSC
0-3 years 4-7 years
8-11 years 12 and above years
SECTION ONE: USES OF A COMPUTERIZED ACCOUNTING SYSTEM
1. Does your organization/company employ the use of a computerised accounting system?

Yes ___
Nofl
2. What are the major tasks performed by the system?
3. List down the names of financial statements prepared by your organisationlcompany

through computerized accounting:
SECTION TWO: THE PROS AND CONS OF COMPUTERIZED ACCOUNTING

AS FAR AS FINANCIAL REPORTING IS CONCERNED.
1. What are the advantages of computerized accounting systems?

a)
b)
c)
d)
2. What are the disadvantages of computerized accounting systems?
a)
b)
c)
d)
67
e)
3. What would you prefer; (please tick in one box of your preference below)
Computerized accounting
Manual accounting
3.1 Please give reasons for your preference ticked above:
SECTION THREE: THE QUALITY OF FINANCIAL REPORTS GENERATED BY

COMPUTERIZED ACCOUNTING SYSTEMS.
1. What are the qualities or characteristics of financial reports generated by the computerized
accounting systems in your organisation?
How often do you get access to the financial reports?
Once a year
Frequently
Never
3. Do all transactions pass unauthorized? (Please tick in one box of your preference below)
Yes
Some
NoD
68
Please give reasons for your choice of answer in Qn. 3 above.
THANKS FOR YOUR RESPONSE
69

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THE EFFECT OF COMPUTERISED ACCOUNTING SYSTEM ON THE

QUALITY OF FiNANCIAL REPORTING IN CORPORATE UTILITIES;

A RESEARCH REPORT SUBMITTED TO THE COLLEGE OF

MAY THE GOOD LORD BLESS YOU ALL.

.1 Background to the Study 1

1.3 Objectives of the study 5

1.3.1 Major Objective 5

1 .3.2 Specific Objectives 5

1.5 Scope of the study 6

1.5.2 Geographical Scope 6

1.6 Significance of the Study 6

1.7 Justification of the study 7

8 Definition of Key terms 7

2.1 Theoretical Review 12

2. 1 .1 The Technology Acceptance Model (TAM) 12

2.1 .2 Agency Theory 13

2.1.3 Unified Technology Acceptance user theory 13

2.2 Computerized Accounting systems 14

2.2.1 Computerized Transaction Processing Systems (TPS) 16

2.2.2 Computerised Reporting Systems 17

2.2.3 System Security 18

2.3 Quality of Financial reporting 19

2.4 Factors that influence the quality of financial reports 21

2.4.1 Timeliness of Reports 21

2.4.2 Comparability of Reports 21

2.5 Specific Objectives 23

2.5.1 The Effect of transaction processing system on quality of financial reports 23

25.2 The Effect of reporting system on quality of financial reports 24

2.5.3 The Effect of system security on quality of financial reports 25

2.6 Other Factors 25

2.6.1 Accuracy of Reports 25

3.2 Area of Study .27

3.3 Population ofthe Study 27

3.4 Sampling Pr~]tire 28

3.4.1 Sample Size 28

3.4.2 Sampling 1’echiiique 28

3.5 Data Collection ?vfetliods amid Instruitients 29

3.5.1 Data Collection l~4ethocls 29

3.5.2 Data Collection Instruments 29

3.6 Quality Control Ivlethods .. 30

3.7 Data i~4anagenient and l’rocessing 31

3.8 Data Analysis 32

3.8.1 Quantitative data analysis 32

3.8.2 Qualitative data analysis 32

3.9. Ethica.l Considerations .33

3.10 I..inuitations of the Study .... 33

PRESENTATION, ANALYSIS AND DISCUSSION OF FINDiNGS 35

4.0 Introduction .35

4.1 Itesponse itate 35

4.2 Background Information of Respondents.

4.2.1 The age of respondents

4.22 Gender of Respondents

4.2.4 Level of Education 38

4.2.5 Computer Literacy 38

4.3 Computerised Accounting Systems and Quality of Financial Reports 39

4.3.2 Objective Two: A descriptive analysis to examine the effect of computerised

4.3.4 Descriptive Analysis of Quality of Financial Reporting 45

4.4 Correlational analysis 47

4.4.1 Correlation between Transaction Processing Systems and Quality of Financial

4.4.2 Correlations between Reporting Systems and Quality of Financial Reports 48