ntrol Systems with the Use of
Information Technology and its Effects on the Financial
Statements Reliability: An Applied Study on Commercial Banks Ali Abdul Ghani Al-Laith
Technical College of Management, Baghdad, Iraq
[Abstract] The study aimed at identifying the importance of the internal control and its adaptation with the
development of the use of information technology and its effect on the reliability of financial statements of commercial banks. The population of the study consisted of all commercial banks. Questionnaires were distributed among them; the researcher designed the questionnaire to target financial managers, internal auditors, and computer section employees who worked at these banks; 122 questionnaires were distributed. The hypotheses of the study were tested using the appropriate statistical methods, which are Cronbach Alpha, standards deviations and means, and One Sample T-(Test).The results showed a high level of adaptation of internal control systems with the development of the use of information technology and its effect on the reliability of financial statements of the commercial banks. The average level of the hypothesis states that “the adaptation of the internal control systems with the development of the use of information technology in the commercial banks do lead to have high reliability financial statements.” The results showed the average level of the hypothesis, which states “there are no difficulties for the adaptation of the internal control systems with the use of information technology in the commercial banks.” The study has several recommendations, including the need to control and supervise the banks' compliance with banking sector legislation or regulations to improve the reliability of financial statements issued by those banks.
[Keywords] internal control system; commercial bank; financial statement; IT; audit; reliability
Information Technology (IT) has significantly been developed during the past 20 years, and the number of the institutions that heavily rely on the Computer Systems in the electronic operation of their statements has also increased. At the present time, most of the commercial banks use the computer-dependent IT in operating their data, archiving them and delivering the same to their users, especially the accounting Information Systems, which are significantly using IT.
However, using IT methods has its own troubles, as it might lead to ease of tampering with accounting information, which is difficult to detect unless the internal control systems keep pace with the technological developments and are able to detect and to prevent occurrence of manipulation, which necessitates more attention from internal control and interest in the security and safety of information. Furthermore, internal controls must be consolidated with the electronic systems in light of the huge development in the data electronic processing. This means there needs to be a sound internal control system within the data electronic entry units where the opportunity of detecting errors is minimized because the electronic systems are unable to detect errors unless certain measures and rules are set up for data entry, processing, and retrieving. That entails development of control methods over the data entry and operation and control over outputs. Since IT involves many risks and challenges, most notably, inter alia, absence of documentary authentication and difficulty in pursuing processes and absence of qualified professional staff members, the development and adaptation of control procedures and instruments to meet these challenges imposed by the use of IT in the banks' accounting systems is necessary.
The impact of IT on the internal control system, together with the accompanying challenges and difficulties facing these systems, like the absence of the documentary authentication and the difficulty in pursuing the operations in...