Factors affecting the capacity of accounting software in controlling frauds and errors in small and medium enterprises (smes): A case study of smes in Ha Noi, Viet Nam

Vietnam Journal 
of Agricultural 
Sciences 
ISSN 2588-1299 VJAS 2020; 3(3): 746-745 
https://doi.org/10.31817/vjas.2020.3.3.08 
746 Vietnam Journal of Agricultural Sciences 
Received: June 13, 2020 
Accepted: March 2, 2021 
Correspondence to 
ngothuhang@vnua.edu.vn 
Factors Affecting the Capacity of Accounting 
Software in Controlling Frauds and Errors in 
Small and Medium Enterprises (Smes): A 
Case Study of SMEs in Hanoi, Vietnam 
Ngo Thi Thu Hang1, Vu Thi Hai1, Tran Quang Trung1, Vu Manh 
Chien2, Nguyen Thi Hong Nga3 
1Faculty of Accounting and Business Management, Vietnam National University of 
Agriculture, Hanoi 131000, Vietnam 
2Faculty of Accounting & Auditing - Vietnam University of Commerce, Hanoi 122868, 
Vietnam 
3Faculty of Accounting and Auditing - Hanoi University of Industry, Hanoi 129000, 
Vietnam 
Abstract 
Financial accounting information has impacted the operation of 
enterprises, especially SMEs. With the development of technology, 
digital accounting applications are playing an increasingly important 
role in minimizing mistakes, and ensuring the accuracy and 
timeliness of accounting information. Using multiple discriminant 
analyses, this study confirmed the significance of accounting 
software in reducing frauds and errors in SMEs’ businesses despite 
some drawbacks. It showed that the managers’ ability to access the 
software and the decentralization of power in accessing the 
accounting software were the two key factors deciding the 
success/failure of applying accounting software to control frauds and 
errors. In addition, smart applications of the accounting software 
positively contributed to the elimination of frauds in enterprises. 
Based on these results, recommendations are drawn for SMEs, such 
as investing more in smart applications of accounting software, as 
well as updating knowledge about accounting for management, in 
order to get more advantages from accounting software applications 
for their business in the long term. 
Keywords 
Accounting software, frauds and errors, SME 
Introduction 
In the modern world, technology has taken a dominant role. 
Information technology has significantly changed the accounting 
profession in recent decades through the advent of countless 
accounting software, and the development of the internet and cloud 
computing. These technologies have transformed the profession in
Ngo Thi Thu Hang et al. (2020) 
https://vjas.vnua.edu.vn/ 747 
many aspects, from the nature of accounting to 
the products of accounting works, and even in the 
structure of accounting systems in a business 
(Amidu et al., 2011). According to Deshmukh 
(2006), there has not been a standard definition 
but the term “digital accounting” refers to the 
representation of accounting information in a 
digital format, as well as the changes in 
accounting due to computing and networking 
technologies. In a word, digital technology has 
broken the boundaries of traditional accounting 
systems, both literally and figuratively. 
Precise and timely economic information 
given by the accounting department will actively 
assist managers both in making decisions and 
managing their business. However, an incorrect 
accounting system could result in many serious 
problems for a company, especially in small and 
medium enterprises (SMEs) (Chakraborty, 
2015). Although errors are inherent to 
accounting and materially impact the quality of a 
financial report, this issue is often neglected 
when the design of accounting systems is 
evaluated (Christensen, 2010). The evolution of 
information technology in accounting has been 
expected to solve the above problems. Previous 
inefficient traditional paper-based manual 
accounting methods have been gradually 
improved through the implementation of 
computerized accounting information systems 
(Zakaria et al., 2011). Saving the amount of 
labour and time for accounting work, providing 
more precise and timely information, and 
increasing the convenience for the related parties 
in economic transactions are inherently 
beneficial not only for the enterprises but also for 
all the users of the enterprises’ financial 
information as well as the whole community. As 
one of the important elements of the internal 
control system, the accounting system is 
expected to powerfully control frauds and errors, 
especially with the support of advanced 
technology and the concept of business 
intelligence (BI) (Graham, 2015). A survey 
conducted in 2019 by The Association of 
Chartered Certified Accountants (UK) found that 
out of 4,264 accountancy and finance 
professionals globally, including members, 
affiliates, and students, 89% considered digital 
skills necessary or very necessary in their 
industry and 63% believed that they had the right 
level of digital skills for their roles (ACCA, 
2020). 
For all kinds of businesses, frauds and errors 
 ... to fully 
comprehend and interpret the results from the 
system. Countless errors have been found as the 
results of these situations, which take a lot of 
time for the accountants to rework or fix. The last 
reason is more related to the causes of the frauds. 
Along with the advantages of a paperless 
accounting system, the application of hi-tech in 
the accounting work also increases the chance of 
the intentional modifications of financial data by 
unethical accountants. This can allow 
accountants to easily make fraudulent changes if 
the managers do not really understand the 
meaning of financial figures or the actual 
financial status of the business. The limited 
accounting knowledge of many managers also 
causes difficulties in controlling their 
accountants. This opportunity has made 
accounting manipulation of financial figures to 
be more easily overlooked by managers. 
Factors affecting the success of accounting 
software application in controlling the 
business frauds and errors 
Given the fact that 81% of the surveyed 
SMEs had succeeded in using accounting 
software to control business frauds and errors, 
9% found there was no impact, and 10% found 
that it had negative impacts in these controlling 
tasks, the SMEs were divided into three groups 
for the multiple discriminant analysis tests, 
which aimed to find out the key factors affecting 
successes/failures. The results, shown in Table 2 
and Table 3, indicated that the role of the 
managers’ access to the accounting software and 
the decentralization power in accessing the 
accounting software were the important factors 
to the success or failure of the SME in using 
accounting software to control frauds and errors. 
Controls by the managers, namely the 
board of directors and the chief of the financial 
department, on financial accounting matters 
were vital in controlling and preventing 
mistakes. Luckily, accounting software 
packages designed for SMEs are usually basic 
programs created with non-accountant 
thinking in mind, which allows business 
owners and managers to perform traditional 
accounting functions without much formal 
training or technical accounting knowledge. 
Even more, small business owners or managers 
may also be able to transfer this information 
electronically to their public accountant for tax 
purposes by themselves (Ghasemi et al. , 2011). 
A similar idea was found in the research of Zhou 
Factors influencing green purchase intention of students: A case study at Vietnam National University of Agriculture 
752 Vietnam Journal of Agricultural Sciences 
Figure 4. Proportions of SMEs categorized by impacts of accounting software in controlling errors and frauds 
(2010) (cited in (Maseko & Manyani, 2011) 
which proposes the use of accounting software 
by the business owner or the managers in SMEs 
to improve accounting practices. Moreover, the 
involvement of managers in the financial system 
can help them to recognize the potential risks in 
the financial accounting of their business, as well 
as find and recruit experienced and qualified staff 
adequately. This, directly or indirectly, could 
help to reduce the inherent risks and control risks 
in their business (Ngo Thi Thu Hang et al., 
2013). Therefore, governance was seen as one of 
the mechanisms that could effectively safeguard 
the interests of the business owner, as well as 
ensure effective monitoring. In other words, the 
important part of the management's duty is to 
promote an effective internal control structure to 
protect the entity’s assets and to maintain the 
credibility of financial reporting (Hussain et al., 
2016). 
The second factor in the success of the 
accounting software in controlling errors and 
frauds was the decentralization of power in 
accessing the accounting software, which means 
Group 1: Positive impact in controlling 
errors and frauds, 81%
Group 2: No impact in 
controlling errors and 
frauds, 9%
Group 3: Negaive impact 
in controlling errors and 
frauds, 10%
Table 2. Multiple discriminant analysis tests on the factors affecting the success of accounting software application in controlling 
errors 
Factors Wilks' Lambda F df1 df2 Sig. 
Experience of the chief accountant 0.988 0.771 2 128 0.465 
Experience of the accountants who manage the software 0.991 0.565 2 128 0.570 
The frequency of maintenance of the software 0.985 0.955 2 128 0.387 
Smart applications in the accounting software 0.973 1.751 2 128 0.178 
The access of managers to the accounting software 0.919 5.659 2 128 0.004 
The decentralization of power in accessing the accounting software 0.763 19.917 2 128 0.000 
Note: 
Experiences of the chief accountant = number of experience years of the chief accountant 
Experience of accountants who manage the software = number of experience years of the accountant who manages the 
accounting software 
The frequency of maintenance of the software = Periodical (every year) / Sometimes (once every 2-3 years) / Never 
Smart applications in accounting software = High level / Average level/ Low level / No applications 
The access of managers to the accounting software = Managers have access to the accounting software: Yes/No 
The decentralization power in access accounting software = High level / Average level/ Low level / Free for everyone to access. 
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 Table 3. Multiple discriminant analysis tests on the factors affecting the success of accounting software application in controlling fraud 
Factors Wilks' Lambda F df1 df2 Sig. 
Experience of the chief accountant 0.973 1.754 2 128 0.177 
Experience of the accountants who manage the software 0.966 2.221 2 128 0.113 
The frequency of maintenance of the software 0.991 0.579 2 128 0.562 
Smart applications in the accounting software 0.906 6.642 2 128 0.002 
The access of managers to the accounting software 0.886 8.237 2 128 0.000 
The decentralization of power in accessing the accounting software 0.840 12.230 2 128 0.000 
Note: 
Experience of the chief accountant: number of experience years of the chief accountant 
Experience of accountants who manage the software: number of experience years of the accountant who manages the accounting 
software 
The frequency of maintenance of the software: Periodical (every year) / Sometimes (once every 2-3 years) / Never 
Smart applications in the accounting software: High level / Average level/ Low level / No application 
Managers have access to the accounting software: Yes/No 
The decentralization of power in accessing the accounting software: High level / Average level/ Low level / Free for everyone to 
access
that each accountant can access only the 
procedure or part of the accounting software 
related to his/her work. The more this mechanism 
was developed in the accounting software, the 
fewer frauds and errors occurred in the business. 
Consistent with this finding, the research of 
Ghasemi et al. (2011) about the impact of 
Information Technology (IT) on modern 
accounting systems also indicated that the 
accuracy of financial information was improved 
by limiting the number of accountants who have 
access to the full procedure of the accounting 
cycle. As for the reason, less access by 
accountants ensures that financial information 
was adjusted only by qualified supervisors. 
Furthermore, the smart applications in the 
accounting software have also been considered 
as one of the important factors in controlling 
frauds, but not a significant factor in controlling 
errors (Tables 2 and 3). The smart applications 
here refer to online access that allow data to be 
updated via many methods such as smartphones, 
tablets, laptops, and integrated with electronic 
invoices, online tax returns, and internet banking 
services, which support early detection of frauds 
by instantly checking and informing the whole 
system. While business errors can be controlled 
by the basic functions of accounting software (for 
example, computerized systems will not allow 
journal entries to be out of balance when posting, 
ensuring that individual transactions are properly 
recorded), these smart applications are expected 
to play a remarkable role to eliminate frauds, 
which are dissimulated and therefore more 
difficult to detect than business errors. 
Conclusions and Implications 
Conclusions 
Generally, accounting software is becoming 
an important part of the accounting system in all 
businesses because it does not only support 
recording data and making financial reports 
timely and accurately, but also plays an 
important role in controlling frauds and errors in 
businesses. The results of this study confirmed 
the effectiveness of accounting software with 
these controlling tasks, with evidence from 81% 
of the surveyed SMEs who succeeded in 
applying it to reduce the frequency and scale of 
frauds and errors in their firms. However, some 
SMEs reported no impacts (9%), or even 
negative impacts (10%) of accounting software 
on controlling frauds and errors. The results of 
the tests showed that the access of managers to 
the accounting software and the decentralization 
of power in accessing the accounting software 
were the two major factors in the success/failure 
of using software to control frauds and errors. In 
addition, smart applications in the accounting 
Factors influencing green purchase intention of students: A case study at Vietnam National University of Agriculture 
754 Vietnam Journal of Agricultural Sciences 
software were found to impact the effectiveness 
of this practice. 
Implications 
Given the above results, this research 
suggests that SMEs should be aware of the long-
term benefits of appropriate investments in 
accounting software because failure to apply this 
measure may lead to significant losses of 
resources in their business. More expensive 
investments in accounting software for 
additional smart applications could be worthy of 
positive contributions to controlling and 
reducing frauds. 
Secondly, a managers’ fundamental 
knowledge of the accounting profession is 
essential, which not only helps them understand 
accounting information but also gives them strict 
control over their accountants. Therefore, they 
should consider taking a training course on 
elementary principles of accounting. With some 
basic understanding of accounting in general and 
accounting software in particular, the 
involvement of the directors/managers in the 
financing system certainly would be more 
effective and efficient, especially in the era of the 
recent Industry 4.0 revolution. 
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