CHAPTER TWO

REVIEW OF RELATED LITERATURE

Introduction

This chapter reviews existing literature on the subject of Accounting Information Systems (AIS)

and their impact on the profitability of manufacturing firms. The chapter explores key concepts

related to AIS, its components, and its role in financial management. Furthermore, it examines

empirical studies and theoretical frameworks that explain the relationship between AIS and

business performance, particularly focusing on profitability. Finally, it reviews challenges and

opportunities associated with the adoption and implementation of AIS in the manufacturing

sector, especially within the context of Nigeria.

2.1 Conceptual Review

2.1.1 Concept of Accounting Information Systems (AIS)

An Accounting Information System (AIS) refers to a structured framework that organizations

use to collect, store, process, and report financial data. AIS integrates both hardware and

software to facilitate the flow of financial information from operational activities to financial

reporting, ensuring that managers, stakeholders, and regulatory bodies receive accurate,

timely, and relevant financial data for decision-making.

Alphonce (2014) defined accounting information system as the system that registers and

manages data of transaction and activities into useful information to be employed in planning.

controlling and separation of businesses. This definition emphasizes the usefulness of

information in the accounting information system to the end users of the system. According

Romney and Steinhart (2000), accounting information system is a system that processes

information and transactions avail users with data which they need to plan, control and carry

out their business operations. They emphasized that accounting information system is not

solely for managing accounting information for related decisions but also for every other

information need of an organization. Mauldin and Rachala (1999) expressed accounting

information system as a computerised system for recording, managing, presenting and

analysing business information with the option to aid accounting decision and information. This

study defines an accounting information system as a system that digitalizes the process and

machinery of information gathering which organisations employ to record, store, analyse

extract, project and present operational data of past and potential activities.

Kim (1989), argued that usage of AIS depends on the perception of the quality of information by

the users. Generally the quality of information depends on the reliability, form of reporting,

timeliness and relevance to the decisions. Effectiveness of accounting information system

System also depends on the perception of decision makers on the usefulness of information

generated by the system to satisfy informational needs for operation processes, managerial

reports, budgeting and control within the organisation. Some research indicate that the

effectiveness of accounting information system Systems depend on the quality of output

information that satisfy the users (Quinn and Rohrbaugh, 1983; Cameron, 1986; Lewin and

Minton, 1986; Kim, 1989 and Delone and Mclean, 1992).

Accounting Information System are considered important organizational mechanisms that are

critical for effectiveness in decision management and control in organizations. (Galbraith, 1983;

Zimmerman, 1995). Accounting Information System will be useful when information provided

by them is used effectively in decision making process by the users. Otley (1980) argued that

accounting systems are an important part of the fabric of organizational life and the need to be

evaluated in their wider managerial, organizational and environmental context. Therefore the

effectiveness of accounting information system systems not only depends on the purposes of

such systems but also depends on contingency factors of each organization.

Accounting Information System is said to be effective when the information provided by them

serves widely the requirements of the system users. Effective systems should systematically

provide information which has a potential effective on decision making process (Ivest et.al,

1983). The effectiveness of accounting information system systems has long been a subject of

many research, (Chenhall and Moriss, 1986, Kim, 1998, Mia and Chenhall 1994, Chong, 1996).

2.1.2 Components of Accounting Information Systems (AIS)

An effective Accounting Information System (AIS) comprises of several interconnected

components that work together to provide accurate, reliable and timely financial information.

These components are people, procedures and instructions, data, software, IT infrastructure,

outputs and feedback.

i. People: The users who interact with the AIS, including accountants, auditors, managers, IT

staff, and external stakeholders (for example, auditors or regulators). The success of an AIS

depends on the people who operate and manage the system. In a manufacturing firm,
accountants and financial managers rely on AIS to process transactions, generate reports, and

provide insights for decision-making. IT personnel ensure that the system is running smoothly,

secure, and integrated with other business applications.

ii. Procedures and Instructions: The set of protocols, instructions, and methods that define how

data is collected, stored, processed, and disseminated within the AIS. Procedures and

instructions govern how financial data is entered into the system and how it is processed to

create useful outputs. In a manufacturing firm, procedures could include specific guidelines for

recording sales, tracking inventory costs, and processing payroll.

iii. Data: The raw financial data that is collected from daily transactions and operations, which

includes figures on sales, expenses, payroll, assets, liabilities, and inventory. The quality and

integrity of the data entered into an AIS directly influence the accuracy of the financial reports

generated. Manufacturing firms must ensure that data entry processes are precise and that the

data is continuously updated and maintained.

iv. Software: The applications and programs that process financial data and manage the various

functions of an AIS. This includes accounting software, enterprise resource planning (ERP)

systems, and specialized applications tailored to manufacturing operations. Software is the

engine that drives an AIS, enabling users to process large amounts of data, generate reports,

and analyze financial performance in real-time. Modern software is often cloud-based,

providing flexibility and scalability.

v. IT Infrastructure: The hardware and networking components necessary to run the AIS,

including computers, servers, data storage devices, and network connectivity. Reliable IT
infrastructure is essential for ensuring that the AIS operates smoothly. Inadequate hardware,

poor internet connectivity, or insufficient data storage can result in system failures, leading to

data loss and operational disruptions. Strong IT infrastructure is also critical for data security,

particularly in today’s environment where cyberattacks are becoming increasingly

sophisticated.

vi. Outputs: The reports, financial statements, and other information generated by the AIS that

provide insights into the financial performance of the firm. The outputs generated by AIS are

essential for both internal decision-making and external reporting. Accurate and timely reports

allow management to assess performance, identify areas for improvement, and make informed

strategic decisions. These outputs are also critical for communicating financial information to

shareholders, auditors, and regulatory bodies.

vii. Feedback and Review Mechanism: The processes for reviewing the outputs of the AIS and

making necessary adjustments to improve the system’s performance. Feedback allows

managers and other users to assess the accuracy and usefulness of the financial data produced

by the AIS. If discrepancies are found or the reports do not meet the firm's needs, adjustments

can be made to the procedures, data inputs, or software settings.

2.1.3 Functions of Accounting Information System (AIS)

AIS (Accounting Information System) is a system that collects, stores, and processes financial

and accounting data (Rachala, 1999). The functions of an AIS are essential for managing an

organization's financial information. AIS key functions are:

i. Data Collection: AIS collects financial data from various sources within the organization. This

data includes invoices, payroll, sales orders, and purchase receipts.

ii. Data Storage: AIS securely stores the collected financial data in a database, ensuring it is

accessible for future analysis, reporting, and decision-making.

iii. Data Processing: The system processes financial data through recording, classifying, and

summarizing it into useful reports like balance sheets, income statements, and cash flow

statements.

iv. Financial Reporting: AIS generates periodic financial reports for internal and external

stakeholders, such as management, shareholders, regulatory bodies, and tax authorities.

v. Internal Controls: AIS helps implement controls to safeguard the organization’s assets,

prevent fraud, and ensure accuracy in financial reporting by monitoring transactions and

enforcing approval procedures.

vi. Decision Support: By providing accurate, timely, and relevant financial data, AIS aids

management in making strategic decisions, forecasting, and budgeting.

vii. Compliance and Audit: AIS helps ensure that financial reporting complies with regulatory

standards (like GAAP or IFRS) and assists auditors by maintaining organized and accessible

financial records.

viii. Integration with Other Systems: Modern AIS integrates with other business systems, such

as Enterprise Resource Planning (ERP) systems, customer relationship management (CRM), and

inventory management systems, ensuring a holistic view of business operations.

2.1.4 The Role of Accounting Information System (AIS) in Financial Management

AIS plays a central role in improving the efficiency and effectiveness of financial management

within organizations. According to Romney and Steinbart (2018), AIS helps firms achieve their

financial goals by enhancing the quality of financial information and ensuring better decision-

making. Specific ways in which AIS contributes to financial management include:

i. Improved Accuracy: By automating processes, AIS reduces the chances of errors that are

common in manual systems. This leads to more accurate financial statements and records,

which are critical for assessing a firm’s profitability.

ii. Efficiency Gains: Automation of tasks such as data entry, financial reporting, and

reconciliations allows accountants to focus on higher-level tasks like analysis and strategy,

improving overall operational efficiency.

iii. Real-time Financial Data: AIS provides real-time updates, allowing managers to make timely

decisions and respond quickly to market conditions, such as changes in raw material costs.

iv. Regulatory Compliance: AIS helps organizations comply with tax laws, financial regulations,

and reporting standards, thus reducing the risk of legal penalties and enhancing corporate

governance.

2.1.5 Specific AIS Features and their Potential impacts of profitability

i. Real-time data analytics: The ability to process and analyze large volumes of data in real-time

allows manufacturing companies to gain insights into their operations, identify trends, and

make data-driven decisions. For example, real-time analytics can be used to monitor production
efficiency, track inventory levels, and identify potential quality issues (Davenport & Harris,

2007).

Ii. Integrated financial and operational reporting: An integrated system that combines

financial and operational data provides a more comprehensive view of a company's

performance. This can help managers identify areas for improvement, allocate resources more

effectively, and make better-informed decisions (Kaplan & Norton, 2004).

iii. Robust internal controls: Strong internal controls help prevent fraud, errors, and

inefficiencies, ensuring the accuracy and reliability of financial information. This can protect a

company's reputation, reduce costs, and improve compliance with regulatory requirements

(COSO, 2017).

iv. Supply chain management integration: Integrating AIS with supply chain management

systems can improve inventory management, reduce costs, and enhance customer satisfaction.

For example, real-time data on inventory levels can help companies optimize ordering and

delivery processes, while integration with suppliers and customers can improve communication

and collaboration (Chopra & Meindl, 2016).

v. Enterprise resource planning (ERP) systems: ERP systems can streamline business processes,

improve efficiency, and provide valuable insights into a company's operations. For example,
ERP systems can help companies manage inventory, track production costs, and improve

customer service (Ross & Weill, 2002).

2.1.6 Challenges Faced by Manufacturing Firms in Implementing Accounting Information

Systems (AIS)

While the adoption of Accounting Information Systems (AIS) has the potential to greatly

enhance the financial performance and operational efficiency of manufacturing firms, several

challenges can hinder the effective implementation of these systems. These challenges can be

technical, financial, infrastructural, or human-related (Stickney, 2017).

i. High Cost of Implementation: One of the most significant barriers to AIS implementation is

the high cost of acquiring the necessary hardware and software (Sharma, 2012). Advanced AIS

systems, especially those integrated with Enterprise Resource Planning (ERP) solutions, often

come with expensive licensing fees. Manufacturing firms, particularly small and medium-sized

enterprises (SMEs), may struggle to afford these upfront costs. In addition to initial setup costs,

firms must budget for ongoing expenses such as software updates, system maintenance, and

technical support. These recurring costs can be financially burdensome for firms with limited

resources, which may lead to underinvestment in the system, causing inefficiencies.

ii. Lack of Technical Expertise: The successful implementation and operation of AIS require

technical expertise that is often lacking within manufacturing firms, especially in developing

economies like Nigeria. Many employees, including accountants and IT personnel, may not be

adequately trained to use AIS to its full potential, resulting in underutilization or system

inefficiencies. To fully capitalize on the capabilities of AIS, firms need to invest in extensive
training programs for their staff. However, many firms either do not prioritize this training or

lack the financial resources to do so, leading to poor system adoption and limited use of the

system’s functionalities (Timothy and Joseph, 2013).

iii. Resistance to Change: Resistance to change is a common challenge when implementing new

technologies such as AIS. Employees who are used to traditional or manual accounting methods

may be reluctant to adopt new systems due to fear of job displacement, lack of familiarity with

technology, or skepticism about the benefits of AIS (Stickney, 2017)

iv. Data Security Concerns: The implementation of AIS exposes manufacturing firms to various

cybersecurity risks. Sensitive financial data stored within these systems can be vulnerable to

cyberattacks, data breaches, or unauthorized access if adequate security measures are not in

place. This is especially concerning for firms that may lack the resources to invest in high-quality

cybersecurity solutions (Albright and Ingram,2017). Inadequate backup systems or data

management practices can lead to the loss of critical financial data. Firms that experience

power outages or system failures without proper backup protocols risk losing important

records, which can significantly disrupt business operations.

v. Complexity of AIS Solutions: AIS solutions are not always “one-size-fits-all.” Manufacturing

firms often require customized AIS solutions tailored to their specific needs, especially if they

are dealing with complex supply chains, inventory management, and multi-step production

processes. Customizing these systems can be time-consuming and costly. Many manufacturing

firms already use various legacy systems for different business functions, such as supply chain

management, procurement, or human resources (Sharma, 2012). Integrating AIS with these
existing systems can be a complex and challenging process, requiring specialized knowledge

and expertise to ensure seamless data flow across platforms.

vi. Regulatory and Compliance Issues: Nigerian manufacturing firms are subject to various

regulatory and tax requirements, which may necessitate specific features within their AIS for

compliance. Implementing AIS that fully aligns with local regulations and standards can be a

complex task, particularly if the system was designed for a global market and requires

significant customization to meet local needs. Manufacturing firms must ensure that their AIS

can generate reports that comply with Nigerian financial reporting standards. In some cases,

firms may face challenges in configuring their systems to produce accurate and timely reports

for tax filings, audits, or regulatory submissions (Timothy and Joseph, 2013).

vii. Sustainability of AIS Systems: The rapid pace of technological change means that even after

implementing AIS, firms must continually update and upgrade their systems to stay

competitive. Failure to do so can result in the system becoming obsolete, which can hinder the

firm’s ability to maintain accurate financial records or meet new regulatory requirements

(Stickney, 2017).

2.1.7 An Overview of Firm Performance

There is no consensus as regard the definition of firm performance and pose

multidimensionality challenges to scholars (Bello & Yinusa, 2010). In accounting literature, firm

performance is captured by financial performance and it entails the effectiveness of the firm

towards profitability, value maximization, shareholder’s wealth maximization and maximizing

profit on investment. Firm performance can equally be explained in terms of operational

measures such as growth in turnover, growth in market share and business stability (Gyasi,

2010).

Business Performance (BP) has been taught with many conflicting definitions and it is not a new

phenomenon among the academics and the industrialists. Business performance has been a

source of influence to the actions taking by firms and the degree to which a business realizes its

goals as well as its stated objectives through the strategies and policies of the business (Folan &

Browne, 2015). The idea of business performance is hanged on the position or premise that it is

a combination of productive assets made up of human, physical, and capital resources, for the

major reason of fulfilling a dream, vision or accomplishing a shared purpose (Barney, 2012;

Carton & Hofer, 2016). Business performance is a measure of how a manager efficiently and

effectively utilizes the resources of the firm to accomplish its goals as well as satisfying all the

stakeholders (Jones & George, 2019). It is the real output measured against the intended or

expected output. It is viewed as a term that is made up of three major areas of firm outcomes

and these three areas are: financial performance that is made up of profits, return on assets

(ROA), return on investment (ROI); product market performance such as sales revenue and

market share; and shareholders return such as total shareholder return (TSR) and economic

value added (EVA).

The performance of an entity cannot be ascertained by mere inspection. Financial ratios are

useful tools in the decision making process, and serves as powerful tool of financial analysis

because, absolute accounting figures reported in the financial statements do not provide a

meaningful understanding of the financial position of a firm (Bello & Yinusa, 2010). The
common indicators used to measure firm performance in literature are profitability ratios and

stock market ratios (Gyasi, 2010; Odia & Ogeidu, 2013). However, in this study, firm

performance is captured from three perspectives namely profitability, liquidity and financial

leverage.

2.1.8 Accounting Information System and Firm Performance

Ponemon and Nagida (2013) emphasize that the principal cause for which accounting

information is created is to enable choice-making. Nevertheless, for efficient financial reporting,

amongst different necessities, it ought to be applicable, complete, and dependable. These

qualitative features need that the accounting numbers ought to be fair and ought not to favour

only one interest group. Hunton, (2017) examines, the connection between AIS and corporate

performance and discovered that there was a sturdy connection between AIS and company

overall performance, this implies that access to accounting records results in businesses being

effective. (Harash, 2015) concurs that AIS assist managers in making decisions. Its benefits are

assessed via its enhancement of the procedures of making decisions, accounting number

quality, evaluating performance, inner controls and easing corporate dealings.

2.1.9 Profitability

The main reason for the establishment of an organization is to generate and maximize returns

on shareholders’ investment (Bello & Yinusa, 2010). Profitability can be measured in terms of

gross profit margin, net profit margin, return on capital employed, return on total assets,

returns on capital employed, return on shareholders’ equity, and so on (Bello & Yinusa, 2010).

This study adopts Return on Asset (ROA) to measure profitability, and to indicate the extent at
which a firm generates profits or returns from its total assets (profit after tax divided by total

assets multiplied by 100%).

2.2 Theoretical Review

This section explains the theories as it relates to the study. Three theories are reviewed relating

to accounting information system and profitabiliy of manufacturing firms. The theories are

Technology Acceptance Model (TAM), Communication Theory and Decision Making Theory.

2.2.1 Technology Acceptance Model (TAM)

The Technology Acceptance Model was proposed by Davis (1989). According to Odoma (2019)

the model posits that when users become aware of a new technology, numerous factors

influence their choice of it and how they will use it. These factors were summarised as

envisaged usefuless which was defined by Davis (1989) as the degree to which it is believed that

employing an accounting information system would enhance his or her performance and

secondly is the believed ease of use which is seen as the level to which a person believs that

using an information system would be free from operational difficulties. Davis (1989) proposed

the TAM to focus in the reason the users accept of reject the information technology and how

to improve the acceptance, off erring, this way, a support to foresee and explain the

acceptance. The model TAM was designed to comprehend the causal relation between external

variables of user's acceptance and the real use of computer, trying to understand the behaviour

of this user through the utility knowledge and use facility perceived by him (Davis, 1989). The

reason this theory is relevant to this study is that it seeks to describe why the development of

information systems has enjoyed widespread acceptance across the world and despite the ever
changing information systems, all participants and users are motivated to keep up with the

phenomenal evolution.

2.2.2 Communication Theory

Communication theory was developed by Bedford and Baladound in 1962 who initiated interest

in communication theory approach to accounting information. They view accountancy as a

communication process which provides a clearer picture of the nature and scope of accounting

function in an economic system. A communication system must begin with an information

source which produces messages or sequence of messages to be communicated to an

interested user. Economic events are the information source in an accounting context.

Communication theory in accounting specifies the type of financial information to be collected

and interpreted and reported about the firm, the best method to be used in reporting the

information (Okon, 2007). The information should be given in a way that it should be

understood by all the users irrespective of their levels. For example, those who do not have

much knowledge of accounting need clear and concise information (Okon, 2007).

Communication accommodation theory agreed that during communication people will try to

accommodate or adjust their style communicating accounting information to others. This aids

management in coherence and coordination (McGraw-Hill, 2001).

One of the important keys to success in organization is communication. Basically,

communication has been defined as the transfer and exchange of information and

understanding from one person to another through meaningful symbols (Okebaram, 2002). For

communication to be effective, understanding must take place. The importance of

communication in any organization has been long recognized. Peretomode (1991) puts the

importance of communication in an organization clearly, when he stated that communication is

the ingredients which make organization possible.

2.2.3 Decision Making Theory

Decision making theory in business developed by Herbert Simon in 1916 cited in Okebaram

(2002), defined decision theory as a discipline in which the mechanisms and consequences of

human decisions are investigated. The essence of this theory is that decision-making is not an

intuition process, but a conscious evaluation of the possible alternatives that leads to the best

result or optimizes the goal. It is the logical sequence that involves the recognition of a problem

that needs decision, defining all possible alternative solution, compiling all the information

relevant to these solutions, assessing the best alternative solution by selecting that one which is

most highly ranked and valuing decision by means of information feedback. The ‘descriptive’

arm of decision theory describes decisions processes as they take place in reality, while the

‘prescriptive’ or ‘normative’ arm attempts to develop instruction for, or aids to decision making

that are based upon rational and logical models. Of central importance for the normative

theory is the fact that human decisions are always context-dependent and presuppose the

availability of information. The factors that accompany this, such as uncertainty and risk, place

restrictions-sometimes major ones upon the rationality of human decisions. Management

accountant uses financial information in order to enable better decision making within

organization. The format and content of management accounts depend on the specific needs of

a particular business. They are typically prepared to a clearly structured timetable on a monthly
basis, often reporting within one week of the period end. The underlying purpose of accounting

information, in the form of financial statements is to provide information that is useful for

making business and economic decisions.

Decision making is a central responsibility of managers. It is the process of choosing from the

alternative ways of achieving an objective or providing solution to a problem. Okebaram (2002)

defined decision making as the process of thought and deliberation that result in a decision. It is

the process of defining problems, gathering information, generating alternatives, and choosing

a course of action. The decision making theory emphasizes the behavior of the decision maker.

That is on how the users of accounting information can make use of the information in decision

making.

The quantum and quality of decisions made by the managers have a direct influence on the

performance of organization and this explains largely why most organizations do well while

others perform below expectation. Decision making is so vital to organizational performance

that every manager must develop sound decision skills (Okebaram, 2002).

2.3 Empirical Review

Kurniawati and Hermawan (2012) conducted a study on ‘Accounting for small and medium

enterprise (SMEs) in Indonesia. The research aimed to analyze accounting application on SMEs

in Magelang, Central Java, Indonesia with obstacles they face. Data taken in this research were

from 46 SMEs using convenience sampling method. Data were gathered through interview and

questionnaire. The analysis technique used was descriptive qualitative analysis technique.

Results show that 69.56% of SMEs done recording, but only 34.78% of them made financial
statements. Transactions recorded include sales transactions (69.57%), purchase transactions

(65.22%), cash inflows and cash outflows (91.30%), inventories (63.04%), salary (56.52%) and

other operational expenses (50.00%). Reports which were made by the managers were sales

reports (45.65%), purchase reports (30.43%), income statements (52.17%), statement of

owner’s equity (17.39%) and balance sheet (28. 26%).The obstacles which hindered accounting

application in SMEs were the educational factor and lack of understanding about accounting

and its importance. It was therefore recommended that it is better to create a simple

accounting information system for SMEs. The government should cooperate with high

education institutions to improve the comprehension of the SMEs about accounting application

in managing their business.

Akang (2014) investigated on ‘Accounting information and management decision in Akwa Ibom

Transport Company (AKTC) Limited, Uyo. Four hypotheses were raised for the study. A

structured questionnaire on a 4-point rating scale was the research instrument. The data

collected were analyzed using simple percentage, chi-square and mean. The findings were AKTC

kept financial records and financial statements. However, they did not have professional

accountants. It was recommended among other things that the company proper financial

records should be kept and professional accountants should be employed to advice

management of decisions to be taken based on the financial reports.

Etuk (2010) conducted a study on the influence of accounting information system on effective

management of Community Banks in Akwa Ibom State. To guide the study 3 research questions

and 3 null hypotheses were formulated. A survey design was adopted for the study. The
population constituted of all the community banks in Akwa Ibom State. One hundred (100)

community banks were sample for the study. Questionnaire was the instrument used for data

collection. The research questions and null hypotheses were analyzed using mean and chi-

square respectively. A significant influence was established between accounting information

and community banks in Akwa Ibom State. Financial statement preparation, decision making,

fraud detection was discovered to have significant influence with accounting information

system of community banks. It was recommended among others that accounting information

should be effective use by management of community banks.

Udoudo (2010) conducted another study on the influence of accounting information and

the management of small scale business firms in Akwa Ibom State. 3 research questions and 3

null hypotheses were formulated by the researcher to guide the study. A-35 item structured

questionnaire was used in collection of data. The population of the study comprised of 377

business managers of registered small scale business firms in Akwa Ibom State. Sample size of

150 was drawn. A survey design was used to determine the opinion, preference and perception

of small scale business managers. The instrument was validated by 3 experts in the department

of vocational education, University of Uyo. Test-retest was used to determine the reliability of

the instrument. The data were analyzed using mean and independent t-test respectively. The

result revealed that accounting records enhance management effectiveness. It was

recommended among others that small business managers should adopt and utilize accounting

information for effective management of their businesses.

Olaofe, Akanni, Ekundayo, Ajibola and Ajibola (2020) studied accounting information system on

performance of corporate organizations in Nigeria. The role of professionals in accounting,

information technology and academics were explored. To attain the aim of the study, 30

questionnaires were administered and 25 retrieved which was analyzed and the single factor

ANOVA technique was used to test the hypothesis. Findings from the research depicted

accounting information systems have a positive impact on corporate organizations performance

in Nigeria because the observed F of 251.43 obtained was greater than F critical value of 2.74.

As recommended, corporate organizations should massively invest in accounting information

system, adopt merit-based recruitment and ensure periodic training of accounting information

systems personnel.

Abdallah, (2013) and Adrian-Cosmin (2015) studied the impact of the accounting information

systems on the quality of financial statements. They found there is a strong effect of using the

accounting information systems on the quality of financial statements. Onaolapo and Odetayo

(2012) found that Accounting Information System (AIS) enhance organizational performance

especially in global technology advancement, agree with Patel (2015), who detect the

importance of accounting information systems, that helps in facilitating decision making and

amend organization’s environment, structure and requirements of task, furthermore,

emphasizes accounting information plays an necessary role in decision making process related

to the financial and economic issues such as cost accounting system, management accounting

system, price and profitability which provide the useful information to the manager to make

the financial and economic decisions, also they a certain that (AIS) played a significant role in

survival of organization.
Tan (2016) studied the impact of AIS on internal auditors in Turkey, he revealed the importance

role of accounting information systems in companies through enable all levels of management

to access comprehensive information that goes into the planning and controlling of activities

within business organizations. In addition, AIS provide high quality of information to internal

and external users and typically cover six main aspects: people, procedures, data, software,

information technology infrastructure and internal controls.

Hla and Teru (2015) studied the efficiency of accounting information system and performance

measures – literature review. The main objective s of many businesses to adopt this system are

to improve their business efficiency and increase competitiveness. The qualitative characteristic

of any Accounting Information System can be maintained if there is a sound internal control

system. Internal control is run to ensure the achievement of operational goals and

performance. Therefore the purpose of this study is to examine the efficiency of Accounting

Information System on performance measures using the secondary data in which it was found

that accounting information system is of great importance to both businesses and organization

in which it helps in facilitating management decision making, internal controls ,quality of the

financial report ,and it facilitates the company’s transaction and it also plays an important role

in economic system, and the study recommends that businesses, firms and organization should

adopt the use of AIS because adequate accounting information is essential for every effective

decision making process and adequate information is possible if accounting information

systems are run efficiently also, efficient Accounting Information Systems ensures that all levels

of management get sufficient, adequate, relevant and true information for planning and

controlling activities of the business organization.

Akanbi and Aruwaii (2018) studied the impact of accounting information systems (AIS) adoption

by manufacturing industries on their general accounting activities and also to estimate the

relationship that exist between AIS devices and accounting activities. Regression and

correlation analyses were used to analyze and interpret the objectives. The tested hypotheses

of this study were measured at level of 95% confidence interval. The study concluded that

accounting information systems devices are spontaneously and simultaneously appropriate for

manufacturing industries engaging in accounting activities, also revealed that there is a

significant relationship between accounting activities and Accounting information systems. The

study also concludes that accounting information systems adoption in manufacturing firms has

the following benefits: facilitation of financial statements preparation, enhancement of

inventory valuations, enhancement of budgetary management, and favoring General Accepted

Accounting Principles adoption. Therefore, manufacturing firms should embrace more and well-

structured accounting information systems to enhance accounting activities.

Saeidi (2004) examined the impact of accounting information system on financial performance.

The study employed survey research design and obtain data from 40 top managers in Tata

consultancy Service (TCS) companies in India through questionnaire. The study analyzed the

collected data using the statistical package for social sciences (SPSS) and uses the one samples

t-test statistics to test the hypothesis. Finding revealed that accounting managers and

accountants, decision making, financial performance and organizational resources. The study

concluded that there is a positive relationship in knowledge and understanding of managers

and accountants, decision making, financial performance and organizational resources.

Taiwo (2006) investigated empirically the impact of information technology on accounting

system and organizational performance. This study utilized both primary and secondary data.

The study sources its primary data from questionnaire administered to 20 staff in financial

services and other related accounting department in Covenants university of Nigeria. Pearson

correlation was used for analyzing the data. Finding showed that there is a significant positive

relationship between ICT system and a significant positive relationship between ICT and

organizational performance.

Esmeray (2016) examined the impact of accounting information on firm’s performance. The

study adopted a descriptive survey research design. Data relating to the study we obtained

from interviews with 60 firms. Data were analyzed using generalized least squares. Finding

suggests that there is a positive and statistically significant relation between the use of AIS and

educational status of managers.

Sammer (2016) examined the effectiveness of accounting information system (AIS) and its

impact on the operational performances of industrial public listed companies in Jordan. The

sample of the study consisted of 42 Jordanian companies from different sectors listed in

Amman Stock Exchange (ASE) at the end of 2012. The findings indicated that AIS employed in

the industrial companies were effective, particularly in meeting planning requirements. The

result also reveals that most of company’s decisions were taken based on executive’s personal

opinions supported by the board of directors who are affected by those opinions.

2.4 Summary of Empirical Review

This section shows a brief summary of empirical review of various authors' related literature

and with title, methodology and findings.

S/N Authors Title Methodology Findings Recommendations

1 Kurniawati Accounting for descriptive Results show that The government should
and small and qualitative 69.56% of SMEs done cooperate with high
Hermawan medium analysis recording, but only education institutions to
(2012) enterprise technique 34.78% of them made improve the
(SMEs) in financial statements. comprehension of the
Indonesia Transactions recorded SMEs about accounting
include sales application in managing
transactions (69.57%), their business.
purchase transactions
(65.22%), cash inflows
and cash outflows
(91.30%), inventories
(63.04%), salary
(56.52%) and other
operational expenses
(50.00%).

2 Akang Accounting simple The findings were It was recommended

(2014) information percentage, AKTC kept financial among other things that
and chi-square records and financial the company proper
management and mean. statements. However, financial records should
decision in they did not have be kept and professional
Akwa Ibom professional accountants should be
Transport accountants. employed to advice
Company management of decisions
(AKTC) Limited, to be taken based on the
Uyo financial reports.

3 Etuk (2010) influence of mean and chi- Financial statement It was recommended
accounting square preparation, decision among others that
information respectively making, fraud accounting information
system on detection was should be effective use by
effective discovered to have management of
management of significant influence community banks.
Community with accounting
Banks in Akwa information system of
 Ibom State. community banks.

4 Udoudo influence of mean and The result revealed It was recommended

(2010) accounting independent that accounting among others that small
information t-test records enhance business managers
and the management should adopt and utilize
management of effectiveness accounting information
small scale for effective management
business firms of their businesses.
in Akwa Ibom
State

5 Olaofe, accounting single factor Findings from the As recommended,

Akanni, information ANOVA research depicted corporate organizations
Ekundayo, system on technique accounting should massively invest in
Ajibola and performance of information systems accounting information
Ajibola corporate have a positive impact system, adopt merit-
(2020) organizations in on corporate based recruitment and
Nigeria. organizations ensure periodic training
performance in of accounting information
Nigeria because the systems personnel.
observed F of 251.43
obtained was greater
than F critical value of
2.74.

6 Abdallah, impact of the Regression They found there is a

(2013) and accounting Analysis strong effect of using
Adrian- information the accounting
Cosmin systems on the information systems
(2015) quality of on the quality of
financial financial statements.
statements.

7 Tan (2016) impact of AIS Regression revealed the

on internal Analysis importance role of
auditors in accounting
Turkey information systems in
companies through
enable all levels of
management to access
comprehensive
information that goes
into the planning and
controlling of activities
 within business
organizations

8 Hla and the efficiency of Mean it was found that the study recommends
Teru (2015) accounting accounting that businesses, firms and
information information system is organization should
system and of great importance to adopt the use of AIS
performance both businesses and because adequate
measures organization in which accounting information is
it helps in facilitating essential for every
management decision effective decision making
making, internal process and adequate
controls ,quality of the information is possible if
financial report ,and it accounting information
facilitates the systems are run
company’s transaction efficiently
and it also plays an
important role in
economic system

9 Akanbi and impact of Regression The study also manufacturing firms

Aruwaii accounting and concludes that should embrace more
(2018) information correlation accounting and well-structured
systems (AIS) analyses information systems accounting information
adoption by adoption in systems to enhance
manufacturing manufacturing firms accounting activities.
industries on has the following
their general benefits: facilitation of
accounting financial statements
activities and preparation,
also to estimate enhancement of
the relationship inventory valuations,
that exist enhancement of
between AIS budgetary
devices and management, and
accounting favoring General
activities. Accepted Accounting
Principles adoption

10 Saeidi impact of samples t-test The study concluded

(2004) accounting statistics that there is a positive
information relationship in
system on knowledge and
financial understanding of
performance managers and
 accountants, decision
making, financial
performance and
organizational
resources.

11 Taiwo impact of Pearson Finding showed that

(2006) information correlation there is a significant
technology on positive relationship
accounting between ICT system
system and and a significant
organizational positive relationship
performance. between ICT and
organizational
performance.

12 Esmeray impact of generalized Finding suggests that

(2016) accounting least squares there is a positive and
information on statistically significant
firm’s relation between the
performance. use of AIS and
educational status of
managers.

13 Sammer effectiveness of Regression The findings indicated

(2016) accounting Analysis that AIS employed in
information the industrial
system (AIS) companies were
and its impact effective, particularly
on the in meeting planning
operational requirements.
performances
of industrial
public listed
companies in
Jordan

2.5 Gap in Literature

To the best of the researchers knowledge, in all the past studies revealed in regards to

accounting information system and the profitability of manufacturing firms. The past

researches shows the adoption and implementation of the accounting information system in

manufacturing firms. However, there is no specific research that has focused on the impact of

accounting information system on profitability of manufacturing firms in Nigeria. Furthermore,

inadequate consideration of technological advancements by past researchers. The rapid

evolution of AIS technology, such as cloud-based accounting systems and artificial intelligence,

necessitats updated research.