The implication of information technology on the audit profession in developing country. Extent of use and perceived importance

• Pages: 237-255
• DOI: https://doi.org/10.1108/IJAIM-03-2016-0022
• Date: 02 May 2017
• Published date: 02 May 2017
• Author: Menna Tarek,Ehab K.A. Mohamed,Mostaq M. Hussain,Mohamed A.K. Basuony
• Subject Matter: Accounting & Finance,Accounting/accountancy,Accounting methods/systems

The implication of information

technology on the audit profession

in developing country

Extent of use and perceived importance

Menna Tarek and Ehab K.A. Mohamed

Faculty of Management Technology, German University in Cairo,

Cairo, Egypt

Mostaq M. Hussain

Faculty of Business, University of New Brunswick-Saint John, Saint John,

Canada, and College of Business and Economics, Qatar University,

Doha, Qatar, and

Mohamed A.K. Basuony

Department of Accounting, The American University in Cairo,

New Cairo, Egypt

Abstract

Purpose –Information technology (IT) largely affected contemporary businesses, and accordingly, it

imposes challenges on the auditing profession. Several studies investigated the impact of IT, in terms of the

extent of use of IT audit techniques, but very studies are available on the perceived importance of the said

issue in developing countries. This study aims to explore the impact of implementing IT on the auditing

profession in a developing country, namely, Egypt.

Design/methodology/approach –This study uses both quantitative and qualitative data. A survey of

112 auditors, representing three of the Big 4 audit rms as well as ten local audit rms in Egypt, is used to

gather preliminary data, and semi-structured interviews are conducted to gather details/qualitative-pertained

information. A eld-based questionnaire developed by Bierstaker and Lowe (2008) is used in this study. This

questionnaire is used rst in conducting a pre-test, and then, the questionnaire for testing the nal results is

developed based on the feedback received from the test sample.

Findings –The ndings of this study reveal that auditors’ perception regarding client’s IT complexity is

signicantly affected by the use of IT specialists and the IT expertise of the auditors. Besides, they perceive

that the new audit applications’ importance and the extent of their usage are signicantly affected by the IT

expertise of the auditors. The results also reveal that the auditors’ perception regarding the client’s IT is not

affected by the control risk assessment. However, the auditors perceive that the client’s IT is signicantly

affected by electronic data retention policies. The results also indicated that the auditors’ perception regarding

the importance of the new audit applications is not affected by the client’s type of industry. The auditors nd

that the uses of audit applications as well as their IT expertise are not signicantly affected by the audit rm

size. However, they perceive that the client’s IT complexity as well as the extent of using IT specialists are

signicantly affected by the audit rm size.

Research limitations/implications –This study is subject to certain limitations. First, the sample size

of this research is somehow small because it is based on the convenience sampling technique, and some of the

respondents were not helpful in answering the surveys distributed for this research’s purpose. This can be

attributed to the fear of the competitors that their opponent may want to gather information regarding their

work to be able to succeed in the competition in the market so they become reluctant to provide any

information about their rm. Even some people who were interested to participate were not having enough

time because the surveys were distributed during the high season of their audit work and there was limited

time for the research to be accomplished. Hence, it is difcult to generalize the results among all the audit rms

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/1834-7649.htm

Implication of

information

technology

237

Received 9 March 2016

Revised 21 July 2016

2 September 2016

Accepted 4 September 2016

InternationalJournal of

Accounting& Information

Management

Vol.25 No. 2, 2017

pp.237-255

©Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-03-2016-0022

in Egypt because this limits the scope of the analysis, and it can be a signicant obstacle in nding a trend.

However, this can be an opportunity for future research. Second, the questionnaire is long and people do not

have enough time to complete it. This also affected the response rate. In addition to this, the language of the

questionnaire was English, so some respondents from the local audit rms were nding difculty in

understanding some sophisticated IT terms.

Practical implications –This study makes some recommends/suggestions that can well be used to solve

some practical problems regarding the issues concerned. This study focuses on accounting information

system (AIS) training during the initial years of the auditors’ careers to help staff auditors when they become

seniors to be more skilled with AIS expertise needed in today’s audit environment. Clear policy statements are

important to direct employees so that IT auditors evaluate the adequacy of standards and comply with them.

This study suggests increasing the use of AIS to enhance individual technical and analytical skill sets and to

develop specialized teams capable of evaluating the effectiveness of computer systems during audit

engagements. This study further recommends establishing Egyptian auditing standards in this electronic

environment to guide the auditors while conducting their audit work.

Social implications –Auditors should prioritize causes of risks and manage them with clear

understanding of who receives them, how they are communicated and what action should be taken in a given

community/society. So, they have to determine and evaluate all risks according to the client’s type of industry

(manufacturing, non-nancial services and nancial). Auditors also have to continually receive feedback on

the utility of continuous auditing (CA) in assessing risk. In particular, it is better for the auditor to determine

how the audit results will be used in the enterprise risk management activity performed by the management.

In addition, privacy has several implications to auditing, and so, it has to be reected in the audit program and

planning as well as the handling of assignment les and reports. Alike, retention of electronic evidence for a

limited period of time may require the auditor to select samples several times during the audit period rather

than just at year end.

Originality/value –As mentioned, this study is conducted within a developing country’s context. The use

and importance of IT is reality of time. However, very few studies are devoted to explore the use/importance

of IT in auditing in developing countries, and thus, this study carries a signicance to have better

understanding about it. Moreover, knowledge of how IT is used, the related risks and the ability to use IT as

a resource in the performance of audit work is essential for auditor effectiveness at all levels including

developing countries.

Keywords Information technology (IT), Audit, Procedures, Developing country, Firm size,

Application

Paper type Research paper

1. Introduction

Accounting provides information, whereas auditing conrms the degree of compliance of the

information to accounting principles and standards. However, the auditing profession is

exposed to major challenges because the procedures of conducting the audit is different from

those applied to the traditional audit of accounting systems (Reynolds, 1989). It has been

becoming increasingly important to address the challenges facing auditing because of the

rapid advancement in information technology (IT). Firms are relying heavily on IT in

conducting their day-to-day operations, resulting in changes in the nature of the work and

the business relationships. This is coupled by the widespread of internet, real-time

accounting systems, electronic commerce (e-commerce) and using websites and social media

to disclose nancial information. Consequently, this leads to an increasing need for new IT

audit techniques (Kotb and Roberts, 2011;Wanger, 2001).

Many rms make huge investments in IT resources because of the major benets gained

from these IT resources. For example, in the 2012 report of the top 500 information systems

(IS) innovators by InformationWeek magazine, IT investments in the banking and nancial

industries accounted for 8.7 and 9.0 per cent of rms’ annual revenues in 2011 and 2012,

respectively (InformationWeek, 2012). In more IT-intensive industries, these investments

could reach 40 per cent of the rms’ total capital expenditures. However, many rms are still

IJAIM

25,2

238