EFFECT OF ICT ADOPTION ONFINANCIAL REPORTING EFFICIENCY IN

KENYA: A STUDY OF PUBLIC ENTERPRISES IN TANA RIVER COUNTY

BY

OJWANDO EVANS ACHAR

CPA(k); BBM(Hons) Mu

A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS
MANAGEMENT

RONGO UNIVERSITY COLLEGE

CONSTITUENT COLLEGE OF MOI UNIVERSITY

NOVEMBER 2014
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DECRARATION

This thesis is my original work and has not been submitted for a degree in any other

university. No part of this thesis may be reproduced without the prior written permission

of the author and/or Moi University

EVANS OJWANDO ACHAR …………………………….DATE: …………….

Reg. No. MBM/1005/12

SUPERVISORS
This thesis has been submitted for examination with our approval as the Moi University
Supervisors

Prof. RICHARD NYANGOSI ………………………… DATE……………….

Rongo University College, Rongo, Kenya

Dr. CHARLES LAGAT ………………………………… DATE……………

Moi University, Eldoret, Kenya
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DEDICATION

This thesis is dedicated to my dear mother Agnes for her intimate love, and constant

prayers; my late father Joel for his blessings; Bishop K’okombo for his spiritual

nourishment and prayers; my two lovely wives Pamela and Linet for their love,

encouragements, care and endurance; my sweet daughters Winnie, Hellen, Juliet, Sheryl,

Brenda and Sarafina for their patience and understanding; and finally to my brave sons

Denish, Victor, Felix and Willis for cheering me up during the period of my study.

MAY GOD BLESS YOU ABUNDANTLY

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ABSTRACT

The purpose of this study was to investigate the effect of ICT adoption on financial
reporting efficiency in Kenya, a case of public enterprises of Tana River County.
Business organizations worldwide have come under immense pressure to maximize
efficiencies as they reduce their spending in order to make profits in order to remain
competitive. However the recent advancement in technology has seen numerous changes
in styles of competition, production environment, and cost structures of firms. These
changes have been advocated as imposing pressures for changes in operational strategies
and financial reporting in order to improve overall firm efficiency. Firms that don’t yield
to these pressures end up being faced out of the market. In Kenya this pressure resulted in
the exit of giant public enterprises while many more continue to register dismal
performance due to high operational costs, inefficient service delivery suboptimal
practices, ambiguous systems/processes and inadequate internal controls. While it is
believed that use of ICT improves efficiency at firm level, there is no consistent empirical
evidence to support that belief. Prior study results give mixed findings with some
supporting while others oppose, hence the need for this study. The objectives of the study
were to;- establish the effect of IS adoption on financial reporting efficiency, examine the
effect of MRP on financial reporting efficiency, analyze effect of ERP usage on financial
reporting efficiency, explore effect of e-business on financial reporting efficiency and
determine the challenges facing ICT adoption in financial reporting in the context of
public enterprises. The study was supported by several theories relating to individual
variables including Technology acceptance model (TAM), Diffusion of innovation theory
(DOI), Resource based view (RBV) and information richness theory (IRT). Descriptive
census survey method was used in which all the 200 accountants and auditors working in
public enterprises in Tana River County were given questionnaires which they filled and
handed back, The data was then organized analyzed and interpreted using Statistical
Package for Social Sciences (SPSS ver. 18.0). Multiple regression analysis was used to
test the hypothesized cause-effect relationship between ICT adoption and efficiency in
financial reporting. Results were presented in charts, graphs and tables. The study model
established that financial reporting efficiency is a function of adoption of IS, MRP
practices, ERP usage and to a minor level, e-business. The researcher therefore suggested
the following standardized multiple regression model for prediction of financial reporting
efficiency in public enterprises in Tana River County; FRE = 0.202IS + 0.106E-Business
+ 0.222MRP + 0.691ERP. Based on these findings, the study concluded that ICT
adoption significantly influences efficiency in financial reporting in public enterprises of
Tana River County. Consequently it is recommended that the government should enhance
use of ICT in financial reporting in order to improve general efficiency of public
enterprises in Kenya.
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TABLE OF CONTENTS

DECRARATION.................................................................................................................ii
DEDICATION....................................................................................................................iii
ABSTRACT.......................................................................................................................iv
TABLE OF CONTENTS.....................................................................................................v
LIST OF FIGURES............................................................................................................ix
LIST OF TABLES...............................................................................................................x
ABBREVIATIONS AND ACRONYMS............................................................................xi
DEFINITION OF OPERATIONAL TERMS....................................................................xii
ACKNOWLEDGEMENT................................................................................................xiii
CHAPTER ONE..................................................................................................................1
INTRODUCTION...............................................................................................................1
1.1 Overview...............................................................................................................1
1.2 Background of the study.......................................................................................1
1.3 Statement of the problem......................................................................................6
1.4 Purpose of the study..............................................................................................7
1.5 Objectives of the study..........................................................................................7
1.6 Research Hypotheses............................................................................................7
1.7 Significance of the study.......................................................................................8
1.8 Scope of the study.................................................................................................9
1.9 Limitations of the study........................................................................................9
CHAPTER TWO...............................................................................................................11
LITERATURE REVIEW...................................................................................................11
2.1 Overview.............................................................................................................11
2.2 ICT Adoption in Financial Reporting..................................................................11
2.2.1 Information System (IS)..............................................................................15
2.2.2 E-business....................................................................................................16
2.2.2.1 Internet..........................................................................................................17
2.2.2.2 Intranet...........................................................................................................18
2.2.2.3 Website...........................................................................................................19
2.2.3 Material Requirements Planning (MRP).....................................................19
2.2.4 Enterprise Resource Planning (ERP)...........................................................20
2.3 Financial Reporting Efficiency........................................................................22
2.3.1 Efficient financial reporting dissemination..................................................24
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2.3.1.1 Timeliness......................................................................................................24
2.3.1.2 Comparability................................................................................................24
2.3.1.3 Consistency and Accuracy.............................................................................25
2.3.2 Adequate financial information integration.................................................25
2.3.2.1 Completeness and Understandability............................................................26
2.3.3 Accounting information trustworthiness.....................................................26
2.3.3.1 Reliability and Relevance..............................................................................26
2.4 Theoretical Framework.......................................................................................27
2.4.1 Technology Acceptance Model (TAM).......................................................27
2.4.2 Diffusion of Innovation Theory (DOI)........................................................28
2.4.3 Resource based view (RBV) and Information Richness Theory (IRT)...........28
2.5 Conceptual Framework.......................................................................................29
2.5.1 Independent Variable...................................................................................30
2.5.2 Dependent Variable......................................................................................30
2.6 Challenges Facing ICT adoption in Financial Reporting....................................31
2.7 Literature Summary and Research Gap..............................................................32
CHAPTER THREE...........................................................................................................34
RESEARCH METHODOLOGY......................................................................................34
3.1 Overview.............................................................................................................34
3.2 Research Design..................................................................................................34
3.3 Study area............................................................................................................35
3.4 Study Population and Sampling Design..............................................................35
3.5 Data Collection Instruments and Procedure........................................................36
3.7 Data analysis and Presentation............................................................................38
3.8 Ethical Considerations of the study.......................................................................39
CHAPTER FOUR.............................................................................................................40
DATA ANALYSIS, PRESENTATION, INTERPRETATION ANDDISCUSSION..........40
4.1 Overview.............................................................................................................40
4.2 Data Screening and Cleaning..............................................................................40
4.2.1 Univariate Outliers.......................................................................................40
4.3 Normality of the study variables.........................................................................41
4.3.1 Assumption of Linearity..............................................................................41
4.3.2 Assumption of Homogeneity of variances..................................................42
4.4 The demographic Profile of the Respondents.....................................................43
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4.4.1 Age of the Respondents...............................................................................43

4.4.2 Respondents’ Distribution by Gender..........................................................44
4.4.3 Respondents’ level of Education..................................................................45
4.4.4 Respondents’ Working Experience..............................................................46
4.4.5 Distribution of respondents by professional Qualification..........................47
4.5 Descriptive statistics of the study variables........................................................48
4.5.1 Information Systems (IS) Adoption.............................................................48
4.5.1.1Frequency of Computer Use...........................................................................48
4.5.1.2 Preferred ICT Platform.................................................................................49
4.5.1.3 Accounting Software Used...........................................................................50
4.5.2 E-Business...................................................................................................52
4.5.3 Material Requirement Planning (MRP).......................................................53
4.5.4 Enterprise Resource Planning (ERP)...........................................................54
4.5.5 Financial Reporting Efficiency....................................................................55
4.6 Hypotheses testing..............................................................................................57
4.6.1 Testing the effect of IS adoption on financial reporting efficiency.............58
4.6.2 Testing the Effect of E-Business on Financial Reporting Efficiency in
Public Enterprises in Tana River County...................................................................59
4.6.3 Testing the effect of MRP on Financial Reporting Efficiency in Public
Enterprises in Tana River County..............................................................................60
4.6.4 Testing the Effect of ERP Usage on Financial Reporting Efficiency in
Public Enterprises in Tana River County...................................................................60
4.7 Study Model........................................................................................................61
4.8 Challenges Facing ICT adoption in Financial Reporting....................................61
4. 9 Discussion of Findings....................................................................................62
4.9.1 IS adoption and financial reporting efficiency............................................62
4.9.2 E-Business and Financial reporting efficiency............................................63
4.9.3 MRP and financial reporting efficiency...........................................................64
4.9.4: ERPand financial reporting efficiency.............................................................64
4.9.5: Challenges Facing ICT adoption in Financial Reporting................................65
CHAPTER FIVE...............................................................................................................67
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS.......................................67
5.1 Introduction.........................................................................................................67
5.2 Summary of the Findings....................................................................................67
5.2.1 Effect of IS adoption on financial reporting efficiency...............................67
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5.2.2 Effect of e-business on financial reporting efficiency.....................................68

5.2.3 Effect of MRP practices on financial reporting...........................................68
5.2.4 Effect of ERP usage on financial reporting.................................................68
5.2.5 Challenges Facing ICT adoption in Financial Reporting............................69
5.3 Conclusions.........................................................................................................69
5.4 Recommendations...............................................................................................70
5.4.1 Recommendations for theory and practice......................................................70
5.4.2 Recommendations for future research.........................................................71
REFERENCES..................................................................................................................72
APPENDIX A: LETTER OF INTRODUCTION..........................................................81
APPENDIX B – QUESTIONNAIRE..........................................................................82
APPENDIX C: AUTHORITY TO CONDUCT RESEARCH......................................86
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LIST OF FIGURES

Figure 2.1: Conceptual Framework ……………………………………………………

30
Figure 4.1: Respondent’s Age Distribution….…………………………………………

44

Figure 4.2: Gender Distribution of Respondent’s………………………………………

45

Figure 4.3: Distribution of Respondent’s Level of Education….………………………

46

Figure 4.4: Distribution of Respondent’s working experience….……………………..

47

Figure 5.1: Map of Tana River County…………………………………………………

87
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LIST OF TABLES

Table 3.1: Accounts and Audit Staff in Public Enterprises – Tana River County
……………………………………………………………………………………36

Table 4.1: Testing for Normality………………………………………...……… 41

Table 4.2: Testing for Linearity Requirements..….……….……………...……… 42

Table 4.3: Testing for Homogeneity of variables………….……………...……… 42

Table 4.4: Respondent’s Professional Qualification…...……………...…………. 48

Table 4.5: Number of Computers Used for Reporting Purposes……..…………. 49

Table 4.6: ICT platform preference…………………….……………...…………. 50

Table 4.7: Accounting Software used……….………….……………...…….……. 51

Table 4.8: Extent to which application of E-Business are Practiced among Public
Enterprise in Tana River County…………………………………………... ………52

Table 4.9: Extent of MRP Practices among Public Enterprise in Tana River
County………………………………………………………………………....…54

Table 4.10:Extent of ERP Practices among Public Enterprise in Tana River

County………………………………………………………………………….. 55

Table 4.11:Extent to which Financial Reporting Efficiency is achieved within

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Public Enterprise in Tana River County………............................................. 56

Table 4.12:Regression Model Summary for financial reporting efficiency…… 57

Table 4.13:Multiple Regression Coefficients for financial reporting

efficiency………………………………………………………………..………..59

Table 4.14:Challenges Facing ICT Adoption in financial reporting among

Public Enterprise inTana River County………………..……….………………...62
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ABBREVIATIONS AND ACRONYMS

ICT – Information Communication Technology

IT – Information Technology

IS – Information System

AICPA – AmericanInstitute of Certified Public Accountants

MRP – Material resource planning

MRPII – Manufacturing resource planning

ERP – EnterpriseResource Planning

ATM – Automated Teller Machine

E-Accounting – Electronic Accounting

E-Business – Electronic Business

ICPAK– Instituteof Certified Accountants of Kenya

OECD –Organisation for Economic Co-operation and Development

TAM – TechnologyAcceptance Model

AIS – AccountingInformation System

SAP – StructuralAdjusted Program

TAM –TechnologyAcceptance Model

IASB – International Accounting Standards Board

ROA – Return on Assets

ROS – Return on Sales

ROI – Return on Investment

ATO – Asset Turn Over

ROE – Return on Equity

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DEFINITION OF OPERATIONAL TERMS

The following terms have the following operational meanings as used in this study;

Auditing: is the examination and verification of a company’s financial and accounting

records and supporting documents by a professional so as to give his profound
opinion as to the truth and fairness of the financial statements of that company.

Public Enterprise (State-Owned Enterprise-SOE))– Alegal entity that is created by the

government in order to partake in commercial activities on its behalf.

Cloud computing:refers to a computer system,which, involves the hosting of real-time

services through the internet.

Cloud computing accounting software: is internationally availed software to support

many handlers of accounting data in large scale through internet.

ETail: is a sub-category of e-Commerce (electronic commerce) that deals with Online

Retail.

Efficiency: isthe optimum use of input resources in the production of maximum output.

Adoption: is the degree of acceptance and use of a new idea, practice, technology or
object by an individual or other unit

Financial reporting: is the communication of financial information, like financial

statements, to both internal and external stakeholders usually by an accountant.
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ACKNOWLEDGEMENT

The success of this thesis was due to the combined effort of many individuals.

First I wish to sincerely thank my supervisors Prof. Nyangosi and Dr. Lagat for guiding

me throughout this thesis writing.

Secondly, my special thanks go to the District Accountant, Tana Delta, Mr. Jason K.

Ndung’u for his encouragements, support and understanding. Many thanks also go to the

Tana Delta Sub-county Commissioner Mr. Mike Kimoko, and my workmates at Tana

Delta District Treasury for their moral support during the study period.

Last but not least I wish to thank CDF Garsen and other donors for their financial support

that funded this thesis.

Finally, special thanks go to friends, class mates and family members namely;- my

mother Agnes; wives Pamela and Linet; daughters Winnie, Hellen Juliet, Sheryl, Brenda

and Sarafina and sons Denish, Victor, Felix and Willis for their understanding, patience,

endurance and continued encouragements, appreciation and love while undertaking this

study.

Thank you!
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CHAPTER ONE

INTRODUCTION

1.1 Overview

This chapter covers the background of study, statement of study, justification of study,

objectives of study, research hypotheses, significance of study, scope of study and

limitations of the study.

1.2 Background of the study

The purpose of this study was to investigate the effect of ICT adoption on financial

reporting efficiency in Kenya.More specifically, the study examined the effect of ICT

adoption, including its contextual significance, implications and threats on efficiency in

financial reporting in public enterprises of Tana River County.

Despite the growing number of studies on the adoption of information communication

technology (ICT) and its effect in financial reporting efficiency, the available literature

still suggests need for advancing understanding of the key factors experienced in different

contexts around the world. In addition, this area of study is still under-researched in

African settings. Most of the existing literature represents other contexts in countries and

regions of the world such as Europe, USA, Asia and Australia, while far less research in

this area has been carried out in African contexts,(Ngplains 2002). Rom & Rohde, (2007)

also hold the view that traditional, researches on ICT focused majorly on the study of

information processing, on computer systems security and on the development of new

systems – leaving for study the relationship between ICT and financial reporting. He

acknowledges that “a few studies that have, in some way, covered this relationship fall
 2

short due to their focus on outdated tools and undetailed analysis” (Rom & Rohde, 2007).

Besides, the recent advancement in technology has seen numerous changes in styles of

competition, production environment, and cost structures of firms (Dixon, 1998). These

changes have been advocated as imposing pressures for changes in operational strategies

and financial reporting needs to meet the changing needs of managers, report profitability

and keep the firm on competitive advantage.Firms that don’t yield to these pressures end

up being faced out of the market (Xiao et al 1996).

Financial reporting must therefore be efficient in order to cope with the changing

technology and the business scenario which has enlarged into a global economic village

called e-business. E-business is “the sharing of business information, maintaining

business relationships, and conducting business transactions by means of

telecommunications networks” (Zwass, 1996).

ICT has been defined as ‘any technology used to support information gathering,

processing, distribution and use’ (Beckinsale and Ram, 2006). The definition used in this

study classifies ICT into information technologies, telecommunications technologies and

networking technologies (Nicol, 2003). This covers all forms of technologies such as

computers, Internet, websites as well as fixed-line telephones, mobile phones and other

wireless communications devices, networks, broadband and various specialized devices

(Manueliet al, 2007).

From a stream of ICT literature that focuses on the financial reporting, this research takes

the ICT adoption approach to advance the understanding of technology uptake among

Accountants in developing nations within Africa(Beckinsale and Ram, 2006; Zappala and
 3

Gray, 2006; Manueli et al., 2007). ICT as used in this study also includes expansive

meaning of information technology (IT).

Prior to the advent of personal computers, businesses were limited to two methods for

keeping track of financial data. One method was to install a mainframe computer and set

up a data processing department. This approach had its own difficulties including, the

cost of mainframe computer which was very high and also many qualified ICT personnel

were required to handle the various tasks involved in processing the accounting data. In

most cases, large corporations were the only organizations that could afford such an

expensive system. The other option was to have a manual accounting system. Such a

system consisted of paper ledgers, typewriters and calculators. Each customer or vendor

was on a separate ledger card which contained all the transactions for that company.

Typewriters were used to type invoices and cheques, while all calculations were

performed using calculators. The key drawback of the manual system was that it was

possible for errors to be introduced into the system and that the error could go undetected

for quite some time. Most firms had no option but to adopt manual systems since the

mainframe accounting system was not within their means. (Tavakolian, 1995).

However, with the introduction of PC-based Accounting Systems, both the computer

hardware and the accounting software have become cheaper, creating an opportunity for

almost all business enterprises including SMEs to adopt e-accounting or accounting

information system (AIS). Nevertheless, there are several factors that determine whether

an organization adopts e-accounting or not. Such factors have created a division between

e-accounting adopters and non-adopters. Fontinelle, (2011) noted that “It is generally

believed that growth within Accounting Information System (AIS) come alive with the
 4

advent of Information and Communication Technology (ICT), with notable products

like;- Enterprise Resource Planning (ERP) system, software and ancillary equipment such

as Automated Teller Machine (ATM), debit cards, E-commerce, modern computer

hardware and softwares, database, internet, intranet, Extranet, Telecommunication,

Oracle, Structural Adjusted Program (SAP), Peachtree, Tax Software (Turbo Tax),

Statistical Package for Social Sciences (SPSS), and lately, cloud accounting”.

Financial reporting is defined by accounting dictionary as the communication of financial

information, like financial statements, to both internal and external stakeholders usually

by an accountant. From this definition financial reporting bears the same meaning as

accountancy which has also been defined by the same dictionary as the practice of

preparing and communicating financial statements about a particular business body to its

users such as shareholders and managers. The definition also marches with accounting

practice which has been defined as the practical application of accounting policies within

a business, as distinct from accounting theory. Hence the term financial reporting will be

used in this study interchangeably with accountancy and accounting practice to mean one

and the same thing. This definition should however not be confused with public practice

accounting, where accounting firms provide accounting, taxation or auditing services to

other organisations or individuals, as this is outside the scope of this study.

Traditionally, financial reporting involved preparing accounts and reporting on assets and

liabilities, revenue and expenditures/sales to stakeholders. However modern financial

reporting can be viewed as a specialized information system (IS) known as Accounting

Information System (AIS) aimed at recognizing, measuring, recording, processing and

reporting economic events affecting business entities, sending, receiving, storing or

 5

otherwise processing electronic communications. In this study the terms E-Accounting

(EA), Information Technology Accounting (ITA) Accounting Information System (AIS)

and Financial Information System (FIS) are used interchangeably to refer to any

accounting system that depends on ICT for performing its information system functions.

Accounting Information System (AIS) began as electronic data process (EDP) and

developed largely as a result of the rise in technology usage in accounting system, the

need for ICT control, and the role of computers on the ability to perform attestation

services. This increased the use of computers in businesses and with it came the need for

accountants to become familiar with EDP concepts in business through rigorous

retraining. Since then, ICT has diverged accounting practice significantly from its initial

primary role of processing accounting transactions and supporting financial reporting.

Efficiency is a borrowed term from economics and is defined as the relationship between

inputs and outputs. Inputs can be classified as, physical, human, financial knowledge and

information. An efficient activity is one in which an optimum output is obtained from a

given input (Nwankwo, 1981; Owolabi, 1996). Efficiency in business institutions was

defined as the optimum use of input resources in the production of maximum

output(Hermes et al 2011). The measure should be viewed in terms of how an

organization uses its resources, such as available funding and staff, in order to achieve its

objectives. An organization applies these resources in such a way as to maximize their

contribution to organization’s outputs.

Financial reporting efficiency was viewed by Barney (2001) as contingent on

competitiveness of accounting practice skills and resources; he maintained that

 6

accounting practice resources and skills are considered a success when they help the

accountant to formulate and developed efficiency, effectiveness, and economy

(Bharadwaj et al., 1993). Financial reporting efficiency in public enterprises can be

measured by looking at its output and how it has overcome the inefficiencies which

affected the relevant reporting system before implementation of ICT. Such output

includes efficient financial reporting dissemination, adequate financial information

integration and accounting information trustworthiness.

1.3 Statement of the problem

Business organizations worldwide have come under immense pressure to maximize

efficiencies as they reduce their spending in order to make profits in order to remain

competitive(Milis and Mercken, 2003). However the recent advancement in technology

has seen numerous changes in styles of competition, production environment, and cost

structures of firms. These changes have been advocated as imposing pressures for

changes in operational strategies and financial reporting in order to improve overall firm

efficiency. Firms that don’t yield to these pressures end up being faced out of the

market.In Kenya this pressure resulted in the exit of giant public enterprises like Kisumu

Cotton Mills (KICOMI), Kenya Railwaysand Kenya Cooperative Creameries (KCC)

while many more continue to register dismal performance due to high operational costs,

inefficient service deliverysuboptimal practices, ambiguous systems/processes and

inadequate internal controls.(Mwaura, 2007).While it is believed that use of ICT

improves efficiency at firm level, there is no consistent empirical evidence to support that

belief. Prior study results give mixed findings with some supporting while others oppose,

hence the need for this study.

 7

1.4 Purpose of the study

The purpose of this study was to investigate the effect of ICT adoption on financial

reporting efficiency in Public Enterprises in Tana River County, Kenya.

1.5 Objectives of the study

The specific objectives of the study were to;-

1. Establish the effect of Information System (IS) adoption on financial reporting

efficiency inpublic enterprises of Tana River County

2. Evaluate the effect of e-business on financial reporting efficiency in public

enterprises of Tana River County

3. Examine the effect of Material Requirements Planning (MRP) on financial

reporting efficiency in public enterprises of Tana River County

4. Analyze effect of Enterprise Resource Planning (ERP) usage on financial

reporting efficiency in public enterprises of Tana River County

5. Determine the Challenges Facing ICT adoption in Financial Reporting in public

enterprises of Tana River County

1.6 Research Hypotheses

The following null hypotheses guided this study

H01: Information System (IS) adoption has no significant effect on financial

reporting efficiency

H02: Material Requirements Planning (MRP) has no significant effect on financial

reporting efficiency
 8

H03: Enterprise Resource Planning (ERP)has no significant effect on financial

reporting efficiency

H04: E-business has no significant effect on financial reporting efficiency

Hypothesis was used because the study is analytical in nature.

1.7 Significance of the study

In the context of practical contribution, the result of this study is expected to provide

valuable contribution not only to firms’ managements but also to the learning institutions

and academics who are concerned with imparting relevant skills to their accounting

students and preparing them for new technology based accounting. The results may also

be useful to the standards setting body – International Accounting Standards Board

(IASB) in setting new guides and standards, practicing accountants and auditing firms to

improve skills of their existing and potential employees and also to select the right

application software to employ in carrying out accounting/audit tasks, business

managements and governments in implementing modern accounting practices that suite

the technological world, investors who will be able to know the level of reliability they

can place on a firm’s financial statements and finally researchers and academicians for

more research work in this area of study. It is also expected add value to the body of

knowledge.

1.8 Scope of the study

The study targeted staff working in the accounting and audit departments of public

enterprises in Tana River County, including state agencies, parastatals and government
 9

departments where information technology platforms host computerized accounting

systems and controls.

The study was done in a period of eight months.

Even though use of ICT covers wide aspects ranging from automation, profession, theory,

statutory obligations, capital investment and a host of several others factors, this work

was restricted to cover the effect of ICT adoption within the context of financial reporting

only. It also covered use of relevant ICT applications and systems that have a bearing on

financial reporting. The study also covered ICT environment that govern the preparation

and presentation of financial statements, by an accountant, distinct from the public

accounting practice. It also serves as a guide for further research work on the field of ICT

effect on accounting practice.

1.9 Limitations of the study

The subject under study is very volatile as ICT keeps changing day and night. This makes

it very difficult to arrive at a logical conclusion. The work therefore suffered from the

problem of concluding on historical status regarding the effect of ICT adoption on

financial reporting. To overcome this problem, the researcher has made a

recommendation for future studies to be conducted at intervals and also to organize the

studies under a theory so that findings can be generalized and the knowledge derived

used to predict future as well as current effects. The study was also limited to only one

out of 47 counties, which was not representative enough of the whole country. The

researcher has therefore recommended for a nation-wide research to be conducted in

future.
10
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CHAPTER TWO

LITERATURE REVIEW

2.1 Overview

This chapter will discuss literature relating to the effect of ICT adoption on financial

reporting efficiency. For a better understanding of the problem, a revisit of previous

studies was outlined as a basis for defining research hypothesis and objectives of study.It

specifically reviewed ICT adoption in financial Reporting,IS adoption,E-

business(internet, intranet, website),Material requirements planning (MRP),Enterprise

resource planning (ERP),Financial Reporting Efficiency (Efficient Financial Reporting

Dissemination, Adequate Financial Information Integration, Accounting information

trustworthiness), Theoretical Framework (Technology Acceptance Model, Diffusion of

Innovation Theory, Resource Based View and Information Richness Theory), Conceptual

Framework andChallenges Facing ICT adoption in Financial Reporting. The chapter also

covers Literature summary and Research gap,

2.2 ICT Adoption in Financial Reporting

ICT adoption is the acceptance/internalization and usage of information and

communication technology by individuals and business firms with a belief that it is

among the main alternatives for cost reduction in an organization. ICT adoption in any

business firm has proved to be beneficial to both firms and customers, as it plays a

significant role in reduction of operational inefficiency in an organization as well as

improvement in its decision making (Krishnaveni&Meenakumari, 2010). ICT is an

essential tool for efficient administration of an organization, and for better delivery of
 12

services to clients as its adoption improves the supply of timely and accurate financial

information, reduce the cost of production due to better access to market information and

facilitates organizational flexibility, which results into ‘improved product quality’

(Majumdar et al; Apulu&Lathan, 2010)

ICT adoption and its usage in financial reporting has also proved beneficial to the

accountants and management of organizations as it increases the supply of information

for decision making, facilitates easy dissemination of financial information within and

without the organization which in turn reduces the time constraints in accessing the

required information and monitoring activities (Spanos et al, 2002). ICT adoption also

results into increased organizational capability and improved performance as a result of

low operating costs, improved coordination, decreased inefficiency and uncertainty as

well as increases in revenues (Hengst& Sol, 2001; Jimenez-Zarco et al, (2006). ICT

adoption is also beneficial as it improves information accessibility on customers and

provides effective means of customer service delivery. “With improved ICT uses in

organization, customers can easy acquire goods and services online and easily access

services and product information online, communicate with organizations easily which in

turn brings customer satisfaction on services offered by the organization” (Melville et al,

2004).

The information stimulates the creation of new knowledge by giving firms and innovators

fast access to knowledge. Lefebvre, (1996) concluded that ICT adoption in financial

reporting brings a host of other benefits including saving time and space in the sending as

well as retrieving of information both within and across diverse organizations using cloud

accounting; providing faster response to market needs and allowing more flexibility in
 13

system and product design; production and equipment delivery; and, facilitation of

training of existing staff on new and sophisticated equipments. Further he concluded that

ICT adoption has also leads to acquisition of additional capabilities by the employees in

these organizations, gives employees sociological and psychological impetus at the

workplace, improves work-group effectiveness, organizational climate, job satisfaction,

personal growth and accomplishment.

Granlund, (2007) however acknowledges that even although ICT plays an important role

in the field of financial reporting, the relationship between ICT and accounting has not

been studied thoroughly well. He also states that, accountants are reluctant to adopt ICT

in financial reporting due its dynamic nature, even though it makes work easier, faster

and cleaner”.

Banda, (2012), looked at the adoption of ICT and its impact on performance financial

reporting in organizations and concluded that there exists positive relationship and a fair

use of ICT in business process automation resulting into increased staff productivity,

reduced transaction costs and growth.

Shanker (2008) in his study concluded that ICT adoption by business institutions

improves efficiency as it assists in reduction of transaction costs, overcome the

constraints of distance by cutting across geographic boundaries thereby assisting to

improve performance and coordination of activities within organizational boundaries. He

notes that financial reports, like cash flow statements, income statements, statement of

affairs, market share reports and departmental profit and loss, have also been improved in

quality and are now more accessible with computerized system. Importantly,
 14

computerized Financial reporting systems allow accountants to process large amounts of

data and produce financial information quicker, cheaper and more efficient. He however

noted that, since ICT was introduced in accounting profession, accountants have only

automated existing processes rather than envisioning how ICT could be used to conduct

business in new and innovative ways, adding that ICT has also led to more transparency

in organizations since it enables networking and information sharing that leads to

demands for greater openness and transparency (Shanker, 2008).

Deloitte’s third-quarter 2012 CFO Signals survey indicated that, nearly half of CFOs

reported that their ICT systems do not adapt well to changes in business strategy, tactics

and/or scale, and only about 40 percent felt positive about their ability to provide

information in ways that reveal relevant business insights and facilitate decision-making”

(Deloitte, 2012)

In the Kenyan perspective, very few studies in this specific area of study have been

carried out and published. A study by Peterson et al (1996) on effect of computers on the

accounting systems found that, there is no significant effect, and that computers only

helped to strengthen the manual accounts and not efficiency. Nganga, &Mwachofi,

(2013), assert that ICT fuels the greatest wave of technical innovation currently spreading

across the globe, affecting new areas of social and economic activity, adding that

“Unsurprisingly, financial businesses everywhere have been in the throes of

organizational changes and innovation based on new possibilities opened up by ICT”

Nganga, (2013).
 15

2.2.1 Information System (IS)

An information system (IS) is a computerized database designed to accept, store, process,

transform, make useful, and analyze data and to report results, usually on a regular,

ongoing basis. It is often construed as a larger system including not only the database and

the software and hardware used to manage it but also including the people using and

benefiting from it and also including all necessary manual and machine procedures and

communication systems.

A business information system was defined by Hooper and Page (1997) as “the sum of all

the tools, techniques and procedures used by the business to process data”. Fisher and

Kenny (2000) suggested that organisations infuse information systems into their

operations so as to enhance competitiveness and facilitate business growth and success.

On the other hand, Laudon and Laudon (2001) believed that information systems are

embedded in organisations and are the result of standard operating procedures, work

flows, politics, organisational culture and structure. Although organisations have different

information systems because they have varying information needs, they all strive for

competitive advantage through continuous improvement;

re-evaluation of the effectiveness and efficiency of their business information system

(Chaffey and Wood, 2005).

Kajogbola, (2004) concluded that adopting IS in financial reporting results in more

effective use of time and accurate calculation of data and faster communication of

financial results, hence contributes significantly to closing communication gaps, as

stakeholders can now communicate easier and faster, through E-mails, internet, intranet
 16

and websites, when accessing financial statements and relevant analysis for quick

financial decisions

2.2.2 E-business

E-business has been defined by Zwass, (1996) as the sharing of business information,

maintaining business relationships, and conducting business transactions by means of

telecommunications networks. E-business has the potential of generating tremendous new

wealth, mostly through entrepreneurial start-ups and corporate ventures. It is also

transforming the rules of competition for established businesses in unprecedented ways

(Amit&Zott, 2001).

The growth in global e-business is important primarily for the manner in which it is

altering the overall business environment and for the productivity-enhancing practices

that e-business enables (Amit&Zott, 2001; Krovi, 2001; Singh &Kundu, 2002). Though

national markets remain important, e-business alters the competitive landscape by

reducing the barriers between geographic markets (Zhao, 2006). The basis upon which

efficiency is determined is also alteredin some cases wherea limited number of firms gain

advantages by achieving previously unthinkable economies of scale, while in other cases

a reduction in essential fixed costs, and operational costs precipitates a substantial decline

in the minimum efficient scale, thereby allowing room for efficient financial reporting

and a greater number of competitors (Mansell, 2001). In addition to the impact on

competitive dynamics, e-business has enabled a broad set of productivity-enhancing

practices (Zhao, 2006).

 17

In a more dynamic sense, e-business enables a more rapid diffusion of existing

innovations and supports the development of further innovations, such as in the realm of

supply chain management. Although the ability of individual firms to reap extraordinary

profits was initially overestimated, there is little doubt that the social gains to e-business

innovations have been dramatic (Loch, Straub &Kamel, 2003). In relation to the use of

Information Communication Technologies (ICTs) in creating business value, electronic

commerce (e-commerce) is also considered as being synonymous to the term e-business

(Hinson &Boateng, 2007). These conceptualizations underpin the use of these

terminologies in this study.

Spanos et al (2003) hold the view that buyers and sellers are able to share information

and transfer goods across national borders with the use of ICT, which helps to increase

access to global supply chains. Jiménez-Zarco et al. (2006) also concluded that ICT plays

an important role in acquiring, creating and managing knowledge as it enables the

diffusion of organizational data that can be crucial for effective decision making and

control at all levels. They further noted that ICT helps in organizational planning and

improves organizational communication and flexibility.

2.2.2.1 Internet

Within a short period of less than 20 years, the Internet has grown from an essentially

academic facility to the backbone of the information superhighway. It is now widely used

in homes, schools, universities, business companies, and public sector organizations for a

variety of purposes. Scupola (2002) suggests that the Internet has increased the cost-
 18

effective flow of information via enabling more open communication systems which

further lead to a perfect information in the market and an efficient resource allocation.

The Internet appears particularly pertinent to financial reporting. First, it is a global

network which makes physical and national boundaries less meaningful and thus

provides a seamless information delivery channel. With the advent of World Wide Web, it

supports powerful hypertext and hypermedia presentations. In addition, the Internet is

capable of integration with other information and communication technologies. In

particular, its convergence with database technology opens many opportunities for

improving financial reporting. Indeed, the Internet is increasingly used for corporate

reporting (Lymer et al, 1999).

Studying the factors that influence internet adoption Taragola et al, (2001) concluded that

internet adoption is positively related to computer training of the firm manager, creativity

and innovation, growth, stabilization and negatively related to intrinsic objectives (being

independent). The conclusion of the study shows that factors determining e-accounting

adoption are actually different from those determining ICT adoption in general. If the

firm has low volume of activities, then the benefits of ICT adoption and usage is likely to

be outweighed by the associated costs,Taragola et al, (2001).

2.2.2.2 Intranet

Intranets are internal corporate networks that operate like Internet sites. They are not

public areas; they restrict access to staff or groups of staff. Organizations use them in

various ways. Some will build a site that simply holds corporate documents such as

policies, employment contracts, templates and key data. Others may add functionality
 19

like internal email, discussion boards, networked projects and access to application

systems. The core benefit of an Intranet is that it can centralize its functions, making it a

hub around which employees can work. Intranet technology can actually make your

company more efficient by enhancing team productivity, save you money, foster

communication, keep employees up-to-date, and enable one-stop access to important

documents.

2.2.2.3 Website

A websiteis a set of related web pages typically served from a single web domain. A

website is hosted on at least one web server, accessible via a network such as the Internet

or a private local area network through an Internet address known as a Uniform resource

locator. All publicly accessible websites collectively constitute the World Wide

Web.Website Performance Optimization (WPO) improves user and business metrics.

WPO also decreases operating costs by reducing hardware requirements and bandwidth,

which in turn reduces carbon footprint. It’s a win on all fronts. We’re going to see even

more case studies on the positive impact of performance optimization, and as a result, the

interest in learning more about this field will continue to grow.

http://www.stevesouders.com

2.2.3 Material Requirements Planning (MRP)

Material Requirements Planning (MRP) is a time-phased priority-planning technique that

calculates material requirements and schedules supply to meet demand across all

products and parts in one or more plants. It is used in production as well as inventory

control system to managemanufacturing processes. Most MRP systems are software-

 20

based operated on ICT platform, while it is possible to conduct MRP by hand as well.

Information Technology plays a major role in designing and implementing MRP systems

and processes as it provides information about manufacturing needs (linked with

customer demand) as well as information about inventory levels. MRP techniques focus

on optimizing inventory and are used to explode bills of material, calculate net material

requirements and plan future production.

Accounting software is critical to business and the MRP system can help in this area as

well. The accounting module will look at purchasing and inventory. The system will also

track cash flow and taxes to keep everything up to date. Maintaining accurate financial

statements is the key to running an efficient business. The best thing about the MRPII is

the way that all aspects of the business are now combined into one system. In order for

the system to work properly, there needs to be collaboration between IT staff and other

members of the organization. This system is a major upgrade over previous versions

because of the integration aspect, http://mrpsystem.org.

According to Moustakis V. (2000), MRP interfaces with otherorganizational information

resources. MRP is part of the organizational informationmanagement infrastructure which

contributes to the achievement ofbroader goals associated with quality, customer

satisfaction, just in time delivery and overall financial performance of the firm.

2.2.4 Enterprise Resource Planning (ERP)

ERP system is an integrated commercial software package that can perform all the

majorbusiness functions of an organization. These functions generally include all

elements of the value chain from rawmaterial purchases, inventory management,

 21

production, goods shipments, invoicing, accounting, and humanresource management

(Peslak, Subramanian, & Clayton, 2008). ERP is a complete project which

integratesinformation and business processes in order to enable the organization to share

their information among alldepartments (Swartz &Orgill, 2001) explained that ERP

system increases the productivity of human resources, finance, purchasing, inventory

control, supply chain and customer relationship management of business organizations.

The software infrastructure facilitates the flow of information among all functions within

the business. This infrastructure is developed on a common database that is responsible

for storing all information that essential for business operations and decision making.

Enterprise Resource Planning systems automate and integrate the core functionality of an

organization (Markus, Tanis, & Fenema, 2000).

Hunton, Lippincott, &Reck, (2003) compared the Financial Performance of ERP adopters

and Non-Adopters. The total sample size comprised 123 companies (63 ERP adopters

and 60 Non-adopters). They compared the results of ROA, ROS, ROI and ATO in

different periods of ERP pre-implementation (t-3 to t-1) and Post implementation (t+1to

t+3) for 3 years’ time. The study found that that return on assets (ROA), return on

investment (ROI), and asset turnover (ATO) were significantly better over a 3-year period

for adopters, as compared to non-adopters.

Sale (2005) compared the actual with the expected performance to examine the impact of

ERP on financial accounting measures. Author used case study of Texas Instruments, Inc.

where ERP system is functional. Author Collected secondary financial data of ROI, ROE,

ROA, Employees, Productivity and Inventory from 1998 to 2002.The study found

negative values of ROE, ROI, ROA after two years of implementation of ERP system
 22

while study also found increase in organizational productivity post implantation period.

Author concluded that ERP system do not improve financial performance immediately

after its installation in organization.

2.3 Financial Reporting Efficiency

Financial reporting is used in this study in the context of practical application of

accounting policies within a business, involving collecting, processing and

communication of financial information, like financial statements, to both internal and

external stakeholders usually by an accountant, as distinct from accounting theory.

Generally financial reporting and accounting practice mean one and the same thing, and

presents accounting information to organization for management use (Hakansson and

Lind, 2004). It is a tool for efficient resource administration, and support of appropriate

decision making. Financial reporting approach has disciplinary and calculative practice,

such as assessing costs, resource and expense allocation methods which are implemented

to support effective decision-making and performance-measuring (Quattrone, 2009).

According to France (2013), in his empirical finding, today’s sophisticated financial

management systems can increase the efficiency and accuracy of financial reporting, and

automate and streamline business processes, thereby reducing time and labor costs while

increasing productivity including accuracy. He adds that “as the accountant’s role

becomes more strategic, there is a growing need to improve the finance organization’s

ability to provide information and insight so that companies can increase their agility and

competitiveness in their markets. Yet outmoded, disparate or incompatible systems that

are dependent on manual processes make it difficult for companies to rise to the

challenges of managing and analyzing their financial data”(France 2013). He adds that
 23

“having an outdated or non-integrated accounting system often means that a business

may be operating at a sub-optimal level. Mitchell, Reid & Smith (1998), while

underscoring the strategic importance of accounting to firms, noted that efficiency of

financial reporting could be linked to the success or failure of any business. This is

because accounting systems are responsible for analyzing and monitoring the financial

condition of firms, preparation of documents necessary for tax purposes, providing

information to support the many other organizational functions such as production,

marketing, human resource management, and strategic planning. Without such a system it

will be very difficult for firms to determine performance, identify customer and supplier

account balances and forecast future performance of the organization.

When organizations adopt ICT in their financial reporting, they usually discover that

besides the fact that computerized accounting systems handle financial data efficiently,

their true value is that they are able to generate immediate and accurate reports regarding

the organization financial status (Hotch, 1992). In order to survive the current wave of

competition, managers need updated, accurate and timely accounting information driven

by ICT, (Lohman, 2000; Amidu and Abor, 2005). According to Ssewanyana (2007), the

adoption and usage of (ICT) is changing business processes, and the way people live and

work and new innovations as a result of ICT adoption will continue to emerge globally.

Financial reporting efficiency can be measured based on qualitative characteristics of

financial reports which are; adequate financial information integration, efficient financial

reporting dissemination and accounting information trustworthiness, Chen and Tan,

(2004). These are qualitative characteristics which enable effective communication

between accountants and users of financial reports, (William and Flora, 2006).
 24

2.3.1 Efficient financial reporting dissemination

Financial reports prepared and audited should be published for the purpose of promoting

efficient performance of an organization.However, global consistency is needed for

financial, as well as non-financial, information disseminated to investors in our markets.

Moreover, there is a growing consensus around the world that financial reporting in any

marketplace should be of high quality in order to serve the needs of investors. At present,

financial reporting requirements vary from country to country under the guide

international Financial Reporting Standards (IFRS) set by IASB. An efficient financial

report should have the following attributes;(IASB 2012)

2.3.1.1 Timeliness

Financial reports should be prepared in time so that management can be able to make

informed decisions and at the same time auditors have to carry on their work after the

preparation of financial reports. Although timeliness is key in financial reporting, it

should in no way conflict other characteristics of quality financial reports like

completeness, Comparability and reliability among others, (William and Flora, 2006).

2.3.1.2 Comparability

Financial reports should be provided on a consistent basis so that valid comparisons can

be made with information produced by other sources. According to the (IASB 2012)

Framework for preparation and presentation of financial statements, accounting

information users must be able to compare the financial reports of an organization

overtime and also be able to compare financial reports of the organization with others.

Comparability refers to the ability to compare similar information from the same entity in
 25

different time periods or from various entities for the same time period (Corporate report,

1975). Comparable information reveals the strengths and weaknesses in an organization

and the edge it has over other organizations, (David and Perkins, 2006).

2.3.1.3 Consistency and Accuracy

The usefulness of financial and other statements is affected by the quality of reporting,

with consistency and accuracy being key measures of quality. According Barney (2001),

“financial performance is viewed as contingent on competitiveness of accounting practice

skills and resources”. Accounting practice, resources and skills are considered a success

when they help the accountant to formulate and develop efficiency, effectiveness, and

economy (Bharadwai et al., 1993). Financial reports are prepared in an effort to assess

financial performance of the organization. The quality of a financial report is what

distinguishes a good accounting system from a bad one. To that effect therefore, in this

study financial reporting efficiency was measured and interchangeably used as quality of

financial reports.

2.3.2 Adequate financial information integration

Financial integration is the process through which financial markets in an economy

become more closely integrated with those in other economies or with those in therest of

the world. This implies an increase in capital flows and a tendency for pricesand returns

on traded financial assets in different countries to equalize(De Brouwer,2005). Financial

integration among economies is believed to have two positive impacts. Itcan, on the one

hand, improve theallocative efficiency of capital, and on the otherhand, help diversify

risks.Financial integration facilitates risk-sharing and thereby should enhance

 26

productionspecialization, capital allocation, and ultimately, economic growth (Obstfeld,

1994).

2.3.2.1 Completeness and Understandability

Financial reports are considered complete when they show the flow of all transactions

over a period usually a month, quarter or a year. All relevant information must be

disclosed in a way that aids understanding of the users, (William and Flora, 2006).

Understandability calls for the provision of all the information,in the clearest possible

form, which, reasonably instructed readers can make use of, (David and Perkins, 2006).

2.3.3 Accounting information trustworthiness

Financial reporting should provide information to help present and potential investors and

creditors and others to assess the amounts, timing, and uncertainty of the entity’s future

cash inflows and outflows (the entity’s future cash flows). The information is essential in

assessing an entity’s ability to generate net cash inflows and thus to provide returns to

investors and creditors.

2.3.3.1 Reliability and Relevance

Accounting reliability refers to whether financial information can be verified and used

consistently by investors and creditors with the same results. Basically, reliability refers

to the trustworthiness of the financial statements. Information should be free from

material error and bias if it is to be considered reliable. Some bad decisions made by

investors are as a result of unreliable decisions. The usefulness of financial reports

implies that information provided is reliable. Information will be more reliable if it is

independently verifiable, (Nkundabanyanga, 2004). The IASB (2012) described three

 27

attributes that all reliable financial information has: verifiability, representational

faithfulness, and neutrality.

Relevance is the ability of financial reports to influence economic decisions of

users(Corporate Report, UK (1975). Financial reports should help the users to understand

the past, present and predict the future. In a nutshell, information provided should satisfy

the needs of the users, (Welsch, 1987).

2.4 Theoretical Framework

This study was supported by several theories relating to individual variables including

Technology acceptance model (TAM), Diffusion of innovation theory (DOI), Resource

based view (RBV) and information richness theory (IRT).These theories are closely

related in their definition of the two variables and their practical application.

2.4.1 Technology Acceptance Model (TAM)

Technology Acceptance Model (TAM) was originally proposed by Davis in 1989. The

model was designed to predict user‘s acceptance and usage of Information Technology in

an organizational context. TAM focuses on the attitude and explanations of intention to

use a specific technology or service; it has become a widely applied model for user

acceptance and usage. There are a number of meta-analyses on the TAM that have

demonstrated that it is a valid, robust and powerful model for predicting user acceptance

(Bertrand and Bouchard, 2008). The TAM model which deals with perceptions as

opposed to real usage, suggests that when users are presented with a new technology, two

important factors influence their decision about how and when they will use it. These key

factors are: Perceived usefulness (PU) – this is the degree to which a person believes that
 28

using a particular system would enhance his or her job performance, Perceived ease-of-

use (PEoU) – the degree to which a person believes that using a particular system would

be free from effort

2.4.2 Diffusion of Innovation Theory (DOI)

DOI theory was developed by Roger’s in 1995. Rogers defines diffusion as “the process

by which an innovation is communicated through certain infrastructure channels over

time among members of a social system”. An innovation, according to Rogers (1983), is

“an idea, practice, or object that is perceived as new by an individual or other unit of

adoption”. The innovation - diffusion model states that an innovation (technology) is

passed on from its source to end users through a medium of agents and its diffusion in

potential users for the most part is dependent on the personal attributes of the individual

user. The model assumes that the technology in question is appropriate for use unless

hindered by the lack of effective communication.

This study uses DOI model and its prior research findings to define independent variables

in the conceptual framework, the findings listed the following indicators for ICT adoption

at firm level;- Material requirements planning (MRP), Enterprise resource planning

(ERP), E-business (Internet, Intranet, Web site) and Information System (IS) adoption.

2.4.3 Resource based view (RBV) and Information

Richness Theory (IRT)

Resource based view theory (RBV) was developed by Barney, in 1991 and Information

Richness Theory (IRT) by Chen and Tan, in 2004. According to the RBV, “financial

performance is viewed as contingent on competitiveness of accounting practice skills and

 29

resources” Barney (2001), accounting practice resources and skills are considered a

success when they help the accountant to formulate and developed efficiency,

effectiveness, and economy (Bharadwaj et al., 1993). Therefore, an accountant who has

more resources and skills in accounting practice is believed to be successful in financial

reporting. IRT on the other hand explains that information influences users' understanding

decision in a timely and efficient manner (Chen and Tan, 2004).

This study applies information richness in financial reporting efficiency and the context

to which it is used to identify the cause of financial performance variables. IRT measures

financial reporting efficiency by using four dimensions which reflect accounting practice

efficiency and encompasses namely;- adequate financial information integration, efficient

financial reporting dissemination, and accounting information trustworthiness. All

dimensions are developed from resource-based view, information richness theory and

relevant literature review.

2.5 Conceptual Framework

This study uses Diffusion of Innovation (DOI) define independent variable and Resource

based view (RBV) and information richness theory (IRT) to define the dependent

variable.
 30

Independent Variable Dependent Variable

ICT Adoption Financial Reporting Efficiency

 IS adoption
Efficient financial reporting
 E – Business
dissemination
 Intranet
 Web site
Adequate financial
 Internet information integration
 Material Requirements
Planning (MRP)
Accounting information
trustworthiness
 Enterprise resource
planning (ERP)

Fig. 2.1: Conceptual framework

Source: Author - 2014

2.5.1 Independent Variable

The main Independent variable in this study is ICT adoption which is measured at firm

level by;-Information System (IS) adoption, E-Business (measured by internet, intranet

and website), Material resource planning (MRP), and Enterprise resource planning

(ERP).

2.5.2 Dependent Variable

The main Dependent variable in the study is financial reporting efficiency which is

measuredby;-Adequate financial information integration, efficient financial reporting

dissemination and accounting information trustworthiness

 31

2.6 Challenges Facing ICT adoption in Financial

Reporting

Technology adoption climates in developing countries are, by nature, problematic,

characterized by poor business and governance conditions, low educational levels, and

inappropriate infrastructure. By its very nature the ICT phenomenon is relatively new in

the developing world. Available data, suggests that the majority of developing countries

such as Kenya in sub-Saharan Africa are lagging behind in the information revolution

(Zhao and Frank, 2003). Not surprisingly, the quest for adoption of ICT in financial

reporting has been problematic and will require fundamental shifts in the regulatory

environment, as well as renewed attention to public-private partnerships and social

services. For example, developed countries have 80 per cent of the world's Internet users,

while the total international bandwidth for all of Africa is less than that of the city of São

Paulo, Brazil. There is little doubt that sub-Saharan Africa's populations are missing out

on the boons of ICT (Bigum, 2000).

Although the proliferation of accounting software and PC has created an opportunity for

organizations to adopt ICT in financial reporting, it also creates problems for innovation

adoption. Accounting software is a critical application in companies of all sizes, computer

managers are hence caught in a no-win situation. They are encouraged to embrace new

technologies or face obsolescence. On the other hand, experimenting with new

technologies at the expense of the accounting data can be a risky proposition. Changing

accounting systems to fit new technology can be a very difficult task as data needs to be

converted from the existing system to new system; accounting staff and all users need to

be retrained and sometimes source documents and reports need to be redesigned. System
 32

capacity should be checked to ensure it can accommodate firm’s data requirement. This

will ensure financial data cannot be lost due to the system crumbling down for lack of

space and speed(Preston, 1993).

ICT also suffers from a number of barriers that disable its adoption and subsequent usage.

The BECTA Report (2003) identifies the key barriers to using technology as: Lack of

access to appropriate ICT equipment, lack of time for training and appropriate training,

exploration and preparation, lack of models of good practice in ICT, negative attitudes

towards ICTs in Accounting, technology anxiety and lack of confidence, fear of change

and a lack of personal change management skills, unreliable equipment and lack of

technical, lack of stable power supply, and lack of administrative and institutional

support. The report further classifies the barriers into the four factors namely; resource-

related factors, factors associated with training, skills, knowledge and computer

experience, attitudinal and personality factors and cultural factors.

2.7 Literature Summary and Research Gap

The foregoing literature indicate inconsistent results regarding effect of ICT adoption on

financial reporting efficiency with some supporting while others oppose.

Most authors agree that ICT adoption results into cost reduction and improvement of

operational efficiency (Krisnaveni & Meenamkumari, (2010); enhanced dissemination

and accessibility of financial information (Spanos, 2002);Timely and accurate reporting

(Lefebvre, 1996), Kajogbola, (2004); fuels technical innovation. E-Business gives

organizations competitive advantage (Amit & Zott, 2001). Nixon (1998) holds the view

that ICT adoption has significant effect in changes in styles of completion production

environment, cost structures and overall efficiency of financial reporting.

 33

However other authors hold the negative view of the effect of ICT on financial reporting.

Peterson et al, 1996 concluded that ICT adoption is not a significant predictor of financial

reporting efficiency. Besides, Granlund, (2007) hold the view that insufficient research

has been done in this area of study. Rom & Rohde, (2007) hold a similar view that very

few studies have been done in this area especially in the developing economy like Kenya;

He further concluded that the few studies fall sort due to their outdated tools and

undetailed analysis.

From the foregoing literature summary, it is evident that exists inconsistency and

inadequacy gaps, which this study sought to fill and also to add to the body of

knowledge.
 34

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Overview

This chapter describes the methods, techniques and procedures that were used in

conducting the study, including research design, data collection procedures and

instruments; validity and reliability of instrument, data analysis and presentation and

ethical considerations.

3.2 Research Design

Research design refers to the procedures used by researcher to explore the relationship

between variables in order to form subjects into groups and administer treatment and

analysis of data (Amin, 2005).

This study adopted a cross-sectional survey research design. This design was preferred

for the study since it provided a quick, efficient and accurate means of accessing

information about the population (Oso and Onen, 2005).According to Oso andOnen

(2005) and Cochran, (1997) survey is the present oriented methodology used to

investigate a population by selecting samples to analyze and discoveroccurrences. The

authors point out that survey provide quantitative description of a part of population and

basically with explorations and explanations of opinions, attitudes, preferences and

perception of groups of people of interest to the researcher, hence according to this study

the variables were ICT adoption and financial reporting efficiency.

 35

All the 200 accounting and auditing staff of public enterprises in the county were

censured by personally administering a questionnaire on them for their perceptions, and

opinionson the extent to which ICT affects financial reporting efficiency in their

organizations. The questionnaires were filled and handed back to the researcher. The

collected data was later analyzed using multiple regression model and report tabulated

accordingly.

3.3 Study area

This study was conducted in Tana River County which is in the northern part of Coastal

Region bordering Kitui to the West, Mwingi to the Northwest, Garissa to the north east,

Ijara to the east, Meru North and Isiolo to the north, Lamu to the south east and Malindi

to the southwest. It also borders the Indian Ocean to the south with a coastal strip of

35km. The County covers an area of 35,375.8 square kilometers and has a population of

240,075 (Census 2009).Tana River was chosen for this study due to its low economic

activity and its unique geographical position. According to Kenya National Bureau of

Statistics, the county was ranked 43 out of 47 counties countrywide in the year 2012 with

poverty index of 76.9%. (http://statistics.knbs.or.ke)

3.4 Study Population and Sampling Design

The study targeted 200 officers working in accounting and audit departments of ten

public enterprises of Tana River County, ranging from state agencies, parastatals and

government departments. The data was stratified as follows;-

 36

Table 3.1: Accounts and Audit Staff in Public Enterprises – Tana River County

Organisation Name Supervisory Management Total

Staff Staff (no.)
Tana and Athi River Development Authority 25 5 30
(TARDA)
Kenya Tourist Development Corporation 17 3 20
(KTDC)
Kenya Wildlife Service (KWS) 18 2 20
Tana Water & Sewerage Co. (TAWASCO) 23 2 25
Kenya Commercial Bank-Garsen 18 2 20
Kenya Commercial Bank-Hola 12 3 15
Tana River County Treasury 28 7 35
National Treasury (Tana Delta sub county) 8 2 10
National Treasury (Tana River sub county) 12 3 15
National Treasury (Bura sub county) 8 2 10
Total 200
Source: Public Staffing Report 2013 – Tana River

This study used census survey method on the entire population due to its small size.

Researcher distributed questionnaires to all the two hundred (200) respondents and later

collected the filled questionnaires; hence there was no need for sampling.

3.5 Data Collection Instruments and Procedure

The study used the questionnaire technique for collecting the primary data, as it is an

efficient means of collecting answers for research purposes, especially those of

descriptive nature, as was used by Alleyne and Howard (2005).

The questionnaire was designed in such a way as to enable the researcher to extract the

necessary information accurately from the respondents’ answers, and to make sure that

collected information is adequate for achieving the objectives of this study. The questions

were designed based on a detailed review of the features of prior studies and subsequent
 37

to an in-depth review of empirical studies of the effect of ICT on financial reporting

efficiency. This was important, because, at a later stage, the collected information was to

be compared with prior findings. Furthermore, the questions were arranged in an order

corresponding to the order of objectives to enable logical thinking.

Data was collected with the help of questionnaires issued out to accounting and audit

staff working in public enterprises. Each questionnaire was made up of thirty nine (39)

questions from which the respondent was expected to choose the option he/she considers

suitable for him by ticking appropriately and also give his opinion in case of open-ended

questions.On five point likert-scale rating, respondents were asked to indicate the extent

to which a particular variable affected financial reporting efficiency and scale it from

very high extent(5) to very low extent(1).

3.6 Validity and reliability of Data Collection Instruments

Validity of data collection instrument is the accuracy and technical soundness of the

research instruments. It indicates how well a test measures what it was supposed to

measure, (Kombo & Tromp 2006). The designed instrument was subjected to content

validity testing order to check how well the items developed to operationalize a construct

provided adequate and representative sample of all the items that might measure the

construct of interest. This was done by consulting research supervisors, other researchers

and accounting/ICT experts. The instrument was found to be valid.

Reliability of a research instrument on the other hand concerns the extent to which the

instrument yields the same results on repeated trials. It is the tendency towards

consistency found in repeated measurements Carmines & Zeller, (1979).Although

 38

unreliability is always present to a certain extent, there will generally be a good deal of

consistency in the results of a quality instrument gathered at different times.

The researcher subjected the research instrument to a test-retest reliability test by

conducting a pilot study in the neighboring Kilifi County (with similar characteristics to

those selected in the study sample; such as geographical context, socio-economic and

cultural characteristics), involving 30 officers, before exposing the tool to the target

population. The instrument was found to be reliable, having yielded result of 0.6 which is

above the set threshold of 0.5 which was set by the researcher.

3.7 Data analysis and Presentation

Data analysis is the process of bringing orderly structure and meaning to the mass of

information collected. It involves examining what has been collected and making

deductions and inferences (Kombo and Tromp, 2006). The data collected from the field

was coded and presented in graphic and tabular form. The coding involved corroborating

the findings from the questionnaires. The data was then input and analyzed using

Statistical Package for Social Sciences (SPSS ver. 18) and results presented in tables

rated in percentages. The researcher then discussed the findings from hypothesis testing

in view to answering the objectives of the study.

In this study multiple regression analysis model was used to test for association, cause

and effects between variables. Multiple regression was used because the study involved

more than two independent variables used to predict the outcome of independent

variables.

Multiple regression equation formula: Y=a + b1X1 + b2X2 + b3X3+ b4X4 + ε

 39

Where:-Y is the value of the Dependent variable (Y), what is being

predicted or explained

a (Alpha) is the Constant or intercept

b1 is the Slope (Beta coefficient) for X1

X1 First independent variable that is explaining the variance in Y

b2 is the Slope (Beta coefficient) for X2

X2 Second independent variable that is explaining the variance in

Y

b3 is the Slope (Beta coefficient) for X3

X3 Third independent variable that is explaining the variance in Y

X4 Third independent variable that is explaining the variance in Y

B4 is the Slope (Beta coefficient) for X4

ε is Error term

3.8 Ethical Considerations of the study

All ethical requirements were observed while conducting this study.

 40

CHAPTER FOUR

DATA ANALYSIS, PRESENTATION, INTERPRETATION ANDDISCUSSION

4.1 Overview

This chapter presents results of analyzed data and their discussions thereof. As part of the

descriptive statistics, the demographic variables analyzed included respondents’ gender,

age, level of education, period in service and employment status. It also covers normality

of variables, descriptive statistics of variables, hypothesis testing, study model and

challenges facing ICT adoption in financial reporting.

The sample population consisted of respondents drawn from ten public enterprises within

Tana River County. A total of 200 questionnaires were distributed; 195 were returned,

from which 5 were discarded for not being completely filled. The overall good response

rate was 95.0%. In some cases the researcher had to make several visits to have the

questionnaires filled.

4.2 Data Screening and Cleaning

The quality of data was first examined before embarking on descriptive and inferential

analysis. Data was examined for missing values, and outliers.

4.2.1 Univariate Outliers

According to Stevens (2002), outliers are cases that have data values that are very

different from the data values for the majority of cases in the data set. Outliers are

important because they can change the results of data analysis.

 41

Univariate outliers are cases that have an unusual value for a single variable. In order to

identify univariate outliers, all scores for each variable were converted to standard scores.

A case was then treated as an outlier if its standard score had an absolute value beyond

3.0 (Stevens, 2002). Analysis of univariate outliers revealed that none of the five

variables (IS adoption, MRP, ERP, E-Business, and Financial reporting efficiency) had

outliers. Consequently, all the 190 cases were used for further analysis.

4.3 Normality of the study variables.

Normality was assessed using measures of skewness and kurtosis. The distribution was

considered normal if skewness and kurtosis values fell within the interval -2.0 to 2.0

(Tabachnick and Fidell, 2007). As shown in Table 4.1, the skewness and kurtosis values

for all variables were within the acceptable interval. Normality assumptions were

therefore met.

Table 4.1: Testing for Normality

Skewness Kurtosis
Statistic Std. Error Statistic Std. Error
Adoption of IS -.082 .183 -.014 .363
MRP .543 .176 -.778 .351
ERP -1.215 .176 .448 .351
E-Business -.301 .176 -.616 .351
Financial Reporting Efficiency -.894 .176 -.435 .351
Source: Survey Data (2014)

4.3.1 Assumption of Linearity

Pearson’s product moment correlation coefficients were used to examine the assumption

of linearity. Results displayed in Table 4.2 indicate that there were positive associations
 42

among predictor variables as well as between predictor variables and the criterion

variable (Financial Reporting Efficiency). The linearity assumption was not violated.

Table 4.2: Testing for Linearity Requirements

1 2 3 4 5
1. Adoption of IS 1
2. MRP .281** 1
3. ERP .296** .491** 1
4. E-Business .298** .428** .448** 1
5. Financial Reporting .278** .571** .480** .544** 1
Efficiency
**. Correlation is significant at the 0.01 level (2-tailed).
Source: Survey Data (2014)

4.3.2 Assumption of Homogeneity of variances

The levenne statistic for equality of variances was used to test for the assumption of

homogeneity of variances. The study posited that the variance of each subgroup across

gender was the same. The desired result for non-violation of homogeneity of variances

was therefore to reject this hypothesis. Table 4.3 shows that testing at the 0.05 level of

significance; none of the Levenne statistics was significant. The assumption of

homogeneity of variances was therefore supported.

Table 4.3:Test of Homogeneity of Variances

Variables Levene Statistic df1 df2 Sig.

Adoption of IS 1.452 1 188 .230
MRP 3.472 1 188 .064
ERP 3.769 1 188 .066
E-Business .160 1 188 .690
Financial Reporting Efficiency 3.486 1 188 .063

Source: Survey Data (2014)

 43

4.4 The demographic Profile of the Respondents.

Analysis of respondents’ demographic information centered on establishing the

respondents age, gender, education level, years of working experience, professional

qualification, and employment status for the sampled respondents. These according to the

researcher were essential for interpreting and discussing effects of ICT adoption on

financial reporting efficiency.

4.4.1 Age of the Respondents

The inclusion of age as a variable was informed on the basis of findings from previous

studies in relation to age and ICT adoption. According to Czaja and Lee (2007), even

though the use of ICT by older adults increased in the last decade, computer and Internet

usage are still negatively correlated with age. Besides, the findings also revealed that ICT

usage differs within the cohort of older adults. It was therefore necessary to examine

respondent’s age and control for the potential influence posed by respondent’s age on

financial reporting efficiency.

Age was examined across four age brackets. Results presented in figure 4.1below reveal

that a majority of the respondents (34.7%) were aged between 41 to 50 years. The least

proportion of respondents (18.4%) was aged between 51 and 60 years. These results may

have positive implication on ICT adoption as it is believed that younger employees are

more adoptive to technology development than older employees who want to maintain

status quo.
 44

Figure 4.1: Respondent’s Age Distribution

4.4.2 Respondents’ Distribution by Gender

A lot of research evidence suggests that ICT access and usage is structured along gender

lines where social, economic, education barriers as well as attitudes impact negatively on

female adoption and usage of ICT's, especially in Africa (Hafkin, 2002). This explains the

choice of gender as a demographic variable for consideration.

The distribution of respondents by gender displayed in figure 4.2revealed that 53.7% of

the total sampled respondents were male while 46.3% were female. These results show

that there was somewhat a balance between men and women in the sample and hence

gender may not have had a major influence on financial reporting efficiency.
 45

Figure 4.2: Gender Distribution of Respondents

4.4.3 Respondents’ level of Education

The ability to read, write and interpret ICT information depends on the respondent’s level

of education. The researcher considered respondents level of education as an important

tool that may influence financial reporting efficiency. For this reason, education level was

analyzed in order to control for its influence.

As shown in figure 4.3, a higher proportion (35.8%) of the total sample respondents was

of secondary level of education. This was closely followed by the proportion of

respondents who had a certificate level of education (28.4%). The least proportion of

respondents (2.6%) had a master’s level of education.

The results show that education level could influence financial reporting efficiency

among sampled respondents since a lower education level translates into lower

understanding. It was therefore necessary to control for the influence of level of

education.
 46

Figure 4.3: Distribution of Respondents Level of Education

4.4.4 Respondents’ Working Experience

The inclusion respondents working experience was informed by a previous study

conducted by Sharma and Rai (2003) on Leadership Characteristics and ICT innovation

adoption in organizations, and which found out that organizations with most workers on a

shorter tenure had a higher adoption rate compared to those contracted on long term

tenure. Consequently, it was necessary to examine and control for the influence of

respondents work experience.

Work experience was measured across four categories. Respondents were required to

indicate whether they have been working for less than 2 years; between 2 and 5 years;

between 6 and 10 years; or above 10 years. Results presented in Figure 4.4 reveal that
 47

most of the respondents (46.8%) have worked for over 10 years. Thirty percent (30%)

have worked for 6 to 10 years. Only 6.3% have worked for less than 2 years. This implies

that the sampled respondents had a high level of work experience which could influence

efficiency in financial report. It was therefore necessary to control for the influence of

employee work experience.

Figure 4.4: Distribution of Respondents Working Experience

4.4.5 Distribution of respondents by professional Qualification

A key demographic factor considered was respondent’s professional qualification.

Analysis of respondent’s professional qualification was necessary since this could have a

potential influence on efficiency in financial reporting. Respondents were required to

indicate their professional qualification. Results presented in Table 4.4 reveal that most of

the respondents (31.6%) had a certificate while a sizeable proportion (28.4%) had no

professional qualification. These results suggest that respondents were not very

professionally qualified, a fact which could have an influence on financial reporting

 48

efficiency. There was therefore a need to control for the influence of respondents

professional qualification.

Table 4.4: Respondents Professional Qualification

Professional Qualification Frequency Percent (%)
CPA 8 4.2
KATC 1 .5
ACCA 23 12.1
Accounting Diploma 37 19.5
ICT Diploma 7 3.7
Certificate 60 31.6
None 54 28.4
Total 190 100.0
Source: Survey Data (2014)

4.5 Descriptive statistics of the study variables.

Means and standard deviation for the independent and dependent variables were

obtained. Besides, frequency distributions were also examined. The purpose was to

provide a general picture of the prevailing levels of ICT adoption indicators and financial

reporting efficiency in the study area.

4.5.1 Information Systems (IS) Adoption

Adoption of Information Systems was conceptualized to be measured via the three

dimensions namely; frequency of computer use, preferred ICT platform, and Accounting

Software used.

4.5.1.1Frequency of Computer Use

Computer knowledge is the primary ground for adopting other computer packages and

software. According to Granlund and Mouritsen (2003), most businesses have shifted
 49

from recording their business transactions manually in preference of computers for quick

and easy presentation of individual financial transaction. The frequency of use of

computer in reporting was therefore considered a fundamental characteristic in ensuring

financial reporting efficiency.

Respondents were asked to indicate the number of computers used within their respective

organizations for reporting purposes. Results presented in Table 4.5 indicate that most

organizations (47.4%) in the study area use 3 to 5 computers for reporting purposes. A

good proportion of organizations (31.6%) use 6 to 8 computers. This is a relatively low

computer usage which may have effect in efficiency.

Table 4.5 : Number of Computers used for Reporting Purposes

Number Frequency Percent (%)
1-2 10 5.3
3-5 90 47.4
6-8 60 31.6
9-10 20 10.5
>10 10 5.3
Total 190 100.0
Source: Survey Data (2014)

4.5.1.2 Preferred ICT Platform

ICT Platform as defined by Hassall (2003) is an underlying computer system on which

application programs can run and allow interconnection of different computer users. The

researcher sought to find out the preferred ICT platform among sampled organizations in

disseminating and receiving financial reports.

 50

Respondents were asked to indicate the ICT platform used by the organization.

Responses were elicited on a 5 point scale (a-website, b-internet, c-intranet, d-stand

alone, e-e-mail). Results presented in Table 4.6 reveal that stand alone (37.9%) and

intranet (29.5%) are the two most preferred ICT platforms among the sampled

organizations. There is however some use of the internet (15.8%) and e-mail (15.8%).

Table 4.6: ICT Platform Preference

Platform Frequency Percent (%)

Website 2 1.1
Internet 30 15.8
Intranet 56 29.5
Stand alone 72 37.9
Email 30 15.8
Total 190 100.0
Source: Survey Data (2014)

The results tend to suggest that most reports made by organizations are internal for which

case, the intranet and stand-alone platforms serve the intended purposes, but this doesn’t

allow for data sharing beyond the firm’s boundaries. The bottom line however is that the

results portray adoption of information systems in posting reports which in turn may

translate into efficient reporting.

4.5.1.3 Accounting Software Used

Accounting software is an application software that records and processes accounting

transactions within functional modules such as; accounts payable, accounts receivable,

payroll, and trial balance (Futura, 2012). The study conceptualized that the type of
 51

accounting software as an element of IS adoption may have a direct influence on

financial reporting efficiency.

Respondents were asked to indicate the accounting software used within their

organizations. Results presented in Table 4.7 reveal that while much software may be on

offer, a majority of the organizations mostly use the Excel spreadsheet (42.1%). Of the

main account related software, only Quick books (20%) and Pastel (10.5%) get some

degree of usage among the organizations.

Table 4.7Accounting Software Used

Percent(%
Software
Frequency )
Quick books 38 20.0
Tally 2 1.1
Sage 13 6.8
Sun 5 2.6
Pastel 20 10.5
Excel 80 42.1
Enterprise Resource Planning (ERP) 10 5.3
Material resource planning 10 5.3
E-Business 8 4.2
Votebook management system 3 1.6
Integrated Financial Management Information System(IFMIS 1 .5
Total 190 100.0
Source: Survey Data (2014)

These results reveal that modern accounting software is being under-utilized in financial

reporting. This may in essence have a negative effect on reporting efficiency.

52
 53

4.5.2 E-Business

E-Business is defined as the application of information and communication technologies

(ICT) in support of all the activities of business (Timers, 2000). Subsequently, when

organizations go online, they have to decide which e-business models best suit their goals

and the time taken to adopt such a model by the employees

In the analysis of the prevailing application of e-business practices, six items (secure

business, online marketing, use of electronic data interchange, website, internet, and

intranet) were used to measure e-business. Respondents were asked to indicate the extent

to which the identified e-business practices were used in the enterprises. Responses were

elicited on a five point scale (1- Very high extent, 2- High extent, 3- Moderate, 4- Low

extent and 5- Very high extent). Results of the mean scores and standard deviations for

the six items are shown in table 4.8 below.

Table 4.8: Extent of Application of E-Business practices within Public Enterprises

in Tana River County
E-Business Practices Mean Std. Deviation
Intranet 4.29 1.153
Use electronic data interchange 3.49 1.428
Internet 3.49 1.316
Secure business transactions 3.11 1.276
Online marketing 2.72 1.222
Website 2.24 1.081
Source: Survey Data (2014)

Results show different levels of application of e-business practices among public

enterprises in Tana River County. While there were high extents of using intranet

(M=4.29, SD=1.153); Electronic data interchange (M=3.49, SD=1.428); Internet

 54

(M=3.49, SD=1.316); Secure business transactions (M=3.11, SD=1.276); and online

marketing (M=2.72, SD=1.222) were used to a moderate extent within the enterprises.

On the contrary, use of a website was on a low extent. These results imply that use of e-

business as an ICT adoption is a concept that has yet to gain prominence in public

enterprises in Tana River County.

4.5.3 Material Requirement Planning (MRP)

Material Requirement Planning was measured using an eight item scale. A previous study

conducted by Monk and Wagner (2006) concluded that the biggest challenge with MRP

adoption is the integrity of the data. If there are any errors of data entered in the system

then the output data will also be incorrect, thus this system requires a lot of user accuracy

in understanding and interpreting of data. Respondents were asked to indicate the extent

to which the selected indicators of MRP were practiced in their organizations. The

responses to the items were elicited using a 5-point likert-scale (5- very high extent, 4-

high extent, 3-moderate, 2- low extent, and 1-very low extent).

Results presented in Table 4.9 suggest that application of MRP indicators in organizations

within the study area is practiced to low extent. Most of the mean response scores were

approximately 2.00 with SD of approximately 1.2, which was coded to indicate low

extent of application. In particular, the indicator that attracted some good measure of

application was inventory management system which was used to a moderate extent

(M=3.18, SD=1.147). On the contrary, the MRP indicator that is least used is bills of

materials which was reported to be used but to a low extent (M=1.94, SD=1.085).
 55

Table 4.9: Extent of MRP practices among Public Enterprises in Tana River County

MRP Indicators Mean Std. Deviation

Inventory management system 3.18 1.147
Inventory management 2.83 1.457
Material needs 2.53 1.352
MRPII systems 2.46 1.189
Supplir lead times 2.37 1.289
Master production schedules 2.36 1.325
Production cycle times 2.25 1.229
Bills of materials 1.94 1.085
Source: Survey Data (2014)

The above results can be explained by the fact that majority of public enterprises under

study are service providers and not manufacturing outfits where MRP is mostly suitable.

However most firms maintain inventory of some nature, hence the high mean of 3.18.

4.5.4 Enterprise Resource Planning (ERP)

Enterprise Resource Planning was conceptualized as an independent variable owing to its

versatility in integrating varied organizational systems and facilitating error-free

transactions and production (Shaul. L &Tauber, 2013). A total of nine items were used to

measure the level of ERP among sampled enterprises.

Respondents were asked to indicate the extent to which ERP practices are applied within

the enterprise. Results presented in Table 4.10 indicate the mean response scores on most

ERP practices were approximately 4.00, a score which was coded to imply a high extent.

Consequently, ERP practices are applied to a high extent within the enterprises. In

particular, respondents indicated high extents in personnel and payroll (M=4.46,

SD=0.852); General ledger (M=4.41, SD=1.008); Account payables (M=4.37,

 56

SD=1.099); Banking and cash management (M=4.31, SD=1.124); Account receivable

(M=4.24, SD=1.205); and Fixed Asset management (M=4.22, SD=1.188). These results

indicate that most enterprises use personnel and payroll system followed by General

ledger, accounts payables, Banking and cash management and accounts receivables in

that order, which in turn enhance financial reporting efficiency.

These results indicate that Enterprise Resource Planning (ERP) is the single most

preferred system among the study organization, hence has most influence on financial

reporting efficiency.

Table 4.10: Extent of ERP practices among Public Enterprises in Tana River

County

ERP Practices Mean Std. Deviation

Personnel and payroll 4.46 .852
General ledger 4.41 1.008
Account payables 4.37 1.099
Banking and cash management 4.31 1.124
Account receivables 4.24 1.205
Fixed asset management 4.22 1.188
Inventory control 3.62 1.202
Batch control 3.01 1.228
Accounting document control 2.98 1.287

Source: Survey Data (2014)

4.5.5 Financial Reporting Efficiency

Financial Reporting Efficiency was conceptualized as the depended variable in the

current study. The idea of including financial reporting efficiency was informed by
 57

findings from previous studies (Poon et al., 2003). In a study on Internet Financial

Reporting, these researchers found that financial reporting issues such as information

integrity, associated with traditional paper reporting are equally relevant when companies

use their accounting software systems for reporting.

Three items were used to measure financial reporting efficiency. These items were

analyzed using means and standard deviations. Responses were elicited on a 5 point scale

whereby respondents were asked to indicate the extent to which the three items were

applied within the enterprises. Results presented in Table 4.11 below reveal that financial

reporting dissemination (M=4.08, SD=1.349) and Adequate financial information

integration (M=3.82, SD=1.341) are applied to a high extent within the public enterprises

in the County. Accounting information trustworthiness (M=3.47, SD=1.189) was reported

to be applied to a moderate extent

Table 4.11: Extent to which Financial Reporting Efficiency is achieved within

Public Enterprises in Tana River County
Mean Std. Deviation
Financial reporting dissemination 4.08 1.349
Adequate financial information integration 3.82 1.341
Accounting information trustworthiness 3.47 1.189
Source: Survey Data (2014)

The implication of these results is that there is some measure of financial reporting

efficiency being achieved by public enterprises in Tana River County. This may be

attributed to adoption of ICT practices in financial reporting. It was therefore necessary to

test the formulated hypotheses to establish whether or not adoption of ICT has an effect

on the observed efficiency in financial reporting.

 58

4.6 Hypotheses testing

Four hypotheses were formulated for the present study. Step-wise multiple regression

analysis was used to test the hypotheses. Stepwise multiple-regression was used so as to

control for the influence of some key demographic characteristics. Background

characteristics were entered in the first step followed with the ICT adoption indicators.

Results of the model summary presented in Table 4.12 revealed that the four background

characteristics (Years of working experience, Gender, Level of education, and Age)

accounted for 17.3% of the variance in financial reporting efficiency (R square change

was 0.173). When the ICT indicators were entered, the combined influence of these

indicators and background characteristics accounted for 96.7% of the variance in

financial reporting efficiency (Adjusted R squared was 0.967). Controlling for

background characteristics, the four ICT adoption indicators were found to account for

79.5% of the variance in financial reporting efficiency (R squared change was 0.795

Table 4.12: Regression Model Summaryc

Mode Change Statistics

l Std. R
R Adjuste Error of Square Sig. F Durbin
Squar d R the Chang F df Chang -
R e Square Estimate e Change 1 df2 e Watson
1 .416a .173 .154 1.12349 .173 9.022 4 17 .000
2
2 .984b .969 .967 .22051 .795 1074.27 4 16 .000 1.696
7 8
a. Predictors: (Constant), Years of working experience, Gender, Level of education, Age
b. Predictors: (Constant), Years of working experience, Gender, Level of education, Age
, IS, E-Business, MRP,ERP
c. Dependent Variable: Financial Reporting Efficiency
59
 60

4.6.1 Testing the effect of IS adoption on financial reporting efficiency

The first objective of the current study sought to establish the effect of IS adoption on

financial reporting. Research Hypothesis Ho1 postulated a lack of influence of adoption

of IS on financial reporting efficiency. Results of the stepwise multiple-regression

coefficients presented in table 4.13 below show that, initially all the background

characteristics were significant predictors of financial reporting efficiency. After they

were controlled for, the standardized coefficient for IS was highly significant (B=0.202,

p<0.01). The hypothesis that adoption of IS has no effect on financial reporting efficiency

was therefore rejected.

The implication of these results is that adoption of Information Systems has a positive

influence on financial reporting efficiency. The standardized coefficient B=0.202 reveals

that an increase of 1% in adoption of IS has the potential to increase efficiency in

financial reporting by 20.2%. Consequently, adoption of IS in public enterprises in Tana

River County could be responsible for the observed efficiency in financial reporting.
 61

Table 4.13: Multiple Regression Coefficientsa

Model Unstandardized Standardized Collinearity
Coefficients Coefficients Statistics
B Std. Error Beta t Sig. Tolerance VIF
1 (Constant) 6.320 .439 14.39 .
0 000
Age -.191 .086 -.160 -2.230 . .929 1.076
027
Gender -.568 .170 -.232 -3.343 . .994 1.006
001
Level of -.181 .063 -.204 -2.885 . .964 1.038
education 004
Years of working -.205 .093 -.155 -2.194 . .969 1.032
experience 030
2 (Constant) .449 .152 2.950 .
004
Age -.027 .017 -.022 -1.538 . .887 1.128
126
Gender .010 .035 .004 .290 . .886 1.129
772
Level of -.003 .013 -.003 -.230 . .898 1.114
education 818
Years of working .006 .019 .005 .338 . .904 1.106
experience 736
IS .183 .019 .202 2.915 . .873 1.145
003
MRP .222 .053 .222 4.211 . .994 1.006
000
ERP .752 .062 .691 17.04 . .964 1.038
2 000
E-Business .117 .099 .106 1.180 . .929 1.076
240
a. Dependent Variable: Financial Reporting Efficiency
Source: Survey Data (2014)
 62

4.6.2 Testing the Effect of E-Business on Financial Reporting Efficiency in

Public Enterprises in Tana River County

Research objective four sought to explore the effects of e-business on financial reporting

efficiency among public enterprises within Tana River County. Research hypothesis

Ho4postulated a lack of significant effect of e-business on financial reporting efficiency.

Results of the standardized coefficient revealed that e-business is not a significant

predictor of efficiency in financial reporting (B=0.106, p>0.05). The hypothesis that e-

business has no effect on efficiency in financial reporting was therefore supported.

The implication of these results is that despite including e-business under the indicators

of ICT adoption, it however may not be utilized to predict efficiency in financial

reporting.

4.6.3 Testing the effect of MRP on Financial Reporting Efficiency in

Public Enterprises in Tana River County.

The second objective of the study focused on examining the effect of MRP on financial

reporting efficiency in Public enterprises. In this regard, research hypothesis Ho2posited

that MRP has no effect on efficiency in financial reporting. Results in Table 4.13 revealed

that MRP was a positive and highly significant predictor of financial reporting efficiency

in public enterprises in Tana River County (B= 0.222, p<0.01). This implies that a 1%

increase in MRP was likely to result in an increase of 22.2% in financial reporting

efficiency.
 63

The implication of these results is that utilization of MRP practices as an element of ICT

by public enterprises in Tana River County is having a positive impact on efficiency in

financial reporting.

4.6.4 Testing the Effect of ERP Usage on Financial Reporting Efficiency in

Public Enterprises in Tana River County

In objective three, the researcher sought to analyze the effect of ERP usage on financial

reporting efficiency in public enterprises in Tana River County. Consequently, Research

hypothesis Ho3posited that ERP usage does not have a significant effect on financial

reporting efficiency in public enterprises in Tana River County. Results of the

standardized coefficient presented in Table 4.13 revealed that ERP usage was a positive

and highly significant predictor of efficiency in financial reporting (B=0.691, p<0.01).

The implication is that an increase of 1 percent in ERP usage was likely to result in a

69.1% increase in financial reporting efficiency. Furthermore, the very large t-value of

17.042 clearly demonstrates that of the indicators of ICT analyzed, usage of ERP

practices is the most important in raising the level of financial reporting efficiency.

4.7 Study Model

The study therefore established that financial reporting efficiency is a function of

adoption of IS, MRP practices, ERP usage and to a minor level, e-business. The

researcher therefore suggested the following standardized multiple regression model for

prediction of financial reporting efficiency in public enterprises in Tana River County.

FRE = 0.202IS + 0.106E-Business+ 0.222MRP + 0.691ERP

 64

4.8 Challenges Facing ICT adoption in Financial

Reporting

The fifth and final objective sought to determine challenges facing ICT adoption in

financial reporting. Respondents were asked to list major challenges faced by their

respective enterprises in the use of ICT in financial reporting. Responses were examined

for prominent, recurrent themes across and within respondents.

According to results presented in Table 4.14 below, 9 key challenges were listed. A large

proportion of respondents (21.1%) identified inability of the system to support large

volumes of data as the major challenge. Other prominent challenges identified by

respondents were loss of data due to power interruptions (15.8%) and loss of traditional

skills (14.7%).

Other minor challenges identified include: high costs (11.1%); training needs (9.0%); job

losses (7.9%); and inability to fully and comprehend results (5.3%).

 65

Table 4.14: Challenges Facing ICT Adoption in Financial Reporting Efficiency

Among Public Enterprises in Tana River County.

Frequenc Percen
Challenge
y t
Extra training needs 17 8.9
High cost of purchase, installation and upgrading of equipment and 21 11.1
software
Inability of the system to support large volume of data 40 21.1
Inability to fully comprehend and interpret the results 10 5.3
Job losses 15 7.9
Lack of perceived usefulness 14 7.4
Loss of data due to power interruptions 30 15.8
Loss of traditional skills 28 14.7
Lost work time due to irrelevant surfing 15 7.9
Total 190 100.0
Source: Survey Data (2014)

4. 9 Discussion of Findings

This section provides a discussion of the findings in line with the objectivesand existing

literature focusing on ICT adoption and financial reporting efficiency.

4.9.1 IS adoption and financial reporting efficiency

The first objective of this study sort to establish the effect of IS adoption on financial

reporting efficiency. Adoption of Information Systems was conceptualized to be

measured via the three dimensions namely; frequency of computer use, preferred ICT

platform, and Accounting Software used. Results reveal that majority of public

enterprises in Tana River County have adopted IS activities though to a low extent,

considering the low frequency of computer usage. Further the study revealed that most of
 66

them have not embraced use of website as they depend on stand-alone and intranets as

their main ICT platforms. On preferred accounting software results indicate that public

enterprises under-utilize modern accounting software for financial reporting, as most of

them depend on Excel spreadsheet for financial reporting.These results reveal that the

enterprises adopt IS. The multiple regression analysis further revealed that IS adoption

has significant effect on financial efficiency. The finding that IS adoption is a significant

predictor of financial reporting is consistent with the finding byKajogbola, (2004) who

concluded that adopting IS in financial reporting significantly influenced more effective

use of time and accurate calculation of data and faster communication of financial results

to the stakeholders in Nigerian economy. It also supports findings by Banda (2012)which

revealed that adoption of IS resulted in to increased staff productivity, reduced transaction

costs and rapid growth. It however contradicts results of Peterson et al, (1996), which

concluded that IS had no significant effect on accounting systems

The findings in the present study therefore add to existing literature with regards to the

Effect of Information System on Finance Reporting efficiency. By finding out that excel

software was the most preferred on stand-alone computers, that website was the least

preferred platform; the study makes an important contribution concerning significance of

IS adoption in financial reporting efficiency

4.9.2 E-Business and Financial reporting efficiency

The second objective of the study sort to explore effect of E-Business on financial

reporting efficiency. Results reveal that public enterprises in Tana River County use e-

business to a low extent. Further results of the un-standardized coefficient revealed that

e-business is not a significant predictor of efficiency in financial reporting hence has no

 67

effect on financial reporting efficiency. These findings contradict those of Mansell,

(2001) which concluded that e- business has significant effect on financial reporting

efficiency and also those by Amit&Zott, (2001); Krovi (2001) and Sing &Kundu (2002)

which concluded that E-Business gives organizations competitive advantage and enables

productivity-enhancing practices. The main reason for this disparity may be explained by

be fact that public enterprises are majorly hosted by their mother ministries’ websites.

4.9.3 MRP and financial reporting efficiency

Research objective three of the current study sought to examine the effect of MRP on

financial reporting efficiency. Results indicate that public enterprises in Tana River

practice MRP though to a moderate extent. Using multiple regression, the study found out

that MRP significantly affect financial reporting efficiency, even though application of

MRP indicators among the studied organizations was practiced at a low extent which

poses great concerns. This may however be due to the fact that most of the enterprises

within the study area are service providers as opposed to manufacturing, where MRP is

mostly used. The finding that MRP is a significant predictor of financial reporting is

consistent with the findings of Moustakis V. (2000) who concluded that MRP has

significant effect on financial performance of Innoregio project

4.9.4: ERPand financial reporting efficiency

Objective four of the study sort to analyze effect of ERP on financial reporting efficiency.

Results reveal that public enterprises in Tana River use ERP to a high extent. The

multiple regression analysis further revealed that ERP significantly affect financial

reporting efficiency. Furthermore, the very large t-value clearly demonstrates that of the
 68

indicators of ICT analyzed, usage of ERP practices is the most important in raising the

level of financial reporting efficiency.

The finding that ERP is a very significant predictor of financial reporting is consistent

support findings by Hunton, Lippincott, &Reck, (2003) who concluded that ERP has

significant effect on financial reporting efficiency. They however conflict with findings of

Sale (2005) who concluded that ERP has no significant effect of on financial reporting of

Taxas Instruments, Inc.

These findings add to existing literature with regards to the effect of ERP on Finance

Reportingsfficiency. By finding out that ERP is the single most preferred system among

the study enterprises; the study makes an important contribution concerning the

significant effect of ERP has on financial reporting efficiency

4.9.5: Challenges Facing ICT adoption in Financial Reporting

Objective five and the last one, sort to determine the challenges facing ICT adoptionin

financial reporting. Results indicate that public enterprises in Tana River are faced with

inability of the system to support large volumes of data as the major challenge followed

by loss of data due to power interruptions and loss of traditional skills. These results are

in agreement with findings of Preston (1993) which concluded that accounting data is at

risk in a new untested system. They also confirm conclusions of by Becta report (2003)

which identified lack of system capacity and stable source of power as barriers to ICT

adoption.

These findings add to existing literature with regards to the challenges facing ICT

adoption in Finance Reporting. By finding out that inability of systems to hold large data
 69

is the most feared challenge among the study enterprises; the study makes an important

contribution concerning challenges facing ICT adoption in financial reporting

 70

CHAPTER FIVE

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

5.1 Introduction

The purpose of this study was to assess the effect of ICT adoption on financial reporting

efficiency in public enterprises of Tana River County. To this end, the study analyzed

perceptions of accountants and auditors on topical areas of ICT adoption and financial

reporting efficiency. In this chapter, the results of the study are summarized and

conclusions drawn.

5.2 Summary of the Findings

The summary of findings focuses on the following sub-headings that formed the study

objectives:

5.2.1 Effect of IS adoption on financial reporting efficiency

Research objective one, sought to establish the effect of IS adoption on financial

reporting efficiency. Using descriptive statistics, the study found out that majority of

public enterprises in Tana River County used between one and five computers on stand-

alone and intranets ICT platforms using Excel and Quick books for financial reporting.

Further using multiple regression the study established that IS adoption is a significant

predictor of financial reporting efficiency, hence the hypothesis that IS has no significant

effect of financial reporting efficiency was rejected.

 71

5.2.2 Effect of e-business on financial reporting efficiency

Research objective two of the study, sort to explore effect of E-Business on financial

reporting efficiency. Using descriptive statistics, results reveal that public enterprises in

Tana River County use Intranet, electronic data interchange and Internet, but not

websites. Further using multiple regression the study established that e-business is not a

significant predictor of financial reporting efficiency, hence the hypothesis that e-business

has no significant effect of financial reporting efficiency was upheld.

5.2.3 Effect of MRP practices on financial reporting

Research objective three, sort to examine the effect of MRP on financial reporting

efficiency. Using descriptive statistics, the study established that inventory management

system is applied in public enterprises of Tana River County to a moderate extent with

the rest of the dimensions indicating low application. Further, using multiple regression,

the study results revealed that MRP has significant effect on financial reporting

efficiency.

5.2.4 Effect of ERP usage on financial reporting

Objective four of the study, sort to analyze effect of ERP on financial reporting

efficiency. Using descriptive statistics, the study found out that public enterprises in Tana

River mainly use a number of ERP components including Personnel and payroll. General

ledger, Account payables, Banking and cash management, Account receivables and Fixed

asset management. Further, using multiple regression the study established that ERP has

significant effect on financial reporting efficiency and that among the four variables, it

was the most important predictor.

 72

5.2.5 Challenges Facing ICT adoption in Financial Reporting

Objective five sort to determine the challenges facing ICT adoption in financial reporting

in public enterprises of Tana River County. Using descriptive statistics, the study found

out that most enterprises are faced with a host of ICT adoption challenges lead by

inability of the system to support large volumes of data followed by loss of data due to

power interruptions and loss of traditional accounting skills. These findings indicate that

the challenges may influence financial reporting efficiency

5.3 Conclusions

In view of the findings summarized above, the following conclusions are drawn.

1. Public enterprises use very few stand-alone computers for

financial reporting using M/S Excel and Quick books. Further

IS adoption has significant effect on financial reporting

efficiency.

2. The extent of Intranet, electronic data interchange and

internet, is high in public enterprises in Tana River County but

there is little use of websites. Further e-business has no

significantly affect financial reporting efficiency.

3. Extent of MRP application is low despite moderate application

of inventory management system. Further, MRP has

significant effect on financial reporting efficiency.

4. The Extent of application of ERP components like Personnel

and payroll, General ledger, Account payables, Banking and

cash management, Account Receivables and Fixed asset

 73

management is high. Further, ERP significantly affects

financial reporting efficiency.

5. Major challenges facing ICT adoption in public enterprises in

Tana River is inability of the system to support large volumes

of data followed by loss of data due to power interruptions

and loss of traditional skills.

5.4 Recommendations

In view of the conclusion made above, the following recommendations are made

5.4.1 Recommendations for theory and practice

a. Public Enterprises through their respective finance and ICT

managers, should consider increasing the number of computers

used for financial reporting in order to enhance efficiency in

financial reporting. Specifically the following areas should have

at-the-source data capture;- sales, stores and stock, purchasing

and ordering, cash and cash management, fixed assets, capital

and investments. Besides,they should expand their ICT platforms

to include e-mail, internetand importantly website. It is further

recommended that finance managers adopt use of modern

accounting softwareswhich easily integrates with other systems

and allows easy dissemination and accessibility of data and

information among users.

 74

b. The Government through respective ministries, should allow

Public Enterprises to host their own websites in order to allow

sharing of financial information beyond the organizations’

borders and enhance e-business for more efficient financial

reporting

c. The Government, through the directorate of public enterprises

should enhance use MRP application especially MRPII which has

integration features even more than ERP in order to improve on

financial reporting efficiency. Even though most enterprises

under study were service providers, MRPII fits in both

manufacturing as well as non-manufacturing.

d. Public Enterprises should embrace ERP more in order to improve

on financial reporting efficiency especially in Inventory Control,

Batch control and Accounting document control where the usage

is low.

e. Public Enterprises through their finance and ICT managers should

ensure that the system can adequately accommodate their data

before procuring them. A new system should be tested with three

times the current financial data capacity to ensure it can

accommodate growth of organization in terms of data load. They

should also ensure that there is sufficient power backup and

surge; and that adequate awareness training is conducted prior

 75

to implementation. There should also be sufficient budget the

system implementation.

5.4.2 Recommendations for future research

i. Given the volatile and dynamic nature of this study, future

studies should be conducted at intervals and/or under a theory

so that findings can be generalized and the knowledge derived

used to predict future as well as current status of technology

development.

ii. The context of the current study is such that the findings could

be low on external validity. In order to improve on external

validity in terms of generalization of the study findings, it is

recommended that similar studies be replicated in other

organizations across the public and private sectors in the

remaining 46 counties in order to get a more representative data

of the whole country.

 76

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 86

APPENDIX A: LETTER OF INTRODUCTION

EVANS O. ACHAR
P. O. BOX 71,
GARSEN
CELL: 0722690780
September 3rd 2014

To whom it may concern

Dear Sir/Madam,

REF: RESEARCH QUESTIONNAIRE

My name is Evans O. Achar, I am a student at Rongo University College, School of

Business and Human Resource Development, seeking to conduct a research in the effect

of ICT adoption in financial reporting efficiency in public enterprises in Tana River

County. This is in partial fulfillment of the requirement for the award of Master of

Business Management degree.

The purpose of writing this letter is therefore to request you to kindly fill the attached

questionnaire which is purely for academic purposes. The information supplied will be

treated with utmost confidentiality.

Please do not write your name on the questionnaire. In case of any clarification kindly

use my above cell number to call me.

I will appreciate your prompt cooperation on this matter.

E. O. ACHAR
RESEARCH STUDENT
 87

APPENDIX B – QUESTIONNAIRE

EFFECT OF ICT ADOPTION ON FINANCIAL REPORTING EFFICIENCY IN

PUBLIC ENTERPRISES IN TANA RIVER COUNTY

Instructions:
You are kindly requested to answer this questionnaire as honestly as possible by
ticking
( ) in the spaces provided. The information you give will be treated with maximum
confidentiality

Part I – Demographic Data

1. Please indicate your gender:

Male [ ] Female [ ]
2. Please indicate your age:
20-30 yrs [ ] 31-40 yrs [ ] 41-50 yrs [ ]
51-60yrs [ ] Over 60 yrs [ ]
3. Please indicate your level of education:
Primary [ ] Secondary [ ]
Certificate [ ] Diploma [ ]
Bachelor’s Degree [ ] Post Graduate Diploma [ ]

Master Degree [ ] PhD [ ]

4. Please indicate the number of years you have worked in your current position
Less than 2 years [ ] Between 2 and 5 years [ ]
Between 5 and 10 years [ ] Over 10 years [ ]
5. Please indicate the status of your employment:
Permanent [ ] Temporary [ ] Contract [ ]
6. Please indicate your of profession:
CPA [ ] ACCA [ ]
KATC [ ] Diploma in accountancy [ ]
Certificate [ ] Diploma in ICT [ ]
None above [ ]
 88

Part II – Objective questions

Section I: IS adoption in financial reporting efficiency

1. By placing a tick in the appropriate box, please indicate the number of computers
used in organization for financial reporting
a) 1-2 computers [ ] b) 3-5 computers [ ] c) 5-8 computers
[ ] d) 9-10 computers [ ] e) Over 10 computers [ ]

2. By placing a tick in the appropriate box, please indicate which of the following ICT
platform is used in your organization
a) Website[ ] b) Internet [ ] c) Intranet [ ] d)
Standalone [ ] e) E-mail [ ]

3. Please indicate which accounting software is used for financial reporting in your
organization
a. ……………………………………………………………………
b. ……………………………………………………………………
c. ……………………………………………………………………
d. ……………………………………………………………………
e. ……………………………………………………………………
f. ……………………………………………………………………

Section II: Effect of MRP on financial reproting efficiency

By placing a tick in the appropriate box, please indicate the extent to which use of the
following aspects of MRP affect financial reporting efficiency

Very high High Moderate Low Very low

extent extent extent extent extent
5 4 3 2 1
Inventory management
MRPII systems
Master production schedule
Bill of materials
Production cycle times
Supplier lead times
Material needs
Inventory management system
 89

Section III: Effect of ERP on financial reporting efficiency

By placing a tick in the appropriate box, please indicate the extent to which of the
following aspects ofERP affects financial reporting efficiency
Very high High Moderate Low Very low
extent extent extent extent extent
5 4 3 2 1
Accounting documents control
Batch control
Inventory Control
Personnel & Payroll
Sales and Purchases
Investment Management
Banking and cash management
General ledger
Account payables
Account receivables
Fixed assets management

Section IV: Effect of E-Business on financial reporting efficiency

By placing a tick in the appropriate box, please indicate the extent to which the following
aspects of E-Business improves efficiency in financial reporting
Very high High Moderate Low Very low
extent extent extent extent extent
5 4 3 2 1
Secure business transactions
Online marketing
Use electronic data interchange
Website
Internet
Intranet

Section V: Financial reporting efficiency

By placing a tick in the appropriate box, please indicate the extent to which the following
aspects of financial reporting efficiency are present in your organization

Very high High Moderate Low Very low

extent extent extent extent extent
5 4 3 2 1

Adequate financial information

integration

Efficient financial reporting

 90

dissemination
Accounting information
trustworthiness
Section VI: Challenges which ICT poses to Financial reporting

In your opinion what are the major challenges faced in financial reporting due to ICT
adoption.
a. ………………………………………………………………………………
…….
b. ………………………………………………………………………………
…….
c. ………………………………………………………………………………
…….
d. ………………………………………………………………………………
…….
e. ………………………………………………………………………………
…….
f. ………………………………………………………………………………
…….

Thank you for your cooperation!

 91

APPENDIX C: AUTHORITY TO CONDUCT RESEARCH

 92

Fig. 5.1: Map of Tana River County

Source: Tana River County Archive