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3. Literature Review
This topic addresses what has affected management accounting during the last decade; the
relationship between modern information and communication technology (ICT) and management
accounting. A starting point for that research tradition has been the two papers published in the
Harvard Business Review, by Davenport (1998) and Cooper and Kaplan (1998), in which the
idea of the new kind of integrated information system was first presented to accounting academia
widely. Since then, it focus more towards the relationship between information systems and
management accounting, such as the possible impacts of ICT on management accounting practices
and the roles of management accountants and more research has been done on this specific topic.
(Sutton & Arnold, 2002) quoted that “The relationship between ICT and accounting has changed
considerably during the last four decades”. Back in the 1970s, only a small part of accounting
functions was operated on computer-based information systems. These transaction processing
systems typically covered payroll, inventory and record keeping. For instance, cost accounting,
budgeting and all the other traditional management accounting tasks were usually organized
manually at that time. Research by Kaplan and Cooper (1998) mentioned that these systems can
best be described as (external) financial reporting-driven systems. In the 1980s, the role of
computer-based information systems in financial management increased with the introduction of
personal computers (PCs) and easy-to-use spreadsheet, database and EIS applications.
ERP System
Ketikidis et al. (2008) conclude that ERP system improves the competitive advantage of a
company. The major operations are combined in a single software module (Kalakota and
Robinson, 1999; Bingi et al., 1999). Matolcsy et al. (2005) shows that it is important to follow
and control logistics to improve efficiency when the process is transparent enough, less cost spent
on unnecessary things. Davenport (1998) recommends ERP system can help the management
control operations to improve the competitive advantage of a business organization. “The
operational performance of a company using ERP system outshines that of a company without it.”
(Hunton et al., 2003).
Wailgum (2009) in Forrester Research survey data of nearly 400 North American and European
enterprise software decision-makers shows that two-thirds of companies actively invest in ERP
application. (Ke and Wei, 2008; Liang et al., 2007) stated that, ERP system is so popular because
it improves operational efficiency and business. Other research also found out the benefit of
implementing ERP system in a company such as (Chou and Chang, 2008) had found out that
ERP system integrates business processes and provides the instant access to integrated data across
the entire enterprise to improve operational efficiency. Other than that, benefits that ERP
implementation brings to a company include the combination of internal resources, a solution to
the inadequate and outdated system, as stated by (Oliver, 1999) and improvement in productivity
and financial cycle (Gargeya and Brady, 2005).
Impact of ERP system on accountants
Cheng (2001) expresses accountants are evaluators in the evaluation stage before ERP
implementation. During ERP implementation, accountants are communicators and coordinators of
front-end departments. After ERP implementation, accountants work in internal operations of a
company instead of data input and collation. * Therefore, accountants are integrators during ERP
implementation (Ke, 2003; Sangster et al., 2009). effectively
Desormeaux (1998) expresses that, after ERP implementation, accountants become makers of
financial statements from data recorders. They provide the analysis of management information
for the company to make decisions so the management is able to get information they need
efficiently. Scapens (1998) points out the management can get relevant information directly by
ERP system. Accountants are the interpreter and analyst of such information. Vemuri and Palvia
(2006) deduce that accountants should regularly provide the management with up-to-date
information to help them make decisions under ERP environment. Grabski et al. (2009) show
ERP implementation improves the job of managerial accountants by providing better operations
such as inventory control, overall quality of data and participating in management decision
making.
“Under computerized operational environment, computer auditing has replaced traditional
auditing,” (Hung et al., 2004). Auditors are familiar with operations of a company because they
usually have “finance or accounting” background. However, a problem occurs when ERP system
has been implemented because of their inadequate knowledge in IT. Computer auditing is the
urgent demand for them under ERP system. It is important to improve the work efficiency of
auditors and create organizational value. Glover et al. (1999) mention the reengineering of
operations may change demands of the company after ERP implementation.
From previous research, we can summarize operations for which accountants may be responsible
under ERP environment are
• data input, general accounting transactions, data compilation and filing, data adjustment
