INFORMATION TECHNOLOGY IMPACT IN ACCOUNTING SYSTEM OF FINANCIAL INSTITUTIONS – STUDY CASE: CENTRAL BANK OF KOSOVO Skender Ahmeti Faculty of Economics/Prishtina University
[email protected] Muhamet Aliu Faculty of Economics/Prishtina University
[email protected] Valbona Gjata
[email protected] Yllka Ahmeti Central Bank of Kosovo
[email protected] Alban Elshani
Faculty of Economics/Prishtina University
[email protected] Abstract The global competition was the main reason that financial institutions - especially banking institutions have changed their system from manual to digital and not only. Information Technology is involved in various spheres of life. It is used by various industrial enterprises, manufacturing, health system, educational system and in every aspect of work. In the same way, IT it's a well-used by accountants in each institution. There are accounting software used in accounting reports, economic reports, etc. The essence of the study is to be studied in independently and impartially the impact of information technology in the accounting system in the CBK. To answer research questions and to prove the hypothesis we have used collected data by a questionnaire, which was conducted with employees of the banking system in the CBK. As a technique of commenting on the results is also used econometric method to show the impact of information technology in the accounting system of the CBK. KEY WORDS: Central Bank of Kosovo, Financial Institutions, Information Technology, Accounting, Software.
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1. Introduction
In developing countries, the impact of information technology in the banking system often is equivalent to that of the financial system. The dynamics of events in the financial world, especially today in the age of globalization, it brings economists to rush in predictions they make and recommendations that they give. Increasingly it is becoming necessary that economic activity to be monitored properly to avoid or to cope with the financial crisis, as well as economic crisis. In the financial world where the events of recent years served as a good lesson for economists around the world, who ran after the heady profits and forgot accounting system and control over financial institutions that they manage. Exactly on this philosophy is established even the paper “Information technology impact in accounting system of financial institutions”. The paper is focused on information technology in the accounting system of financial institutions in Kosovo, and more specifically to the accounting system of the Central Bank of Kosovo, as this is the main representative system of financial institutions in Kosovo. Information technology has become a common structure of data that allows the data entered and accepted by the whole world.1 By managing the level of activity, costs, budgeting, performance measurement, forecasting, resource costs, production etc. can be improved in terms of efficiency. With the help of information technology (PBN system) financial institutions can measure the costs and performance more frequently, even daily instead of monthly long wait.2 According to Davenport the first institutions that implement information system of accounting suffered these changes: made significant strategic implications, enterprise system became the direct in organization and enterprise culture. On the other hand access to real time and financial data became more universal where systems allow the company to improve their management structures and making them more flexible. In addition, they also include the centralization of control over information and the standardization of processes and qualities are more in line with the hierarchy, command of organization and control and the same cultures.3 With the help of information technology has become the elimination of budgeting accompanied by a bookmarks, activities based on the costs and 1
Kaplan, R.S. and Cooper, R.; Cost & Effect: Using Integrated Cost Systems to Drive Profitability and Performance. Harvard Business School; Boston; 1998; fq.275 2 Kaplan, R.S. and Cooper, R.; Cost & Effect: Using Integrated Cost Systems to Drive Profitability and Performance. Harvard Business School; Boston; 1998; fq.279 3 Davenport, T.H.; Putting the enterprise into the enterprise system; Harvard Business Review; 1998; fq.127
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management, repeatable planning and benchmarking.4 Judging by the actions of information technology in the accounting system has led to changes in accounting5, it means elimination of working routine, line management in the development of accounting knowledge, creating more forward-looking information, as well as creating broader role of accounting. To reach the final stage, i.e. in making recommendations, this paper has some important goals which may include: identifying the challenges faced by information technology in the accounting system, to study the role and the impact of the information technology in the accounting system of the CBK, to see if there is a connection between information technology and the performance of the CBK. 2. Methodology Scientific methods are generally divided into two main groups: the inductive method and deductive method. Then calculated in the analysis of figures and facts given in this way a more accurate picture of the current situation of the impact of information technology in the accounting system of the Central Bank of Kosovo. The questionnaire was conducted with employees of the banking system in the CBK. For answers to complete the questionnaire it is more reasonably to be individual forms , thus avoiding the pressure that can be exercised by one or several individuals with the aim deformation responses to protect certain interests (individual or of the bank). The questionnaires were completed by the staff of the department of IT and high-level managers in order to have a better distribution. To perform measurements on several questions we used the system with 5 Likert scale,6 1 -Fully disagree to 5 - totally agree. Throughout the paper it is analyzed the role and challenges faced by the accounting system. Based on the results of the analysis will conclude whether the CBK or not has proper development. Analysis of information technology in the accounting system is supported by an econometric model, which is built to validate hypotheses which are: • IT has no negative effects on the accounting system of the CBK, • IT in accounting activities had a positive impact on the practice of accounting system
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Hope, J. and Fraser, R; Beyond budgeting: White paper, CAM-I Beyond Budgeting Round Table; 2001; fq.5-6 5 Ahmeti.S, Hoti.A, Alshiqi.S. (2014), “Analysis of Financial Performance in the Banking System in Kosovo - the Period 2006-2012”, Journal of Knowledge Management, Economics and Information Technology , IV (2), 2 6 Likert, Rensis; (August 1903-September 1981) with diploma in economics in University og Michigan 1926.
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3. Information technology impact in the accounting system of financial institutions Information technology has a special significance, not only in the banking sector, but everywhere. Generally a newly employed person needs a certain amount of time to adjust, to understand and learn the process of work, especially when it comes to the banking sector where mistakes would be fatal. Through the questionnaires, the following questions are asked: 1. Mistakes during operations occur as a result of : a. human mistakes ( logical), b. The mistakes of module (software program) From the questionnaire responses obtained, it showed that all respondents claimed that errors occur during operation as a result of human mistakes. So that the training of employees from the bank is in favor of the bank. This confirms the importance of information technology in the accounting in the financial institutions. So the results of this study will help us to confirm the hypothesis of the paper that:” Information technology in the accounting system has important effects on the performance of CBK". 2. Is efficient accounting information system to provide information such as: interpretation, reporting, accounting information communication? From the questionnaire responses obtained, showed that 85.72% of respondents claimed that the accounting information system has brought efficiency in reporting, interpretation and communication of accounting information. The results obtained from the questionnaire are presented below in Table 1. Table 1. The responses on the effectiveness of accounting information system: Options Yes No Uncertain Total
Frequency 48 5 3 56
% 85.72 8.93 5.35 100
3. Does the accounting information system influence on accounting practices in activities as timely distribution of financial statements , preparation of financial statements, creation of new paths in obtaining financial information , creating capacity of data storage , reduce clerical work. To perform measurements in this question has been used the system with 5 Likert scale, 1 completely disagree to 5 completely agree for each activity. From the respondents were given the following answer : Chart 3. Influence of SIA in accounting practices of the CBK: 4
80 70 60 50 40
Strongly Agree Agree
30
Neutral 20
Disagree
10
Strongly Disagree
0 Preparation Timely Creation of Large of financial delivery of other storage statments financial avenues to capacity statments access financial information
Reduction of clerical works
The greatest impact that information technology has made in the accounting system is a possibility that has created financial institutions to develop and use accounting software to record and track all transactions in real time and accurately. From the results of study we came to a conclusion that the IT has an impact on the accounting system at their institution. The responses from the chart 3 from each activity of accounting we have these following data : 19.64 % disagree that SIA has helped in the preparation of financial statements , on the other hand 42.86 % and 19.64 % agree completely that SIA has assist in the preparation of financial statements . As has helped SIA timely delivery of financial statements, 19.64 % and 71.43 % totally agree on the issue and the remaining 8.93 % are declared neutral. To create new paths to obtain financial information, 8.93 % and 71.43 % of respondents agreed completely and agreed to the assistance SIA provided in this matter, while 19.64 % were indifferent. Regarding the assistance that SIA has provided in creating capacity for data storage here must not have doubts, but from the respondents we have received these responses: 25 % completely agree, 46.43 % agree and the rest from 28.57 % remain indifferent. Regarding the issue of reducing clerical work, as can be seen in Table 2: 19.64 % declared themselves completely agreed that SIA has given special contribution to the use less paper and reducing other clerical work, 57.41 % 5
agreed and 23.22 % are neutral on this case. The data shown we can come to the conclusion that SIA has tremendous positive impact on the practice of accounting in the CBK. 4. Is it IT efficient, especially the information system of accounting (SIA) in providing information such as interpreting, reporting, communication of accounting information? In chart 5 the data are expressed as a percentage. From the respondent’s employees of the CBK, 83.93 % of respondents claimed that IT does bring efficiency in the providing of information such as: reporting, interpretation and communication of accounting information, 8.93 % have refused to do so and 7.14 % do not have the information about this matter. Chart 5. IT Efficiency in providing accounting information’s: 7.14% 8.93%
Yes No Uncertain 83.93%
Based on the survey results regarding the above matters can be concluded that the CBK and other financial institutions should not be underestimated in IT as it improves the quality of service delivery. So to provide banking services with better quality for all categories of financial institutions, banks should implement IT and secondly, the implementation of IT increases the efficiency of giving accounting information’s. 5. The more integrated an information technology to be into the accounting system of financial institutions (e.g. the adaptation and implementation of many PBN system modules etc.) is the largest effort to make the IT system in use and not only in accounting. Table 3 shows the impact of IT on accounting system taking as independent variables budgeting, financial statements and expenditure, performance, profitability analysis, divergent, cut costs, etc.
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Table 3. Impact of IT on accounting systems Independent Variables Budgeting Financial Statements Budget Control Expenditure Control Performance measurement Forecast performance in quartile Profit Analysis Divergent analysis Spending cuts (shortening costs) Total
1- poorly
2- enough
3- good
4- very good
5- excellent
No % No. % No. % No. % No. % 3 5.36 29 51.79 22 39.28 2 3.57 3 5.36 18 32.14 19 33.93 16 28.57 -
-
3 3
5.36 5.36
24 18
42.86 32.14
24 27
42.86 48.21
5 8
8.92 14.29
3
5.36
3
5.36
18
32.14
11
19.64
21
37.50
-
-
3
5.36
21
37.50
22
39.28
10
17.86
-
-
6 3
10.71 5.36
18 24
32.14 42.86
30 27
53.58 48.21
2 2
3.57 3.57
-
-
6
10.71
26
46.43
19
33.93
5
8.93
3
0.60
33
6.55
196
38.88
201
39.88
71
14.09
From the data can be clearly observed that IT has; not affected only on the activity in the accounting system but in all activities taken as a variable independent, variable dependent that in our case appears accounting. If we collect total column 3, 4 and 5 we have the result:
196 201 71 468 0.9285 189 504
%ofrespende nt sin positivean swers 0.9285 * 100 92 .85
92.85 % of respondents believe that IT has a positive impact on the accounting system in the aforementioned activities. The remaining of 6.55 % believe that IT has sufficient influence in the accounting system and 0.6 % believe that IT does not sufficiently influence in the accounting system in the CBK. From the data presented in table 3 we can came to a conclusion, the system of accounting has helped in activities such as budgeting, financial statements, budget control, cost control, performance measurement, divergent analyzes and cut costs of the CBK. This means that accountants of the CBK are less involved in the activities of data entry and more are included in compilations
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and improve the processes of financial institutions and the need to be "brain" of information technology. So, IT has contribute in accounting system making it more efficient, more responsive to problems, more accuracy in forecasting, better understanding of the behavior of costs, better decision making, etc. Table 4. Verification of the hypothesis Obs. 5 4 3 2 1 Total
100.8 100.8 100.8 100.8 100.8 504
71 201 196 33 3
s2
( ) -29.8 100.2 95.2 -67.8 -97.8 0
( )2 888.04 10040.04 9063.04 4596.84 9564.84 34152.8
504 100.8 n 5
( ) 34152.8 34152.8 8538.2 n 1 5 1 4
S2 shows the variance, the smaller is the variance, the data tend to be very close to X ( expected value ) and thus with each other, in our case the variance is 8538.2, which means that the data are spread out average, i.e. from one another . The results shows that the impact of IT in the accounting system in the activities mentioned above (Table 3) is high. Standard deviation is calculated as ( ) In our case the standard deviation is applied to each activity accounting in Table 3 and as a whole to measured average responds. Standard deviation is also known as the critical point and is used as a measure for the expected number. Based on the above data (Table 3) standard deviation is lower than the average in which case can be verified the hypothesis: "IT has a tremendous impact on the accounting system of the CBK activities as: budgeting, financial statements, budget control, cost control, performance measurement, performance forecasts quarterly/annual profit, profitability analysis, divergent analysis, cutting costs, etc.
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4. Challenges of IT in the accounting system Despite the numerous benefits that IT brings in our accounting system in practice, some of them are shown in the table above, this system is not remained without its challenges. The purpose of this section is to identify challenges / problems associated with applicable IT in accounting practices. This means that employees must have knowledge in IT to handle the system. However, in Table 5 we see that 14.29 % and 17.86% completely agree that the lack of expertise in IT is a challenge in the implementation of IT in the practice of accounting, while the rest of the respondents think the opposite (46.42% disagree and 8.93% completely disagree) and 12.5% declared neutral. According to these data we can conclude that the lack of expertise in IT is not a challenge to the application of the accounting practice. Part of this study are involved the software, some of these are modified or are common (general) related to functions performed by the institution. From this perspective, 16.07% and 37.5% of respondents declared that they fully agree that the adoption of software function that performs CBK is challenging in the accounting system and 35.71% were declared neutral. Thus, the majority of respondents agreed that adaptation of software is a challenge for accounting systems. This may be as a result of the function of the CBK which does not correspond to the functions that perform other financial institutions in Kosovo. One issue that was thought that is a challenge to the system of accounting were the high cost of purchasing and implementing the software, but according to the data in Table 5 of the respondents received a reply that this issue is not a challenge to CBK, 17.86 % fully agreed on this challenge and 53.57 % and 1.78 % were against (completely disagree), 8.93% declared neutral. Frequent breakdown of the IT system in the CBK is challenging for accounting? In this question, respondents gave the following answers: 41.08 % agree, neutral 32.14%, 19.64% disagree and 7.14% completely disagree. The high percentage of declarants indifferent and did not agree on the breakdown of the common system of IT may be the result of software applicable, installation of generators, electricity etc. which do not harm the frequency of the program and computer equipment. In general, the majority of respondents do not support the idea that the frequent breakdown of IT systems is a challenge for accounting in practice. Security of data and financial information seems disturbing to some respondents. 23.21% and 12.5% stated that they agree completely respectively agree that the challenge of IT's accounting system is the security of data and financial information, 14.29% disagree and 46.43% declared neutral. Challenge of IT 's on accounting practices by some respondents appear to be the system of internal control ,7.14% and 44.65% fully agreed respectively agreed on this issue, 37.50% indifferent, 5.36% disagreed and 5.36% completely disagreed. 9
From the result shown in the table can be concluded that IT's challenge in accounting seems to be the internal control system and software in accordance with the works of the Central Bank of Kosovo. Table 5. Challenges of IT on CBK accounting system Strongly Agree No. % Problems with 4 7.14 Internal control system Lack of IT 8 14.29 expertise Technology 9 16.07 (software) not suited to institution Cost of pur 10 17.86 chase an im plementati on Security of 13 23.21 date and financial information Frequent breakdown of systems
Agree
Indifferent / Disagree Neutral
Strongly Disagree
No. % 25 44.65
No. % 21 37.50
No. % 3 5.36
No. % 3 5.36
10
17.86
7
12.50
26
46.42
5
21
37.50
20
35.71
6
10.71
-
10
17.86
5
8.93
30
53.57
1
1.78
7
12.50
26
46.43
8
14.29
2
3.57
23
41.08
18
32.14
11
19.64
4
7.14
8.93
Table 6. Testing hypothesis of the study Variables
Obs. Mean
Std. Dev.
Min.
Max.
Problems with Internal control system 5 Lack of IT expertise 5
11.2 11.2
10.87198 8.467585
3 5
23 26
Technology (software) not suited to institution Cost of purchase an implementation Security of date and financial information Frequent breakdown of systems
4
14
7.615773
6
25
5 5
11.2 11.2
11.16692 9.148775
1 2
30 26
4
14
8.286535
4
23
Observation in this case has to do with options utilized in the survey for each issue raised. Standard deviation shown in the third column for each activity is lower than the average and it can be verified hypotheses raised in this case. 10
5. Conclusions According to research conducted CBK staff, information technology has led to a satisfactory level in the accounting system of the Central Bank of Kosovo. Through this study confirm the hypothesis, moreover, the study conducted shows that IT has also affected other systems such as the control. From the study we can conclude that: Information technology has no significant effect on the accounting system in practice in the Central Bank of the Republic of Kosovo. The impact of IT in accounting system of the CBK activities such as budgeting, budget control, cost control, performance measurement, forecasting performance in quarterly / annual analysis of profitability, analysis divergent, spending cuts is extraordinary and these data without fundamental changes made in detail, accurately and quickly. IT has created opportunity CBK-s to develop and use of accounting software to record and track all relevant transactions in real time and accurately. Besides this, IT has helped accounting system to: timely delivery of financial statements, preparation of financial statements, creating new paths to obtain financial information, building capacity in data storage and reduce clerical work. After the results obtained from this study, it is quite obvious that IT has created a new opportunity to improve the accounting system in the CBK. 6. Bibliography 1. Davenport, T.H.(1998), “Putting the enterprise into the enterprise system”, Harvard Business Review, fq.127 2. Hope, J. and Fraser, R. (2001), “Beyond budgeting: White paper”, CAM I Beyond Budgeting Round Table; fq.5-6 3. Kaplan, R.S.& Cooper, R.(1998), “Cost & Effect: Using Integrated Cost Systems to Drive Profitability and Performance” Harvard Business School; Boston; fq275, 279 4. Ahmeti, S. (2011) “Management Accounting”, Prishtinë 5. Luboteni, G. (2013) “Bank and bussines banking”, Prishtinë 6. Ahmeti.S, Hoti.A, Alshiqi.S. (2014), “Analysis of Financial Performance in the Banking System in Kosovo-the Period 2006-2012”, Journal of Knowledge Management, Economics and Information Technology , IV (2), 7. Statistical Bulletin Nr. 10, Central Bank of Kosova, 2010. 8. Financial Stability Report Nr. 10, 1,2,3, Central Bank of Kosova (2011, 2012) 9. Annual reports of commercial banks for periods of Kosovo, 2006-2012. 10. Foreign Trade Statistics, Economic Statistics, (serie 3, ASK, 2013).
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