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Topics: Audit, Auditing, Financial audit Pages: 14 (3927 words) Published: January 15, 2014
Usage of technology in audit: A case study with a large Audit Firm1

Miklos A. Vasarhelyi
Rutgers the State University of New Jersey
miklosv@rutgers.edu
Silvia Romero
Montclair State University
romeros@mail.montclair.edu
Usage of technology in audit: A case study with a large Audit Firm

Abstract
Accounting information systems are ubiquitous in today’s business, supporting most of its operational functions. Since their review and assessment is necessary and appropriate software tools are now available, this paper asks: Do auditors use the available technological tools? What are the difficulties they find? Are there mediators to facilitate usability? Through a cross sectional case-based field study comparing four engagements in a major audit firm, this paper finds that the characteristics of the audit team determine the levels of technology adoption. However, quality integration between technology support teams and auditors may improve usability and consequently increase technology adoption. Keywords: audit tools, audit technology, usability audit

Introduction
The potential of technological tools, and the progressive digitization of business, has changed the way external audits are conducted. The increasing ubiquity of accounting information systems has made it necessary enhance the auditor’s toolset and to include specialized teams to evaluate those systems throughout the external audit. Dowling [1], looks at factors that determine the appropriate usage of technological tools; and Dowling and Leech [2] compare the audit support systems used in five big audit firms. In this paper, on the other hand, we focus on tool usage and their conditionants. We also discuss what are the difficulties found in system implementation and tools to facilitate usability. These questions are investigated through a cross sectional case-based field study comparing four audit engagements. The following section reviews the literature, the ensuing section discusses the methodology, and the final two sections address findings and conclusions. Conditions that favor usage of technology

In this section we examine the determinants of technology usage. Then, by conducting interviews with audit teams, we inquire why available technological tools are not used. Further analysis leads to suggestions concerning tools to improve the levels of usage. Manager’s attitudes, beliefs and social environment

“Many times users do not rely on decision aids even when doing so would improve the quality of the decision” [3]. For any technological tool to be adopted in an audit engagement, the audit manager must believe that its use will provide some advantage. However, auditors are often overconfident in their judgments and believe that they do not need the tool, and will adopt it only if it confirms their judgment [4]. Different studies have examined the determinants of information technology usage. Karahanna et al. [5] present the following key constructs in the innovation-decision process: 1. Innovation’s perceived attributes,

2. Individual’s attitude and beliefs, and
3. Communications received by the individual from his/her social environment about the innovation (subjective norm). These norms are determined by the individual’s beliefs about what their peers expect from them. Therefore, when audit managers do not have the required knowledge about a new tool and/or do not perceive its benefits, the tool will only be adopted if there is substantive pressure by peers or supervisors. Dowling [1] surveys 569 auditors of large and medium sized audit firms, and finds evidence that intention to use a system increases the appropriate use. She also finds that perceived normative pressure and auditor’s attitude influence appropriate auditor’s system usage. However, lack of knowledge about the tool might convince the auditor that s/he should rely on other evidence [6].

Arnold and Sutton [6] express concerns that the continued use of an intelligent...

References: [1] C. Dowling, “Appropriate audit support system use: the influence of auditor, audit team, and firm factors,” The Accounting Review, vol. 84, 2009, pp. 771-810.
[2] C. Dowling and S. Leech, “Audit support systems and decision aids: current practice and opportunities for future research,” Internation Journal of Accounting Information Systems, vol. 8, 2007, pp. 92-116.
[3] M. Eining, D. Jones, and J. Loebbecke, “Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.,” Auditing: A journal of practice and theory, vol. 16, 1997, pp. 1-19.
[4] R. Ashton, “Preassure and performance in accounting decision settings: paradoxical effects of incentives, feedback and justification,” Journal of Accounting Research, vol. 28, 1990, pp. 148-180.
[5] E. Karahanna, S. Detmar, and N. Chervany, “Information Technology Adoption Across Time: A Cross-Sectional Comparison of Pre- Adoption and Post-Adoption Beliefs.,” MIS Quarterly, vol. 23, 1999, pp. 183-213.
[6] V. Arnold and S.G. Sutton, “The theory of technology dominance: Understanding the impact of intelligent decisionʼs aid on decision makers ' judgments,” Advances in accounting behavioral research, vol. 1, 1998, pp. 175-194.
[7] R.P. Oisen, “Can Project Management be Defined?,” Project Management Quarterly, vol. 2, 1971, pp. 12-14.
[8] J. Klonglan, Gerald E. And E Walter Coward, “The Concept of Symbolic Adoption: A Suggested Interpretation,” Rural Sociology, vol. 35, 1970, pp. 77-83.
[9] R. Yin, Case Study Research: Design and methods, Sage Publications, 2003.
[10] V. Arnold, “Behavioral research opportunities: Understanding the impact of enterprise systems. No Title,” International Journal of Accounting Information Systems, vol. 7, 2006, pp. 7-17.
[11] A. Rom and C. Rohde, “Management accounting and integrated information systems: A literature review,” International Journal of Accounting Information Systems, vol. 8, 2007, pp. 40-68.
[12] A.M. Lillis and J. Mundy, “Cross-sectional field studies in management accounting research -Closing the gaps between surveys and case studies,” Journal of Management Accounting Research, vol. 17, 2005, pp. 119-141.
[13] B. Cushing and J. Loebbecke, Comparison of audit methodologies of large accounting firms, American Accounting Association, 1986.
[14] A. Arens and J. Loebbecke, Applications of statistical sampling to auditing, Englewood Cliffs, New Jersey: Prentice Hall, 1981.
[15] M. Vasarhelyi, D. Lombardi, and R. Bloch, “The Future of Audit: A Modified Delphi Approach in 2009,” working paper, 2010.
[16] G. Rowe and G. Wright, “The Delphi technique as a forecasting tool: issues and analysis,” International Journal of Forecasting, vol. 15, 1999, pp. 353-375.
[17] A. Baldwin-Morgan, “Impact of Expert System Audit Tools on Auditing Firms in the Year 2001: A Delphi Investigation,” Journal of Information Systems, vol. 7, 1993, pp. 16-34.
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