financial management in ICT

Introduction In the recent past, before the inception of Information and Communications Technology (ICT), the financial system of an organization were using a socially acceptable behavioral method of reporting accounting and economic reports, carried out during accounting year ends, the preparation of accounting records, book such as the profit and loss account, the balance sheet, cash book, cash flow statement, income and expenditure accounts. The application of Information and Communication Technology (ICT), on financial practice in Nigeria has become a subject of fundamental importance and concerns to all business enterprise and indeed a prerequisite for local and international competitiveness. It is obvious that the way accountants plan and take decision on what and how to provide their service in the financial profession has been affected immensely by Information and Communication Technology (ICT). This has continued to change the manner in which accounting practice and their corporate relationships are organized worldwide and the variety of innovative device available to improve and facilitate the speed and quality service delivery. It is obvious that the biggest impact of Information and Communication Technology (ICT) has been made on accounting; and it is the ability of companies to develop and use computerized system to track and record financial transactions properly and accurately. The recording of business transaction manually on ledgers, papers, spread sheets etc has been translated and computerized for quick and easy presentation of individual financial transaction and give report on it. (Granlund & Mouritsen, 2003). A vital message of the work is that researchers in accounting Information (AIS) and other areas accounting, such as financial, Auditing, Tax and managerial should work together on projects, as each party can learn a great deal from the other. By so doing, a synergistic relationship arising from such teamwork hold great potential to yield high-quality research results that can have notable impact on the accounting profession. (James E. Hunton, 2002). Shanker (2008) ascertains that the use of ICT in many organizations has assisted in reducing transactional cost, overcome the constraints of distance and have cut across geographic boundaries thereby assisting to improve Coordination of activities within organizational boundaries. It is very clear that, the computerized accounting system have improved the functionality of accounting departments by increasing the timeliness of accounting information. By improving the timeliness of financial information, accountants can prepare repots and operations analysis that gives management an accurate picture of current operations. The number of financial reports has also been improved by computerized system; cash flow statements, market shares reports and departmental profit and loss are now more accessible with computerized system. A Prior observation shows that computerized accounting system have internal check and balance measures to ensure that all transactions and accounts are properly balanced before the financial statements are finally prepared. It also will not allow journal entries to be out of balance when posting, ensuring that individual transactions are properly recorded. Importantly, since the inception of Information and Communication Technology (ICT), computerized accounting system allow accountants to process large amounts of financial information and process it quickly through the accounting system. Quicker processing time for individual transactions has also lessened the amount of time needed to choose out each accounting period. Transaction that would have taken an accountant months or years to prepare would be done quickly and faster and thereby cutting high cost that would have resulted in preparing these reports (Pricewaterhousecoopers, June 2008). In trying to assess the impact of ICT on accounting practice in Nigeria, one does not only need to concentrates on trying to gather fresh knowledge or facts but also need to concentrates on how to get himself familiarized with existing studies on the same subject and how to develop solution to solving the problem under review. In trying to do so, the researcher need to take into cognizance the findings made in the previous studies and also be able to know the answers to come out with; that could be useful for further research work. Information and Communication Technology needs not be over emphasis as people needs and relies on information systems to communicate effectively using physical devices (Hardware) e.g. telephone, computer, information processing and procedures (softwares) e.g. the use of DMS,SPSS, Yahoo messenger, 2go, Face book, communication channels (Network) e.g. intranet, extranet, internet, intercom and data store (data resource) has been so impacting from the onset of civilization. CONCEPTUAL FRAMEWORK The advance in ICT and other business technology are making financial practice easier, faster and cleaner; however, the rate at which technology has been introduced makes it more difficult for accountants to cope up with accounting practice. It is important to consider where the impact of ICT lies, being in a broader information society conceptual model. These model used by OECD 2009 to illustrate the information society, identifies the following inter-related segments: ICT supply (ICT sector), ICT demand (use and users), ICT infrastructure, ICT products, information and electronic content and in a wider social and political context. These research work will examine the impact of ICT on Auditing, individuals, work group, employment and production etc. and the application software that are needed in executing each task at the various sector of the economy. REVIEW OF PRIOR STUDY The effectiveness of financial practice and increase in productivity and high turnover as well as the profit of any organization is as a result of the impact of ICT. Electronic data processing (EDP) is the process of changing raw data, facts into information that are meaningful to the mangers and accountant for decision making. EDP is the function of planning, recording, managing and reporting business transactions by the use of computer and related peripherals. EDP in accounting practice; the accountant gets the data from the source documents which includes the receipt, invoice, payment vouchers, written cheques etc before there are been inputed into the computer and process into information meaningful to the users as output. (MIS by James O’Brien). According to Apulu and Lathan (2010), claim that ICT enables customers to receive immediate feedback that allow companies to react fast to customers’ demands and recognize new market niches. This entails that organizations that are able to exploit the potentials offered by ICT can handle various types of innovative processes in their businesses since ICT influences the performances of an organization in multifaceted ways. Thus ICT can bring about change in organizations and make them more competitive, innovative and assist to increase organizational growth. Alam and Noor (2009) argue that ICT offers enterprise avenues to compete on a global scale with improved efficiency and closer customer and supplier relationships. Therefore, ICT should be regarded by businesses as an important strategy to stay competitive. Currently, the manner in which accountants can potentially add value to economic entities and society is undergoing a metamorphosis. Many traditional accounting task dealing with the recording and processing of accounting transactions can be reliably automated. In this regard, accountants add little incremental value to organization, but now accountant’s worth is reflected in higher-order critical-thinking skills, such as designing business processes, developing financial strategies, designing e-commerce models, providing independent assurance to companies and individuals. Financing/accounting and application software This is a set of computer programs that help the financial system of the 21st century to carry out their task effectively. Prior to the 1960s, the accountants were perceived as a book-keeper whose primary responsibility was ensuring that records were kept. The accountants fought a constant battle against the failure and lost of records. Computer provides more efficient means of keeping the books, and they afforded the accountant quick access to financial information for reporting purposes. Accounting software and applications such as peach tree, SAP, share point, DMS, Turbo tax, Microsoft dynamics, Quick book, Oracle, spreadsheets, Global enterprise resource planning system (ERPS)loctus (e-mail) etc has help accountants like auditors perform their task effectively and efficiently. These software and applications have helped tremendously in impacting on work group level and business process level. Impact of ICT at business level Information technology has made it possible to stay plugged in and connected on a 24/7 basis. Documents containing information regarding business operation and performance can be access effortlessly. Impact of ICT at work group level Information can be easily shared among colleague in an organization. ICT has made it possible to stay connected 24/7 with the help of: Blackberries Laptop Facebook E-mails 2go Twitter etc. The problem of one staff is not on seat so work should be delay or stop is eliminated as you can literally be flying over the Atlantic and still be able to talk and e-mail colleagues and clients. Benefits of the impacts of ICT on work group Increase productivity Increased customers service relationships Increased freedom to work from any were Audit An audit is an official inspection of an organization books, accounts and financial statement. Audit can be carried out internally by the internal auditors in the entity internal control department or externally by independent professional accountants (Auditor). It is aimed at; providing information as to true and fairness of the financial statement. It provide assurance of accountability, identifies the weakness of the internal control system and make recommendations. The report of the auditor forms an opinion as to the true and fairness of the financial statement. The report provide users such as individuals, tax authority, investors, creditors, Government etc as an assurance to rely upon for their decision making based on the audit report. Impact of ICT system on auditing (a) Computerized accounting system. One of the greatest impact of ICT on accounting is the ability of companies (audit firms) to develop and use computerized system to track, extract and report on financial transactions. It allow the auditor to report quickly and easily for decision making. (b) Increase functionality. Computerized accounting system have improved upon the functionality of accounting departments by increasing the timeliness of accounting information. Accountants can now prepare reports and operations and analysis that give management an accurate picture of the client firm under review. (c ) Improved accuracy Errors and fraud are easily detected as it limit the number of accountants that have access to financial information. Less access by accountants ensure that financial information is audited by only qualified accountants or supervisors. (d) Reporting deadline/testing processing. Since the advent of ICT, accountants now process large volume of financial information quickly through the use of some audit software such as CAAT. Reporting that might have taken an accountant months or years to prepare can be done within a relatively short period of time, thereby aiding companies in cost control, which increase the companies overall efficiency. (e) Better external reporting Investors can be inform on time on the liquidity of the company, and make informed decision as to whether to invest in the company or not. The existing shareholders will know the performance of the directors and how efficient they are. Auditing in ICT environment At this point, the auditor tries to evaluate the effectiveness of the internal control system and the weakness as well relating the manner in which electronic datas are been processed, the time it take, the nature and the extent to which they is compliance base on substantive audit procedure. However, these can not be effectively achieved without a prior knowledge of computer system in planning, organizing, directing and controlling. Summary i. Computer hardware These are the physical parts of computer that can be seen, felt and touch. It include the input and output components firm like audit purchase large number of laptops to help them carry out their audit work at any point in time. These have replace the use of desktops computer which can not be move from time to time. In order for audit firms to carry out their task effectively, timely and accurately, the accountants try to construct and expand in their network base infrastructure. This may be increase in the bandwidth or the installation of central network system with the help of Local Area Network (LAN). Various branches can loop network from the main central network through the help of Virtual Private Network (VPN). ii. Computer softwares. These are the part of the computer system that can neither be seen nor touch but are fully active for the smooth operation of the computer system. Softwares are programs that assist a particular task to be performed . firm have software that suit their purpose such as DMS, Turbo tax etc. some software like CAAT are design to fit the audit style of the professionals in the firm. Prior to the invent of these software, preparation of audit work paper is obsolete as the software does that. iii. Audit software These are software that are developed to serve audit purposes, most often, the generalized audit software (GAS). Design of audit program created for a particular audit will serve the needs of testing the audit programs of the clients. These program have a function of checking calculations, examining of records, corrections and comparism of clients records with the data obtained through other procedures. iv. Nature of evidence generated using ICT As a starting point, the evidence generated and or created using ICT are documentary evidence, since holding otherwise, that the oral evidence would amount to standing logic on its head. ICT stands as a long lasting evidence store house for clients companies. v. Capturing Economic Events Prior to the 1960s, the accountant was perceived as a bookkeeper whose primary responsibility was ensuring that records were kept. The accountant fought a constant battle against the failure of records. On the low-value end of the spectrum falls the traditioned functions of identifying, measuring, recording accounting transactions as they pierce the boundary of the entity. But now, most of these functions are routines and predictable, cleverly written computer program can handle most of these activities. vi. Junior and senior Auditors. Most of the task of the junior auditors like preparation of audit working paper and audit procedures are relatively repetitive and involve substantial calculations and referencing across different accounts. Computer applications can automate such structured task and substantially reduce the processing time and error. Senior auditors assist in audit plan development, organization of audit activities, supervision and review of the work of senior auditors. The FIRM’S audit software organized all required audit procedures in a common list and cross-referenced them to items in the working paper. Since electronic presentation of information facilitate user’s information acquisition (Jones et al, 1993), a senior auditor is likely to benefit from the convenient information gathering and organization enabled by the new software.