Impact of Accounting Information System on Organizational Performance

This research investigates the impact of Accounting Information System (AIS) on the performance of the organization. It explores the effect of AIS on management efficiency, control of SMEs, worker productivity, and information gathering. The study also analyzes the relationship between AIS and enterprise culture, data quality, system quality, and information quality.

Running head: BUSINESS RESEARCH
BUSINESS RESEARCH
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Introduction......................................................................................................................................2
Objective of the project...................................................................................................................2
Project scope....................................................................................................................................3
Research Hypothesis........................................................................................................................3
Literature Review............................................................................................................................4
Accounting information system (AIS).........................................................................................4
Impact of AIS on the performance of the organization...............................................................6
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Introduction
The present research aims to investigate the impact of Accounting Information System
(AIS) on the performance of the organization. AIS refers to the tool that when integrated into the
area of information and technology system facilitates the management as well as control of
topics in relation to economic – financial field of the enterprise (Hall 2012). But the increasing
advancement of technology has generally opened up possibility of utilizing AIS in the enterprise.
For bettering understanding the term AIS, the words should be illustrated separately. Firstly.,
accounting can be recognized into three main components that includes- financial data source,
language of the businesses. Secondly, information refers to valuable processing of data that gives
the basis for decision making. Thirdly, System refers to an integrated firm where the structure
focuses on the set of business objectives. The utilization of AIS effectiveness is huge spread of
the information needed by several users of organization.AIS has been vital to the enterprise
operations, either profit or non- profit oriented enterprise requires to maintain this. It has the
impact on the business decision making and also assists administrative coordination in the
enterprise. In addition, an AIS relates to those components that are basically put together for
gathering raw data, information and then transform this into financial data for the objective to
report them to the decision makers (Simkin, Norman and Rose 2014). This study basically
analyses on the relationship between the AIS and the performance of organization. Furthermore,
this study will also explore about the evidence that the enterprise culture facilitates to improve
performance by interrelating with data quality, system quality and information quality.

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Objective of the project
The general purpose of this project is to assess the effect of AIS on the performance of an
entity. Moreover, the other objectives also involves-
 Examine the effect of AIS on the efficiency of management in the specified business
 Assess the effect of AIS on the effective control of business in small and medium
enterprises( SMEs)
 Investigate whether integration of AIS improves the efficiency of the workers and
enhances productivity
 Explore whether adoption of AIS helps to gather more information for the businesses that
operates in the global market.
Project scope
The research of this project ahs further scope of providing more information or data to
the enterprises that strategizes to integrate this tool in their business. As effective as well as
efficient management of each enterprise is generally anchored on the quality decisions, this
project will help the management of the enterprise to understand the significance of this tool
within their operations. In addition to this, this study will however explore about the fact that
leveraging of AIS within the business helps to compete in the present complex as well as flexible
business environment and thereby provides the enterprises huge scope to expand the business
globally. Furthermore, it also helps the enterprises to understand the requirement of information
for different purposes and also concentrate on various accounting tools for supporting their
business operations. The findings of this project will provide the businesses with some facts
about the need of AIS within the business operation.

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Research Hypothesis
The hypothesis that can be raised for this particular project involves-
H0.: AIS have significant effect on the performance of the organization
H1: AIS do
not have significant impact on the performance of the enterprise
Literature Review
Accounting information system (AIS)
In the present times, AIS apt to be the information system that generally do not stop at
limiting the financial information as well as data, but also involves the data and quantitative as
well as descriptive information that is useful in making business decision for the users. These
users mainly include- present and potential leaders, creditors, investors, suppliers, customers and
the governments. The accounting literatures basically argue that the strategic success is mainly
taken into account the result of the AIS design. It has been analyzed from the recent study that
the AIS has huge impact on the strategic management, thereby examining different attributes of
AIS under various strategic priorities. It has been opined by Sajady, Dastgir and Nejad (2012)
that , the appropriate AIS design usually supports the business strategies in several ways by
which it enhances the performance of the enterprise. Moreover, enhancing the investment of AIS
also helps to achieve stronger as well as flexible enterprise culture for facing with the persistent
changes in competitive business environment. This tool is also used in the business for recording
all kinds of financial transaction occurring within the enterprise. It also combines methodologies,
accounting techniques and controls with different technologies of IT sector for tracking

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transactions, financial statements, providing internal data reporting, external data reporting and
analyzing the current market trend in which the business operates. According to Collier (2015),
innovation in the AIS design also leads to better performance of the enterprise and decrease
financial as well as enterprise obstacles, thereby increases possibility to access the capital
market. The AIS in business is crucial as it helps in administering the enterprise as well as
integrating internal control system. But a vital question that arises in the accounting field is that
whether AIS fits with the enterprise requirement for information control as well as
communication (Hamdan 2015). Benefits of the AIS can be assessed by its influence on the
enhancement of decision-making procedure, accounting information quality, internal controls,
evaluation of performance and helping in transaction of organization.
Organizational performance mainly depends on the effective management of the business
operations. It is mainly explained as the effectiveness as well as efficiency of the quantifying
approach which raises the productivity of the organization. Every employees and staffs play a
crucial role in the productivity of the organization and hence they contributes to the effectiveness
of the enterprise. Effectiveness of the enterprise has been succinctly stated by Gelinas, Dull and
Wheeler (2011) as the level to which the enterprise realizes its target and produces intended
output. In the enterprise management perspective, the measurement of business performance
reflects the procedure of quantifying the efficiency as well as effectiveness of the particular
business actions that are viewed as to contribute in the accomplishment of the desired target. It
has also been found out by Hall (2012) that, enterprise performance also reflects on the ability of
the firm to produce desired outcome. The performance of the firms also reflects the goals that
they achieve in face of limited resources, disagreement among different interest groups and huge
competition. Lucia (2013) states that there are several ways of measuring the performance of the

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company, which involves various criteria as profit margin, productivity, business growth ,
turnover rate, cohesion and stability. The perspectives of open system concentrate on exchanges
with business environment that involves- flexibility, adaptability, profitability etc. In context to
this, the perspectives of natural system mainly concentrate on the target of the enterprise
including morale, interpersonal skills, workers satisfaction etc. Rational perspectives mainly
focus on attainment of previously set target as well as on the output variables such as
productivity, efficiency and quality. According to Lucia (2013), utilization of AIS helps in
improving the performance of the organization.
Impact of AIS on the performance of the organization
One of the main advantages of the optimal utilization of AIS in the organization involves-
high level of competitiveness, better adaptation to the changing business environment and
effective management of the all kinds of business transactions. It is also considered as the boost
to dynamic enterprise nature with larger information flow between various staff levels. In
addition to this, integration of AIS also increases the possibility of the new network in the
business and enhances external as well as internal relationships within the enterprise especially
with the international customers through its web. It has been found out by Lucia (2013) that, the
AIS mainly operates certain function of collection of information or data, categorizing,
processing and reporting the financial events with the target of providing accurate data for the
objective of score- keeping and business decision making. It has been evident from some recent
studies that AIS generally plays crucial role in effective strategic management and thus acting as
the mechanism of enabling enterprise strategy. Radulescu et al.(2016) describes AIS relating to
apparent usefulness of different information attributes such as timeliness, aggregation level,
integration and scope of the business. Timeliness relates to the reporting accuracy, frequency and

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information orientation. Aggregation level signifies the method of aggregation in different time
periods or according to decision models. Scope relates to the extension of AIS in space as well as
time. Integration relates to the requirement of providing data to highlight the interaction as well
as coordination impact of various functions in an enterprise. All these four attributes helps to
highlight on the effectiveness of AIS on the enterprise financial performance. Recent studies also
reflects on the fact that the enterprises systematically differs AIS design for supporting their
strategy, identifying that AIS have potentiality to facilitate strategic management and improve
the performance of the enterprise. Moreover, successful adoption of AIS also helps to save both
time as well as money of the stakeholders. The value of information produced by AIS to
stakeholders as well as shareholders helps them to make investment decisions. AIS also provides
the financial managers of the organization with financial as well as accounting data, which in
turn helps them to evaluate the past performance of the organization and map plans for the
future.
AIS have also been taken into account as the vital enterprise mechanism, which are
critical for the effectiveness of control and decision management in the enterprise. Gelinas, Dull
and Wheeler (2011) opines that AIS being one of the vital systems in enterprise has changed its
method of collecting, storing processing and distributing information. In today’s world, digital as
well as on- line information is generally used in the AIS. The quality of data or information
produced from AIS is also crucial for the management of organization. However, the
organizations often utilize AIS for providing support to the management decisions. In fact, the
management of the organization uses AIS for comparing information about present performance
to few benchmarks for measuring the degree to which the target are being attained and also to
identify unusual conditions. Hilton and Platt (2013) found out that, the internal controls typically

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revolve around the AIS for transferring financial information within the business. Thus, it also
facilitates the managers to measure as well as monitor the effectiveness of accounting operations
on the business performance.
Performance management plays huge role in enhancing the value of the organization.
AIS are the most vital formal information sources in the industrial enterprises. In these
enterprises, the AIS are designed in such a way that it provides all management levels with
accurate as well as timely information to influence on the performance management as well as
aid them make decisions in accordance with the enterprise goals. Thus, the performance
management helps to measure the growth of business with the implementation of AIS. AIS
output mainly depend on the data quality and thus it is important to AIS. It has been suggested
by Hall (2012) that, all processes of data production (collection of data, storage of data, and
utilization of data) should work properly for achieving high quality of data. According to
Morrison (2015), inaccurate as well as incomplete data causes damage to competitiveness of
organizations. It has been found out by some researcher that input control as well competent
workers are important to data quality of AIS.
AAIS (Automated Accounting Information System) mainly provides tool for the finance
department in enhancing effectiveness of the enterprise especially in the era of advancement of
global technology. It has been viewed by Rahayu (2012) that, AIS provides the enterprise with
higher degree of flexibility and thus permits the managers as well as business owners to change
the system of collecting and distributing the financial documents. In addition to this, it also
allows the managers in developing or reducing the processes, which in turn helps to reduce the
time for processing the financial information. This in turn benefits the organizations to meet the
target within the specified time.

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The SMEs in the competitive business environment might not have the ability to strive
for long period without effective management of expenditure, flow of cash and giving
information for monitoring as well as control. However, integration of AIS aid the SMEs proper
cost analysis, effective budgeting and business decision making. Belfo and Trigo (2013) suggests
that the businesses are basically run with the shareholders’ capital, long term as well as short
term borrowing that should be effectively accounted for. Hence, with the integration of AIS
mechanism, organizing a loan re-payment schedule will adversely impact the growth as well as
expansion of SMEs in long-run. Hall (2012) poses that implementation of AIS system helps to
translate all these various dimensions into financial dimension. Galliers and Leidner (2014)
further elaborates that AIS provides the mechanism for appropriate recording of all transactions
especially the financial transaction, information production and storage relating to the financial
flows as well as positions at certain time period. This tool which when integrated into the field of
IT (Information and Technology systems) facilitates in the management as well as control of
topics relating to company’s economic financial area.
According to Chae, Koh and Prybutok (2014), AIS is the part of enterprise information
system that aid in giving processed information. This processed information however aids the
management to take decision and that has huge impact on the profitability level of enterprise.
AIS also help to improve utilization of the financial information in context of decision making
procedure. Not only this, it also aids to analyze data as well as produce various alternatives.
Therefore, with these, the processed data management can make accurate decision, which in turn
leads to increase in profit of enterprise. Thus, adoption of this business system has enhanced
profitability level as well as control of cost in the organization. Although AIS benefits the
business in several ways, it has few disadvantages. These includes –

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Loss of data- As AIS is basically computerized, there might be risk of loss of data or information
through system crashes. In this situation, the company faces huge loss in the business.
Reevaluation-Enterprises often change its method of doing business for keeping up with the
latest trends. Hence, the company faces huge problem in reevaluating the AIS for keeping up
with these changes.
Conclusion
From the above report, it can be concluded that AIS influences the business enterprise
both positively and negatively. AIS is an effective tool that helps in decision making of the
organization in several aspects involving- managerial decision making, enhancement in
performance measurement, aiding financial transaction procedure and profitability growth. But
this system involves some risk such as loss of data, which in turn adversely impacts on the
performance of the business. However, effective AIS design in accordance with business goals is
necessary for the growth and expansion of business.

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References
Belfo, F. and Trigo, A., 2013. Accounting information systems: Tradition and future
directions. Procedia Technology, 9, pp.536-546.
Chae, H.C., Koh, C.E. and Prybutok, V.R., 2014. Information technology capability and firm
performance: Contradictory findings and their possible causes. Mis Quarterly, 38(1), pp.305-
326.
Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision
making. John Wiley & Sons.
Galliers, R.D. and Leidner, D.E. eds., 2014. Strategic information management: challenges and
strategies in managing information systems. Routledge.
Gelinas, U.J., Dull, R.B. and Wheeler, P., 2011. Accounting information systems. Cengage
learning.
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Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic
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Lucia, P.P., 2013. ACCOUNTING, AN ESSENTIAL COMPONENT OF THE INFORMATION
SYSTEM. Annals of'Constantin Brancusi'University of Targu-Jiu. Economy Series, (1).

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Morrison, R., 2015. Data-driven organization design: Sustaining the competitive edge through
organizational analytics. Kogan Page Publishers.
Radulescu, D., St-Hilaire, M.O., Allard, Y. and Hammond, T.R., 2016. Sharing AIS Related
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