Information Technology in an Audit Context: Have the Big 4 Lost Their Advantage?

Abstract

Audit firms use information technology (IT) to improve audit quality, effectiveness, and efficiency. While audit IT has evolved over the past decade, limited guidance is available to assist practitioners in determining how IT can be used. Our research objectives are fourfold. First, we examine to what extent auditors use and assess the perceived importance of IT in their audits. Second, we look at different-sized firms to determine whether IT adoption and implementation decisions differ by firm size. Third, we investigate changes in auditors' use and perceived importance of IT over the past decade. Fourth, we examine whether IT has impacted the communication modes used by auditors when reviewing workpapers and fraud brainstorming. Overall, Big 4 auditors were not significantly more likely to use IT than non-Big 4 auditors, suggesting that the dominance of the Big 4 firms' use of IT has lessened. In fact, there are a few applications where non-Big 4 auditors appear to have taken the lead. In addition, our findings indicate that auditors have increased the use of all the IT applications we examined ten years ago. However, we find evidence that auditors may prefer to use even more IT in their audits than they are currently using. Data Availability: Data used in this study are available for download, see Appendix B.

Data Visualization in Local Accounting Firms: Is Slow Technology Adoption Rational?

“…We gather survey evidence from 31 partners (and one manager) at local accounting firms concerning their use of, and perceived benefit from, data visualization technology. Consistent with recent research (Lowe, Bierstaker, Janvrin, and Jenkins 2018), we find low usage rates of this 'newer' technology among local accounting firms. However, relative to Lowe et al 2018, we note relatively favorable views regarding benefits that data visualization might offer local firms.…”

“…Given the emerging consensus that the expected payoffs from data analytics initiatives are substantial (Griffin and Wright 2015, 379), current research has examined various aspects of technology adoption within the accounting profession (e.g., Hampton and Stratopoulos 2016, Lowe et al 2018, Austin et al 2019, Brown-Liburd and Walker 2019. While each study cogently documents current technology adoption trends and factors, each is also consistent with the underlying assumption of the epidemic model of technology diffusion, 4 that new technology is "better" and the reason for slow adoption is some form of constraint among non-adopters.…”

“…1 As such, general encouragement to use data visualization could affect how local firms conduct audits in unique and possibly unexpected ways. Aside from the fact that they 'are different' from larger firms (Lowe et al 2018), little is known about the technology use and technology perceptions of local firms. Therefore, assessing the perceptions and the use of data visualization in local firms can inform academics, practitioners, and standard setters who are seeking insights from practice regarding the current state of data visualization in auditing (AICPA 2017; PCAOB 2017; IAASB 2018).…”

“…Often, local firms are grouped with regional/medium-sized firms for analysis (e.g. Hampton and Stratopoulos 2016), in spite of the fact that local firms can differ from regional firms in their technology choices (Lowe et al 2018). theoretical explanations of technology adoption, Rogers' (1995Rogers' ( , 2003 categories of adopters (innovators, early adopters, early majority, late majority, and laggards) overlap with the epidemic model in casting a negative light on slow adopters.…”

Evaluating Information Security System Effectiveness for Risk Management, Control, and Corporate Governance

“…The cybersecurity controls that manage the data within a system can control significant risk exposure of the big data (Eastman, Versace, & Webber, 2015). Lowe, Bierstaker, Janvrin, and Jenkins (2017) studied improvement in the auditing system of an organization and suggested information technology as one of the useful tools that can help work in the accounting system to control errors (Lowe et al, 2017). Information technolgy issues may arise while in use for auditing, depending on the size of the organization that has implemented the system.…”