CHAPTER ONE

 INTRODUCTION

1.1. Background of the Study

Micro finance institutions (MFIs) play a vital role in the global economic development and mostly in many developing countries. Studies indicates that in the United states (US) micro constitute 99%  of  employer business firm ,while in Cameroon they  constitute 90%  of the business firm and with significant contribution to the production of good and services employment and entrepreneurial  capacity building(U.S. small business Administration [USSBA])  However  MFIs are face with a high failure rate ,which is because of the following factors including poor business experience, lack of adoption of technological  tools ,hindrance to finance , poor business management and poor reporting(Alsaaty,2012)These failure factors are interrelated ; for example ,insufficient reporting could be because of inadequate technological tools implementation which lead to poor reporting quality As such, it is important to put in place strategies that would promote the success of MFIs and performance  in improving their accounting records –keeping practices and financial information quality. The main object for accomplishing this goal is the implementation of a good accounting information system (AIS) .An accounting information system is responsible for collecting, storing and processing of financial and accounting data that are used by decision markers. With this definition in mind an accounting system without technological installation would be incomplete and inefficient in the business world today

Computerized accounting is an integration of computer-based schemes application and infrastructure put in place by an entity in collecting recording, organizing, storing, and analyzing transactions and to interpret and communicate financial information to stakeholders to informed decision making. According to Kogan (1986), accountability refers to a condition in which a role holder renders account to another so that judgment maybe made about adequacy of performance. Lerner and   Tetlock  (1999),equate accountability not only to reporting but also to the justification of performance , they continue to describe accountability as implicit and explicit explanations that anyone may be  called upon to justify one’s belief , feelings , and actions to others  Lewis (1999), in his study ,mentions that Computerization saves time on transactions hence reliable and  accurate information can be generated thus    necessitating   the   study. According to Pandey (1998), Financial reporting to the company’s stakeholders for instance the government is a statutory obligation for every organization. Saleemi (1981) defined financial reporting as the process of supplying financial information that is reliable, accurate and complete to various stakeholders for making economic decisions

This is to always inform of financial statements such as a statement of comprehensive income , statement of financial position and cash flow statement, and other financial report  which provide an overview of the company’s current financial strength  Microfinance is  defined as a development tool that grants or provide financial services and products such as very small loans ,micro-savings, micro-insurance ,and money transfer to assist the poor in establishing or expanding their business.(Robison,1999). Regardless  of the size  of an organization  ,an accounting system is designed to collect , process, and  report  periodic financial information about the entity (0luoch,2014).Several tool such as annual report ,audits ,quarter reports ,financial accounts  performance assessments, and independent evaluation are derived from computerized  accounting systems .

With the fall of CONFINEST, one of the major micro-financial institutions in Cameroon, many MFIs in Cameroon have changed their systems of operations from manual to computer-based systems. With the advent of ICT, packages, and computerized accounting software, MFIs enterprises in Cameroon have adopted and are applying ICT in almost all areas of their actions, due to its inter-sectional link. It appears to be reaping most of the benefits of revolution in technology, as can be seen by its application to almost all areas of its activities such as: using debit and credit cards, inter-regional money transfer, using computerized accounting systems in the recording, preparation, and presentation of their financial reports.

This has however prompted the researcher to assess the effect of computerized accounting systems on the quality of financial reporting by MFIs enterprises in the Bamenda municipality. More light will be thrown by having an insight into the quality of financial reporting in MFIs in Bamenda Cameroon. Several studies have being conducted  on the relationship between accounting information systems and the quality of financial reporting around Europe ,United states, , and Asia (for example :Adbullah,:2013,Fardina,:2013;Al-Dalabih,2018) Moreover, no study has being found by the researcher to examine the influence of computerize accounting systems   on the quality of financial within Cameroon MFIs. A few studies on computerized accounting focus more on internal control. There is therefore a scarcity of research work on the influence of computerized accounting systems on the quality of financial reporting information within MFIs and this has brought a space in this crucial and fast development of accounting and finance. To fill this space this sought to examine the relationship between computerized accounting systems and financial reporting quality in MFIs in Cameroon

Therefore the main objective of the study was to determine the extent to which computerized accounting systems influences the quality of financial reporting information among MFIs ,in terms of relevance ,faithful representation ,and understandability. To achieve this objective, the research question was pose, thus: to  what extent do computerized accounting systems influence the quality of financial reporting information within MFIs, This has prompted the researcher to assess how computerized accounting influence the quality of financial reporting micro finance institutions within  Bamenda   municipality    in Cameroon.

1.2. Statement of the Problem

Recent reports on the use on the of computers in banking operations has help management to effectively control and monitor the efficient used of limited resources thereby improving on performance. The many advantages from the use of computerized accounting systems have led to many to conclude that CAS in corporate reporting is the “engine of growth” in business organization. (Frenzel, 2006). Despite the huge benefits these accounting systems play, many micro finance institutions still use manual accounting system which are mostly associated with, keeping a large number of books with errors in recording huge volumes of transactions. Such problem includes the insufficient supply   of skilled knowledge about computerized accounting system, huge set up  and  maintenance cost Otieno and Oima  (2013) studied the implementation of a computerized accounting  systems in Kisumu ,Kenya and discovered that despite the recent upgrade on the accounting systems by the use of computer soft ware’s , most small and mediums-sized enterprises have most small and medium-sized enterprises have been unable to fully exploit its benefits on the quality of financial reporting due to problems such as software failure, inadequate training on how to use computerized accounting systems which have led to the misuse of these systems and improper software maintenance.

Thus, this study intends to fill this research gap by assessing the effect of the computerized accounting systems by small and medium-sized enterprises on the quality of financial reporting in Buea Cameroon. The following research questions are set to guide this study.

1.3 Research Questions

1.3.1. Main Question

The main research question of this study focused on what is the influence of computerized accounting on the quality of financial reporting in microfinance institutions in Bamenda II?

1.3.2. Specific Questions

For this study this study to be realized, it is necessary to break down the main research question into the following concerning the influence of computerized accounting on the quality of financial reporting in microfinance institutions, which will serve as a guide to sanction this study:

• What are the qualities of financial reports prepared by MFIs in Bamenda II
• What are the level of benefits in using computerized accounting over manual system of accounting and preparation of financial reports?
• What is the relationship between computerized accounting and financial reporting in MFIs in Bamenda II?
• To what extent does the quality of financial reports of MFIs influence the decisions of potential investors and their customers?

1.4 The Research Objective

1.4.1. The Main Objective

The main objective of the study is to critically assess the influence of computerized accounting systems on the quality of financial reporting in MFIs.

1.4.2. The specific objectives

• To examine the quality of financial reports prepared by MFIs in Bamenda II
• To compare the level of benefits in using computerized accounting over manual system of accounting and preparation of financial reports
• To establish the relationship between computerized accounting and financial reporting in MFIs in Bamenda II.