Impact of Computerized Accounting Systems on the Quality of Financial Reports of SMES - Special Reference to Vavuniya District in Sri Lanka

Abstract

The research examined the effort of computerized accounting systems to improve the quality of financial reporting in SMEs in Vavuniya District, Sri Lanka. Identifying how computerized accounting systems enhance financial reporting capacity is the primary goal of this study. The researcher modeled computerized accounting systems (CAS) as the predictor variable with four formative constructs: Level of Knowledge, Efficiency, Reliability, and Data Quality. The dependent variable is the Quality of Financial Reporting (QFR). Four hypotheses were tested on how computerized accounting systems influence quality financial reporting in relevance, faithful representation, comparability, verifiability, and understandability. The study data were collected using a web-based self-completed questionnaire from fifty firms randomly selected from SMEs in the Vavuniya district. The collected data were analyzed using descriptive statistics and a structural equation econometric model with the aid of SPSS23. The study's findings indicated that CAS usage significantly positively influences quality financial reporting. Consequently, the researcher concluded that computerized accounting systems significantly enhance the quality of financial reporting information. Hence, SMEs need to be encouraged to adopt computerized accounting systems to improve the quality of financial reporting.