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.