Explaining the information systems auditor role in the public sector financial audit

Axelsen, Micheal; Green, Peter; Ridley, Gail

doi:10.1016/j.accinf.2016.12.003

Cited by 42 publications

(40 citation statements)

References 48 publications

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“…At the most strategic level, IT transforms the business (Dehning et al, 2003). IT capability is likely to influence financial reporting and the financial statement audit (Axelsen et al, 2017) and require the use of IT auditors, who generally receive higher compensation (Half, 2015).…”

Section: Theoretical Background and Hypothesis Developmentmentioning

confidence: 99%

“…These issues likely would add the complexity of the audit, increasing audit effort. Axelsen et al (2017) state that financial statement auditors struggle with clearly understanding the role of the information systems auditors and how best to use them during the financial statement audit. Challenges such as these are likely to lead to a more complex auditing environment for the external auditor, which is likely to lead to higher audit fees.…”

Section: It Capability and Audit Feesmentioning

confidence: 99%

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The impact of client information technology capability on audit pricing

Hoffman

Sellers

Skomra

2018

International Journal of Accounting Information Systems

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This paper explores the question: "How does a client's information technology (IT) capability influence audit pricing?" Company data for the years 2004 through 2012 are employed. Firms appearing on the InformationWeek 500 (IW500) annual list of U.S. organizations with superior IT functions serve as a proxy for companies with superior IT capability. Our findings suggest that companies with superior IT capabilities incur higher levels of audit fees. In addition, as client size increases, the audit fees of firms with advanced IT capabilities increase at a greater rate than firms without such capabilities. These findings contrast with prior research by Chen et al. (2014) that found in the immediate post-Sarbanes-Oxley Act (SOX) period for the years 2004 through 2007, client IT capability reduced audit fee increases. In addition, we replicate the Chen et al. (2014) results and find that IT capability did not influence audit fee increases during the sub sequent recession and recovery periods. Further, superior capability clients see smaller audit fee increases when exogenous shocks such as SOX regulations occur. These results suggest a revised interpretation of Chen et al. (2014) may be warranted. This study contributes to the literature by providing a more complete picture of how a client's IT capability affects audit fees. Prior research has studied the effect of IT capability on the external audit. This work focused exclusively on the immediate post-Sarbanes-Oxley Act of 2002 (SOX) period. Masli et al. (2010) suggest that specific IT investments in internal control-monitoring technology reduce the rate of audit fee increase. Also, during the immediate post-SOX period, for the years 2004 through 2007, companies with strong IT capabilities had slightly lower (9.1%) rates of audit fee increase than those without strong IT resources (Chen et al., 2014). We argue, however, that these findings may not extend beyond the immediate post-SOX era when public audit failures (for example, Enron Corporation, WorldCom, Tyco International, Adelphia Communications Corporation) generated severe market and regulatory responses, leading companies to deploy IT resources specifically targeted to addressing audit and internal control risks. Additionally, we are unaware of any research that explores how the client's IT capability impacts the actual level of audit fees incurred. This paper addresses the gap in prior research by exploring the broader question: How does a client's IT capability impact audit pricing? The COBIT 5 (Control Objectives for Information and Related Technology) framework recommends that firms align, plan and organize IT investments in support of their chosen business strategy (ISACA, 2017). Firms may gain sustainable advantage by uti lizing IT to develop business capabilities that are difficult for competitors to imitate or acquire (Mata et al., 1995). In particular, firms generate value by aligning their internal capabilities with their IT strategy, creating synergistic resources to respond to market, industry and s...

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Section: Theoretical Background and Hypothesis Developmentmentioning

confidence: 99%

Section: It Capability and Audit Feesmentioning

confidence: 99%

The impact of client information technology capability on audit pricing

Hoffman

Sellers

Skomra

2018

International Journal of Accounting Information Systems

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“…The value of sound public sector risk management and internal control systems comes with positive implications (Ahluwalia et al 2016;Ahmed 2016;Akotia 2016). First, the result (Table 2) reaffirms the importance of demonstrating a commitment to ethical values and a control environment as key determinants of positive risk attitude that would align the activities within the organization to ethical practices that will minimize the occurrence of risk (Ashraf and Uddin 2016;Axelsen et al 2017). The study also makes a relevant contribution to literature by creating a research gap for further debates regarding the relationship between internal control principles and risk management in the private sector and other jurisdictions, since it is not a popular topic in literature.…”

Section: Discussion and Theoretical Implicationmentioning

confidence: 99%

The Value of Public Sector Risk Management: An Empirical Assessment of Ghana

Kong

Lartey

Bah

et al. 2018

Administrative Sciences

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This study investigates risk management practices in public entities in the Ghana. We relied on the popular framework designed by the Committee of Sponsoring Organizations of the Treadway Commission-COSO, to advocate for possible ways to minimize the occurrence and effects of risk in public organizations. The internal control elements used include: control environment, commitment to ethics, segregation of duties, review and information and communication. These constitute the explanatory variables used in performing multivariate data analysis to determine the dimensionality of the data set and possible outcomes. The exploratory research followed a quantitative approach using the survey method and a structured equation model. We established that, due to globalization and increases in the scale of operations, it is practically impossible for management through the help of auditors and those in charge of governance to validate the entire operations of the public sector to ensure strict compliance to internal control principles, in order to minimize the detrimental impacts of risk. However, an alternative sustainability depends on the prominence of quality financial reporting, compliance, commitment to ethical values and consistency in pursuit of the strategic and operational objectives based on good corporate governance. On the other hand, the implications of risks should be embedded in the minds of public servants as part of the organizational culture that will complement existing tools and techniques of internal control.

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“…To bridge the gap between information systems and professional auditors, Li et al (2007) proposed a systematic analysis approach that provides a framework for auditors to understand business processes and the data flow/structures of information systems effectively. Axelsen et al (2017) developed an explanation theory that addresses the role of the information systems auditor in the public sector in supporting the financial audit and outlines key determinants that affect that role.…”

Section: Literature Reviewmentioning

confidence: 99%

Designing a Generic Information Systems Audit Framework to Improve the Quality of Audit in Higher Education

Mohamed¹,

Elshareif²,

Mohamed³

2019

Journal of Computer Science

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There are some similarities between Financial Statement Audit (FSA) and Information Systems Audit (ISA). FSA is an examination of the reliability and integrity of financial statement records, whereas ISA is a review and evaluation of the controls, risks and system development within an information systems infrastructure to ensure that the safeguards protect against abuse, protect assets, maintain data integrity and operate effectively to achieve the organization's objectives. Decision makers need to ensure a reliable collection and evaluation of the evidence of an organization's information systems, practices and operations. Data manipulation can be caused by external or internal threat. Internal manipulation threat is the most dangerous because it is committed by authorized personnel, which makes it very difficult to detect. In particular, the framework introduces an anomaly detection technique, a data mining method, to determine if the suspected transactions arose from internal or external threats. Once the suspected transactions are identified, procedures and monitoring controls will be in place to minimize each threat. The proposed framework is expected to help university and ministry of higher education managers at all levels to make vital decisions based on reliable and accurate information.

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Explaining the information systems auditor role in the public sector financial audit

Cited by 42 publications

References 48 publications

The impact of client information technology capability on audit pricing

The impact of client information technology capability on audit pricing

The Value of Public Sector Risk Management: An Empirical Assessment of Ghana

Designing a Generic Information Systems Audit Framework to Improve the Quality of Audit in Higher Education

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