An Appraisal of the Production Cycle Accounting Information System: Feat and Failure. The Case of Manufacturing Firms in Ethiopia

Abstract

Accounting Information System (AIS) continues to flourish, and organisations continue to become increasingly dependent upon their AIS to support business process and decision making. Should organizations do not give due attention to their AIS, the number of errors in stored data and the organisational impact of these errors is likely to increase. Inaccurate and incomplete data may adversely affect the competitive success of an organisation. Indeed, poor AIS can have significant social and business impacts.To make the study area more appealing, today’s organisations are operating and competing in an information age. Information has become a key resource of most organisations, economies, and societies. Indeed, an organisation’s basis for competition has changed from tangible products to intangible information; thereby highlighting the need for having well-developed Accounting Information System (AIS). Managers and other decision makers rely on the information provided to them when making decisions. Hence, the quality of the decision they make is a function of the quality of the information they get. This noticeable value of information marks the importance of having excellent accounting information system that enables decision makers to make informed decision. Simply put, in this information oriented era, managers and other decision makers rely heavily on information generated from the AIS employed by companies. Therefore, nowadays companies are paying good attention to their accounting information system which enables them to analyze their firm’s performance. This growing importance of AIS has led the researcher to investigate the application and use of accounting information systems of selected manufacturing firms in Ethiopia.The design of the study is exploratory method of research design. This research design is found to be suitable because it addresses major objectives and research questions stated in the study satisfactorily. In the meanwhile, qualitative research approach was adopted to carry out this study. Moreover, because it was possible to obtain the information needed from all stakeholders of the nominated firms simultaneously, the time dimension of the study was cross-sectional. The study also gathered both primary and secondary data. Furthermore, the target population of this study is the entire permanent and temporary employees of the selected firms, out of which 25% of the employees were taken as a representative sample via a non-probability judgment sampling technique.

Since the greatest expense or cost of manufacturing firms is their raw material cost, decision makers at all levels of the firms need to get well-timed reliable cost information for their sound decision making. Briefly, accounting information systems are pillars to the operation and management of every organization (predominantly manufacturing firms). Thus, owners, managers, regulatory bodies, and so on need the accounting information provided by their AIS to evaluate their firm’s past performance and to map their future plans. To sum up, this study revealed that the role of accounting information systems to enhance the performance of manufacturing firms is undeniable; however; management perception, financial constraints, and unqualified human capital have hindered the establishment of sound accounting information systems in manufacturing firms in Ethiopia. Therefore, it can be concluded that the nominated manufacturing firms are not functioning at their full capacity as stakeholders are not getting the information they require for their decision making on account of the fragile and overlooked accounting information systems of the firms.

Keywords: Accounting Information System, Manufacturing Firms, Informed Decision Making, Company Performance

DOI: 10.7176/IKM/10-2-01

Publication date: February 29^th 2020