Examining The Application Package Of Accounting Software Information Technology Essay

Examining The Application Package Of Accounting Softw ar reading Technology EssayIt is a widely look fored topic to motivate pocketable creasees to adopt IT. Thither is little look into foc go ford speci totallyy on the motivating factors for adopting com frame uperized account statement system system systems (CAS) in secondary organization, though in that respect is practically study on the everyplaceall adoption of IT. However, low-pitched production line accounting softw atomic number 18 is an innate sub- find of overall scurvy line of merchandise IT explore. Accounting softw ar was the biggest industriousness package used and the powerful factor behind the IT hardware eruditeness conclusion. To look into the motivating factors for adopting accounting software, it would be practical to first review the more comprehensive lit on overall IT adoption. Hence, this literature review begins with a discussion of the studies of general IT adoption and then reviews studies in particular focused on accounting software adoption.2.1 FACTORS FOR ADOPTION OF ITwhip (1999), Harrison, Mykytyn and Riemenschneider (1997), Cragg and King (1993), Moore and Benbasat (1991) and Treadgold (1990), who stick made research ab let on down in the mouth handicraft IT adoption, generate now identified a variety of motivating factors. change of mind (1999) attempted to strengthen the myriad of IT adoption research by developing an integrated model of schooling systems adoption. This model is a useful framework in reviewing the variables that impact on a slight duty owners decision to adopt IT. Thong classified the factors into four elementsCharacteristics of the organizationCharacteristics of the counselCharacteristics of the technological design and4. Characteristics of the line environment.2.2 Characteristics of the OrganizationThe characteristics of the organization are variables that manipulate the decision whether to adopt IT or non. Organizationa l characteristics for instance employees take aim of IT knowledge, military control location, information-intensity, business size and industry sector has been evaluated in preceding research studies of Fink (1999) bourgeois (1998) Wenzler (1996) Attewell (1992) Yap (1990) and Delone (1988). In general, the great the sales turnover are determined by the larger the deed of employees and the more information-intensive the industry, thus the more apparent a small business go away adopt IT presentation .In addition, Thong (1999) states that small businesses tend to suffer resource poverty in terms of financial competence, offered clip and IT skilled staff to relieve origination adoption. As a result, Attewell (1992) adds that resource poverty raises the obstacle to basis adoption in small business.2.2.1 Information IntensityYap (1990) quoted in Thong (1999), that businesses have dissimilar information-processing needs in different sectors. Those in more information-intensive sectors are more likely to adopt IT than those in little information-intensive sectors. Further, (Porter and Millar, 1985) have delineateed that greater uses of IT in businesses are due to greater information intensity. Therefore, greater information intensity will lead the holder or supervisor of small business to recognize IT as a most pregnant competitive device and as a result make up the probability and complexity of applying estimator software.2.2.2 Business SizeDewar and Dutton (1983) and Moch and Morse (1977) quoted in Thong (1999), point out that the technological innovation literature has found that larger businesses have more capital and infrastructure to advance to adopt com puzzleerized accounting system. However, Ein-Dor and Segev (1978), delineate that small and medium businesses face considerably more barriers, among early(a)s, a wish of internal information system expertise, restricted monetary resources and as much(prenominal) are less likely to adop t information systems than large businesses. Supplementary literature Alpar and Reeves (1990) quoted in Thong (1999) disagree that, even among small businesses, the larger the business, the more able it is able to employ people with specialized skills, for example, knowledge of information systems. Hence, thither is a greater opportunity to move from manual system and adopt the calculatorized one.2.2.3 Industry SEcTOR or so particular industries are more suited to computerized record retentivity than others are discussed by some researchers. These findings are partly payed by the Australian Bureau of Statistics (ABS) 1999-2000 report, Business Use of Information Technology. The maximum use of computers was in businesses in the material goods, business services, electricity, gas and water supply industries. At the kindred time, the stripped-down computer use was in the private and other services like ho increase, cafes, restaurants, transport, storage, retail trade and construc tion. Therefore, it is more suitable to instrument a CAS in industries in which there are more trading relations and transaction processing so that to facilitate day-to-day running of the business.2.3 Characteristics of ManagementThong (1999) points out that in large businesses, group teams are unremarkably involved in the IT decision-making process. However, this is in distinction to small businesses where the owner- passenger vehicle is chiefly the IT decision maker. Therefore, Rizzoni (1991) indicates that in small businesses, the characteristics of the owner-manager are vital in determining the businesss approach to IT. Thong (1999) show that the three major characteristics of owner- manager which are important to IT adoption areLevel of IT education and accounting knowledge.Computer self-efficacy, andInnovativeness.2.3.1 Level of IT Education and Accounting KNOWLEDGEIn view of the fact that managers have small knowledge somewhat accounting or seeing as they do not know ho w to check accounts and financial statements, they generally prefer to stupefy out their accounting work to public accounting firms. In addition, in several countries and in several businesses, managers neither considered the accounting subject by any substance nor the accounting subject in the secondary level or tertiary level. Accordingly, Lees (1987), DeLone (1988) and Neidleman (1979) quoted in Thong (1999), specify that the takeors are not alert of the significance and the usefulness of accounting information over and in a higher place the emoluments of using computers to make effortless accounting works. Thus, it still exists an disinclinedness to apply computer software for the reason that business process outsourcing decreases the lack of accounting perceptive of owners. Consequently, there would be a larger possibility to implement a CAS, if managers have been educated about the accounting knowledge or if they could be learned about the advantages of computer know-ho w to produce rapid and precise accounting information.2.3.2 Computer self-efficacySelf-efficacy is the belief that one has the capability to perform a particular behavior that is extending the social cognitive theory. Compeau and Higgins (1995) described computer self-efficacy as a brain of ones capability to use a computer. Delone (1988) and Raymond (1988) state that small businesses owners or managers who have commenced computer genteelness and possess computer self-efficacy are more liable to implement IT. The key leader for innovation is the owner-manager and small businesses a lot cannot afford the luxury of experts to guide them towards the innovation adoption and diffusion process. Thus, it is important for the owner-manager to have computer self-efficacy. It is posited here that, to the degree that the owner-manager feels comfortable and confident with the information engineering, here construed as the owner-managers computer self-efficacy, innovative information enginee ring will be adopted.On the other hand, Gableand Raman (1992) discovered that managers in quite a lot of firms are less alarmed or have no idea of the probable remuneration resulting from the use of computers in accounting as they do not possess computer knowledge. Hence, managers would be willing to adopt such computer technology to process accounting data and produce appropriate and consistent financial reports on time, if they could be learnt about the favourable effects resulting by adopting accounting software package.2.3.3 INNOVATIVENESSInnovation is delimitate as a change made in the traditional way of doing things. In this framework, innovation means the development of altering the way of preparing financial reports from manual system to accept accounting software package as a device for recording and processing accounting proceedings and financial reports. Thong (1999) states that the owner-manager is the one who is in charge for the running of the company in small and me dium businesses. As a result, the characteristics of owner-manager are essential in determining the innovation attitude given that they are the primary(prenominal) decision maker. Kirton (1976) quoted in Thong (1999), contends that everyone is surfaced on a continuum ranging from an ability to do things better to an ability to do things differently. The owner-manager will try out solutions that have already been tried and understood, if the latter is not a modernizer. In contrast, Kirton, (1984) indicates that the owner or manager who wants to innovate will favour solutions that have not been attempted and are thus hazardous. However, Thong (1999) suggests that there is not anything that other associates of the business can do to use computers for accounting works if the owner-manager has not the will power to innovate.2.4 Characteristics of the Technological InnovationThe decision to implement Information Technology is dependent on the characteristics of the technological innov ation itself as they are also a vital determinant. Rogers (1983) defined diffusion as the process by which an innovation is communicated through certain channels overtime among the members of a social systems. Rogers uses the terms technology and innovation synonymously, but explains that technology is a design for instrumental action that reduces the uncertainty in the cause-effect relationships involved in a desired outcome. There are five, potentially relevant, characteristics of innovation noted by Rogers (1983) which are potentially valuable in explaining the results of our research.Complexity how difficult technological innovation is perceived as easy or difficult to understand and useCompatibility how technological innovation must be consistent with the existing values, late(prenominal) experiences and needs of potential adopters, for instance producing quick reports as efficiently and effectivelyRelative advantage how a lot technological innovation must be perceived as bet ter or worse to be compared to its predecessor systemTrialability is the degree to which an innovation may be experimented with by potential users on a limited basisObservability how much time it takes for the results of technological innovation to become visible and maximize profit.It has been noticed, over the past decade that the initiation of powerful, economical microcomputers jointly with available accounting software, have enhanced and brocaded the barriers to IT modernization. Thong (1999) confirms that, this has shown the way to a boost in the adoption of IT in the accounting field of small businesses.2.5 Characteristics of the Business EnvironmentBusiness environment encompasses all those factors that affect a companys operations, and includes customers, competitors, stakeholders, suppliers, industry trends (accounting firm and accountants), regulations, other government activities, social and economic factors and technological development.2.5.1 ACCOUNTING firmOran (1988) and Shannon (1986) indicate that many a(prenominal) small business owner-managers are not alert of the extra services supplied by accountants. Additionally, until a enigma does not arise, owner-manager will not discuss with accountants (Holmes 1987). Moreover, ASCPA (1992) and Breen et al. (1994) maintained in their research that an external accountant used up much of his time on an act in accordance with accounting practice and accounting standards, thus he can service of process a business to acquire and put into practice the accounting software in the business accounting cycle. Gorton (1999) found that businesses that were recently start-up were more liable to move toward an external accountant for tracing than more grown-up organizations. Also, Wenzler (1996) states that accountants are exceptionally placed to provide accounting software advice and support to their clients. Such final cause shows to be efficient and effective for businesses to opt for accounting software.T here are close relationships between small and medium business owners and accountant, seeing as quite a few small and medium businesses contract out their operation transaction recording and reporting to external accounting firms. In addition, Davis (1997) noted that small and medium businesses depend a lot on accounting firms as their most faithful business advisors. Accounting firms have more acquaintance about their clients and their clients business. They know what their objectives are, and can put forward approaches to help in attaining those objectives. For this reason, as recommended by Yap et al. (1992), accounting firms can considerably influence CAS adoption among small and medium businesses and besides their participation may also contribute to the achievement of computerized accounting implementation.Nevertheless, to reduce errors and put a stop to fraud, it is essential for accountants to be aware of the impact of making use of of computers on the accounting procedures and controls that are premeditated. Moreover, computers cannot replace the opinion and insight of educated accountants but the computerized accounting software can facilitate the tasks by automating much of the everyday bookkeeping processes in the manual accounting systems (e.g. posting, trial balance preparation). Furthermore, computer software allows the accountant to spotlight more on how to proceed with the accounting entries and techniques on financial reports. pass but not least, more of the accountants hard work can be paying attention on supporting management in considering the impact of financing, investing and operating decisions on financial statements and other measures of transaction by utilizing accounting software.2.5.2 CompetitionIves Learmonth (1984) and Link Bozeman (1991) quoted in Thong (1999) confirmed that it is usually assumed that aspiration will enhance the possibility of innovation adoption. Ettlie (1983) and Ettlie Bridges (1982) quoted in Thong (19 99) also point that disputation leads to environmental insecurity and increases both the need for and the rate of innovation adoption. Porter and Millar (1985) advise that, businesses will be able to compete in three ways by adopting ITIT can create competitive advantage by reducing costs or increasing differentiation.IT can change the industry structure and, in doing so, change the rules of competition.IT generates new businesses by creating derived demands from new products, often within existing operations of the business.2.5.3 External Agents miserable businesss customers were a considerable reason for implementing IT, more than the pressure of competitors suggested by Wenzler (1996). Luckily, Public Practice Accountants are in a superior position to provide systems analysis, design, implementation, and support advice to their clients as many small businesses are in lack of resources to adopt CAS.Furthermore, the introduction of the Goods and Services Tax (GST) was an external influence on small business owner-managers decisions to adopt a CAS. Many small businesses would have taken advantage of Government incentives to help with the enactment costs of the GST. Many small businesses computerized their accounting systems following the introduction of the GST because accounting for the GST using manual records turn up to be too complicated (Lief 2000). Since the introduction of the GST, it has been shown that many small businesses agree that the costs involved were usually offset by better record-keeping and resultant better business management. The general consensus was that the move to computerized records was very domineering for the small business sector overall.2.6 BARRIERS FOR ADOPTION OF ITComputerized accounting implies that the only thing that employees do is inputting and recording transactions into the computer, which then processes the other steps of the accounting cycle automatically or by a request. Davis and Olson (1985) defined Informatio n System adoption as using computer hardware and software applications to support operations, management, and decision making in the business. In this study, computerized accounting is defined as using computer software applications to support accounting operations. However, many small businesses are cautious about the effect computer may have in their firm. When a CAS is installed, if there is a bad option of hardware or software, or deficient planning, this may lead to obscurity and may have severe long-term consequences. Some reasons uninterruptedly mentioned in literature to explain why small firms that had not yet adopted IT, identified the three main barriers to IT acquisition.2.6.1 Lack of computer skills and knowledgeStanworth and Gray (1992) and Marlow (1998) reported that drains on time and money characterize important limitations. Computer technology infuses businesses both large and small the need for employees with adequate IT knowledge is serious. There are two achie vable solutions to this dilemma. Firstly, it is the employment of devoted IT staff. However, this is can be outer the budget of the small connecter and is expensive. Secondly, IT training is another choice. Conversely, this also appears to be costly. The courses for small firms, professional practices where clients are to be paid on a time basis, time used up when undertaking training is considered by many owner-managers to be a loss of income as all these have proved to be expensive. Accordingly, many small and medium enterprises struggle forward with what knowledge exists inside the organization. The small body of study emphasizing upon the outcome of training in small firms is contradictory. Delone (1988), investigation of vital process factors, express that the level of computer training was not connected with IT success (measured as the impact of IT on the organization and computer use).On the other hand, Montazemi (1988) stated that there is a favourable relationship betwee n levels of training and measures of the impact of IT. Where workers were disappointed with the levels of training available, he noticed their computer literacy, end-user fulfillment and approval of IT was poorer than their better-trained counterparts. In addition, Igbaria et al. (1997) accounted that training also is useful for small organizations. Their research demonstrates training to be definitely related with the apparent effectiveness of IT and to use it without difficulty. On the basis of their conclusions, Igbaria et al. harbinger that individuals with no sufficient training are liable to face troubles while using the system. Since they are struggling, they may in fact consider that the system is too rigid to utilize and that the performance remunerations of practice are offset by the hard work of employing it and finally become hesitant to adopt the technology, thus defeating the social function of establishing the new technology.2.6.2 Lack of TimeNiederman et al.(1991) and Galliers et al.(1994) state that analysis carry out in large businesses have constantly revealed information systems (IS) planning to be one of the top priorities of information systems and business managers for time management. However, Fidler et al.(1993) and Dou- kidis et al, (1994) report that existing study puts forward that small organizations are fading to pursue the model set by their larger counterparts and remain, in terms of modern management practice, in the dark ages. Whilst it is recognized by Malone (1985) and Cragg (1990) that the ex officio planning techniques of large businesses are not essentially suitable for small businesses as investigation recommends that small firms that have adopted more titular planning systems come across lesser IS problems.Regardless of such results, Cragg and King (1993) report finding few formal planning and control activities associated with the computer, or for that matter, with the business as a whole. Where planning does take place it has a tendency to be assumed on an unexpected, problem basis only an action of the owner-manager informal, periodic and closed and prejudiced seriously by advice from external sources with less skills and experience than the owner-manager. While Doukidis et al. (1996) suggests, although IT is generally linked with a systematic approach to management and decision-making and its introduction requires calculated planning, much small business management performance is based on short-term, informal, ad hoc lines.Furthermore, McMahon (2001) study mentioned that it rattling develops management in small firms and frees up time by using a computerized record keeping system. However, John Breen and Nick Sciulli (2002) initiated that business operators are probable to have complexity finding time to put into operation a CAS as they lack the time to examine and or implement a computer software package. For that reason, it may have a positive effect on the business taken as a whole an d may facilitate to find the time to adopt CAS, if owner-managers could have the required management and financial skills. Besides, Proudlock et al (1999) research observed that some businesses owners did not have enough time to locate and acquire particular accounting software that satisfy their business necessities, and they did not have time to set up the accounting software and to record the routine business dealings. This is why they did not adopt Information Technology in the financial accounting system.2.6.3 financial resourcesIacovou et al. (1995) finds that small and medium enterprises need a constant supply of sufficient financial resources for a flourishing adoption of CAS. The financial resources are looked-for to face the adroitness costs, maintenance, and other current expenses that might crop up during the whole course of the system operation. However, Iacovou et al. (2005), Quayle (2002) and Riquelme (2002) added that not all small and medium enterprises have enough financial resources needed to support the adoption of CAS and as such financial limitation becomes the barrier to CAS.Head (2000) confirmed that ..small business cries poor when it comes to buying computers. This shows that it is very costly and difficult when shifting from manual system to computerized system. Also, due to costly investment, many small business managers were unwilling to use computer software in the accounting system as mentioned by Head (2000) research study.However, Doukidis et al. (1994) and Proudlock et al. (1998) state that consultant assistance comes at an elevated price, often too high for the small business. Consequently, many small organization owners prefer to obtain advice from neighbouring firms and support firms as well as less formal sources of advice such as immediate family, friends and acquaintances, who basically have little or no understanding of the business. In the same way, Delone (1988) and Gable (1991) affirmed that IT consultants may not a lways be the reply. Although they are familiar with the application of IT in business, they hardly ever are aware of the specific needs of individual businesses in the same depth as the owner-manager.2.7 ConclusionThis overview of past research studies has clearly demonstrated the criteria which influenced the factors for the adoption of information technology in the accounting profession for some small and medium businesses. Nevertheless, these past studies have lifted a debatable issue in the literature. Consequently, no contrasts are made between businesses that use a computerized accounting system. This assessment would be practical in the reasons for using or not using computerized records, over and above what factors would persuade more businesses to adopt IT irrespective of their dimensions.Moreover, according to the literature, all of the above characteristics influence the owner or managers decision to implement IT in the accounting field to a varying extent depending on th e parsimoniousness and industry in which the business operates..