ADIGRAT UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTEMENT OF ACCOUNTING AND FINACE

The Effect and challenges of Accounting Information System (AIS) on internal control
(in case of construction and business bank Adigrat Branch)

A senior essay submitted to department of accounting and finance for the partial
fulfillment of the requirement of BA degree of arts in accounting and finance.

Prepared by: MESERET ENDALAMEW

ID Number 2664/05

Advisor: Msc. Ruth Alemayehu

June, 2015

Adigrat, Ethiopia
ACKNOWLEDGEMENT

Firstly, I want to express gratitude to Almighty God for enabling me to overcome the difficult
challenges that I faced on the path of my education and blessing me and the results of my efforts.

Secondly, I want to thank my family for giving me all the opportunities to pursue my education
and encouraging me in all my initiatives at all levels during my education. Further, I would like
to thank my Adviser Ruth for his unlimited advising services.

Finally, I thank those who were involved in the making of this paper for their help, supply of raw
data and different ideas, very important for completing this paper.
ABSTRACT
This research conducted in construction and business bank in Adigrat branch .which operates
banking services. The study would focus on the effect of accounting information system on
internal control. The main objective of the study is to show whether the employees have
adequate awareness about accounting information, its essential the integrity, confidentiality and
reliability of critical data and to show dependability on extensive accounting information to
administer internal control over the preparation of financial statement.

The researcher collect data through quisioneries from judgmentally selected the employees of
construction and business bank in Adigrat branch. Currently accounting information system is
widely used in bank for internal control, because the most of the bank activities are depends on
information. The result indicate that the use of accounting information system at this bank is
caused the improvement of manager decision making process ,internal controls and the quality of
the financial for internal control.

Acronyms
AIS:-Accounting information system

ATM:- Automatic teller machines

BOD:- Board of director

CBB:- Construction and business bank

IC:- Internal control

ICD:- Internal control development

ISD:- Information department

IT:- Information technology

MIS:- M anagemet information system

Table of Contents
ACKNOWLEDGEMENT...........................................................................................................................2
ABSTRACT................................................................................................................................................3
Acronyms.....................................................................................................................................................3
List of table content.............................................................................................................................7
CHAPTER ONE......................................................................................................................................8
1. Introduction.............................................................................................................................................8
1.1 Background of the study......................................................................................................................8
1.2 Statement of the problem.....................................................................................................................9
1.3.1 General objectives of the study.........................................................................................................10
1.3.2 Specific Objectives..........................................................................................................................10
1.4 Significance of the study.....................................................................................................................10
1.5 The scope of the study.........................................................................................................................10
Limitation of the study..............................................................................................................................10
1.6 Research Methodology......................................................................................................................11
1.6.1 Research design................................................................................................................................11
1.4.2 Source of data...................................................................................................................................11
1.4.3 Sample size and Sampling techniques..............................................................................................11
1.4.4 Method of data analysis....................................................................................................................12
1.8 Organization of the paper....................................................................................................................12
LITRATURE REVIEW................................................................................................................13
2.1. Accounting information system (AIS)....................................................................................13
2.1.1 Importance of accounting information system.....................................................................13
2.1.2 Feature of AIS......................................................................................................................14
2.1.3 Advantage of AIS..................................................................................................................14
2.1.4 The AIS course compliments other system course................................................................14
2.2 Accounting information in valuation setting...........................................................................15
2.3 Accounting provide economic information..............................................................................15
2.4 Internal control system............................................................................................................16
2.5 Component of internal control process....................................................................................16
2.5.1 Control environment............................................................................................................16
2.5.2 Risk assessment....................................................................................................................16
2.5.3 Control activities...................................................................................................................17
2.5.4 Information and communication..........................................................................................18
2.5.5 Monitoring............................................................................................................................18
2.6 Analysis of internal control process.........................................................................................19
2.7 Banking and information system.............................................................................................19
2.7.1 the of important of accounting information in bank activity................................................20
2.7.2 Resource of bank accounting information and their users.................................................21
3. DATA ANALYSIS AND INTRPRETATION..............................................................................22
3.1 Introduction.................................................................................................................................22
3.3. General questionnaires to employees of CBB in Adigrat branch................................................24
3.3.1 Awareness on importance of AIS.............................................................................................24
3.3.2 AIS as a tool of ensuring integrity, confidential and reliability on critical data........................25
3.3.3. Contribution of AIS in reducing the risk of the errors, frauds and other illegal acts................26
3.3.4. AIS to process reliable in financial report................................................................................26
3.3.5 Functions of AIS in internal control..........................................................................................27
3.3.6 Preparation of financial statement to administer internal control depends on AIS....................28
3.3.7 Construction and business bank (CBB) uses AIS properly.......................................................28
Chapter four.......................................................................................................................................29
4. Conclusion and recommendation...................................................................................................29
4.1 conclusions..................................................................................................................................29
REFERANCE....................................................................................................................................31
Appendix...........................................................................................................................................32
List of table content page

Table 1 summarize the sex structure of the respondent………………………………………………………………………..

Table 2 summarize the age of the respondents………………………………………………………………………………………

Table 3 response on education back ground …………………………………………………………………………………………..

Table 4 responses work experience in the bank………………………………………………………………………………………

Table 5 awareness on importance of AIS of CBB employees……………………………………………………………………

Table 6 ensuring integrity, confidentiality and reliability of critical data…………………………………………………...

Table 7 AIS in reducing risk, frauds and other illegal acts………………………………………………………………………….

Table 8 AIS to process reliable in financial report………………………………………………………………………………………

Table 9 function of AIS in internal control…………………………………………………………………………………………………

Table 10 preparation of financial statement depend on AIS………………………………………………………………………

Table 11 CBB uses AIS properly…………………………………………………………………………………………………………………

CHAPTER ONE

1. Introduction

1.1 Background of the study

Accounting information system (AIS) of the past focused on the recording, summarizing and
validating of the data about business financial transaction. Accounting system that is previously
performed manually can now be performed with the help of computers. Therefore, improvements
in the information technology have facilitated the use of cost and management accounting
procedures. Development in information technology (IT) has been par amount in the recent
decades and they have been leading developments in the globalization of markets and societies.
In today`s world. Most companies depend on information system in order to stay competitive.
Information in just as much as source as plant and equipment productivity which is crucial to
staying competitive. Can be increased through better information. Accounting information
system identifies, collects, process and communicates information about an entity to a wide
variety of people. Information is a useful data organized such that correct decision can be based
on it. A system is collection of recourses related such that certain objective can be achieve
(George and willians, 1998).

Perhaps the most important aspect of AIS is the role it plays in an organization internal control
process. The term internal control process suggests actions taken within an organization to
regulate and direct the activities of the organization. Much information need by management to
control finances and operation comes from AIS .One of the management responsibility is
stewardship. The role of importance of accounting information system in the bank of activity is
derived from the role and function commercial bank themselves. Banks are the great financial
inter mediates in economy. (George and willians, 1998).

1.2 Statement of the problem

Accounting information system is an important mechanism of an organization that is vital for
effective management decision making in controlling and administering an organization even if
the AIS are vital for internal organization control. Most managers depend on AIS still some
problems are related with business. But the experience and awareness on the AIS is very
important for the employees and for an organization. The AIS impacts managements operation to
prepare financial reports that identifies records all valid financial transactions. Effective AIS will
ensure the integrity, confidentiality, and reliability of critical data that minimize risk and frauds.
( Georg and Williams,1998)

Accounting information on internal control are activates of various categories of business

enterprise. Most of the time, they lack to utilize accounting information purpose. Therefore based
on above facts the study tries to investigate the effect of accounting information on internal
control in construction and business bank (CBB) in Adigrat branch.

There are some questions with accounting information system on internal control that would be
answered by the researcher

1. What are the functions of AIS in CBB?

2. In what ways AIS affect internal control in CBB?

3. How AIS facilitates the internal control in CBB?

4. How can the challenges faced by the bank regarding internal control while using AIS be
assessed?

1.3 Objectives of the study

1.3.1 General objectives of the study

The general objectives of the study would be to assess the effect and challenged of accounting
information system (AIS) on internal control in case of construction and business bank of
Adigrat branch.

1.3.2 Specific Objectives

The objective aims to achieve the following specific objectives

1. To assess the purposes of AIS on internal control in CBB.

2. To assess AIS is essential for the integrity, confidentiality, and reliability of critical data while
reducing the risk of error, frauds and other illegal acts.

3. To assess the importance of AIS in facilitating internal control in the bank.

4. To assess the challenges faced by the bank regarding internal control while using AIS.
1.4 Significance of the study
The result of the study would help CBB to understand the strangeness and weakness of AIS.
Besides this research also use for other organization on the same sector such as commercial bank
of Ethiopia. Adigrat bank and etc. Therefore hope fully that CBB would take all the necessary
measures to overcome the problems of the AIS.

1.5 The scope of the study

The scope of the study would restrict to the effect of AIS on internal control in the CBB in
Adigrat branch. The head office is located in Addis Ababa and has 106 branches. This study
would confine in one branch office located in Adigrat .Also this study would not the overall
effect of accounting information systems.

Limitation of the study

Although it is necessary to conduct the study more accurately and precisely, the researcher faced
some limitation in this research study. Some of these limitations were.

 Absence of manager from office due to meeting during data collection period.
 The lack of related literatures useful as reference
 The inefficiency and reluctant of members to respondents the questions, prepared by the
researcher
 Lack of finance and accessibility to computers write the research

1.6 Research Methodology

1.6.1 Research design

CBB has many branches which most of them operating out of the study would be conducted at
construction and business bank in Adigrat branch. To achieve the objectives of this study the
researcher specialized on the sampling techniques and descriptive type of data about the study .
 1.4.2 Source of data
Primary and secondary source would be used for the source of data that is appropriate for the
study and which would come up with a lot of data that is constrictive for the study. The primary
data would be collected through questionnaires.

Questionnaires are distributed to judgmentally selected employee also is conducts with the
managers of the bank. Secondary data were collected from published materials of the
organization like company profiles and report books.

1.4.3 Sample size and Sampling techniques

From the 14 total employees of construction and business bank, seven of them would selected
including the two managers(information system manager and internal control manager) of the
bank for questionnaires who are very crucial in giving information for the study.

The researcher would use judgmental sampling technique which is a non-probability sampling
tool. The selection of this method is enabling the researcher freely selecting any respondents that
by considering whether the responder would fit to the question or not.

1.4.4 Method of data analysis

After responses gathered from both primary and secondary source. The data would be analyzed
by using tabular representation based on the nature and characteristics of the data.

1.8 Organization of the paper

This study would include four chapters. The first chapter presents the introduction part, which
reflects the background of the study, statement of the problem objective of the study,
methodology, significance of the study, scope of the study, and organization of the study. The
second chapter deals with literature review. The third chapter would be consists with data
analysis and interpretation and the fourth chapter consists of summary, conclusion and
recommendation.
Chapter two

LITRATURE REVIEW

2.1. Accounting information system (AIS)

Accounting is the service of function that seeks to provide the user with quantitative information
on the other hand AIS on information system an organized means of collecting, entering, and
processing data and storing, managing, controlling, and reporting information that an
organization can achieve its objective and goal that designed to make the accord punishments of
accounting function possible. AIS possess data and transaction to provide user with the
information they need to plan, control, and operate their business. AIS can be manual system or
computerized system using computer regardless of the type.AIS is designed to collect, enter,
process, store, and report information (Marshal Romney2000).
2.1.1 Importance of accounting information system
Generally, information the related component that are working together to collect, store, and
distribute data for the purpose of planning, controlling, coordination, analysis, and decision-
making. The AIS that disc created in business is directly related to the organizational cultural,
level of strategic planning and the information technologies that specific business has it is
possible to obtain healthier information about the financial structure of the business that set up a
good accounting information system .some of the important function that an accounting
information system perform in a business are collecting and recording data about the activities
and transaction ,planning, prosing, the data training it in to information be used in decision
making for planning ,application ,and control activities ,and carryings out the necessary control
in order to control the business asset. Accounting information plays an important role in the
processing of managing an enterprise activity. In the last ten years, there has been an intensive
process of implementing AIS in the world. These systems were implementing in the large
industrial and small trade enterprise later, implementation on of AIS started in other enterprises
and state institution. The implementation of AIS is quite an extensive investment project for
most enterprises.

2.1.2 Feature of AIS

Information system is perceived as an entity of information system and resource of enterprise
meant form and disseminates information lacy was established that the system information is a
system of unanimously operating people ,data and procedure for the purpose of provide useful
information contemporary cannot function without computer and other means to consumer .

For this reason, computerized information system (CIS) is designed and implemented (Mahdi
Sale, 2010]

2.1.3 Advantage of AIS

According to the several researcher AIS have a lot of benefit to company and corporation as
follows.

 Good cooperation
 TO meet the needs of multi user
  To control afterward and control in advance and in concurrent (Mahdi
Saleh .2010).

2.1.4 The AIS course compliments other system course

There are many system that cover design and implementation system and that help an
organization to develop specialized skill in such areas data base, expert system and
telecommunication. The AIS course differs from these other information system course in its
focus on accountability and control .These issue are important because in most large business the
manager is not the owner. In stead’s the owner have interested management with asset and hold
them accountable them for their proper use. Data and information are among an organization
most valuable assist clearly the AIS must include control to ensure safety and a viability of the
every organization accept input and transform them in to output that take form of product and
service .A manufacturing firm transform raw material, labor and other scarce resource in tangible
output .The user of accounting information fall in to two braved group.

 External user and

 Internal user

External include stock holder, creditor ,government agency ,customer and compotator, labor
union and public at large .they receive at depend on variety of output from organization
accounting information system. Many of these outputs are routine in nature.

Internal user comprises manager whose requirement depend on their in an organization or

Particular function they perform. The AIS summarize and filter the data available to decision
maker by processing data and AI influxes’ organization decision. The uncertainty of the
environment in which information in developed and presented means of the estimate and
judgment must be made. No Information system can ignore the partiality of presenting
information .various government agencies, private agencies and legislation set statuary
retirement for record keeping and report (Marshal Romney).

2.2 Accounting information in valuation setting

It is time to combine the themes of accounting as a source of information and that information is
used in valuation setting .The accounting system is the sole supplier of information to the
valuation market. This means the accounting measure and the market valuation are based upon
the same under lying source information about the reporting entity. Accounting and non-
accounting source, thereby allowing the market valuation to be informed by non-accounting as
well as by accounting information

(john and accounting theory,2000)

2.3 Accounting provide economic information

Accounting has been described sufficiently and accurately as the measurement and
communication of financial economics data. The accountant is the major channel through which
quantitative information flows to management. The position of the management account is
unique either respect to information about the firm apart from top management. probably no one
bin the organization can know more about the function of the given business .The management
accountant must not only gather information from every function area and level of the company
but also keep abreast of happening outside the firm in the business world.

(S.KBhattachey,1975).

2.4 Internal control system

The system of internal control is plan of the organization and all the method procedure adopted
by the management of the entity to assist in achieving management objective of ensuring, as far
as practicable, the ordering and efficient conduct of its business .In other word, internal control
is defined as a process, affectedly the entity board of director, management and other person
designed to provide reasonable assurance regarding the achievement of objective in the
following categories.

 Effect mess and efficacy of operation

 Reality of financial reporting
 Compliance with applicable laws and regulation

2.5 Component of internal control process

Internal control of an origination may be viewed as including five component .these are; the
control environment, risk assessment, the accounting information and communication and
system, control activity and monitoring.
2.5.1 Control environment
The control environment sets the tone of an organization by inflicting the control consciousness
of the people .it i8s viewed as the foundation for the other component of the internal control .The
following are the major control environment factories.

 Integrity and ethical value

 Communication to competence
 Board of director
 Management philosophy and operating style
 Organization structure
 Human resources policies and procedure
 Assessment of authority and responsibility (Whittington and penny ,2000)

2.5.2 Risk assessment

Risk assessment is management’s processes of identifying and analyzing the risk that might
prevent the organization from achieving the objective. Risk arise from both external and internal
factor .Risk or from external factor affect the organization as the whole they include risk from
economic or technological change ,government regulation, and environmental catastrophe .Risk
from internal factor related to specific activities of the organization. They include eruption of the
information system, error due to untrained or unmotivated employee or to change in management
responsibilities and the result of the effective board of director or audit committee charge is a
source of risk for all organization. Managements may for example for identifying alternative
supply source, expand product line, and obtain more relevant operation report or imperative
program (Whittesgon and payny.2001).

2.5.3 Control activities

Control activities are policies and procedures that help ensure that management directive are
carried out .These policies and procedures promote action that addresses the risk that face to
organization while there are many different type of control activities performed in an
organization .only the following type are generally relevant to an audit of the organization
financial statement.

 Performance review
  Information processing control
 Physical control
 Segregation of duties

A. Performance review

These control include review of actual performance as compared to budget ,forecast and prior
period performance relating different set of data do one another ,and performance over all review
of performance review provide management with an overall in direction of wither personnel at
various level are effectively.

B. Information processing control

Variety of control activities is performed to check the accuracy, completeness, and authorization
of transaction. The two broad categories information control include general control activities,
which apply to all information processing pro cedars, and application control activities, which
apply only to one particular activity.

C. Physical control

These controls include those that provide physical security over both record and other asset
activities that safeguard may include maintaining, control, at all-time overrun-issued per number,
document as well as other journal and ledgers and restricting asset to compute programs and data
files.

D. Sesegregation of duties

A fundamental concept of internal control is that no one department or person should handle all
aspect of transaction from beginning and to end. In similar manner, no one individual should
perform more than one of the functions of authorized transaction, recording transactions and
maintains custody over assets. Also to extent possible individuals exercising the specific
transaction should be segregated from these functions.
2.5.4 Information and communication
Information refers to the organizations accounting systems which consists of methods and
records established to identify, assemble, analyze , classify , record and report the organizations
transaction and to maintain accountability for the related asset and liabilities maintain
organizations have systems that are able to process huge numbers of various types of
transactions. Information system are designed , and installed not only to produce the ledger
balance from which financial statement are prepared, but also to produce management control
and operation information thus, accounting system and operation control are closely related in an
organization. Good communication requires effective oral communication adequate procedure
manuals and other types of documentation.

2.5.5 Monitoring
Monitoring is the internal control component which involves the ongoing process of assigns the
quality of internal controls over time and taking corrective action when necessary. The quality of
control might be adversely affected in various ways including lack of compliance, changing
condition or even miss understanding monitoring is accomplished through ongoing activities
separate evaluation or the same combination of the ongoing activates would include management
supervise activities and other actions the personal might take to assure an ongoing effective
internal control processes. An internal audit function is common in large organization to monitor
and evaluate controls ongoing basis. The expanded span of control and the growth in the volume
of transaction associated with a large organization where factors in the emergency of internal
control function. The objective of internal audit function is to serve management by finishing
management with results of analysis and appraisal of such activities and system as

 The organization’s information system

 The organization’s internal control structure
 The extent of compliance to operating policies procedures and plan
 The quality of performance by company personnel

External auditors may performance in monitoring controls it is common practice s for external
auditors to provide lists of specific recommendations for management to improve internal control
(George, Williams, 2000)
2.6 Analysis of internal control process
The analysis of internal control process requires an understanding of the process both as it is
designed and as it is actually operates. The actual process may or may not conform to
expectations. Documentations may be out dated and the structure may be operating under new
procedures. Internal control process routinely collect information concerning fulfillment of
internal of duties transfer of authority’s approval and verification. This documentation of internal
control duties must be examined to evaluate the reliability of the system operation. Reliability is
independent on the people who administer internal control processors. Designing an internal
control process is only the first part of the problem it is essential that internal control duties are
actually performed as prescribed. (George, Williams, 2000).

2.7 Banking and information system

Information system is widely use in banking sector. This system is particular appropriate because
banking organization by their nature are information intensive. Information systems plays a
control role in the service sector that they are called the back bone of service organization the
only thing bankers manufactures is information’s

They use and invest the information system by banking organization are important for two
reasons. First many customers and bank employees are using this system to manage their money,
account and saving information’s. Secondly, banking information system is important to enhance
effectiveness and efficiency by improving service delivery and reduces cost .Banking
information system input include a type ofaccount, data and account of deposit and withdrawals.
Their output consist of statement which show interest paid of owed balance and other
information.(Harangues Daniela,2005 )

2.7.1 the of important of accounting information in bank activity

Activity in business. The main generating source accounting information in bank account and
bank activity are client account ,bank account and bank computerized program(which deal both
with accounting data an statically data, bank management etc.).The classification of bank
operation in to active and passive operation underlines the importance of accounting information
in the whole bank activity. In the context of world economic globalization the great bank which
are the agent of the international financial market, fight ferociously for supremacy accounting
information and the transpierce of their accounting system lead bank to success. For exerting
their function bank generate extremely useful accounting information both for the management
and for the client .These function and operation traditional for the bank confirmed by
law ,generator of accounting of refer mainly to:

 Accept deposit from client

 Issue and management of payment and credit
 Payment
 fund transfer
 transaction in the client account

The classification of bank operation in active and passive depending on the way they are found
in the balance sheet also underline the role and important of accounting information in the whole
banking activities .Activity bank operation generate accounting information regarding the
placement of bank resource (in credit ,placement on the interbank market etc.).passive bank
operation generate accounting information regarding the attraction of resource by the bank (own
capital, deposit for the client).Bank accounting information allows the commercial to speculate
up to some attractive business opportunity connected to give credit ,guarantee, and other
facilities in favors of performing client.(Harangues and Daniel ,2005.).

2.7.2 Resource of bank accounting information and their users

The main resource generating accounting information in bank activities are:

 Client account which can be availebity in the bank account ,current account and stock
account or credit account.
 Bank entity account which refer specially to cash accountants stock account, inter
banking settlement account, income and spending account of the bank etc.
 Account outside the bank cash statement, which are reflected in to engaged guarantee
record engagement unfolding credit guarantee related to credit, claims from current asset
and flowed afterward.
 Bank computerized programs, which mange accounting data and statically data, bank
management etc.

In bank the main source for collecting accounting information come from the front office. Client
operation and inter and intra banking operation. The type of accounting information in the bank
activity refers to the value of account surplus stock (initial and final), debit and credit turnover of
these accounts, the number of registered account operation and their value. The quantitative
structure of accounting operation overage. All these type of accounting information may exist in
raw or advanced form with the aid of computerized program user of bank accounting information
can be:

Internal user: bank client, stockholder, office, employee and bank manager.

External user: client business partner, supplier and their cleat financial and fiscal institution
and other bank.

All these external user take accounting information from the client account made available to
them by the client .The bank must respect the confidentiality principle for their operation in the
client account and for these resistant ,they usually give accounting information only to the
internal user. In the analysis of accounting information of its accuracy and importance for the
bank stock holders, the issue of the bank accounting system transpierce is interesting to approach
(Harangues and Daniel, 2005).

CHAPTER THREE

3. DATA ANALYSIS AND INTRPRETATION

3.1 Introduction
The main purpose of this chapter is to analyze data collected through questionnaires’ related in to
AIS of CBB in Adigrat branch. As indicated in chapter one .relevant data were gathered though
questionnaires. The questionnaire conducted form CBB employees. This chapter mainly
concerned with the effect of accounting and internal control.

As clearly stated in chapter one of the paper. The collected data by using questionnaires is
analyzed through quantitative method of data analysis. Including table and percentages were
employees and presented in the preceding section of this chapter.

Additionally, the researcher collects data about governance and organizational hierarchy which
of them are general assembly of shareholder, the board of director, executive, management and
departments. The general assembly of CBB shareholder is at the helm of CBB organization
structure. As such it is entrusted among others, with making decision with regard to the
following

• The ultimate purpose of CBB´s existence.

• The appoint and removal of the members of CBB´s board of directors and its external auditors.

• The reviewing and approval and ⁄ or rejection of CBB´s performance reports.

• The amount of money that should be given out to CBB´s shareholder as divided and the capital
Issuer of the bank.

Finally in this chapter, the researchers try to evaluate the effect accounting information system
on internal control in CBB of Adigrat branch. The researcher distributed 7 questionnaires and
that are direct related employees and all questionnaires are collected.

3.2 Personal profile of the Respondents

Table 3.1. Is summarize the Sex structure of the respondent

Sex Number of respondents Percentage %
Male 5 71.42%
Female 2 28.58%
Total 7 100%

As shown in table 3.1 above from, respondent of 7, 5 are males and 2 are a female which means
the males take the majority number from the respondent and minority of the respondents are
females.
Table 3.2: Is summarize the Age of the respondents
Age of the respondents Number of respondents Percentage
20 – 30 5 71.42%
31 – 40 1 14.28%
41 – 50 1 14.28%
51‒ 60 0 0%

Total 7 100%
Source: Questionnaire
As indicated in table 3.2 about 71.42% of respondents are between 20 – 30 ages, 14.28% of the
respondents are between 31 – 40 ages, 14.28% of the respondents are between 41 – 50 and 0%
are above 50.this indicate the age between 20 – 30 are more in bank.i.e the majority employee of
construction and business bank in Adigrat branch age is young as compared to the other type
bank.
Table 3.3: responses on educational background
Educational background No of respondents Percentage
12 completed 0 0%
Diploma 1 14.28%
First Degree 6 85.72%
Master Degree and above 0 0%
Total 7 100%
Source: Questionnaire
As it is indicated in table 3.3, the respondents’ educational level is more of first degree. This
insures that most of the employees are well educated and they are much aware about accounting
information system in the bank .In the other case, the researcher can infer that the bank is aiming
to maximize their customer by employing BA degree which has good education level. There is
no employee who scores master degree and above and 12 completed background.
Table: 3.4: Responses work experience in the bank.
Service year No of respondents Percentage
0 – 3 years 5 71.42%
4 – 10 years 2 28.58%
5 – 20 years 0 0%
Above 20 years 0 0%
Total 7 100%
Source: Questionnaire
As it is indicated in table 3.4, the work experience respondents are categorized in to four
categories. That is from 0 – 3 years, 4– 10 years, 5 – 20 years and above 20 years. Most of the
respondents (71.42%) have 0 – 3 years’ work experience in the factory and this implies that they
are well familiar with jobs they have been assigned based on the questionnaire responses. Hence
the researcher hopes that there will be a faire response from the respondents. There is no
employee who has work experiences from the age of 5-20 and above 20 years in construction
and business bank.

3.3. General questionnaires to employees of CBB in Adigrat branch

In this part of research paper, the researcher wants to analyze the general information of about
AIS and internal control system in CBB Adigrat branch.

3.3.1 Awareness on importance of AIS

The awareness on the importance of AIS is very important for the employees and for an
organization especially of service giving business organization like CBB is very crucial.

Table 3.5: Awareness on importance of AIS of CBB employees

Important Number of respondents Percentage
Yes 6 85.72%
No 1 14.28%
I don’t know 0 0%
Certainly yes 0 0%
Total 7 100%
Source: Questionnaire
As human is one component of information system resource, it is vital to have awareness toward
the importance of AIS. The above table reveal that about 85.72% total respondent are full
awareness in the importance of AIS and 14.28% employees have some awareness because it can
be viewed that those respondent who have no awareness should have training and support from
AIS department and they have to be aware of about importance of AIS.

3.3.2 AIS as a tool of ensuring integrity, confidential and reliability on critical data
As it is possible to understanding from the respondents. AIS are very importance to ensure the
integrity, confidentiality and reliability of critical data. It is obvious that there are a number of
activities operating in this bank. They have their own data and work together by interchanging
these data. These data are not functioning in one activity but also in there activates. So in this
case those data are used as AIS for each activity.
Table 3.6: Ensuring integrity, confidentiality, and reliability of critical data
 Ensuring I.C.R of critical data No of respondent Percentage
Yes 6 85.71%
Partially yes 0 0%
No 1 14.29%
Partially No 0 0%

I don’t know 0 0%

Total 7 100%

Source: Questionnaire
As shown in the above table. The inference can be drawn that about 85.72% of the total
respondent are agree that AIS can ensure the integrity, confidentiality and reliability of critical
data in every activities and 14.29% of the respondents are not sure. From this the researcher can
understand that accounting information system can ensure integrity, confidentiality and
reliability of data in the banks.

3.3.3. Contribution of AIS in reducing the risk of the errors, frauds and other illegal acts.
In addition to ensuring the integrity, confidentiality and reliability of critical data. AIS have a
great role reducing the risk of error, frauds and other illegal acts. Now a day’s most of business
organization including CBB uses computer based AIS in order to reduce the risk of error. Even
though computer is operated by human most of the time if do not accept the correct data .In such
case the operator can catch where there is an error and re- correct again and order the computer
to re- process.
Table 3.7 AIS in reducing risk, frauds and other illegal acts.
Reducing risk No of respondent Percentage

7 100%
YES

NO 0 0%

I don’t know 0 0%

Total 7 100%
Source: Questionnaire
The above table can be summarized that the total respondents agree that AIS can reduce the risk
of error, frauds and other illegal acts. Almost no risks occur in the organization according to the
employee construction and business bank and they use risk reduction technique.

3.3.4. AIS to process reliable in financial report

There are many activities performed under many departments. Activities performed under those
departments are used as accounting information or row data to process reliable financial
reporting as the whole the bank.

Tabel.3.8: AIS to process reliable in financial report

Process reliable financial No of respondent Percentage
report

Certainly 4 57.14%

Possibly 1 14.28%

Probably 2 28.58%

I don’t know 0 0%
Total 7 100%

.Source: Questionnaire
From the above table it can be generalized that respondents who has been giving an opinion of
this view. About 57.14% of the respondents or that AIS has contribution to process reliable
financial reporting and the other 28.58% and other are not sure so the bank has to give awareness
for the employees that how AIS and financial reports are inter dependents to each other.
The above table indicates the respondents explain their reasons related to reliable of financial
reporting. Since it is periodical analysis it results in reliable financial reports and also without
AIS no financial can be done reliable financial report can be done if AIS used correctly. Through
data collection to preparation of financial statements.

3.3.5 Functions of AIS in internal control

As the data collection from the respondents show that AIS has a crucial role in internal control.
Table. 3.9 function of AIS in internal control.
Function No of respondent Percentage
Yes 5 71.42%
Certainly yes 0 0%
No 2 28.58%
I don’t know 0 0%
Total 7 100%
Source: Questionnaire

From the above table, the inference can be drawn that about 71.42% of the total respondent have
a hint on the AIS on internal control fully and the remain not hint on the AIS on internal control
fully. But most of them have a concept on it. From the above responses, information system has
a constructive role in the overall operation of the CBB not only in internal control department.
In the above table the more respondent answer will be yes the reasons is in their any activities for
the government at controlling system. In case of that it makes easy and clearly. And also it may
have different controls internally for how to finance the accounting. All financial statements are
passed though the AIS.

3.3.6 Preparation of financial statement to administer internal control depends on AIS.

Preparation of financial statements can administer internal control. Every transaction under taken
by this bank is included and used to administer and control every asset of this bank.
Table. 3.10 preparation of financial statement depends on AIS
Depend No of respondent Percentage
Yes 5 71.42%
May be 0 0%
No 2 28.58%
I don’t know 0 0%
Total 7 100%
Source: Questionnaire
As it shown in the above table, it can be concluded that about 71.42% of the total respondents are
said preparation of financial statements to administer internal control depend on AIS and the
remaining 28.58% of respondents are not sure that preparation of financial statements to
administer internal control depends on AIS.

3.3.7 Construction and business bank (CBB) uses AIS properly.

Accounting information system in the bank activity is extremely important in the orientation
bank management towards successful strategies.
Table. 3.11 CBB uses AIS properly
Properly No of respondent Percentage
Yes 6 85.71%
May be 0 0%
No 1 14.29%
I don’t know 0 0%
Total 7 100%
Source: Questionnaire
From the above table, it can be generalized that construction and business bank Adigrat branch
use of accounting information system properly that performances and accounting information
system ensures banks the path to success. Some percentage of the employee don’t use
appropriate proper accounting information system.

Chapter four

4. Conclusion and recommendation

4.1 conclusions
The role of accounting information system in the bank activity is extremely important in the
orientation of the bank management toward successful strategies. Bank accounting is the domain
where all accounting information system is essential for bank activities are collected and
synthesized, construction and business bank after started operation it adapted main progress and
new systems. By adapting these new system CBB some important in it, over all operations.

In addition to this the researcher has derived the following points from the analysis.
  The main purpose of AIS is to provide efficient, effective and accurate information for
the information users.
 AIS are used as a tool to ensure integrity, confidentiality, and reliability of critical data.
 AIS are used to reduce risk of error, fraud, and other illegal acts occurring in the
operation of bank.
 The main challenge of information system department at the bank is lack of efficient
infrastructure in the country, disapproval of new information system and budget
consistent by top management and internal control of the bank.
 AIS help the bank to be competitive organization in the market.
 The AIS process reliable in financial report are used as accounting information or raw
data to process reliable financial reporting as whole for bank.
 There is preparation of financial statement to administer internal control that depends on
the AIS.
 The majority of the respondent have hint about AIS internal control system fully.
 AIS minimize the problem by improving decision making process, quality of accounting
information and internal control.
 AIS use properly that performances and accounting information system ensures banks the
path to success.
 The awareness of AIS is very important for the employees and for an organization
especially of service giving business organization like CBB is very crucial.
 Generally, internal control is impossible without accounting information system.

4.2 Recommendation

Even though the bank has achieved its objectives becoming efficient dynamic and competitive in
the country and in internal market. Much coercion should be taken to make information system
dynamic and internal control efficient. So as the researcher derived the following points as
remedies for further information system and efficient internal control.

 The bank should employ the professional related with banking as much as
possible BA degree and above.
 Top management of the Bank should give emphasizes to information system
development and allocate necessary budget to information system
department .In a addition to information system department should develop its
internal strength by arranging different train’s to its staffs.
 The bank management should be flexible to cope up with the changing
environment and continuous department of information system.
 Information system department should be given necessary training to its staff
where necessary.
 Every transaction should be reviewed by the internal controls auditors to
discover any error and frauds occurred in the all activities of the employees.
 Both information system department and internal control department must do
together for efficient and effectiveness of the construction and business bank.

In General, the bank should focus around its information system in relation to internal control
and so that action would be taken to make the system more efficient.

REFERANCE
 George H Bodnar .Williams. Hopwood (1998), Accounting information system.
 Harangues Daniela (2005), Accounting information in bank activity.
 H.sajady Midestaginof information sciences and technology. Volume 6.NO.2 July 2008.
 M ahadisalehi (2010), international journal of economics and finance.
 Marshal Romney (2000).Accounting information system.
 S.K.Bhattacharyya.Johan Deaden (1976), .Accounting for management.
 Whitigtonnpany (2008).principle of auditing.

Appendix

ADIGRAT UNIVERSITY
 COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

Dear respondents: The questionnaire is designed to help Assess the effect and
challenge of accounting information system (AIS) on internal control in case of
construction and business bank in Adigrat branch. So you are kindly requested to
give the right response you think since it contributes a lot for the success available
for this study.

Questionnaire
N.B There is no need of writing your name

Put the check mark” x” in the box provide

1 Personal profile

1. Sex

Male Female

2 Age

20-30 years 41-50 years

31- 40 years 51-60 years

3 Educational back ground

12 completed First Degree

Diploma Master Degree and above

4 Work experience in the bank

0-3 years 4 – 10 years

Between 5- 20 years > 20 years

General question

1. Do you think that employees of CBB have adequate awareness about the importance of
accounting information system (AIS) of (CBB)?

Yes No I don’t know certainly yes

2. Do you think accounting information system insures the integrity,

confidentiality, and reliability of critical data?

Yes No I don’t know partially yes

partially no

3. Does AIS has a contribution in reducing risk of error, frauds other logical acts?

Yes No I don’t know

4. Does AIS used to process the reliable financial report?

Certainly Probably Possibly I don’t know

5. If your answer to question number 4 is certainly, in what way?

_____________________________________________________________________________

6. Do you think AIS has any function for internal control?

Yes No I don’t know

7. If your answer to question number 6 is yes in what way it function? specify

______________________________________________________________

8. Do you the preparation of financial statements to administer internal control

depend on AIS?

Yes No I don’t know

9. Do you think AIS uses accounting information properly?

Yes No I don’t know