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

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\u27 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\u27 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

Accountants\u27 perceptions regarding fraud detection and prevention methods

Purpose : The purpose of this study is to examine the extent to which accountants, internal auditors, and certified fraud examiners use fraud prevention and detection methods, and their perceptions regarding the effectiveness of these methods. Design/methodology/approach : A survey was administered to 86 accountants, internal auditors and certified fraud examiners. Findings : The results indicate that firewalls, virus and password protection, and internal control review and improvement are quite commonly used to combat fraud. However, discovery sampling, data mining, forensic accountants, and digital analysis software are not often used, despite receiving high ratings of effectiveness. In particular, organizational use of forensic accountants and digital analysis were the least often used of any anti-fraud method but had the highest mean effectiveness ratings. The lack of use of these highly effective methods may be driven by lack of firm resources. Practical implications : Organizations should consider the cost/benefit tradeoff in investing in highly effective but potentially underutilized methods to prevent or detect fraud. While the costs may seem prohibitive for small organizations, substantial cost savings from reduced fraud losses may also be significant. Originality/value : By identifying methods that work well for fraud detection and prevention, prescriptive information can be provided to accounting practitioners, internal auditors, and fraud examiners

Integrating business risk into auditor judgment about the risk of material misstatement: The influence of a strategic-systems-audit approach

Auditing standards direct auditors to consider business risk and other risk factors when they evaluate the overall risk of material misstatement during the planning phase of an audit. Large audit firms generally use either a strategic-systems approach (SSA) or a transaction-focused approach (TFA) to evaluate misstatement risk. This study used data from a laboratory experiment to examine whether (1) being trained to use either SSA or TFA and (2) analyzing information organized in an SSA or TFA format influence the extent to which auditors integrate knowledge of business risk into their judgment about the likelihood of financial misstatement. Only auditors trained to use SSA who analyzed information provided in an SSA format effectively integrated business risk assessments with their assessment of the risk of material misstatement.

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

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.This accepted article is published as Lowe, J., J. Bierstaker, D. Janvrin, and G. Jenkins. 2018. Information Technology in an Audit Context: Have the Big 4 Lost Their Advantage? Journal of Information Systems 32 (1): 87-107. DOI: 10.2308/isys-51794 Posted with permission. </p