Evaluating the Design of Accounting Information System and its Implementation

in Ethiopian Manufacturing Industries

Dr. Yuvaraj Sambasivam, Associate Professor, Department of Management, College of Business and
Economics, Debre Morkos University, Debre morkos, Ethiopia

Mr. Kibret Baye Assefa, Head, Department of Accounting, College of Business and Economics
Debre Morkos University, Debre morkos, Ethiopia

Abstract

The purpose of this research is to evaluate the effectiveness of accounting information system design
and implementation. This study give an insight in identifying better and poor performance of the AIS,
and a clue of measurements to be taken in order to improve the AIS design and implementation. Data
were collected from primary sources while Z-Test statistics and multiple comparison tests were used
for analysis of data. The results indicate that the accounting information system design and
implementation of these firms is effective at the same time as it could: enhance quality of financial
reports, control and safeguard assets. The results did not indicate that the accounting information
system design and implementation is effective, as it could not improve performance evaluation. It was
concluded that for accounting information system design and implementation to be effective, firms’
accounting information system stakeholders are supposed to focus on: enhanced AIS design and
implementation criteria and increased attention towards professional and operational standard.

Key Words: effectiveness of accounting information system, AIS design and implementation,
manufacturing industries, quality of financial reports, professional and operational standard

Introduction

Accounting Information System (AIS) as one of the most critical systems in the organization has also
changed its way of capturing, processing, storing and distributing information. Nowadays, more and
more digital and on-line information is utilized in the accounting information systems. Organizations
need to take an action, which put such systems at the forefront, and consider both the system and the
human related factors while managing their accounting information systems. In managing an
organization and implementing an internal control system, the role of accounting information system
(AIS) is crucial.

The evaluation of accounting Information system design and its implementation idea of the research
study can be viewed from two points. First, AIS installation process should consider the cost that is
cost of designing should be lesser than the benefit. It is also important for organizations to focus on the
fitness of the design to the firms need. Second, the data quality issue and critical success factors for the
system’s effectiveness. The Decentralization Support Activity (DSA) of USAID commenced its
activities in January, 1997in Ethiopia, found from the report of evaluation of ‘The in Service Training
Program in Financial Management- September 2006 that the budgets of the federal and regional
governments were using a single-entry, cash-basis accounting system based on the chart of accounts
extant at this time, reflected the level of human capital administering the system. Although Budget
Disbursement and Accounts (BDA) were developed using Visual Basic and used relational industry-
compatible database systems, they had significant weaknesses (e.g., lack of security features and
integration capability, a basic database system, no online capability, etc.). In 1998, DSA outsourced
the task of converting the Common Business Oriented Language (COBOL) mainframe system to a
Windows based MS Access database application to a private company. In 1997, the project recognized
the need to automate the budget preparation and consolidation activities.

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All the above country level weaknesses are most likely similar with Ethiopian manufacturing firms’
financial preparations and reports weaknesses’, which are characterized by poor quality, incompatible,
inaccessible, inefficient in controlling and safeguarding the entities’ asset (ROSC, 2007). The reason
for such outcomes may be because of inefficient AIS design and implementation; this is why it
captures an attention to be studied. So, being in the developing economy, Ethiopian manufacturing
enterprises’ failure to have efficient design and effective implementation of the system can have a
negative impact on the desired achievement, that is, poorly designed and ineffectively implemented
AIS may have adverse effects on decision making. The evaluation of accounting Information system
design and its implementation is aimed to assess performance of the AIS of medium and large-scale
manufacturing firms.

Statement of the Problem

An important question in the field of accounting and management decision-making concerns the fit of
AIS with organizational requirements for information communication and control. Manufacturers need
fittest financial and non-financial information such as financial statements, price changes, market
trends, and customer behaviors to survive and grow (Chen hall & Morris, 1986). Without which it is
extremely difficult to make good decisions. According to USAID-Ethiopia, (2006) Ethiopian firms
have poor accounting records for the purpose of to avoid tax and other obligations. This creates
twofold problem. Poor records make it difficult for companies to get reasonably priced credit and then
to manage their affairs effectively if they do get credit. Failure to make better decision based on
financial reports is a feature of firms in Ethiopia due to multiple books kept by businesses in order to
avoid taxes and other obligations, so that most companies do not have audit-worthy financial records.
Thus, poor accounting increases the likelihood of bankruptcy and makes bankruptcy administration
more difficult as well (USAID Ethiopia, 2007). As ROSC, (2007) studies, manufacturing companies
in Ethiopia has exercising inefficient accounting system Due to poor implementation of the
International Accounting Standards and the study also shows limited number of professional
accountants contributed to the problem.

However, studies mentioned above indicated that the AIS design and implementation is inefficient, the
measurement criterions are not in compliance with the roles of AIS for virtual manufacturing firms of
Ethiopia. This initiates the research study in light shading knowledge of existing literatures towards
the AIS’s actual performance. Sajady. H, (2008) studied accounting information system performance
can be best evaluated on the point view AIS roles or criteria in addition to evaluation criteria set by
ROSC and USAID. Therefore, aim of this study is to evaluate the AIS design and implementation
based on the roles or criteria of effective AIS.

Research Hypothesis

Hungjiang Xu, (2003) studied that AIS’s quality is affected by different factors. Accordingly, it is
critical to consider success factors while implementing AIS like quality of financial reports and quality
of decisions by managers. Sajady. H, Dastgir. M.et al, (2008) showed that, accounting information
system can be effective as, if it can improve performance measures. Better, AIS performance enable
to strengthen the internal control (Lembi Noorve, 2006). More over fittest accounting information
system comes true as far as business firms can implement appropriate system design in line with
organizational objective.

After reviewing relevant literatures, in addition to focuses of studies mentioned above, the following
research ideas were developed in order to measure four main variables that are hypothesized in line
with research questions.

Hypothesis 1: Accounting information systems enhance the quality of financial reports.

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 Hypothesis 2: Accounting information systems is affected by the system design.
Hypothesis 3: Accounting information systems improve performance measures.
Hypothesis 4: Accounting information systems lead to more effective internal control system.

Objective

The research had a general objective of evaluating the design of AIS and its implementation by
medium and large scale manufacturing firms in and around Addis Ababa.

Specific objectives

The specific objectives of the research were to:

 Evaluate effectiveness of firms’ accounting information system to provide adequate
control.
 Estimate accuracy of AIS designing in determining data and report qualities.
 Evaluate firm’s devotion towards the continuous redesigning of AIS’s weakness if any.
Significance of the research

The research study as it had evaluated AIS effectiveness of manufacturing firms,

It provides an insight on the prevailing performance of AIS and the status of system design, to
concerned parties, because of the presence of little documentation.
In identifying better and poor performance of the AIS, the study gives a clue of measurements
to be taken in order to improve the AIS design and implementation.
The study also provides some information regarding the gap exists in the field to be studied.

Scope and Limitations of the study

The research study had focused on the AIS effectiveness of medium and large scale manufacturing
firms found in and around Addis Ababa. The study covers a period of six months since identifying
problems while reviewing literatures. The effectiveness was on the design and implementation of the
AIS. Manufacturing firms are selected because the AIS functions can be best explained by operations
of such firms.

Limitations of the research study were:

 The study is confined to in and around Addis Ababa, since it should include wider range of the
economy.
 The limited number of sophistications AIS user manufacturing firms in the study area. Studies
shows that the extent of accounting information system implemented by private and public
companies in Ethiopia needs to be improved in quality (USAID,2006), this shows that, firms
which are implementing the AIS lack modernity. In addition, manufacturers, which cover only
12% of the total economy (World Bank 2008), are obviously limited in number.
 Shortage of related literature review in Ethiopian context
 Its exclusion of service delivery firms

Review of Literature

Information system: An information system is a set of formal procedure by which data are collected
and processed into information and distributed to user (Romney et al., 1997). Accounting information
system is a system that collects, records, stores, and processes data to produce information for decision
makers. It can use advanced technology or be a simple paper-and- pencil system: or be something in
between. Accounting information system is a specialized subsystem of the information system that
collects, processes, and reports information related to the financial aspects of business events (Ulrich J.

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GeLinas, Jr, 2008). Accounting information system is a computer-based system that increases the
control and enhances the corporation inside the organization (Essex, P. A. and Magal, S. R., 1998,).

AIS Modeling

According to Steve (2003) are based on the tools that are used to collect, process, manage data and
generate information for the system implemented. Data collection (Capturing transaction data,
Recording data onto forms, Validating and editing the data), Data processing (Classifying,
Transcribing, Sorting, Batching, Merging, Calculating, Summarizing, Comparing), Data management
(Storing, Retrieving, Deleting) and Information generation (Compiling, Arranging, Formatting,
Presenting)

As Ulric J. and GeLinas, Jr, (2008) pointed out diagrammatically documenting organizational data
flows (data flow diagrams-DFDs) and business processes (systems flowcharts); Data storage methods;
The role of databases in data management; and the various business intelligence tools that are
important for making sense out of the vast enterprise databases to enhance strategic decision making.
Entity relationship (E-R) diagrams (used to model database structures); modeling information systems
using the REA (Resources, Events, and Agents) method, creating E-R diagrams, mapping these
diagrams to relational databases, and using SQL (Structured Query Language) to manipulate and
retrieve data from relational databases.

AIS for Internal Control

According to Hall, J. A. (2004), internal control is the process implemented by the board of directors,
management and those under their direction to provide reasonable assurance that the following control
objectives are achieved.
Asset (including data) are safeguarded
Records are maintained in sufficient details to accurately and fairly reflect assets.
Accurate and reliable information is provided
There is reliable assurance that financial reports are prepared in accordance with Generally
Accepted Accounting Principle (GAAP)
Operational efficiency is promoted and improved.
Adherence to prescribed managerial policies is encouraged
The organization is complies with applicable laws and regulations.

Internal control is designed to assist organizations in achieving their objectives. The five components
of COSO’s Internal Control - Integrated Framework (the COSO Framework) work in cycle to alleviate
the risks of an organization’s failure to achieve those objectives. Internal control performs three
important functions, preventive controls, detective controls, and corrective controls (Romney, Marshall
B et al, 1997).

Control Frameworks

A number of frameworks have been developed to help companies develop good internal control
system. Three of the most important are: The COBIT (control objective for information and related
technology) framework, the COSO (Committee of sponsoring organization) internal control
framework. In addition, the COSO’s enterprise risk management framework (ERM). The COSO
framework addresses the issue of control from the vantage points or dimensions: business objectives,
Information Technology resources, Information Technology processes. COSO internal control model
has five crucial components: control environment, control activities, risk assessment, information and
communication, and monitoring. The COSO Enterprise Risk Management integrated framework can
provide enhanced corporate governance document, enable business to achieve its financial and

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performance target, provide reasonable assurance that company objectives and goals are achieved and
problems and surprises are minimized (Romney, Marshall B et al, 1997).

AIS in Value Chain

As described by Romney, Marshall B. et. al., the value chain the full range of activities, which are
required to bring a product or service from conception, through the different phases of production
(involving a combination of physical transformation and the input of various producer services),
delivery to final consumers, and final disposal after use. Value chain can be one or many. The
objective of many organizations is to provide value to their customers. A business will be profitable if
the value it creates is greater than the cost of producing its products or services. An organization’s
value chain consists of nine activities that collectively describe everything it does. The first five
(Inbound logistics, operations, outbound logistics, marketing and sales, and services) are performed in
order to create market and deliver products and service to the customers and to provide post sales
service and support. The remaining four (firm infrastructures, human resource, technology, and
purchasing) activities in value chain make it possible for the primary activities to be performed
efficiently and effectively. AIS add value by providing accurate and timely information so that five
primary value chain activities can be performed more efficiently and effectively. AIS can also adds
value by improving the quality and reducing the cost, or services, improving efficiency, improving
decision making capabilities, increasing the sharing of knowledge. Well-designed AIS can also an
organization profit by improving the efficiency and effectiveness of its supply chain (Hall, J. A.,
2004).

Manufacturing Industries in Ethiopia

Compared to industrialized nations Ethiopians history of industrialization is a recent one. According to

Eshetu Chole (1985), Manufacturing started to develop in Ethiopia around the turn of the century with
the emergence of a strong central government, political stability, the installation of the railway to
Djibouti and the strengthening of Ethiopian foreign relations. The increasing settlement of foreign
citizens from Armenia, Greece, Italy and India also brought entrepreneurial capacity. Industry in
Ethiopia was, before 1957, dominated by cottage and handicraft industries, which met most of the
population's needs for manufactured goods such as clothes, ceramics, machine tools, and leather
goods. Eshetu also finds that, including the current territory of Eritrea, Ethiopia had 25 companies by
1927. By the time of the overthrow of the imperial regime, however this figure raised to 273
establishments.Various factors - including the lack of basic infrastructure, the dearth of private and
public investment, and the lack of any consistent public policy aimed at promoting industrial
development - contributed to the insignificance of manufacturing (Theo van der Loop, 2003). After the
overthrown of the imperial regime manufacturing was facing stagnation, According to Theo van der
Loop, after the Derg regime, EPRDF’s liberalization policy, since 1991 has opened up the country for
competition from outside to a previously protected industrial sector. This led to a rather fast increasing
influx of cheap, second-hand and new consumer goods (from watches, through fashionable, leather
ladies shoes, to used clothing and brand-new T-shirts), especially from China. Numerous factories and
workshops were pushed out of business and others had to reorient themselves.
The manufacturing sector contributed 5% of GDP and 37.8% to the total value of industrial
production in 2008 – 09 (Theo van der Loop 2003). The major manufacturing activities are production
of food, beverages, tobacco, textiles and garments, leather goods, paper, metallic and non-metallic
mineral products, cement and chemicals. Under the export-led industrial development strategy,
production of textile and garments, leather products and agro-processing are priority areas for
investment.

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IMPORTANCE OF ACCOUNTING INFORMATION SYSTEM ADOPTION

Implementing the AIS is becoming inevitable to be competent in the current time with the
globalization of trade and investments, as well as dynamic technological changes taking place, there
for manufacturing firms need to gear themselves to face harder competition in the future. These firms
there for need to recognize that IT has the potential to improve productivity, quality and performance -
areas that are essential for their survival and success. In addition to the basic financial reports,
Manufacturers also need non-financial information such as price changes, market trends, and customer
behaviors to survive and grow (Chen Hall & Morris, 1986). Therefore, it is believed that for the
owners/managers it is becoming extremely difficult to make good decisions without the use of IT.
Even though there is a limitation of prior researches that are done in Ethiopia, there are
empirical evidences done on developing countries, like on Saudi Arabia (Ahmad A. Abu-Musa, 2006),
Nigeria (A. A. Owojori and T. O. Asaolu, 2010), Malaysia (Noor Azizi ismail, and Shamsul Nahar
Abdullah,2003), Iran (H. Sajady, M. Dastgir,et al,2008), Jordan (Mahmoud Al-Eqab1 and Noor Azizi
Ismail, 2011), which discussed and found inefficient accounting information system has multi-
dimensional effect on the respective countries’ economy, and asserted the importance of evaluating the
AIS design, adoption, implementation effectiveness.

Evaluation of Effectiveness
To implement the accounting information system successfully the system should consider
contingency factors like dominant view of the organization, problems to be solved and norms of the
organization in addition to the purpose of the system (Ives, B., et al., 1983). Accounting information
systems are said to be effective if the information provided by them serves widely the requirements of
the system users. Effective systems should systematically provide information that has potential effects
on decision-making process. Coordination of the organization is the result of integration of the system,
there for coordination of the organization in turn increases the quality of the decisions (Huber, 1990).
Simon R. (1987) also AIS provide financial report on a daily and weekly basis which enable in turn
provides a measure of control for management (Mia, L., 1994). Accessibility to information related to
the main transactions of an organization leads to a categorized detailed information, which facilitates
decision making in any difficult situation. In addition, AIS provide use full information for monitoring
decision-making process and performance of the organization, which enable to evaluate the
effectiveness. Choe,J. M, (1998), wrote that effective accounting information systems can be analyzed
on three bases: 1) information scope, 2) timeliness, 3) aggregation.

Evaluation Criterions of AIS Effectiveness

The goals of evaluation are to learn from experience, to provide an objective basis for assessing
the results of the work done, and to provide accountability in achieving its objectives. It is therefore to
improve entities work by identifying and disseminating lessons learned from experience and by
framing recommendations drawn from evaluation findings. Therefore, the criterions of evaluation of
the effectiveness of AIS are the role/benefits of the AIS. The alignment between the role of AIS and
implemented AIS in the organization has a positive effect on companies’ performance (Cragg et al.,
2002).

Research Design and Approach

The research paper followed a survey design in order to evaluate the AIS design and
implementation of medium and large scale manufacturing firms. More than 60% of manufacturing
firms of the country are found in and around Addis Ababa, Ethiopia. The firms are actively operating
and owned by different investors from every part of the country and from abroad. Different types of
manufacturing firms throughout the country are almost found in the study population area (Addis
Ababa chamber of commerce). Therefore, the survey design is suited to evaluate medium and large

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scale manufacturing firms in Ethiopia based on the evaluation of medium and large scale
manufacturing firms found in and around Addis Ababa. There is some evidence suggested that the
differences of accounting information system performances are likely to be minor in Ethiopia.
Although the results of this study are only drawn from manufacturers in and around Addis Ababa,
there might be similar results, if a study was conducted in other parts of Ethiopia (USAID Ethiopia
2006).

Sample Size: - From a survey of 555 medium and large-scale manufacturing firms in Addis Ababa
Ethiopia, 105sample manufactures were taken out of which 79 firms return the questionnaire.

Data Collection Method

As the main data collection instrument, in this study, consists of both open ended and closed ended
questions. A questionnaire was designed after reviewing the relevant literature. It was distributed to
major AIS stakeholders, throughout 105 sample manufacturing firms. Distribution was conducted both
in person delivery and through e-mail addresses compiled by Addis Ababa Chamber of commerce. The
questionnaires from respondent firms were filled or replied by 33 accountants, 15 IT officers, and 25
finance manager, and 6 executive managers.

Method of Data Presentation and Analysis

A total of 79 valid responses were collected from different types of industries categorized in to four for
the sake of clustering. The questionnaire had both open ended and five likert- scale questions were
designed to measure moderator and main hypothesis of the study, based on roles of AIS.

The data collected has two features of information, the first is demographic information and the second
is study objective based. A total of 32 questions are categorized into four, as they were prepared to
address four theoretical hypothesis of the study. Under each group the mean of each questionnaire
were computed because of similarity towards a grouping variable, the mean can be used as
representative of one questionnaire, with similar fashion means of the grouping variables were
determined. One-tail Z test, to measure the probability that the sample mean would be greater than the
average of observations in each hypothesis, by measuring proportion of actual average and a likert
mean of 3 as if a population mean, using spreadsheet, Microsoft office excel 2010. In addition
Software Package for Social Science (SPSS 16.0) was used to measure central tendency, dispersion,
and one way Analysis of Variance (ANOVA), the data out puts are presented in tabulation.

Data Presentation and Result Analysis

A total of 32 questions were categorized into four, as they were prepared to test four theoretical
hypothesis of the study. Mean for each hypothesis were computed based on similarity of questions
towards a grouping variable, Mean of a question is used as a representative from one questionnaire,
with similar fashion means of the grouping variables were determined. We have applied a one-tail Z
test, to measure proportion of actual average and a Likert mean of 3 as if a population mean, using
Spreadsheet of Microsoft Office Excel. In addition SPSS 16.0 was used to measure central tendency,
dispersion, and one way ANOVA. The data out puts are presented in tabulation.

Performance Analysis

Suitable analysis of effectiveness evaluates actual performance through the comparison of AIS’s
importance. An importance of AIS can be evaluated based on the likert scale of 5 points, 1 for no
importance, 2 for less importance, 3 for medium importance, 4 for very good importance and 5 for
highest importance. Therefore actual performance is compared with the mean value ‘µ > 3’ for better

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performance and ‘µ ≤ 3’ weaker performance. The likert mean therefore used as of the population
mean computed as:

Table 1 Statistical means compared with a Likert mean.

Variables Mean Std. Pop. Differen Rank
Quality of Data Used 3.52 Dev.
1.096 Mean
3 ce
0.52
Extent of AIS Designing Accuracy 3.62 1.066 3 0.62
Reliance of Auditors on FOut put 3.48 0.945 3 0.48
Automatically Performs Many Data 3.33 1.227 3 0.33
Ease of Modification of the System 3.54 1.107 3 0.54
System Maturity 3.59 0.927 3 0.59
AIS enhance the quality of financial reports 3.514 3 0.514 1st
Compatibility of Software 3.34 0.766 3 0.34
Security Level of the System 3.44 0.764 3 0.44
Validity of the System 3.46 0.765 3 0.46
Integrity of the System 3.28 0.876 3 0.28
Recovery Ability of the system 3.39 0.898 3 0.39
AIS Redesigning Custom of the Company 3.11 0.832 3 0.11
AIS is affected by the system design 3.337 3 0.3367 2nd
Educational Fitness Level of Accountants 3.3366
2.59 0.840 3 -0.41
Training Taken for Better Performance 7
2.62 0.773 3 -0.38
Need of Future AIS Improvement 3.04 0.912 3 0.04
Up to Date System Usage 2.73 0.843 3 -0.27
Communication Between Different Professionals 2.73 0.902 3 -0.27
AIS improve performance measures 2.744 3 -0.256 4th
Reliability of the AIS in Controlling Assets of the 3.29 0.736 3 0.29
Business
Level of the Integration and System Interpretability 3.34 0.783 3 0.34
Effective Data Management Approach 3.41 0.840 3 0.41
Communication Between Different Departments 3.28 0.767 3 0.28
Suitable Organizational Structure 3.32 0.777 3 0.32
Accounting information systems lead to more 3.326 3 0.326 3rd
effective internal control systems
Source: Table of means output from ANOVA SPSS

The whole questionnaire is divided into the four categories that are considered as research hypothesis,
therefore, means of each question under each category are further used to compute mean of each
hypothesis or category. As shown in the Table 1 above, means of actual performance of AIS of five
measuring criterions for effectiveness are above the mean value assigned for importance of AIS. One
is below the mean of importance.

Based on mean of the effectiveness and mean difference AIS’s role of enhancing the quality of
financial reports is highest with 3.51 mean and 0.51 mean difference. System design impact on AIS is
the second highest with mean 3.337 and mean difference 0.337. The third effective criterion of AIS
performance measurement is implementation of AIS lead to effective internal control system with
mean value of 3.326 and mean difference with importance mean of 0.326. Among effectiveness
evaluating criterions of AIS’s role, the actual performance of performance evaluation measures, whose
mean and mean difference were 2.74 and (-0.26).

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Statistical tests

To test four hypotheses of the study statistical hypothesis are set as follows:
H0: μ≤3
H1: μ > 3

Z test was used, in order to accept and reject hypotheses, by comparing proportions of actual means of
each hypotheses and a five-scale likert mean as a population mean. Z test was computed using
spreadsheet-Excel-Function reference-Statistical- Z test, with a Z test formula of one-tail normal
distribution as: =ZTEST(array,μ0). Excel formula can be used to calculate the one-tailed probability
that the sample mean would be further from μ0 than Average(array), when the underlying population
mean is μ0. Z test represents the probability that the sample mean would be greater than the observed
value average (array), when the underlying population mean is μ0. From the symmetry of the normal
distribution, if average or array < μ0, Z test will return a value greater than 0.5. The test was conducted
at a 95% confidence level, with a 5% critical level, for which a Z value is 1.645, so that, Z value of the
average compared against the critical value. Therefore, we have tested whether the mean value of each
question was less than or greater than 3. Number 3 was the average number of the five choices in each
question.

Hypothesis Testing and Result Analysis

Four major roles of AIS, those were described in the literature part and observed in Table 2, are
hypotheses, whose averages were tested.

Table 2 Hypothesis Representations

S. No. Hypothetical theory of the role of AIS
1 AIS enhance the quality of financial reports
2 AIS is affected by the system design
3 AIS improve performance measures
4 AIS lead to more effective internal control
No. of questions Representative
6 Hypothesis 1
6 Hypothesis 2
5 Hypothesis 3
5 Hypothesis 4

Table 3 Descriptive Statistics

Hypo Std.
thesis Median Mini. Maxi. Mean Devi. Variance Skewness Kurtosis
Std. Std. Std.
Statistic Statistic Statistic Statistic Error Statistic Statistic Statistic Error Statistic Error
1 3.5 2.3333 4.6667 3.514 0.0639 0.5687 0.323 0.121 0.271 -0.576 0.535
2 3.333 2.1667 4.6667 3.337 0.0573 0.5098 0.260 0.210 0.271 0.295 0.535
3 2.8 1.2000 3.8000 2.744 0.0593 0.5271 0.278 -0.470 0.271 0.231 0.535
4 3.4 2.4000 4.4000 3.326 0.0560 0.4983 0.248 0.136 0.271 -0.283 0.535
Source: Summarized from Table of Descriptive Statistics of ANOVA analysis

Table 4 Z Test Computation

Hypothesis Average Z-VALUE CALCULATED P Value
1 3.514 4.441 0.0000045
2 3.337 1.997 0.0229
3 2.744 0.999 0.1589
4 3.326 2.868 0.0021
Source: Z calculation Procedure on Excel

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Using the descriptive statistics output of each hypothesis Z test , shown in Table 3, were analyzed in
comparison with the average, standard deviation of the average, skewness, and kurtosis. Z test is used
to compare the proportion of a five point scale likert mean, here after 3 and averages of actual
observations.

Result of the First Hypothesis

AIS Enhance the Quality of Financial Reports: Average value of the hypothesis is 3.514 with kurtosis
of -0.576 and skewness of 0.12, which shows the distribution of data, is shorter than the normal
distribution curve compared to the hypothesis 1 standard deviation of 0.569. The statistics also shows,
the data are distributed not far from the mean than the standard deviation and large proportion of the
data variables are found to the right side of the mean, that is larger respondents’ reply were above the
average. One-tail Z test, shown in Table 4, conducted for the hypothesis resulted 4.441 Z value, which
is larger than the critical value 1.645 for a critical level of alpha = 0.05, by 2.796. The test represents
the probability that the sample mean is greater than the observed value 3.514 with p (< 0.0001),
considering the underlying population mean is 3. So, the test rejects H0: μ≤3 and accept H1: μ > 3.
Therefore, according to the respondents reply, Accounting Information System enhances the quality of
financial report. So that, it is possible to conclude that the AIS design and implementation by the
respondent firms is effective, in providing quality financial report.

Result of the Second Hypothesis

The System Design affects AIS: The hypothesis has a mean 3.337 with a standard deviation of 0 .5098,
skewness of 0.210 and kurtosis 0.295, which shows, the data variable distribution is a little shorter than
the normal curve and larger proportion of the respondents views are lied to the right of the mean, that
is more than the hypothesis average. Z test conducted for the second hypothesis resulted 1.997
calculated value, shown in Table 4, greater than the critical value 1.645. The difference between Z
calculated and the critical value is 0.352. This test represents the probability that the hypothesis’s mean
is greater than the observed average value 3.337 with a significance of p = (0.0229), taking into
account the underlying population mean is 3. The test rejects H0: μ≤3 and accept H1: μ > 3. Therefore,
from the respondents’ point of view, the system design quality has direct relationship with the AIS.
From this it is possible to conclude that the AIS they implement, is effective.

Z test formula for one tail which results Z values for each hypothesis, is based on the column array of
the excel sheet which contains 79 means of clustered questions for each hypothesis.

Result of the Third Hypothesis

AIS Improve Performance Measures: The hypothesis has a mean 2.744 with a standard deviation of 0
.527, skewness of -0.470 and kurtosis 0.231. It shows, the data variable distribution is a little shorter
than the normal curve. The larger proportion of the respondents views are laid to the left of the mean
that is more than the hypothesis average. As shown in Table 4, Z test conducted for the third
hypothesis resulted 0.999, which is lesser than the critical value 1.645. The difference between Z
calculated and the critical value is -0.646. The test represents the probability that the hypothesis’s
mean is not greater than the observed average value 2.744 with p value 0.1589, referring the
underlying population mean 3. The test accepts H0: μ≤3 and rejectsH1: μ > 3. Therefore, from the
respondents’ point of view the AIS did not enable them to improve performance measures. From this,
it is possible to conclude that the AIS they implement, is ineffective. Empirical studies also support the
result found, and concluded that their respondents on average do not believe that accounting
information systems improve performance measures

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Result of the fourth Hypothesis:

AIS Lead to More Effective Internal Control: Z test conducted for the six hypothesis resulted 2.868,
shown in Table 4, which is higher than the critical value 1.645. The difference between Z calculated
and the critical value is 1.223. This test represents the probability that the hypothesis’s mean is greater
than the observed average value 3.326 with p value 0.0021, considering the underlying population
mean is 3. The test rejects H0: μ≤3 and accept H1: μ > 3. Therefore from the respondents’ point of
view the accounting information systems lead to more effective internal control. From this it is
possible to conclude that the AIS they implement, is effective in leading to a more effective internal
control. The hypothesis has a mean 3.326 with a standard deviation of 0.498, skewness of 0.136 and
kurtosis -0.283, which shows, the data variable distribution is a shorter than the normal curve, and
larger proportion of the respondents views are laid to the left of the mean that is less than the
hypothesis average.

Table 5 Hypothesis Conclusion

Hypothesis H1 H2 H3 H4
Average 3.514 3.337 2.744 3.326
Standard Deviation 0.569 0.5098563 0.527 0.498
Z value calculated..ZV* 4.441 1.997 0.999 2.868
Alpha (0.05) Z value..AV** 1.645 1.645 1.645 1.645
(ZV*)-(AV**) 2.796 0.352 -0.646 1.223
P value < 0.0001 0.0229 0.1589 0.0021
Conclusion Accept Accept Reject Accept

(ZV*)-(AV**) = Z value calculated- Alpha (0.05) Z value

Analysis of Moderator Variables Test

The external (moderator) variable test on levels of respondents' education was applied. It is to test
whether it has any impact on averages of each hypotheses, the SPSS 16.0 software of ‘compare mean-
one way ANOVA- descriptive statistics and TUKEY HSD with alpha 0.05’ was used.

Result of the External Variable Test

There is a relationship between the levels of respondents' education and evaluation of the effectiveness
of accounting information system.

As shown in Table 6, there were 3, 25, and 51 respondents whose education levels are certificate,
diploma, and 1st degree, respectively. To test whether the variation in education also reflected on the
average values that they have towards the AIS effectiveness, the education level used as independent
variable and four hypothesis used as dependent variable. Post Hock test for multiple pair-wise
comparisons showed in detail no significant difference between means of each education level. The
mean difference could be significant at the 0.05 level, but the multiple comparison tests showed as in
Table 6, p values of mean difference between certificate, diploma, and 1st degree is ranged from 0.137
to 1.000, with mean difference ranged from 0.00094 to 0.6311.

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 Table 6 Multiple Comparisons of education levels
Tukey HSD
Dependent Variable (I) Education Level
(J) Education Level Mean Sig.
of the Respondent
of the Respondent Difference (I-J)
AIS enhance the Certificate Diploma 0.6311111 0.166
quality of financial 1st degree 0.6143791 0.165
reports Diploma Certificate -0.6311111 0.166
1st degree -0.0167320 0.992
1st degree Certificate -0.6143791 0.165
Diploma 0.0167320 0.992
AIS is affected by the Certificate Diploma -0.1333333 0.904
system design 1st degree 0.0588235 0.979
Diploma Certificate 0.1333333 0.904
1st degree 0.1921569 0.275
1st degree Certificate -0.0588235 0.979
Diploma -0.1921569 0.275
AIS improve Certificate Diploma -0.2186667 0.780
performance measures 1st degree -0.2196078 0.767
Diploma Certificate 0.2186667 0.780
1st degree -0.0009412 1.000
1st degree Certificate 0.2196078 0.767
Diploma 0.0009412 1.000
AIS lead to more Certificate Diploma -0.5626667 0.148
effective internal 1st degree -0.3333333 0.485
control systems Diploma Certificate 0.5626667 0.148
1st degree 0.2293333 0.137
1st degree Certificate 0.3333333 0.485
Diploma -0.2293333 0.137
Source: A summary of multiple comparisons Post Hoc test of Education level mean comparison.

Conclusion

The study had analyzed AIS design and implementation to evaluate the effectiveness based on four
hypothetical roles, enhancement of the quality of financial report; effect of system design on
implementation, improvement of performance measures and effective internal control systems. There
was no evidence for the third hypothesis. Accounting information system designing and
implementation would not improve performance measure. Reason for hypothesis rejecting or failure of
the result might be improper specifications of questions related with the third hypothesis. Three
hypotheses testing on the actual performance resulted, AIS design and implementation could make
possible the enhancement of quality of financial report; system design could affect quality of AIS
implementation; AIS design and implementation could facilitate financial transaction processes, lead
to better decision-making by managers, enable to have more effective internal control systems. Based
on identified roles, the AIS designed and implemented were successful, by attaining three out of four,
with a more than average actual performance compared with the average importance. Therefore, in
fulfilling business objectives the study concluded that accounting information System design and
implementation by manufacturing firms in Ethiopia was effective, except achieving the accounting
information system’s role of performance evaluation measurement. The study also concluded,
evaluation of accounting information system design and implementation was not affected by the
difference in education level of the respondents. The implication is medium and large-scale
manufacturers are implementing effective AIS, which fit their need.

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Continuous AIS design and implementation for high-level data quality management practice is one of
the keys to success for many organizations. Adoption of the some criteria for effective design and
implementation accounting information system for a better financial data quality management in AIS
can permit managers to obtain a better understanding of accounting information system data quality
management practices. If firms focus on enhanced AIS design and implementation criteria, they may
be able to improve their decision making role, and can ensure better quality of the accounting
information in the future.

Performance of firms in general and each department of firms in particular can be measured and
improved through implementing effective AIS. Manufacturing firms, therefore, are recommended to
take an advantage of their AISs’ role in measuring every segment’s performance, to direct operations
or tasks, to forecast business. In addition manufacturing firms are recommended to provide necessary
training for accountants and financial managers on accounting software packages, in order to update
accounting information system, to appreciate performance through incentives.

The group effort between different stakeholders can become more important for effective AIS design
and implementation. The findings of this research provide firsthand information to AIS stakeholders as
the front line practitioner, namely accountants, system designers, financial managers and firm
managers that they should take an active approach to improve activities of effective AIS.

It is recommended to policy makers to pay attention towards the current actual performance and future
improvement of accounting information system of manufacturing firms. Ethiopian Revenue and
Custom Authority (ERCA), Ministry of Finance and Development (MFD), The Ethiopian Professional
Association of Accountants and Auditors (EPAAA), Accounting Society of Ethiopia(ASE) are
recommended to take an action in setting laws or regulations that requires accounting standards and
GAAP / IFSR in preparation of financial statements.

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