THE IMPACT OF INFORMATION TECHNOLOGY ON AUDITING ABSTRACT The research work has been undertaken to find out the impact of information technology on auditing. A further objective was to ascertain whether information technology have any relationship with audit quality and also determine whether information technology enhance audit integrity. In order to accomplish this objective questionnaires were designed and administered. This was analyzed using chi-square which was tested using non-parametric statistics and the chi-square test at suitable level of significance. In conclusion, the computed value from the chi-square was greater than the critical value obtained from the chi-square table. This implied that information technology enhance audit process. It is recommended by the researcher that internal and external auditors should play a pivotal role in helping organization leverage I.T audit to meet the increased demand for improved governance by evaluating current risk and controls as well as define and assess the premise and utility of future contemplated monitoring systems. TABLE OF CONTENTS CHAPTER ONE Background of the Study - - - - - - - - - Statement of the Problem- - - - - - - - - - - Objective of Study - - - - - - - - - - - - Scope of the Study - - - - - - - - - Significance of the Study- - - - - - - Research Hypothesis - - - - - - - - - Limitation of Study- - - - - - - CHAPTER TWO 2.1 Introduction - 2.2 A Brief Historical Background on Information Technology on Auditing- - - - - - - 2.3 Information Technology Auditing Decision- 2.3.0 Evaluation Decision- 2.3.1 Decision on Timing of Audit Approach- - 2.3.2 Decision on the Application System Selection- 2.4 Roles of I.T Audit in Fraud Control- 2.5 Information Technology Controls and Audit Importance- 2.6 I.T Audit Techniques - 2.7 Information Technology Audit Process - 2.8 Phases of an I.T Audit - CHAPTER THREE 3.1 Introduction - 3.2 The Population and Sample- 3.3 Data Collection Method- 3.4 Source of Data 3.5 Data Analysis Method- CHAPTER FOUR Introduction Data Presentation based on the Personal Data- Data Presentation Based on Responses to Question related to the impact of Information Technology on Auditing 4.3.1 Hypothesis 1 4.3.2 Observed and Expected Frequencies 4.3.3 Computation of Chi-Square (x2) 4.3.4 Survey of Respondents Response to Questions 8,9 and 10 4.3.5 Observed and Expected Frequencies- 4.3.6 Computation of Chi-Square (x2) - - CHAPTER FIVE 5.1 Introduction- - 5.2 Summary of Findings- - - - - - - 5.3 Conclusion- - - - - - - - - - - - - - - - - - - 5.4 Recommendation- - - - - - - BIBLIOGRAPHY - - - - - - - - - - - - - - - - QUESTIONNARE- - - - - CHAPTER ONE 1.1 BACKGROUND OF THE STUDY The last few years have been an exciting time in information technology in auditing as a result of the accounting scandals and the increased regulation that resulted from the scandal. Information technology in auditing has had a relatively short yet rich history when compared to auditing as a whole and remains an ever changing phenomenon. At the beginning, only mainframe computers were used. The mid 1960s saw the introduction of new, smaller and less expensive machines. The introduction of the less expensive computer led to increase business use of computers and with it came the need for auditors to become familiar with Electronic Data Process (EDP) concept and application in business. Along with the increase in computer use, came the rise of different types of accounting system. The software industry soon realized that they needed to develop a specialized accounting software; therefore, in 1968, generalized audit software (GAS) was developed. (Wikipedia,2004) Information technology (IT) is concerned with technology to treat information. The acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronic-based combination of computing and telecommunication are its main field. The term in its modern sense first appeared in a 1958 article published in the Harvard Business Review by authors Leavitt and Whisler. It is the area of managing technology that include computer software, information systems, computer hardware and programming languages such as process and data constructs. (Wikipedia, free encyclopedia 2010). The speed and accuracy of the computer data processing process is what attracted authors to introduce the technology into the auditing profession. According to Izedonmi, (2000) auditing involves an independent examination of the financial statements of an enterprise by an appointed professional auditor to determine whether or not those financial statement show a true and fair view position of the enterprise as at the end of the engagement as well as other relevant statutory and professional regulation. It is the examination of financial statements by an independent certified public accountant as to the fairness with which the financial statements are prepared. Information technology came into the auditing profession during the time period of 1954 to the mid-1960s, as Electronic Data processing (EDP) Auditing. An information technology audit is an examination of the check and balance or controls, within an information technology (IT) group. Schneider,(2008). The application of information technology in auditing can be grouped into three categories that include: auditing around the computer, auditing through the computer, and auditing with the computer. According to Izendonmi, (2000) auditing around the computer is an approach that tends to ignore the procedures which take place within the computer programs. It concentrates on initial input and final input usually on selective basis. The auditor checks the validity of the input to ensure proper authorization and control totals as a means of checking accurate processing. On the other hand, auditing through the computer requires a thorough examination of the computers own processing. This is the use of computer to check any and all information. It is done to ensure that: (a) All data to be processed are imputed into the computer (b) The accuracy of input to remove processing errors (c) Operators of computer systems cannot cause irregularities in processing and in the final reports to be distributed (d) Controls with computer programmes are as effective in practices as they may appear to be in theory. (Izedonmi 2000) Auditing with the computer is the utilization of the computer by an auditor to perform same audit work that would otherwise have to be done manually. All three categories are embedded in auditing in the age of information technology. Furthermore, information technology in auditing function is use for designing, implementing and maintaining control over organization business processes. Information technology in auditing has a critical role in collecting, processing and storing data that is summarized and reported in financial statements (Connon and Crowe, 2004, P.31). Many organizations and audit firm are becoming increasingly dependent on information technology with such elements as fully integrated information systems and electronic document management becoming more popular each day. Information technology in auditing increases the accuracy and speed of transaction processing, and even lead to competitive advantages for many organization in terms of operational efficiency, cost saving, and reduction of human errors (Warren et al 1998). 1.2 STATEMENT OF PROBLEM The proliferation of fraudulent financial reporting and other computer applications have led to the increase use of information technology in auditing. Organizations and companies in Nigeria do undertake a number of projects, which they claim comply with auditing laws. These claims ought to be verified in some ways through their reporting practices. But on close examination of the financial statements of banks and auditing firms in Nigeria, one observes that such reports do not contain enough information about their performance on information technology audit issues. Conventional bottom-line accounting does not deal with auditing issues separately. However, information technology on auditing is an important factor in the establishment, survival, records maintenance, goodwill and growth of an entity, there is sample justification for information technology to incorporate audit issues arising from companies operations. Until companies and banking sectors incorporate information technology issues in their auditing reporting practices their report would be regarded as incomplete and misleading. Therefore, the goal of this study is to empirically examine the impact of information technology on auditing. Specific questions which this study seeks to answer are: (a) What role does information technology play in auditing? (b) Does information technology have any relationship with audit quality? (c) Does information technology enhance audit integrity? 1.3 OBJECTIVES OF THE STUDY The objectives of this study are to investigate empirically the impact of information technology on auditing and examine whether the information technology evaluation performed by organization vary based on organizational characteristics. Specific objectives of the study are to: (a) Determine the roles information technology play in auditing (b) Ascertain whether information technology have any relationship with audit quality (c) Determine whether information technology enhance audit integrity? 1.4 SCOPE OF THE STUDY The research work will have its bedrock on the impact of information technology on auditing. The study will be limited to banks, breweries and audit firms in Edo State. 1.5 SIGNIFICANCE OF THE STUDY The study is relevant in that it identifies unique information technology practice of auditing companies in Nigeria. To this end, the following groups will benefit from the outcome of the study. Management in companies will benefit immensely from the study as the study identifies specific information technology issues which are expected to be incorporated in the company annual reports. Take for example the technology commonly referred to as XBRL (eXtenisble Business Reporting Language) XBRL will assist management to present the company annual report faster and more accurate. The use of XBRL has help managers in different companies to share, compile and communicate financial data more efficiently and effectively with each other and with the financial market. XBRL is a freely available, open and global standard for exchanging business information. XBRL is an XML (Extensible Markup Language) based computer language for the electronic transmission of business and financial data. XBRL is a standard that was developed to improve the way in which financial data is communicated, making it easier to compile and share this data. It is a type of XML (eXtensible Markup Language), which is a flexible way to create common information formats and share both the format and the data on the world wide web, intranets and elsewhere. (Wikipedia, the free encyclopedia 2010) Government and its agencies will benefit from the study recommendations. Specifically, the study will provide valuable information like the XBRL (eXtensible Business Reporting Language) which will assist regulatory agencies in the collection of financial data in a timely manner. Those having stake in companies will also benefit from the study since it identifies issues that are of importance when evaluating the performance of these companies. At least, they will to a large extent be guided when evaluating the performance of companies they have stake in, with the aid of XBRL (eXtensibl Business Reporting Language) which will help in the efficient and effective communication of the company’s annual reports to all intended users. 1.6 RESEARCH HYPOTHESIS A hypothesis is a “tentative, conjectural statement of the relationship between two or more variables” (Kerlinger 1976) Hypothesis is uncertain in the sense that truth can only be proven after they have been tested empirically. The hypotheses to be tested are as follows: Hypothesis I Ho: There is no significant relationship between information technology and auditing. HA: There is a significant relationship between information technology and auditing. Hypothesis II Ho: There is no significant relationship between information Technology and audit integrity. HA: There is a significant relationship between information technology and audit integrity. Hypothesis III Ho: There is no significant relationship between information technology and audit quality. HA: There is a significant relationship between information technology and audit quality. 1.7 LIMITATION OF THE STUDY There are some limitations which constrained the researcher’s effort in this research exercise and they include: Inadequate research materials: This is most important of all the factors limiting this research work Time constraint was also a limiting factor because of the rigorous research. There was not enough time to gather the necessary data.
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