A Critical Review Of The Effect Of Good Accounting System In The Growth And Development Of Insurance Industry

A Critical Review Of The Impact Of Good Accounting System In The Growth And Development Of Insurance Industry

Abstract

This study survey critical review of the impact of good accounting system in the growth and development of insurance industry. Some problems facing accounting system includes, Good accounting system has not been adequately carried out in insurance, inadequate accounting management. In insurance industry causes fraud, financial statement mis-interpretation also causes a problem. Objective was on the problems of good accounting management. This study critically reviewed the problems of good accounting system in 1G1, leadway and NICON insurance companies. This study made affair contribution towards the understanding of the treatment of various items by insurance companies and their accounting department. Data was sources from primary and secondary data, the primary data used was questionnaire the and observation to the accounting staff of IGI leadway and NICON, while secondary data are annual reports accounts, journals insurance year book etc. in the determining the sample size, Taro Yamani’s was used. Method of data presentation, tabular method was used in data presentation and analysis, it assembles information on the attributes under study in such a way that the relationship between all the information that can be observed and clearly understood at a glance

Chapter One

Introduction

1.1 Background of the Study

Insurance accounting as related to insurance company is a district and specialized account that is always referred to as ‘specialized account” just like taxation is a specialized area. Though it employs the general accounting principles, concepts and conventions, there are needs for a clear understanding of its preparations.

In the days of T-form presentation of financial statement an insurance company account could be easily recognized from the sides of the “T” to which income and expenditure items are posted, they are not in conventional form. The convention was placing revenue to the right of the “T” insurance company revenue items to the left of the “T’ and expenditure items to the right.

Nowadays, there are other features that distinguish accounting system in insurance industry or company or company’s from their accounting system, they are:

1. Requirement by law for remitting of quarterly and annual returns to central bank of Nigeria (CBN) and Nigerian Insurance supervisory bank (NISB).
2. Prescription by law of the type and level of investment of insurance
3. Requirement by law for condition of returns to the Nigerian Insurance supervision board (NISB) with stated deadline.
4. Requirement by law of the maintenance reserves known as “TECHNICAL RESEARVES” comprising of insurance funds, reserves for outstanding losses reserves for incurred but not reported and contingency reserves.

All these are in addition to rendition of the required returns to the corporate affairs commission (CAC) being and incorporated company under in pursuant to the companies and allied matters decree (CAMD) 1991.

From the above, it can therefore be seen that without a proper understanding of intricacies involved in both the interpretation of the decree as well as items that makes up insurance accounts and right treatment is afforded to the financial statement as narrated wil not give a true and fair view of the statement of affairs and of profit and loss for the period.

Having read and studied the above insurance industry, the researcher felt it work bring out a detailed research work in order to benefit the students in higher institutions and readers alike.

1.2 Statement of the Problem

Some of the problems facing accounting system in insurance industry includes:

1. Good accounting system has not been adequately carried out in insurance.
2. Inadequate accounting management in insurance industry causes fraud.
3. Financial statement mis-interpretation also causes a problem.

1.3 Objectives of the Study

The objectives of this research work is to find solution to the above mentioned problems and at the same time explain and illustrate some of the items so as to practically assist staff of the account department of the insurance industry as follows:

1. To examine why good accounting system has not been adequately carried in insurance.
2. To evaluate how inadequate accounting management in insurance industry can cause fraud.
3. To explain how financial statement misinterpretation can cause problem.

1.4 Research Questions.

Some of the research questions are:

1. Why is good accounting system has not been adequately carried out in insurance?
2. How is inadequate accounting management in insurance industry caused fraud?
3. Explain how financial statement mis- interpretation also caused a problem?

1.5 Research Hypothesis

In this research work, Null Hypothesis (Ho) and alternative hypothesis (Hi) will be used, Null hypothesis (Ho) will use for rejection while alternative hypothesis (Hi) will be used for acceptance.

1. Ho: Good accounting system has not been adequately carried out in insurance.
   Hi: Good accounting system has been adequately carried out in insurance.
2. Ho: Inadequate accounting management in insurance industry causes fraud.
   Hi: Inadequate accounting management in insurance industry does not causes fraud.
3. Ho: Financial statement mis-interpretation also causes a problem.
   Hi: Financial statement mis-interpretation does not causes a problem.

1.6 Significance of the Study

Industry keeps growing which shows an increase in the public funds placed in another person’s hand in form of premium. There is the need for proper and adequate reporting so that confidence in the industry can be established. Capital market internalization distress in the economy and subsequent need for merger and acquisition as a means of survival calls for proper understanding as well as to treatment is based, which will be used for all these.

The following are the significance of the study

1. It is important to me in partial fulfillment of HND degree.
2. It is important to the insurance industry to their accounting section.
3. It is important to the financial industry on their accounting management.
4. It is important to the society on their day to day transactions.
5. It is also very important to the economy special in oil and gas sector

Chapter Five

Summary and Conclusion

5.1 Introduction

This chapter consists of a brief summary of findings that were obtained. It also presents the deduced conclusions and offers recommendations on how to improve the present situation. The research implications are discussed and suggestions of opportunities for further research presented. Section 5.2 is the summary of the study, section 5.3 gives the conclusion, 5.4 outlines the limitations of the study & section 5.5 outlines recommendations for further research.

5.2 Summary of the Study

The aim of the study was to find out the impact of a good accounting Information Systems on the organizational growth and development. The study measured the growth and development of the Accounting Information Systems based on the various dimensions, including, system quality, information quality, service quality, system use, user satisfaction and net benefits of the AIS.

The findings of the study indicated that the AIS used in the insurance industry in Nigeria are quality systems. The researcher evaluated various characteristics of an information system. These characteristics included ease of use, system flexibility, system reliability, ease of learning, as well as system features of intuitiveness, sophistication, flexibility, and response times. The findings further indicated that the quality of information was guaranteed. The results indicated that the outputs from AIS were clear, accurate, and timely.

The results of the study indicated that staff and customers utilize the capabilities of AIS. The results show that the web sites of the insurance companyare updated regularly and contain accurate information. The findings further indicated that AIS contribute to the success of individuals, groups, organizations, industries, and nations. Some of the benefits included improved decision-making, improved productivity, increased sales, cost reductions, improved profits, market efficiency, consumer welfare, creation of jobs, and economic development.

The study sought the challenges faced when using the AIS. The findings indicated that the major challenges were lack of proper training and lack of proper system documentation as some of the challenges they face. Further, the results indicated that high staff turnover is a major challenge of using the AIS. The results indicated that when the staff turnover is high, some of super trained staff leaves the organization and they happen to be having more information about the AIS than the normal users of the AIS. Other shortcomings included lack of finances and risk of obsolescence.

The findings of this study indicate that AIS is an important mechanism of an organization that is vital for effective management decision-making and controlling organization. The results are consistent with empirical reviews which indicated that there exist a relationship between AIS and organizational performance. AIS are an effective decision-making tool for controlling and coordinating the activities of an organization. The findings also indicate that an effective AIS increase system integration and improve internal communications throughout the organization. The top management team with various planning and management information system influences on strategic performance of the organization.

5.3 Conclusion

Accounting information systems are critical to the production of quality accounting information on a timely basis and the communication of that information to the decision makers. Existing literature offers evidence of the relationship between these AIS and organizational growth and development; though it is important to highlight that an in-depth study is required to examine other factors that may influence this relationship. The information value generated by AIS to shareholders and stakeholders in making investment decisions is invaluable. Financial managers need the financial and accounting data provided by AIS to evaluate the firm’s past performance and to map future plans.

This study showed that there is strong relationship between accounting information system and organizational growth and development, which means access to accounting information, will lead to organizational growth and development. Therefore, it can be concluded that accounting information systems have an impact on the growth and development of insurance company in Nigeria.

5.4 Limitation of the Study

This study was not without limitations. First, it was difficult to measure the level of the organizational growth and development of the insurance industry in Nigeria with limited subjectivity. I relied on questionnaire responses to measure the organizational growth and development of the firms under study.

Moreover, time was also limited. Perhaps other data collection methods such as secondary data analysis and interviews or face-to-face communication would have been employed and the target population would have been expanded to include more companies.

5.5 Recommendations for Further Study

Throughout working on this study, some suggestions concerning the expansion of the present study have arisen. First, in terms of data collection, I would suggest to collect data from different sources. This would include further case studies, interviews or face-to-face communication, and secondary data analysis.

Secondly, I would suggest similar studies to be done in more companies in order to compare the findings with the findings of this study. A survey would shed more light than just a case of selected companies in the industry.

Finally, a similar study could be carried out focusing on the growth and development of accounting information systems in enhancing the organizational growth and development. Similarly, a similar study could also be carried out focusing on factors influencing implementation of accounting information systems or even challenges faced during implementation of accounting information systems in the insurance industry in Nigeria.

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