THE EFFECT OF INFORMATION TECHNOLOGY ON ACCOUNTING RECONCILLATION

1.1 Introduction

Accounting reconciliation system is essential for majority of the business entities. The significant improvements of technology have lead in the creation a computerized accounting reconciliation system which is mainly accepted by business entities at present. This has created a competitive market. Hence, organizations need to grow their systems in order to meet their information needs for better decision making. Many businesses do not have qualified Accountants others who have them find out too late that many have little or no grasp in theoretical and practical aspects of bank reconciliation. Many of these fraudulent misappropriations go undetected, unreported or unproven at best. Where fraud is not the intent, businesses may lose money from not detecting wrong entries or credit omissions in their business bank accounts.

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.

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1.2 Background of Study

The introduction and usage of information and communication technology ideas, techniques, policies and appliance techniques to accounting services has become vital, a top priority a concern to mostly every accountant and perhaps a must have for local and global competitiveness. Information Technology as we all know is the mechanization, robotization of processes, controls, and information affair using computers, telecommunications, software etc. Most of, if not all the banking services have been metamorphosed and enhanced as a result of the implementation of ICT and these changes can be seen on the accounting reconciliation, account opening, customer account mandate, and transaction processing and recording. IT to a large extent helps customers to confirm, ratify their account numbers and also receive instruction on when and how to receive their cheque books, credit and debit cards.

Accounting reconciliation is viewed as the act of analogize transactions from the accounting records against those presented on the bank statements or records. Generally, expenses are carefully looked into on monthly basis and they are being charged to a cost center in other to make sure that all the expenses have been adequately and correctly billed. It is also seen as a guide for validating that the balance in a cheque book matches the same bank statement. This is naturally done by preparing a bank reconciliation statement.

Accounting being the art of keeping record, arranging in segments or in other and summing up in an ordered manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof has been enhance through the implementation of information technology. Accounting is a study that has had a significant impact on bankers, accountants, business men and women, organizations, to mention but a few. It is an information system that takes care of all the processes and conveys financial information about an economic entity.

Enhancements in information technology have single handedly upgraded accounting reconciliation systems and significantly improved the economic life. Computers and other digital technologies have maximized office efficiency facilitating the vast and continuous exchange of documents, research, collaboration with far-flung partners and the gathering and analysis of data. So far, information technology has given all manner of individual economic factors the new valuable tools for recognizing and chasing economic and business opportunities.

Binging in the idea of IT in the business world, it is crafted to assist management in their stewardship function, reinforce management in their everyday activities and decision making. Over the years, the improvements on information technology have transformed accounting reconciliation systems and its activities. There were many improvements in the Accounting Information System (AIS). This is crafted to assist in the management and control of processes that has to do with or is related to an organizations’ economic and financial area.

Accounting reconciliation are instituted processes that enable organizations establish evidence on transactions that are contained in the organization’s books but not the corresponding bank account statements and vice versa for the period under consideration. Accounting reconciliation is analytical in nature but is supported by accounting theories such as matching concept.

Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Effect of Information Technology on Accounting Reconciliation.

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1.3 Statement of Problems

Investigation revealed that the desire to undertake a systematic investigation on the impact of information technology on account reconciliation is due to difficulties faced by business organizations and the banking industry to achieve their service rendering objective, large market share and target profit as part of the purpose of their existence. This is because the quality of services rendered by some organisation has created a negative multiplier effect on the banking industry as their chance of optimizing profit is affected. There are lots of complaints from the beneficiaries of banking services or bank customers that poor information technology result to inefficient application of computer to the accounting system of the banking industry.

Some of the poor information and communication technology (ICT) products use in the banking industry include Automated Teller Machine (ATM), smart cards, telephone banking, alert, electronic funds transfer, electronic data interchange, electronic home and office banking.

In this study the researcher seeks to find out how the information technology has impacted on account reconciliation of the banking industries in Nigeria using the guarantee trust bank as the case study.

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1.4 Aim and Objectives of Study

The aim of the study is to investigate the Effect of Information Technology on Accounting Reconciliation. In achieving this aim, the following specific objectives were laid out as follows:

1. To determine the contributions of information technology on organizational growth and development;
2. To determine the general importance of information technology;
3. To examine the need for information technology in accounting;
4. To examine the benefits of account reconciliation; and
5. To recommend ways of further improvement of account reconciliation in Nigerian business organizations and the banking sector.

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1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• What are the contributions of information technology on organizational growth and development?
• What is the general importance of information technology?
• What is the need for information technology in accounting?
• What are the benefits of account reconciliation?
• What are the ways of further improvement of account reconciliation in Nigerian business organizations and the banking sector?

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1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

• H0: Information technology has no effect on account reconciliation.
• H1: Information technology has an effect on account reconciliation.

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1.7 Significance of Study

The study would greatly benefit business organizations, the banking sector and relevant stakeholders as it would reveal the effect of information technology on account reconciliation. The study would also be of immense benefit to students, researchers and scholars who are interested in developing further study on the subject matter.

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1.8 Scope of Study

The scope of the research is focused on the Effect of Information Technology on Accounting Reconciliation using the First Bank PLC as a case study.

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1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
3. Research material: availability of research material is a major setback to the scope of the study.
4. Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
5. Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

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1.10 Definition of Terms

Accounting Reconciliation: It is viewed as the act of analogize transactions from the accounting records against those presented on the bank statements or records.