Examining the Potential Benefits of Internal Control Monitoring Technology Adi Masli, Gary Peters and Vernon Richardson Juan Manuel Sanchez Sam M. Walton College of Business Department of Accounting University of Waterloo Centre for Information Integrity & Information Systems Assurance 6th Bi-Annual Research Symposium
17
Embed
Examining the Potential Benefits of Internal Control Monitoring Technology Adi Masli, Gary Peters and Vernon Richardson Juan Manuel Sanchez Sam M. Walton.
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Examining the Potential Benefits of Internal Control Monitoring Technology
Adi Masli, Gary Peters and Vernon Richardson
Juan Manuel Sanchez
Sam M. Walton College of Business
Department of Accounting
University of Waterloo Centre for Information Integrity & Information Systems Assurance
What are the potential benefits that firms can realize from implementing Internal Control Monitoring (ICM) technology designed to support and facilitate internal control processes?
Potential Benefits of ICM Technology
Enhanced Audit
Efficiency
More Effective Internal Control Systems
Timely Audit Reporting
Conceptually
Lower audit fees
Lower likelihood of material control weaknesses
Shorter audit report delays
Empirically
Incremental Contribution Structural changes have increased the demand for
and sophistication of effective internal control monitoring (Coderre 2006; PwC 2006; PCAOB 2007). SOX Section 404 requires evaluation and disclosure of
internal control process - penalties for non-compliance (e.g., Hammersley et al. 2008; Ashbaugh-Skaife et al. 2009).
COSO issued additional guidelines on monitoring internal control systems (2009). Many organizations were not fully utilizing the monitoring
component of internal control.
Practitioners’ (ITGI 2008) and external audit partner’s (Behn et al. 2006) views suggest that ICM technology may or may not work.
Effective Internal Control Systems
Enhanced Monitoring
Explicit Controls
SOX Process Support
Lower likelihood of Material Weaknesses
Period of Increasing Focus and Revelation of Material Weaknesses
H1: Firms implementing ICM technology will exhibit a lower likelihood of experiencing material internal control weaknesses subsequent to ICM technology implementation.
Doyle et al. (2007)
ICM
Technology
Enhanced Audit Efficiency
Timely Audit Support (persuasive evidence)
Enhanced SOX Audit Trails
Stronger Reporting Systems
Constraint on Increasing Audit Fees
Period of Increasing Audit Requirements and Audit Fees
H2: Firms implementing ICM technology will exhibit smaller increases in audit fees subsequent to ICM technology implementation.
Raghunandan and Rama (2006)
ICM
Technology
Enhanced Audit Timeliness
Stronger Reporting & Documentation Systems
Automation of Process Workflows
Management of Disparate Reporting Systems
Constraint on Increasing Audit Delays
Period of Increasing Audit Requirements and Audit Report Delays
H3: Firms implementing ICM technology will exhibit smaller increases in audit delays subsequent to ICM technology implementation.
Ettredge et al. (2006)
ICM
Technology
Strategic Nature of ICM technology
H4: ICM technology transformative implementations will exhibit greater impacts on assurance outcomes than ICM technology compliance implementations.
Dehning et al. (2003)
Go Beyond Complying with SOX
Integrate Enterprise-wide Risk and Compliance Assurance Initiatives
ICM is a Critical Component of IS
Greater Impacts on Assurance Outcomes
Relative to Compliance Implementations, Transformative Ones:
ICM
Technology
Sample• Announcements of “SOX” ICM IT Implementations