Article Review

Accounting Information System’s Barriers:

Case of Emerging Economy in Tehran Stock
Exchange
 RIFY VALLEY UNIVERSITY HACHALU HUDESSA CAMPUS

Introduction
1. Summary of the Article

From the articles gained useful information especially in the area of the barrier of
Accounting Information System. Among them the author wrote the major barriers that
affect the implementation of the AIS in Tehran Stock companies like middle manager,
environmental factors, culture, human resource, organizational structure, financial issues.
But there is also another factor that affect the implementation of the AIS beyond the authors
stated above. Information quality and data quality should be included to implement the
system properly. Again, in the background parts of this articles AIS contains small sub-
systems that support larger systems, and includes people, methods, information and
software and information technology infrastructures (Lautier 2001).

However, in today’s complex world there is another component of AIS like that of internal
control and information security that safeguard the system and the asset of the
organizations. In articles review its possible to include the title of articles in the review
therefore, the article is titled as accounting information system’s barriers: Case of an
emerging economy in Tehran Stock Exchange.

The articles is very important for those companies that are going to implement the AIS. The
purpose of the articles to identify the factors that impact the implementation of accounting
information system in Tehran Stock Exchange Company. Overall, the articles imply the
barriers that affect the implementation of accounting information system and identify the
variables that has great significant for the implementation of the AIS like that of middle
manager, environmental factors, organizational structures etc.

The authors compare the traditional and modern just in time (JIT) inventory management
techniques. The comparison between them is encouraged as it helps the reader to know
about the AIS. But the comparison is not much interrelated to the implementation of AIS
because of the modern JIT has its own advantage and disadvantages. The major advantage
is identified in the articles nevertheless the disadvantages was identified by authors. The
major disadvantage is excess demand, supply disruption, input price change and the risk is
the major drawbacks of using JIT. However, the disadvantage is missed from the articles.

2 | Page
 RIFY VALLEY UNIVERSITY HACHALU HUDESSA CAMPUS

Therefore, in order to make the comparison clearer for audience and the users the authors
must be include them in their studies. The way reviewing the literatures was very nice it
includes all the necessary items that support other interested body that needs to engage in
the similar issues. The methodology the authors were used for sampling technique is not
much clear for the audience. The authors identified 406 participants and selected 100
participants to collect data. The authors could not be identified the sampling techniques
selected for the studies. The method of selection of the 100 participants among 406 were not
justified in their selections. The selection is the inappropriate for the audiences.

Moreover, the authors used T-test for data analysis. The T- test is for these studies are not
appropriate because of the T-test has its own criteria. T-test is used for the sample size that
is below 30 sample size. In the data collection part, the authors used only questionaries to
the managers. Its good data collection techniques but it doesn’t identify what types of
questionnaires is used in the data collection. The authors identified 100 respondents but the
analyzed the responses of the 13 participants and they don’t identify where they put the
remaining. Finally, I concluded from the articles the appropriate presentation of review
literatures and some of introduction parts. The methodology is not clear for audience or the
readers so it must be included the sampling techniques and method assigning the
representatives for collected data.

AIS of the past focused on the recording, summarizing and validating of data about business
financial transactions. Accounting systems that were previously performed manually can
now be performed with the help of computers. Therefore, improvements in the information
technology have facilitated the use of cost and management accounting procedures.
Developments in IT have been paramount in recent decades, and they have been leading
developments in the globalization of markets and societies (Castells, 1996). In the view of
the fact, it is widely acknowledged that IT plays an important role in the field of accounting;
IT can be strategic weapons to support the object and strategy organizations. Some business
organizations get competitive advantage by equipping new information systems. Therefore
organizations tend to increase the money for IT, which makes the ratio of IT investment to
their total budget higher.

3 | Page
 RIFY VALLEY UNIVERSITY HACHALU HUDESSA CAMPUS

AIS of the past focused on the recording, summarizing and validating of data about business
financial transactions. These functions were performed for the various groups within the
organization that were concerned about the respective decisions associated with financial
accounting, managerial accounting, and tax compliance issues (Hollander et al. 1996).

The need to integrate these often diverse systems led to the accountant’s appreciation of
shared databases that provide a cohesive picture of the organization’s data, eliminating
duplications and reducing data conflicts (Moscoveet al. 1999).
2. Problem of the Statement

The developments in information technologies, together with globalization and international

legal arrangements, have generated such notions as “new economy”, “e-commerce” and
“new accounting”. In addition, these developments have been useful in saving time and
money and reducing the costs by accelerating transactions and communication. The
developments in information technologies have caused all or some of the financial
transactions in a business to be carried out in such different forms in electronic
environments as electronic commerce and electronic data exchange. This, as a result, caused
the financial transactions to be removed from the traditional paper-based activity
environment to the electronic environment in the accounting information system, which is
described as the language of a business, and therefore, resulted in changes in all processes
such as recording, classification, reporting and analysis. At the same time, this change has
also affected such accounting applications as keeping the books, preparing financial
statements and tax statements, auditing activities and, therefore, the activities of the
members of the accounting profession.

The above-mentioned developments in information technologies, which made the changes

in accounting information system, applications and profession inevitable, also created a
change in the demands of the society and an increase in the expectations from the members
of accounting profession. So, in this paper the authors try to show the significance of
accounting information system in developing country, namely Iran.

4 | Page
 RIFY VALLEY UNIVERSITY HACHALU HUDESSA CAMPUS

3. Objectives of the study

To achieve this aim, the following use research objectives:

 To investigate of the social factors influencing the use of AIS.

 To investigate of the organizational factors influencing the use of AIS.

 To determine the role of AIS is used by accounting firm to achieve their intended
purpose.

4. Research methodology

So far accurate answer to the research question, the authors design and developed a
questionnaire which it is the most suitable for this study. A survey questionnaire was
completed by the financial managers of Iranian corporations. The questionnaire contains
two parts namely (A) bio-data and (B) this section includes several deep questions related to
AIS application and usefulness in Iranian corporations. The questionnaire was based on
Five-Point Likert,s Scale questionnaire. The Five-Point Likert’s scale having the ratings of
“strongly disagree” (1) and “strongly agree” (5) were used. Totally 600 questionnaire were
distributed among the financial managers in Iran. Out of 600 questionnaires, 498 useable
questionnaires were returned in first Feb to end of April 2009.

4.1 Information Systems

An information system is an organized means of collecting, entering, and processing data

and storing, managing, controlling, and reporting information so that an organization can
achieve its objectives and goals (Romney et al., 1997:18). This definition of information
system shows that an information system has following components.

Every information system is designed to accomplish one or more goals or objectives. For
example, an information system may be designed to collect and process data about
employees to help managers prepare payroll reports.

Inputs: Data must be entered into the information system to be processed.

Data are the facts that are collected and processed by the information system. Data are
meaningless and useless, which, therefore, should be processed and transformed to

5 | Page
 RIFY VALLEY UNIVERSITY HACHALU HUDESSA CAMPUS

meaningful, organized, and useful form that is called information.

Outputs: Output is the meaningful and useful information produced by the information
system. For example, weekly payroll report produced by the information system is an
output.

Data storage: In addition to the external data entered into the information system, there
should be internally stored data used for processing.

Processors: In order to produce useful and meaningful information, data must be processed.
Most companies process data by using computers.

Instructions and Procedures: An information system produces data by the following

instructions and procedures. In computerized information systems, software includes
procedures and instructions that direct computers to process the data.

Users: Users are people who use the information produced by the system and who interacts
with the system. For example, managers who use financial statements that are produced by
an accounting information system are the users of the information system.

Control Measures: In order to make the information system produce correct, and error free
information, necessary measures should be taken to protect and control the information
system.

Any system that includes the above components is known as an information system. The
following section will show how accounting systems are established using these
components.

5. Related literature

Computers are now a key resource in accounting and financial information processing.
Furthermore, major advances in information technology (Seligman, 2000) as well as the
existence of observable and tangible economic benefits (Botosan, 1997 and Seligman, 2000)
have driven traditional auditing and financial reporting ever closer to being real-time tasks.
Companies like Cisco Systems have made significant progress in making real-time financial

6 | Page
 RIFY VALLEY UNIVERSITY HACHALU HUDESSA CAMPUS

reporting a reality (Seligman, 2000). Seligman (2000, p.148) reports that “Cisco Systems is
one of the rare companies today in which the boss can clap his hands and get the books
closed within an hour.”

5.1 Real-time financial reporting

Although real-time financial reporting provides benefits to investors and financial analysts,
prior discussion regarding the use of technologies that would bring the business community
closer to real-time financial reporting has raised several concerns. For instance, when
Cushing (1989) wrote about the emergence of the Securities and Exchange Commission’s
EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system (SEC, 2000 a), he
examined the feasibility and consequences of using a database approach to corporate
financial reporting. The database approach is a precursor to the current Internet client/server
based portal approach. At the time of Cushing’s work, the World Wide Web did not exist,
and Bernard-Lee’s HTML (W3, 2000) was not yet invented. Nonetheless, the issues
addressed by Cushing are still relevant and point to a need for reexamination of the content
of accounting information systems education. In his work, Cushing found that the database
approach would be feasible for financial reporting. Yet, he also recognized that this
approach would have varying economic effects on several players in the economy. One of
his observations dealt with which players might support the database approach and which
ones might oppose it. Cushing (1989) conjectured that the most likely supporters of the
database approach would be governmental agencies involved in regulatory enforcement,
accounting scholars, and the data processing industry.

On the other hand, the most likely opponents might be corporate management, corporate
accountants, financial analysts, and investors with private access to inside information.
Cushing (1989) argued that corporate management might object to the database approach
because it would hinder their ability to manipulate financial information in a manner that
best serves their self-interest. Cushing believed that the database approach would enable
meticulous monitoring and appraisal of management’s accounting choices. As a result, he
reasoned that this approach would almost certainly lead to restrictions in these choices, and
that corporate management might experience a significant reduction in their ability to
manage earnings. Similar arguments could be made about real-time financial reporting in

7 | Page
 RIFY VALLEY UNIVERSITY HACHALU HUDESSA CAMPUS

the context of today's environment as it could lead to greater transparency in financial

reporting and enable more efficient monitoring of management’s accounting method
choices. Since 1989, technological advancements and the World Wide Web have
transformed the way users of financial reports seek financial information and how
corporations have supported (albeit selectively), through their web pages, users' demand for
timely information.

The emergence of the World Wide Web has also made the “nearly real-time” financial
reporting convenient and economical for individual investors. Constantly updated World
Wide Web pages have shown investors that themay have the opportunity to acquire
financial information on a real-time basis. It might be argued that the cost of disclosing
information real-time and/or the fear of passing on proprietary information to competitors
might discourage companies from disclosing their financial information in a real-time
manner. However, these disadvantages might be offset by the impact of timely disclosures
on the cost of capital. Botosan (1997) found that the cost of capital is lower for companies
(particularly smaller entities) that provide more thorough and timely financial disclosure
than those companies that do not. Botosan’s findings provide some insight into the potential
benefits that might accrue from real-time financial reporting.

5.2 Assurance services for real-time reporting

The quality and effectiveness of real-time financial reporting is contingent upon the ability
to provide real-time, continuous financial auditing. Continuous auditing has been defined as
"a methodology that enables independent auditors to provide written assurance on a subject
matter using a series of auditors' reports issued simultaneously with, or a short period of
time after, the occurrence of events underlying the subject matter" (CICA/AICPA, 1999).
Continuous auditing requires a high degree of automation. It is also dependent upon (a)
precise definitions of the data underlying the items to be audited, (b) use of real-time
controls to signal errors and irregularities, and (c) automated integrated audit agents and
other technologies that enable collection, analysis, summarization, and reporting of audit
evidence and opinions. Like real-time financial reporting, real-time, continuous auditing
also creates a need for a new breed of accounting information systems professionals, who
are not only well-versed in traditional audit and accounting methods, but also information

8 | Page
 RIFY VALLEY UNIVERSITY HACHALU HUDESSA CAMPUS

technology (IT).

5.3 Changing nature of financial information systems and enabling technologies

The possibility of sharing very timely financial data and information on the Web has
accelerated many new developments in financial reporting that have the active support of
the corporate community. One such significant breakthrough is XBRL (Extensible Business
Reporting Language, 2000), a variation of XML (Extensible Markup Language), for
financial reporting. XBRL is expected to make it easier to locate, retrieve, and use financial
data that are published on the Web. Moreover, by establishing penalties for private,
preemptive disclosure of financial information to exclusive groups such as financial
analysts, the recent SEC fair disclosure ruling provides additional impetus for advances in
real-time reporting to the entire business and investing community (Seligman, 2000).
Corporations may now attempt to make timely (including real-time) information available
to all market participants rather than select groups of analysts and investment bankers. In
order to reach a distributed audience, real-time financial reporting and auditing require
sophisticated network technology and Web-based systems. As advances in real-time
financial reporting and auditing continue, a new breed of accounting practitioners and
accounting scholars may question and subsequently reexamine some of the fundamental
assumptions made under the guise of manual systems usage during most of the last century.
As demonstrated by EDGAR (SEC, 2000 a) and other media available via the World Wide
Web, the fundamental assumptions underlying modern accounting may need to be
thoroughly reexamined in this post-modern age in which the media for financial
communication is no longer confined to a linear time frame, but rather is capable of
accommodating spatial data points within dynamic financial transactions.

6. Conclusion

Accounting information systems of the past focused on the recording, summarizing and
validating of data about business financial transactions. These functions were performed for
the various groups within the organization that were concerned about the respective
decisions associated with financial accounting, managerial accounting, and tax compliance
issues (Hollanderet al.1996). The need to integrate these often diverse systems led to the
accountant’s appreciation of shared databases that provide a cohesive picture of the

9 | Page
 RIFY VALLEY UNIVERSITY HACHALU HUDESSA CAMPUS

organization’s data, eliminating duplications and reducing data conflicts (Moscove, et al.
1999). The results of this study showed that AIS improve financial statements and reporting
correctness in Iran. However, the results also revealed that there is hug gap between what
AIS and what should be.

The major weakness of AIS in Iran as follow: in is not affected to Iranian accounting
standards, it is not confirms with other financial and managerial systems, it is not covers all
information needs have company and financial information and it is not covers all
management levels information in Iran. So, to this situation, the managers which are aware
of AIS benefits should take more as well as academicals action for reducing such gaps in
Iranian corporate sectors.

From the results of the statistical analysis, it can be deduced that the use of AIS is relatively
accepted within accounting firms, which is largely as a result of the 'change' that comes with
the use of such application. The use of AIS which is a computer- based application brings a
new trend of change from the conventional way of accounting to a computerized way which
most people are not prepared for or find very difficult to adapt to. It is seen that its usage is
majorly influenced by the institution. It was also found out that the majorities of recent users
are within the diploma level of education and have minimal experience with the use of
computers. This therefore creates a level of difficulty for effective usage of the applications
available. The use of AIS is seen to have improved the productivity and delivery of the
users' work, although this was not quantified in this study. In addition, this study found out
that all three factors influencing the AIS process were found to have a direct effect on
attitude, although no direct effect of this process on behavioral intentions were observed.
Hence, this emphasis on innovation adoption and diffusion initiatives should be focused on
developing user attitudes that are conducive to effective utilization and acceptance behavior.

9. Recommendations

For proper and effective usage of AIS, there must be an increased awareness of the usage
and of AIS to facilitate its wide adoption. Therefore, higher levels of formal education
should be encouraged, alongside workshops, training and re-training of users for adequate
improvement. In addition, further studies should be conducted to quantify the impact of AIS
on accounting firms, in order to be able to establish its full potential.

10 | P a g e
 RIFY VALLEY UNIVERSITY HACHALU HUDESSA CAMPUS

References:

Abdipour, Mahdi Salehi and Abdoreza. "Accounting information system’s barriers: Case of
an emerging economy in Tehran Stock Exchange." December 2012

11 | P a g e