ACCT6007: Critical Analysis of Accounting Technology Adoption Report

This report critically analyzes the academic article by Agyekum and Singh (2018) on how technology is changing accounting processes, viewed through the lenses of institutional and legitimacy theories. The report begins with an overview of these two theories, detailing how institutional theory explains the adoption of accounting practices based on societal expectations, and how legitimacy theory focuses on organizational acceptance within society. The analysis then assesses the adoption of information technology in accounting, highlighting its impact on efficiency, information disclosure, and decision-making. The report evaluates the four propositions made by the authors, agreeing with them based on the supportive evidence from the theories. Finally, the report discusses the strengths of the article, such as its explanation of the relevance of accounting systems, and its weaknesses, like the lack of empirical studies. The conclusion emphasizes the importance of both theories in understanding the adoption of advanced technology in accounting and its implications for organizational legitimacy and competitive advantage.

Running head: FINANCIAL ACCOUNTING THEORY AND PRACTICE
Financial Accounting Theory and Practice
Name of the Student
Name of the University
Author’s Note

1FINANCIAL ACCOUNTING THEORY AND PRACTICE
Table of Contents
Introduction......................................................................................................................................2
1. Brief Explanation on Institutional Theory and Legitimacy Theory of Accounting....................2
2. Assessing the Adoption of Information Technology in Accounting...........................................3
3. Evaluation of the Propositions Made by the Authors..................................................................5
4. Strengths and Weaknesses of the Article.....................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

2FINANCIAL ACCOUNTING THEORY AND PRACTICE
Introduction
The omnipresence use of the accounting systems within the business organizations along
with the rapid advancements of information technology, it is believed that the impact of
accounting functions improve with the adoption of advanced information technology (Agyekum
& Singh, 2018). The main aim of this repost is the assessment of the adoption of information
technology in accounting through using the concepts of institutional theory and legitimacy theory
through evaluating an article. This report briefly discusses about these two specific theories in
accounting while aligning them with the adoption of information technology in accounting
within the organizations. This report also assesses the propositions made in the article while
discussing the strengths and weaknesses of the same.
1. Brief Explanation on Institutional Theory and Legitimacy Theory of Accounting
Institutional Theory in Accounting – The main use of institutional theory can be seen in
assessing the similarity of forms and processes of the organizations. Under this theory,
institutionalization refers to the process enabling the organizations to consider the expectation of
the society on the form and behavior of the organization. This particular theory helps in
explaining the choice of an organization of their accounting operation (Goddard et al., 2016). As
per this theory, accounting gives a mechanism through which rational conceptions are
incorporated by the business organizations; and it aims to create as well as process information
in such a manner so that people become enable in making informed and rationale decisions.
Thus, from the isomorphic perspective of institutional theory, the similarity of accounting
systems provides the organizations with a bases to adopt accounting structure within their
organizations so that the information can be provided to the people (Agyekum & Singh, 2018).

3FINANCIAL ACCOUNTING THEORY AND PRACTICE
Legitimacy Theory in Accounting – The main concern of legitimacy theory is that how the
business organizations are accepted by the society. In legitimacy theory, legitimacy can be
considered as a general assumption that takes into consideration a business organization’s action
as desirable within the binderies of social definitions, boundaries, norm and values. The
utilization of accounting within an organization gives patterns of organizational visibility to it;
and thus from the perspective of the legitimacy theory, adoption of appropriate accounting
system offers the organizations with legitimacy (Mousa & Hassan, 2015). At the same time,
adoption of appropriate accounting system and disclosure of the required accounting information
provides the organization with the required legitimacy among the users. Therefore, from the
perspective of the legitimacy theory, business organizations can use the accounting system so
that they can disclose the required information for gaining organizational legitimacy. This
legitimacy can be considered as n manifestation of efficiency and rationality (Agyekum & Singh,
2018).
2. Assessing the Adoption of Information Technology in Accounting
The adoption of information technology in accounting can well be evaluated and assessed
in the lights of institutional and legitimacy theory. Accounting can be considered as an
institutionalized function with the formal structure of the business organizations; and massive
advancements in the accounting information technology is assisting in enhancing overall
efficiency while allowing the financial managers in further expanding their focus to make
strategic decisions. This also assists the business organizations in disclosing the accounting
information to the public in better manner so that they can make better decisions (Agyekum &
Singh, 2018).

4FINANCIAL ACCOUNTING THEORY AND PRACTICE
In the presence of massive changes in technologies, there is a major need for the business
organizations to adopt new information technology so that the overall effectiveness and
efficiency can be improved. Institutionalization can be considered as a process through which
business organizations widely accept any change in the formal structure of the organization that
is appropriate and necessary for providing legitimacy to the organizations; and this particular
notion can be used for assessing the adoption of advanced information technology in accounting
by the companies (Nurunnabi, 2015). The adoption of information technology in accounting
improved the whole accounting process which facilitates in better analysis of the financial
information along with better disclosure of the accounting information. For example, the
adoption of Enterprise Resource Planning (ERP) system helps in providing better information for
decision making. Therefore, from the institutional theory perspective, the adoption of
information system in accounting helps the companies in gaining the legitimacy for operating in
the norms, values and believes of the society (Aldemir & Uysal, 2017).
Legitimacy can be considered as the desire of an organization for seeking to show
similarity between the social values. Moreover, legitimacy can be constructed as an operational
resource utilized by the organizations within the competitive environment for achieving the
organizational goals and objectives (Aldemir & Uysal, 2017). Therefore, within the competitive
environment, the adoption of advanced information technology in accounting by an organization
can be considered as a tool for gaining competitive advantage. This is because the changes in the
accounting practices through the introduction of information technology have become the kind of
practice that is accepted by the society (Nurunnabi, 2015). Therefore, adopting the information
technology in accounting can be considered as the move of the companies to gain legitimacy

5FINANCIAL ACCOUNTING THEORY AND PRACTICE
within the society. In this manner, the institutionalization of accounting system within the
organizations provides the companies with the external legitimacy.
3. Evaluation of the Propositions Made by the Authors
It can be seen from the article that four propositions are made by the authors and the
following discussion shows the reasons for either agreeing or disagreeing with these
propositions.
The first proposition states that there is an increase in the roles of accountants as a
mechanism of institutionalization in the organizations due to the change in accounting process
for adopting new technologies (Agyekum & Singh, 2018). This can be considered as a fair
preposition because with the introduction of advanced technology, the role of accounting is not
only associated with the preparation and presentation of financial statements, but it has expanded
to the efficient disclosure of this information to the users so that they can make sound decisions
(Jinga & Dumitru, 2015).
The second proposition states that there is an increase in the legitimacy of the
organization due to the change in accounting practice due to the adoption of new technologies
(Agyekum & Singh, 2018). Business organizations can increase its legitimacy within the society
by disclosing all the financial information of their businesses so that decisions can be made
easily. From this perspective, this proposition is fair as the adoption of new technologies has
increased the capability of the organizations in disclosing the information to the people so that
they can make better decisions and the companies can earn the competitive advantage (Van Zijl,
Wöstmann & Maroun, 2017).

6FINANCIAL ACCOUNTING THEORY AND PRACTICE
The third proposition states that there is an increase in the performance of the companies
due to the changes in accounting practice because of the adoption of new technologies
(Agyekum & Singh, 2018). The adoption of advanced technology in the accounting practice has
enabled the business organizations in gaining the competitive advantage in the highly
competitive environment and this helps the organizations in enhancing their performance.
Therefore, this proposition is fair (Saldanha et al., 2015).
The last proposition states that changes in accounting practice because of adopting new
technologies are being continuously institutionalized that needs alterations in the fields of
accounting (Agyekum & Singh, 2018). This needs to be considered as a fair proposition because
of the presence of the aspect that the adoption and implementation of advanced accounting
technologies requires the business organizations to change its structure and operations for
facilitating these advanced changes. This helps the organizations in gaining legitimacy to operate
within the norms and believes of the society (Bamber & McMeeking, 2016).
4. Strengths and Weaknesses of the Article
The main strength of this article can be seen in explaining how the accounting system has
major relevance within the organizations as this provides the companies with the mechanism to
institutionalize the business organizations so that they can obtain the required legitimacy for
operating in the society (Agyekum & Singh, 2018). At the same time, another major strength of
this paper can be seen in pointing out the rapid changes in accounting technology that need to be
adopted by the companies so that they do not become obsolete. Therefore, this paper shows how
the companies can get legitimacy by institutionalizing the technological changes in advanced.
However, the weakness of this article can be seen in not conducting any empirical study for

7FINANCIAL ACCOUNTING THEORY AND PRACTICE
testing propositions as there is a need for longitude study on the these propositions. These
weaknesses of this article can be considered as further research opportunities that can increase
the research work in this field (Agyekum & Singh, 2018).
Conclusion
It can be seen from the above discussion that both the institutional theory as well as
legitimacy theory has major relevance with the adoption of advanced technology in accounting
profession. Adoption of advanced information system in accounting helps the companies in
gaining the required competitive advantage through institutionalizing the changes and these help
the companies in gaining legitimacy for operating in the norms, values and believe of the society.
The above analysis shows that all the four propositions made by the authors are fair as they are
well supported by the institutional theory and legitimacy theory of accounting.

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References
Agyekum, A. A., & Singh, R. P. (2018). How Technology is Changing Accounting Processes:
Institutional Theory and Legitimacy Theory Perspective. Journal of Accounting &
Finance (2158-3625), 18(7).
Aldemir, C., & Uysal, T. U. (2017). Public Accounting Reform from Institutional Theory
Perspectives: Case of Turkey. ACCOUNTING AND CORPORATE REPORTING, 277.
Bamber, M., & McMeeking, K. (2016). An examination of international accounting standard-
setting due process and the implications for legitimacy. The British Accounting
Review, 48(1), 59-73.
Dumay, J., Frost, G., & Beck, C. (2015). Material legitimacy. Journal of Accounting &
Organizational Change.
Goddard, A., Assad, M., Issa, S., Malagila, J., & Mkasiwa, T. A. (2016). The two publics and
institutional theory–A study of public sector accounting in Tanzania. Critical
Perspectives on Accounting, 40, 8-25.
Islam, M. A. (2015). Stakeholder Network and Corporate Legitimacy: An Extended Analysis.
In Social Compliance Accounting (pp. 107-115). Springer, Cham.
Jinga, G., & Dumitru, M. (2015). The Change in Management Accounting from an Institutional
and Contingency Perspective: A Case Study for a Romanian Company. International
Journal of Social, Behavioral, Educational, Economic, Business and Industrial
Engineering, 9(6), 1913-1920.

9FINANCIAL ACCOUNTING THEORY AND PRACTICE
Mousa, G., & Hassan, N. T. (2015). Legitimacy theory and environmental practices: Short
notes. International Journal of Business and Statistical Analysis, 2(01).
Nurunnabi, M. (2015). The impact of cultural factors on the implementation of global accounting
standards (IFRS) in a developing country. Advances in Accounting, 31(1), 136-149.
Saldanha, J. P., Mello, J. E., Knemeyer, A. M., & Vijayaraghavan, T. A. S. (2015).
Implementing supply chain technologies in emerging markets: An institutional theory
perspective. Journal of Supply Chain Management, 51(1), 5-26.
Van Zijl, W., Wöstmann, C., & Maroun, W. (2017). Strategy disclosures by listed financial
services companies: Signalling theory, legitimacy theory and South African integrated
reporting practices. South African Journal of Business Management, 48(3), 73-85.