international e journal of commence and management vol 1 issue 3

IEJCM Publication

C-5333, Shantinagar-1,

Behind Silverbells School, IEJCM Publication


Behind Silverbells School,

IEJCM Publication



Kaliyabid, Bhavnagar,

Gujarat, India.

Pin:364002

E-mail: [email protected]

Website: www.iejcm.co.vu

IEJCM Publication




Gujarat, India.

Pin:364002


Website: www.iejcm.co.vuI

IEJCM PUBLICATION

2015

International e-journal of

Commerce and

Management E-ISSN: 2394-9074

Volume: 1

Issue:3

IEJCM Publication




Gujarat, India.

Pin:364002


Website: www.iejcm.co.vu

www. iejcm.co.vu

VOLUME NO. 1 (2015), ISSUE NO. 3 (June) ISSN: 2394-9074

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INTERNATIONAL E-JOURNAL OF COMMERCE & MANAGEMENT A Bi-Monthly Peer Reviewed (Refereed/Juried) Open Access International e-Journal - Included in the International Serial Directories

http://www.iejcm.co.vu/

About the Journal

In this age of Commerce, Economics, Computer & Management and cut

throat competition, a group of intellectuals felt the need to have some platform, where

young and budding managers and academicians could express their views and discuss

the problems among their peers. This journal was conceived with this noble intention

in view.

This journal has been introduced to give an opportunity for expressing

refined and innovative ideas in this field. It is our humble endeavour to provide a

springboard to the upcoming specialists and give a chance to know about the latest in

the sphere of research and knowledge. We have taken a small step and we hope that

with the active co-operation of like-minded scholars, we shall be able to serve the

society with our humble efforts.

International e-Journal of Commerce & Management is an open access

peer review Two monthly research journal that publishes articles in the field

commerce & management. The journal serves as a bridge between worldwide scholars

and commerce and management studies researchers. The journal publishes research

articles and papers in all areas of commerce and management. The journal aims to

provide the most complete and reliable source of information on recent developments

in business studies. Each issue brings you critical perspectives and cogent analyses,

serving as an outlet for the best theoretical and research work in the field. The purpose

of the journal is to further the understanding of the theory and practice of business

studies by publishing articles of interest to practitioners and scholars.


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yhj


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Contents

Sr.

No.

Title and Name of the Authors Page

no. 1 A paper on Forensic accounting (A conceptual framework)

*Miss Bhanuben N. Parmar

5

2 An Empirical investigation of the Adoption of modern

Banking Technologies amongst Bank Account holders of

selected Private & Public Sector Banks in Ahmedabad

(Gujarat-India) City” * Asst. Prof. Devendra Khakhdia

16


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A paper on Forensic accounting (A conceptual

framework)

Miss Bhanuben N. Parmar, Research scholar of Ph.D., Faculty at M.J.College of

commerce, Bhavnagar-364002

Abstracts:

Forensic accounting has come into limelight due to rapid increase in financial frauds

and white-collar crimes. But, it is a largely untrodden area in India. The integration of

accounting, auditing and investigative skills creates the speciality known as forensic

accounting. Before the latest economic downturn, the accounting profession had already

undergone radical changes as a result of the Enron and WorldCom debacles, as well as other

accounting scandals. With the spotlight on the accounting profession, a new market with a

new breed of accountants — forensic accountants — has emerged. With the current

economic downturn, we have seen an increased demand for forensic accounting services as

the public deals with financial collapses, increased white collar crime and growing

occurrences of occupational fraud. The Association of Certified Fraud Examiners (ACFE)

estimates that occupational fraud losses cost organizations $994 billion annually.

Being an effective accountant does not necessarily translate into being an effective

forensic accountant. Being an effective forensic accountant requires the professional to

possess a broad spectrum of skills and knowledge. In 2006, Bruce Dubinsky, a partner and

director of forensic accounting and dispute analysis at the Bethesda, Maryland firm of

Dubinsky & Company, PC, emphasized that: Although forensic accounting is

currently on the ―hot‖ list of client services, there are plenty of accountants getting involved

who shouldn‘t be because they don‘t understand the ins and outs of the niche...Many

accountants think it is simply fraud investigation, and it‘s not. It is really much more than

dealing with the numbers. It‘s no longer just basic fraud work.

The opportunities for the forensic accountants are growing fast; they are being

engaged in public practice and are being employed by insurance companies, banks, police

forces, government agencies, etc. This article seeks to examine the meaning and nature,

activities and services rendered, core knowledge and personal skills required for forensic

accounting as a specialised field in the accountancy profession. Indeed, there is a future in

forensic accounting as a separate niche consulting.


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Keywords: Forensic accounting, role of a forensic accountant, required skills and knowledge

of an forensic accountant, niche consulting.

Introduction:

Until recently, detecting fraud or whitecollar crime was thought to be part of the

conventional accounting function. Fraud was something the internal or external auditors were

supposed to guard against through their periodic audits. Now, we as accountants know that

auditors can only check for the compliance of a company‘s books to generally accepted

accounting principles, auditing standards, and company policies. Thus, a new category of

accounting was needed to detect the fraud in companies that suspected fraudulent

transactions. This area of accounting is known as ‗forensic accounting‘. Worldwide, we

consider Sherlock Holmes to be the first forensic accountant. However, the contribution of

some historic characters in India cannot be ignored. In India, Kautilya was the first person to

mention the famous forty ways of embezzlement in his book Arthashastra during the ancient

times. He was the first economist, who openly recognised the need of the forensic

accountants. Similarly, Birbal was the Scholar in the time of King Akbar. He used various

tricks to investigate various crimes. Some of his stories give the fraud examiner a brief idea

about the Litmus test of investigation.

Forensic accounting is the ‗speciality‘ practice area of accounting that describes

engagements, which result from actual or anticipated disputes or litigation. ‗Forensic‘ means

―suitable for use in Court,‖ and it is to that standard and potential outcome that forensic

accountants generally have to work. The forensic engagement is distinguished by engagement

objective, emphasis on gathering evidence, and the application of a variety of techniques

often custom-developed to the requirements of the specific engagement. Forensic accountants

often have to give expert evidence at the eventual trial.

All of the larger accounting firms, as well as, many medium-sized and boutique firms

have ‗specialist‘ forensic accounting departments. Within these groups, there may be further

sub-specialisations: some forensic accountants may, for example, just specialise in insurance

claims, personal injury claims, fraud detection, construction, or royalty audits. Nearly 40 per

cent of the top 100 US accounting firms are expanding their forensic and fraud services,

according to Accounting Today. If this data is an indicator of Indian scenario, then the day is

not far away when forensic accounting practice will contribute significantly to the total

revenue of the Indian CA firms. In short, these services are in great demand and rendered at a

premium in current context of flourishing business and rising instances of frauds and

litigations.


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Forensic accountants, in fact, utilise an understanding of business information and

financial reporting systems, accounting and auditing standards and procedures, evidence

gathering and investigative techniques, and litigation processes and procedure to perform

their work. Forensic accountants are also increasingly playing more ‗proactive‘ risk reduction

roles by designing and performing extended procedures as part of the statutory audit, acting

as advisors to audit committees, and assisting in investment analyst research.

Examples of forensic accounting objectives include: assessment of damages caused

by an auditor‘s negligence, fact-finding to see whether an embezzlement has taken place, in

what amount, and whether criminal proceedings are to be initiated; collection of evidence in a

criminal proceeding; and computation of asset values in a divorce proceeding. The primary

orientation of forensic accounting is explanatory analysis (cause and effect) of phenomena—

including the discovery of deception (if any), and its effects—introduced into an accounting

system domain. The primary methodology employed by forensic accountants is objective

verification. Forensic accountants, thus, are trained to look beyond the numbers and deal with

the business reality of a situation.

The opportunities for the forensic accountants are growing at a rapid speed. Collapse

of the Enron Corporation and World Trade Center‘s twin towers have led to lots of work

opportunities for the American forensic accountants. In India the formation of Serious Fraud

Investigation Office (SFIO), however, is the landmark creation for the forensic accountants.

Growing cyber crimes, failure of regulators to track the security scams, series of co-operative

banks bursting— all point to the need of forensic accounting, irrespective of whether we

understand the need or not. In the Indian context, the forensic accountants are most required

in the wake of the growing frauds. The growing number of regulatory and administrative

agencies will demand the services in the nature of forensic practice. The changing nature of

the Indian and International accounting, and auditing & assurance standards also confirm this.

Curriculum change will most likely occur if the written exams and practical industry training

are revamped to more accurately reflect the ―new knowledge base and skill set‖ required by

the accounting profession in the new era. It is, therefore, recommended that the subject

―forensic accounting and auditing‖ be incorporated in the ICAI professional examination

curriculum, as soon as possible.

It is most unfortunate that forensic accounting is by and large an unexplored area as

far as India is concerned. Chartered Accountants (CAs) sporadically handle some of the

aforesaid cases. At present, lawyers and police force, insurance companies, government and

regulatory bodies, banks, courts and business community are increasingly utilizing the

services of forensic accountants in the Western countries. Undoubtedly, the accounting

professionals possess the skills to venture into forensic accounting and auditing arena but we

must have the correct mindset to venture into the emerging field.

What is Forensic Accounting?


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The definition of forensic accounting is changing in response to the growing needs of

corporations. Bologna and Lindquist had defined forensic accounting as ―the application of

financial skills, and an investigative mentality to unresolved issues, conducted within the

context of rules of evidence. As an emerging discipline, it encompasses financial expertise,

fraud knowledge, and a sound knowledge and understanding of business reality and the

working of the legal system.‖ This implies that the forensic accountant should be skilled not

only in financial accounting, but also in internal control systems, the law, other institutional

requirements, investigative proficiency, and interpersonal skills.

According to AICPA: ―Forensic accounting is the application of accounting

principles, theories, and discipline to facts or hypotheses at issues in a legal dispute and

encompasses every branch of accounting knowledge.‖ Similarly, forensic accounting is

defined by Horty as: ―The science that deals with the relation and application of finance,

accounting, tax and auditing knowledge to analyse, investigate, inquire, test and examine

matters in civil law, criminal law and jurisprudence in an attempt to obtain the truth from

which to render an expert opinion.‖

Simply stated, forensic accounting includes the use of accounting, auditing, and

investigative skills to assist in legal matters. It consists of two major components: litigation

services that recognise the role of an accountant as an expert consultant, and investigative

services that use a forensic accountant‘s skills and may require possible courtroom testimony.

In legal matters, forensic accountants are often engaged to assist in investigations of theft and

defalcation of corporate and individual assets using their education and experience to discuss

the fact, patterns of the theft, or misappropriation. Forensic accountants are also called upon

to review business accounting systems and, based on their experience, make

recommendations as to how the system of internal control and internal check can be

improved to prevent theft and fraud. Because of their education, background and experience,

forensic accountants add an additional dimension to their work.

Forensic accountants do not win or lose cases but seek only the truth in conducting

their evaluations, examinations and inquiries, merely reporting the ―true‖ result of their

findings in an ―unbiased‖ and objective manner. To be effective as a forensic accountant, one

needs legal training in addition to education and extensive experience in the fields of finance,

accounting, taxes and auditing. Since the work of the forensic accountant will many times be

used in a court of law, expertise in litigation support and testimony in courts of law are also

prerequisites of the forensic accountant. The knowledge of business valuation theory is most

helpful because many times a forensic accountant is called upon to determine the damages,

which have resulted from the criminal or civil wrongdoing.

What Does a Forensic Accountant Do?


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Forensic accountants are trained to look beyond the numbers and deal with the

business realities of situations. Analysis, interpretation, summarisation and the presentation

of complex financial and business related issues are prominent features of the profession. A

forensic accountant will also be familiar with legal concepts and procedures. Public practice

or insurance companies, banks, police forces and government agencies are major employers

of forensic accountants.

Activities usually carried out by forensic accountants involve:

Investigating and analysing financial evidence.

Developing computerised applications to assist in the analysis and presentation of

financial evidence.

Communicating their findings in the form of reports, exhibits and collections of

documents.

Assisting in legal proceedings, including testifying in courts, as an expert witness and

reparing visual aids to support trial evidence.

In a nutshell, the following services can be provided by a forensic accountant:

quantifying the impact of lost earnings, such as construction delays, stolen trade secrets,

insurance disputes, damage/loss estimates, malpractice claims, employee theft, loss of profits,

financial solvency reports, disturbance damages, loss of goodwill, compensable losses

suffered in expropriation determination, assessment of the potential business compensation

costs, and consultation on business defalcation minimisation.

Commercial damages include lease default damages, breach of contract, business

interruptions, breaches of shareholder and partnership agreements, reconstruction of

accounting records, investigation of misappropriation, assistance in establishing ownership

and division of assets, commercial damages, professional negligence cases, partnership

disputes, expert evidence, fair

value or fair market value, and personal injury damages. Tax matters include tax advocacy,

ompliance and review of financial statements, tax reporting, and tax planning in such areas as

income and estate matters.

A forensic accountant has to analyse, interpret, summarise and present complex

financial and business-related issues for investigation. Forensic accountant carries out

investigative accounting and provides litigation support. The services of forensic accountants

are in great demand in the following areas:

Detection of fraud committed by employees:

Where the employee indulges in fraud, forensic accountants are engaged. They detect

fraud, trace the asset (if any) created out of fund embezzlement, gather and review the

evidence, and interview the employee alleged to have embezzled the funds.


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Criminal Investigation:

Where the matter under investigation involves financial implications, the services of a

forensic accountant are availed of by the investigation department, law society, etc. The

report of an accountant is very much useful in preparing and presenting evidence.

Settlement for outgoing partner:

When the retiring partner feels that he has been unjustly settled with, he can challenge

the settlement with the help of a forensic accountant, who can correctly assess the value of

assets and liabilities due to his client.

Cases relating to professional negligence:

Forensic accountants also take up cases relating to professional negligence. Whenever

there is a breach of generally accepted accounting standards (GAAS) or auditing practices or

ethical codes of any profession, forensic accountants are required to quantify the loss

resulting from such professional negligence or deficiency in service.

Arbitration service:

Forensic accountants render arbitration and mediation services for the business

community, since they undergo special training in the area of alternative dispute resolution.

Facilitating settlement regarding motor vehicle accident:

As the forensic accountant is well acquainted with intricacies of laws relating to

motor vehicles, and other relevant laws in force, his services become indispensable in

measuring economic loss

when a vehicle meets with an accident.

Settlement of insurance claims:

Insurance companies engage forensic accountants to have an accurate assessment of

claims to be settled. Similarly, policyholders seek the help of a forensic accountant when they

need to challenge the claim settlement as worked out by the insurance companies. A forensic

accountant handles the claims relating to consequential loss policy, property loss due to

various risks, fidelity insurance and other types of insurance claims.

Dispute settlement:

Business firms engage forensic accountants to handle contract disputes, construction

claims, product liability claims, infringement of patent and trade marks cases, liability arising

from breach of contracts and so on.


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Matrimonial dispute cases:

Forensic accountants entertain cases pertaining to matrimonial disputes wherein their

role is merely confined to tracing, locating and evaluating any form of asset involved.

Core Knowledge of Forensic Accountant

A forensic accountant is expected to be a specialist in accounting and financial

systems. Yet, as companies continue to grow in size and complexity, uncovering fraud

requires a forensic accountant to become proficient in an everincreasing number of

professional skills and competencies. Here are some of the broad areas of useful expertise for

a forensic accountant.

An in-depth knowledge of financial statements and the ability to critically analyse

them. These skills help forensic accountants to uncover abnormal patterns in

accounting information and recognize their source.

A thorough understanding of fraud schemes, including but not limited to asset

misappropriations, money laundering,bribery, and corruption.

The ability to comprehend the internal control systems of corporations, and to set up a

control system that assesses risks, achieves management objectives, informs

employees of their control responsibilities, and monitors the quality of the programme

so that orrections and changes can be made.

Proficiency in computer and knowledge of network systems. These skills help

forensic accountants to conduct investigations in the area of e-banking and

computerized accounting systems.

Knowledge of psychology in order to understand the impulses behind criminal

behaviour and to set up fraud prevention programmes that motivate and encourage

employees.

Interpersonal and communication skills, which aid in disseminating information about

the company‘s ethical policies and help forensic accountants to conduct interviews

and obtain crucially needed information.

Thorough knowledge of company‘s governance policies and the laws that regulate

these policies.

Command of criminal and civil law, as well as,of the legal system and court

procedures.

Personal Skills Required

So what does it take to become a forensic accountant? In addition to the specialized

knowledge about the techniques of finding out the frauds, one needs patience and an

analytical mindset. One has to look beyond the numbers and grasp the substance of the

situation. There is a need for the same basic accounting skills that it takes to become a good

auditor plus the ability to pay attention to the smallest detail, analyse data thoroughly, think

creatively, possess common business sense, be proficient with a computer, and have excellent

communication skills. A ―sixth‖ sense that can be used to reconstruct details of past


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accounting transactions is also beneficial. A photographic memory helps when trying to

visualise and reconstruct these past events. The forensic accountant also needs the ability to

maintain his composure when detailing these events on the witness stand. Finally, a forensic

accountant should be insensitive to personal attacks on his professional credibility. A fraud

accountant (as forensic accountants are sometimes called) should also observe and listen

carefully. By this, you can improve your ability to detect lies whether they involve fraud or

not. This is so because ―not all liars are fraudsters, but all fraudsters are liars‖ (Wells).

According to a forensic accounting expert, ―the traits of a forensic accountant could

be compared to a well-baked pizza. The base of forensic accounting is accounting

knowledge. Size and the extent of baking decide the quality of the pizza. A middle layer is a

dispersed knowledge of auditing, internal controls, risk assessment and fraud detection. It is

like the spread of the cheese in pizza. The toppings of this pizza are a basic understanding of

the legal environment. The legal environment is essential in order to support the litigations.

The cherry on the toppings of the pizza is a strong set of communication skills, both written

and oral. It is just the beautification part. Perfect combination of the pizza base, cheese spread

and good toppings makes the pizza delicious and the Forensic Auditor perfect. It is a

combination that will be in demand for as long as human nature exists.‖

In addition to these personal characteristics, accountants must meet several additional

requirements to become successful forensic accountants, say a Certification, acknowledging

his competence. One can learn forensic accounting by obtaining a diploma given by

Association of Certified Fraud Examiners (ACFE) in the US. Indian chapter of ACFE offers

the course based on the white-collared crimes prevalent in US, based on their laws. However,

there is no formal body that provides formal education of the frauds in India. Besides the

formal certificate, one can deepen one‘s knowledge and sharpen one‘s skills in forensic

accounting by undergoing training under an experienced forensic accountant, participating in

various international conferences, reading relevant journals, books and other literature on

forensic accounting.

To combat the frauds effectively one needs the active support of government at every

stage. There are three-four such agencies in India, which are dedicated to the mission of

combating frauds. Serious Fraud Office looks into violations of Income Tax, FEMA, RBI

Act, etc.; CBI (Economic Office Wing) deals with big financial frauds; Central Vigilance

Commission deals with corruption. These are the major government agencies that combat

frauds of different types. Unfortunately, there is no specialised education provided by any of

the Universities in the country. Recently, TCS has also come out with software to combat

money laundering and Subex Systems have designed software to combat the telecom frauds.

Thus, combating the frauds with software has started picking up in India, with few big

companies like ACL and IDEA, joining the race.

The Need For Niche Consulting


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The CPA Vision Statement states: ―The CPAs are trusted professionals who enable

people and organisations to shape their future. Combining insight with integrity, CPAs

deliver value by: (a) communicating the total picture with clarity and objectivity, (b)

translating complex information into critical knowledge, (c) anticipating and creating

opportunities, and (d) developing pathways that transform vision into reality.‖ It reflects the

trend towards providing a broader range of assurance services.

However, recent corporate accounting scandals and the resultant outcry for

transparency and honesty in reporting have given rise to two disparate yet logical outcomes.

First, forensic accounting skills have become crucial in untangling the complicated

accounting manoeuvres that have obfuscated financial statements. Second, public demand for

change and subsequent regulatory action has transformed corporate governance. Increasingly,

company officers and directors are under ethical and legal scrutiny. Both trends have the

common goal of responsibly addressing investors‘ concerns about the financial reporting

system.

Indeed, there is a future in forensic accounting as a separate ―niche‖ consulting area in

India. The need to specialise, otherwise known as Niche Consulting, is imperative to

practising accountants because the fast-paced developments in business thereby demand

specialised knowledge and skills. While a majority of CAs have excellent analytical skills,

they need to acknowledge that ‗forensic‘ services require ‗specialised‘ training as well as

real-life ‗practical‘ corporate experience. There is a need for specialised information, not just

audit and tax service. What clients seem to want are people with unique sets of skills and

experiences. With the maturing of the audit business, and the rapid development of

technology that makes existing services low cost and cheap, it appears that it is the right time

now to acquire those unique skills.

To help practitioners move into ‗niche‘ consulting, some professional organizations in

the US have concluded that: ―Future success for the profession depends, in part, on how the

public perceives the ability of CPAs. New efforts in consulting, specialisation and

understanding global business practices and strategies are considered crucial. We go out into

the niche market, examining our strengths first. We go where the action is, only then we

know we can adequately service our clients and make money doing it.‖ One area where

‗niche‘ consulting is becoming the global trend is in ―Forensic Accounting and Auditing‖.

But the major question facing the Indian accountancy profession is: Are we ready to plunge

to where the challenging action is?

Conclusion

Forensic accounting in India has come to limelight only recently due to rapid increase

in white-collar crimes and the belief that our law enforcement agencies do not have sufficient

expertise or the time needed to uncover frauds. A large global accounting firm believes the


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market is sufficiently large to support an independent unit devoted strictly to ‗forensic‘

accounting. All of the larger accounting firms, as well as, many medium-sized and boutique

firms have recently created forensic accounting departments.

Forensic accounting, in fact, integrates accounting, auditing, and investigative skills to

conduct an examination into a company‘s financial statements. Broad-based knowledge

(within the themes listed above) is crucial to the success of entry-level forensic accountants.

Because forensic accounting is relatively a new area of study, a series of working definitions

and sharing of corporate experiences should be undertaken and encouraged to ensure a

common understanding. Indeed, there is great future in forensic accounting as a separate

―niche‖ consulting.

While the forensic accounting and auditing practice had commenced in the US as

early as 1995, the seed of this specialisation has yet to take off in India. Forensic accountants

are only dealing with financial implications of the cases entrusted to them and not engaging

in auditing exercise. On account of global competition, the accounting profession must

convince the marketplace that it has the ―best-equipped‖ professionals to perform such

services.

Forensic accountants are also increasingly playing more ‗proactive‘ risk reduction

roles by designing and performing extended procedures as part of the statutory audit, acting

as advisors to audit committees, and assisting in investment analyst research. While majority

of CAs have excellent analytical skills, they need to acknowledge that ‗forensic‘ services

require ‗specialized‘ training as well as real-life ‗practical‘ corporate experience.

References:

1. Adeniyi, A.A. (2004). Auditing and Investigation Lagos, El-Toda Ventures Limited

2. Black law Dictionary (1997). 5th Edition

3. Bologna J. and Lindquist, R. (1995). Fraud Auditing and Forensic Accounting, New

York, Wiley and Sons

4. Brink, V. Z. (1996). Modern Internal Auditing: An Operational Approach, New York,

the Ronal Press Company

5. Eze, J.C. (2005). Principles and Practices of Auditing; Enugu, J.T.C Publishers

6. Michael, B. (2004). Forensic Accounting: Its Positively Ancient, Rosenfrab, M & K

Publisher.

7. Oliver, R. (2004). What is Transparency? New York, McGraw-Hill

8. Arnoff, N.B and Sue, C.J. (2001). ‗‗Forensic Accountant‘s Role and Expert before

and during Trial‘‘ New York Journal, 226

9. Courlber, J.L. (2004). ‗‗Forensic Accountants: The Sarbanes Oxley Act (SOA), and

Audit Standards‘‘ The Forensic Examiner, Vol. 13, No. 2.

10. Dandago K.I. (1997). ‗‗Fraud Detection and Control at Local Government Level‘‘

Journal of the Association of National Accountant of Nigeria, Vol. 7, No. 4


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11. Houck M., Kranacher, M., Moris B., and Robertson, J. (2006). ‗‗Forensic Accounting

as an Investigative Tool: Developing and Model Curriculum for Fraud and Forensic

Accounting (ethnics)‘‘ The CPA Journal, Vol. 12, No. 5

12. Jenfa, B.I. (2002). ‗‗Internal Control and Fraud Prevention: Accountant perspective‘‘

Journal of ANAN, Vol. 10, No. 4

13. Krell, E. (2002). ‗‗Will Forensic Accounting go Mainstream?‘‘ Business Finance

Journal, October Vol. 8. No. 5

14. Nurudeen, A.A. (2006). ‗‗Role of the Accountancy Profession in Tacking Fraud‘‘

Journal of ANAN, Vol. 10, No. 4


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“An Empirical investigation of the Adoption of modern Banking

Technologies amongst Bank Account holders of selected Private & Public

Sector Banks in Ahmedabad (Gujarat-India) City”

*Asst.Prof.Devendra Khakhdia, Harivandana College Mng. & IT, Rajkot.

ABSTRACT

An extensive banking network has been established in the last thirty years and the Indian

banking system is no longer confined to metropolitan cities and large towns but also is

catering the need of the rural people even in the remote areas of the country. The network of

the Indian banking has spread out in the remote, difficult and the most isolated areas of the

country in terms of branches, which is recognized as one of the largest network in the world.

The researcher has chosen to analyze the adoption rate of the banking technologies amongst

Bank Account Holders of selected Private & Public Sector Banks in Ahmedabad (Gujarat-

India) City. This research is mainly based on Primary data. Kendall‘s Coefficient of

Concordance test is used by researcher. Classification of reasons for not using banking

technology channel is discussed in this research work. This research work highlights so many

new facts in this field.

Keywords: Banking technology, ATM, Internet banking, Mobile banking

Introduction

The researcher has chosen to analyze the adoption rate of the banking technologies

amongst Bank Account Holders of selected Private & Public Sector Banks in Ahmedabad

(Gujarat-India) City.

The research problem under taken for the study has been selected after review the

existing literature in the library, and deep discussion with the guide. Researcher is also

interested in this field. Researcher has selected this problem to highlight new facts in this

field, the problem has been selected after considering the effected factors like the availability

of time, cost, information tools and techniques for data analysis and other related factors.

Objectives of Research Study

There are some basic objectives prevailing in the initial steps for introducing any

work. The present study is based on the following objectives.

(1) To analyze the use of ATM facility.

(2) To study the use of Phone banking.

(3) To analyze the use of Internet banking services


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(4) To study the use of Mobile banking.

Review of Literature

Dr. Kulwant Singh Pathania and Mamta Sharma Research Paper on ―Adoption of Banking

Technologies‖, Shimla - Himachal Pradesh / 2010.

The paper examines the adoption rate of the banking technologies. It identifies the

operational problem in the use of modern technologies and suggests measures for

improvement in the use of technologies. It also examines the level of satisfaction in respect of

the adoption of modern technology and identifies the reasons for not using the different

banking channels.

References: Vol 63, No. 3, July-September 2010, The Indian Journal of Commerce

Ms. Aakanksha D. Dave Research Project on ―A study of Tourism Perspective in Saurashtra

and Kutchch Region‖, March / 2008

The above mentioned research work has been undertaken with a view to present analytical

understanding and scope for tourism in Saurashtra and Kutchch region. The study also aims

at forecasting the trends of tourist traffic which helps the policy makers to prepare planning

policy for development of tourism.

References: From Saurashtra University, Department of Commerce Library

Ms. Kiran Mungara Research Project on A research project on ―Financial Statement Analysis

of Ahmedabad (Gujarat-India) District Co-Operative Bank‖, Ahmedabad (Gujarat-India) /

2010. The research work deals with Financial Statement Analysis, which highlights the

important relationships between various components of the financial statement. It focuses on

the evaluation of past operations. Financial statement analysis embraces the methods used in

messaging and interpreting the results of past performance and current financial position as

they relate to particular factors of interest in investment decisions. It is an important means of

assessing past performance and in forecasting and planning future performance. Financial

statement analysis can be used by the different users and decision makers to achieve the

objectives.

References: From Saurashtra University, Department of Commerce Library

Asst. Prof. Dr. Ulun Akturan & Asst. Prof. Dr. Nuray Tezcan Research Paper on ―The Effects

of Innovation characteristics on Mobile banking adoption‖, Turkey / 2010.


__________________________________________________________________________________ 18



This study aims to determine the effect of innovation characteristics on mobile banking

adoption intention. In the study, the eight characteristics of innovation- relative advantage,

compatibility, complexity, image, result demonstrability, visibility, trial ability, and

voluntariness- are portrayed and their combined effect on adoption intention was searched.

The data was collected from 311 college students- who are described as young prospects- and

the research hypothesis tested by SEM. The results provide support for the theoretical

relationship between the relative advantage and compatibility, and mobile banking adoption.

However, no relationship was found between image, result demonstrability, complexity,

trialability, and adoption intention.

References: www.gcbe.us/10th_GCBE/.../Ulun%20Akturan,%20Nuray%20Tezcan.doc

Scope of the Study

The present research work is a micro level study. The scope of study is based on two

criteria, as under.

Functional Scope: Functional scope of this study is to examine the adoption rate of the

banking technologies of bank account holders of Ahmedabad (Gujarat-India) city.

Geographical Scope: As per the criteria of geographical area, researcher has taken the

respondents of Ahmedabad (Gujarat-India) city as scope of the study.

For this study services are taken in to considerations which are provided by the banks like

ATM, Internet Banking, Mobile Banking and Phone Banking.

Nature of the Study

This is empirical research. The numbers of Bank account holders of Ahmedabad

(Gujarat-India) city are very large. So it is beyond the capacity of an individual researcher to

pursue the study on hundred percent of enumerative basis of adequate size of the sampled

bank account holders of Bank.

Data Collection

Sampling Design

The population of the study consists of all types of bank account holders of

Bank in Ahmedabad (Gujarat-India) city but the number of bank account holders is

quite large; it is not easy to contact all. So, the convenience random sampling is

selected here. 100 respondents are selected in the Ahmedabad (Gujarat-India) city.

Source of Data

This research work is based on the survey method. The main source of

collection of data in the present study is primary data which are supported by the

secondary data.


__________________________________________________________________________________ 19



The researcher has used the questionnaire method for collecting the primary

data and the secondary data are collected from the records, documents, reference

books, journals, websites and other publications.

Mode of Collection of Data

The researcher has used the primary data for purpose of analysis of Bank

account holders‘ adoption of modern technology. The primary data were collected

with the help of a structured questionnaire administered to 100 respondents. The

questionnaire consists of the questions related to use of modern banking technology.

The Researcher contacted each respondent who have bank accounts

individually at the convenient time of respondent and requested them to fill up

questionnaire with correct answers. The researcher gave assurance to the respondents

for keeping their views confidential and be used in the research work only.

Tools and Techniques used for Data Analysis

Data Analysis is an important part of research work to test the formulated hypothesis.

First of all researcher has processed the collected primary data by questionnaire. Further, the

processed data has been analyzed by statistical tools and techniques. The tools and techniques

used by researcher for data analysis are as under.

Kendall‘s Coefficient of Concordance

Hypotheses

A hypothesis is a special proposition formulated to be tested in certain given

situation as a part of research which states what the researcher is looking for. Thus

hypothesis may be defined as a proposition or a set of proposition set forth as an

explanation for the occurrence of some investigation or accepted as highly probable in the

light of established facts.

For the present study the researcher has formulated two hypothesis viz, Null

hypothesis and Alternative hypothesis. Both hypotheses were tested with the help of

statistical tools.

In your opinion what are the reasons for not using the ATM, Internet Banking,

Phone Banking, and Mobile Banking?

Rank the reasons from 1 to 5 with 1 for the most important & 5 for the least

important reason.

Variables ATM Internet

Banking

Phone

Banking

Mobile

Banking

Risky

High Charge

Don‘t Feel

Necessary


__________________________________________________________________________________ 20



Inadequate

Knowledge

Didn‘t Have

Facility

As there are five sets of ranking in above four questions, researcher can work out the

coefficient of concordance (W) for judging significant in ranking in terms of various

facilities and their attributes. For this purpose researcher use this technique for each rank

as under.

Kendall‘s coefficient of concordance, represented by the symbol W, is an important

non-parametric measure of relationship. It is used for determining the degree of

association among several (k) sets of ranking of N objects or individuals. When there are

only two sets of ranking of N objects, researcher generally work out Spearman‘s

coefficient of correlation, but Kendall‘s coefficient of concordance (W) is considered an

appropriate measure of studying the degree of association among three or more sets of

rankings. This descriptive measure of the agreement has special applications in providing

a standard method of ordering objects according to consensus when researcher do not

have an objective order of the objects.

The basis of Kendall‘s coefficient of concordance is to imagine how the given data

would look if there were no agreement among the several sets of rankings, and then to

imagine how it would look if there were perfect agreement among the several sets. When

perfect agreement exists between variables, W equals to 1. When maximum disagreement

exists, W equals to 0. It may be noted that W does not take negative values because of the

fact that with more than two judges complete disagreement cannot take place. Thus,

coefficient of concordance (W) is an index of divergence of the actual agreement shown

in the data from the perfect agreement.

W = s / (1/12)*k2

(N3

- N)

Where, s = ∑(Rj – R͞j)2

K = no. of ranking

N = Number of objects ranked

R͞͞͞͞͞j = ∑Rj / N

(1/12)*k2

(N3

- N) = maximum possible sum of the squared deviation i.e., the sum of s

which would occur with perfect agreement among k rankings.


__________________________________________________________________________________ 21



As there are five sets of ranking, researcher can work out the coefficient of

concordance (W) for judging significant in ranking in terms of various facilities and their

attributes. For this purpose researcher did the given matrix for each rank as under.

Classification of Reasons for not using

Banking Channels for Rank 1

VARIABLES RISKY HIGH

CHARGE

DON’T

FEEL

NECESSARY

INADEQUATE

KNOWLEDGE

DIDN’T

HAVE

FACILITY

ATM 25 20 33 14 8

INTERNET

BANKING

45 10 15 27 3

PHONE

BANKING

24 12 24 32 8

MOBILE

BANKING

24 22 18 28 8

With the help of the above given data researcher has developed the given matrix as

under:

VARIABLES

K = 4

RISKY HIGH

CHARGE

DON’T FEEL

NECESSARY

INADEQUAT

E

KNOWLEDG

E

DIDN’T

HAVE

FACILITY

ATM 2 3 1 4 5

INTERNET

BANKING

1 4 3 2 5

PHONE

BANKING

2.5 4 2.5 1 5

MOBILE

BANKING

2 3 4 1 5

Sum of ranks

(Rj)

7.5 14 10.5 8 20


__________________________________________________________________________________ 22



(Rj - R͞j)2 20.25 4 2.25 16 64

Classifications of Reasons for not using

Banking Channels for Rank 1

Analysis:

H0 = There is no significant correlation among the ranks given by the

individuals to various banking facilities with respect to their attributes.

k = 4

N = 5

R͞͞͞͞͞j = ∑Rj / N

= 60 / 5

= 12

s = ∑ (Rj – R͞j)2

s= 20.25 + 4 + 2.25 + 16 + 64

05

101520253035404550

Risky High Charge Don't Feel Necessary

Inadequate Knowledge

Didn't Have Facility

ATM

Internet Banking

Phone Banking

Mobile Banking


__________________________________________________________________________________ 23



= 106.5

W = s / (1/12)*K2

(N3– N)

= 106.5 / (1/12)*(4)2 *

[(5)

3 – 5]

= 106.5 / 160

= 0.665

scal = 106.5

stab = 88.4

scal > stab

As per the above calculation it is found that calculated value of (s) is 106.5 which are

higher than table value of (s) at 5% level of significance i.e. 88.4. Thus, the null

hypothesis is rejected and the alternate hypothesis is accepted. In other words, W =

0.665 is significant and the ranking is more or less dependent in terms of various

facilities and their attributes.

The above table and figure 4.2(7) reveal the rank 1 wise classification of respondents

for not using banking channels. In that majority of the respondents have given the first

rank for ATM services they have given reason for that they don‘t feel necessary. For

internet banking majority of the respondents have given first rank to risky attributes and

for phone banking majority of the respondents have given first rank to inadequate

knowledge followed by mobile banking where majority of the respondents have given

first rank to inadequate knowledge.

Significance of the Research

This study gives a clear picture about the services provided by the Bank. It throws

light on what are the criteria which affect the customers the status of Bank account holders,

awareness of modern Banking channels, frequency of use of Banking channels, satisfaction

level of respondents regarding banking services and the overall effectiveness of the services

provided by the Banks.

Limitations of the Research

In real world nature, the researcher in any field of knowledge makes the ground for

further researches and this process going on. But all studies and researches have their own


__________________________________________________________________________________ 24



limitations. The researcher has to face many problems, some related to circumstances/

situations. The main limitations of the study are as follows.

1. The data will be collected through Questionnaire; there are chances of biased

information provided by the respondent and also the limitations of the questionnaire

method are viably attached to the present study.

2. The present study is limited to only 100 respondents of Ahmedabad (Gujarat-India)

city. Although care has been taken in sample selection the respondents in the present

study may not be representative of the actual population.

3. The study does not include all the bank account holders of the group of Ahmedabad

(Gujarat-India) city. So the interpretations and findings of this study cannot be

generalized without further supporting researches.

4. The statistical techniques have their own limitations. They also apply to this study.

5. Some of the respondents may not have able to either express their views accurately to

the close ended questions.

6. The researcher has to consider time factor that is why the study survey is made

limited to only for Ahmedabad (Gujarat-India) city.

7. The researcher based on the primary data. So it would be depends upon the

respondents‘ awareness for survey.

References:

[1] Devi & Suma, ‗Electronic Banking-Entry in the Indian Banking Scenario‘, Banking

in the New Millennium, Kanishka Publications (2001)

[2] Gupta P. K. , ‗Internet Banking in India: Consumer Concerns and Bank Strategies‘,

Global Journal of Business Research, Vol. 2 (2008)

[3] Hawke J. D., ‗Internet Banking: Challenges for Banks and Regulators‘, Institute of

Chartered Financial Analysts of India (ICFAI) University Press Publications (2001)

[4] Kaleem A. & Ahmad S., ‗Bankers‘ Perceptions of Electronic Banking in Pakistan‘,

Journal of Internet Banking and Commerce, Vol. 13 No. 1 (2008)

[5] Nitsure R. R., ‗E-Banking: Challenges and Opportunities‘, Economic and Political

Weekly (2003)

[6] Rajagopalan S. P., ‗Banking in the New Millennium‘, Kanishka Publications (2001)


__________________________________________________________________________________ 25



[7] Safeena R., Date H. & Kammani A., ‗Internet Banking Adoption in an Emerging

Economy: Indian Consumer‘s Perspective‘, International Arab Journal of e-Technology Vol.

2 (1). (2011)

[8] Saunders, ‗Financial Institutions Management – A Modern Perspective‘, IRWIN (1997)

[9] Scott W. L., ‗Markets and Institutions – A Contemporary Introduction to Financial

Services‘, South-Western College Publishing (1999)

[10] Sinkney J. F., ‗Commercial Banks Financial Management‘, Prentice Hall (1998)

[11] Thulani D., Tofara C. & Langton R., ‗Adoption and Use of Internet Banking in

Zimbabwe: An Exploratory Study‘, Journal of Internet Banking and Commerce, Vol. 14 No.

1 (2009)

[12] Uppal R. K., ‗Internet Banking in India: Emerging Risks and New Dimensions‘,

Prime Journal of Business Administration & Management Vol. 1 (3) (2001)

international e journal of commence and management vol 1 issue 3

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