A content analysis of auditors' reports on IT internal control weaknesses: The comparative advantages of an automated approach to control weakness identification

Boritz, J. Efrim; Hayes, Louise; Lim, Joon S.

doi:10.1016/j.accinf.2011.11.002

Cited by 45 publications

(12 citation statements)

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“…Huang and Li () identified 25 types of risk factors from 10‐Ks, using a ‘text classification algorithm called the multi‐label categorical K ‐nearest neighbor (ML‐CKNN)’, which calculated a ‘categorical similarity score for each label’, achieving 74.94% accuracy. Boritz et al () applied quadratic discriminant analysis, demonstrating the value of ‘advanced searching capabilities, dictionary building tools, and visualization tools, including dendrograms in S+ (from HAC), divisive clustering, and concept maps’. This allowed the team to produce a validated term dictionary, categorizing 387 Sarbanes Oxley Act of 2002 (SOX) Section 404 reports into 14 categories of risk associated with IT weaknesses (Boritz et al, ).…”

Section: Classificationmentioning

confidence: 99%

“…Boritz et al () applied quadratic discriminant analysis, demonstrating the value of ‘advanced searching capabilities, dictionary building tools, and visualization tools, including dendrograms in S+ (from HAC), divisive clustering, and concept maps’. This allowed the team to produce a validated term dictionary, categorizing 387 Sarbanes Oxley Act of 2002 (SOX) Section 404 reports into 14 categories of risk associated with IT weaknesses (Boritz et al, ). Malo et al () used an LPS model (‘a hybrid of rule‐based linguistic models and machine‐learning techniques’) and a multi‐class SVM algorithm to analyse the semantic tone of debt disclosures in 10,000 financial news articles, generating a lexicon of finance phrases and a general model to assess the ‘semantic orientations’ (positive, negative or neutral sentiment) of finance‐related narratives.…”

Section: Classificationmentioning

confidence: 99%

“…In the audit literature, investigators have identified several applications of NLP that should be considered in future research. After illustrating the value of NLP‐based dendograms and concept maps in analysing the content of auditors’ SOX 404 reports, Boritz et al () encouraged future investigators to ‘study the efficacy of using automation, rather than manual methods’, to code textual evidence and assess the content of MD&As. Cecchini () encouraged future researchers to refine and extend applications of his NLP, SVM and kernel‐based model to risk assessments, bankruptcy prediction and fraud detection.…”

Section: Future Applications Of Natural Language Processingmentioning

confidence: 99%

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Natural Language Processing in Accounting, Auditing and Finance: A Synthesis of the Literature with a Roadmap for Future Research

Fisher

Garnsey

Hughes

2016

Intell. Sys. Acc. Fin. Mgmt.

154

112

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Natural language processing (NLP) is a part of the artificial intelligence domain focused on communication between humans and computers. NLP attempts to address the inherent problem that while human communications are often ambiguous and imprecise, computers require unambiguous and precise messages to enable understanding. The accounting, auditing and finance domains frequently put forth textual documents intended to communicate a wide variety of messages, including, but not limited to, corporate financial performance, management's assessment of current and future firm performance, analysts' assessments of firm performance, domain standards and regulations as well as evidence of compliance with relevant standards and regulations. NLP applications have been used to mine these documents to obtain insights, make inferences and to create additional methodologies and artefacts to advance knowledge in accounting, auditing and finance. This paper synthesizes the extant literature in NLP in accounting, auditing and finance to establish the state of current knowledge and to identify paths for future research.of achieving human-like language processing for a range of tasks or applications' (Liddy, 2001). This implies, as demonstrated throughout this paper, that 'there are multiple methods or techniques from which to choose to accomplish a particular type of language analysis' (Liddy, 2001). We reference a variety of analytical methods that incorporate NLP data, at various 'levels of linguistic analysis' (Liddy, 2001). However, since 'NLP is considered a discipline within Artificial Intelligence (AI)' we focus most heavily on the AI-related applications of NLP (Liddy, 2001). Despite the plethora of analytical methods that are associated with and use data produced by NLP, it comprises a unique set of 'computational techniques' that should not be confused or conflated with the many analytical tools referenced in the text that follows.Fifty years ago Goldberg (1965) stated: 'it is scarcely an exaggeration to say that the problem of communication is the axial problem in accounting'. Accounting practice is replete with written documents intended to communicate such messages as, but not limited to: current accounting standards, past and expected future corporate performance (along multiple dimensions), policies and practices embodied by financial statements and the results of financial statement audits. The growth in digital and social media usage by businesses has further increased the volume of unstructured text documents. Since the dissemination of these documents and messages is now largely automated by and through computers, we believe that NLP research and applications have considerable potential to enhance communication in the areas of accounting, auditing and finance. Our paper is motivated by the desire to determine the state of the extant literature in NLP in accounting, auditing and finance so as to inform and guide future research efforts. ObjectivesThis paper examines the NLP literature in accounting, auditing and fi...

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Section: Classificationmentioning

confidence: 99%

Section: Classificationmentioning

confidence: 99%

Section: Future Applications Of Natural Language Processingmentioning

confidence: 99%

See 1 more Smart Citation

Natural Language Processing in Accounting, Auditing and Finance: A Synthesis of the Literature with a Roadmap for Future Research

Fisher

Garnsey

Hughes

2016

Intell. Sys. Acc. Fin. Mgmt.

154

112

View full text Add to dashboard Cite

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“…This inconsistency between the provided frameworks and legal requirements for organizations inherently leads to various interpretations of the term in both the academic and the professional literature (Holm and Laursen 2007). Such inconsistency also leads to a potential problem for the user of the internal control reports, such as when trying to link the terminology that is used in auditors' reports back to that which is used in the professional literature or published guidelines and standards (Boritz et al 2013). The management control literature tends to understand the term as a 'narrower scope definition of management control' or the process of 'strategy implementation' (Merchant and Otley 2007) and thereby sees internal control as a basis of information that feeds into both the strategic control (external focus) and the management control (internal focus) systems of an organization (Pfister 2009).…”

Section: Introductionmentioning

confidence: 99%

Internal control through the lens of institutional work: a systematic literature review

Henk

2020

J Manag Control

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Despite the growing interest in research on the topic of internal control, there is confusion about the concept in both theory and practice. This study addresses this lack of clarity by systematically structuring the literature that uses the concept by investigating what we know from previous studies about the practice of internal control and how it is institutionalized. To examine the existing literature in this field, the paper utilizes the theoretical lens of ‘institutional work’. The review finds that the understanding of internal control is currently divided: one part of the literature understands the concept as internal control over financial reporting, while the other part has a more global and strategic understanding of the term. Internal control is institutionalized by different organizational actors at the micro level in an attempt to implement internal control systems that are not a simple act of compliance but present an added value for the organization. At the same time, it is noteworthy that not all categories of institutional work could be identified in the internal control literature, indicating that the actors are largely limited by their institutional embeddedness. The paper also presents an aggregated understanding of the term internal control, which can therefore significantly supplement the efforts of practitioners and regulators to implement internal control procedures that add value for the corporate governance of organizations.

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“…In fact, the IT Governance Institute (ITGI) repeatedly addresses this issue by stating that the reliability of the financial reporting system is dependent on a "well-controlled IT environment" (ITGI, 2004). Given that ITMWs (typically) include weaknesses in access, monitoring, design issues, change and development, end-user computing, segregation of duties, policies, documentation, master files, backup, staffing sufficiency and competency, security, outsourcing and operations (Boritz et al, 2013), ITMWs are likely to have a negative impact on the reliability on financial reporting. Furthermore, recent work highlights that IT is the foundation of an effective system of internal controls, and firms that are proactive in the adoption of IT within internal controls are less likely to have material weaknesses in their internal controls (ITGI, 2004;Hunton et al, 2008;Masli et al, 2010).…”

Section: Prior Literature and Hypothesis Developmentmentioning

confidence: 99%

External reputational penalties for CEOs and CFOs following information technology material weaknesses

Haislip

Masli

Richardson

et al. 2015

International Journal of Accounting Information Systems

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A content analysis of auditors' reports on IT internal control weaknesses: The comparative advantages of an automated approach to control weakness identification

Cited by 45 publications

References 20 publications

Natural Language Processing in Accounting, Auditing and Finance: A Synthesis of the Literature with a Roadmap for Future Research

Natural Language Processing in Accounting, Auditing and Finance: A Synthesis of the Literature with a Roadmap for Future Research

Internal control through the lens of institutional work: a systematic literature review

External reputational penalties for CEOs and CFOs following information technology material weaknesses

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