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Auditor Detected Misstatements and the Effect of Information Technology

Author

Listed:
  • Austen, Lizabeth A.

    (Department of Accounting, College of Business, East Carolina University)

  • Eilifsen, Aasmund

    (Dept. of Accounting, Auditing and Law, Norwegian School of Economics and Business Administration)

  • Messier Jr., William F.

    (School of Accountancy, J. Mack Robinson College of Business, Georgia State University)

Abstract

This paper presents information on the causes and detection of misstatements by auditors and the relationship of those misstatements with information technology (IT). The last major study of misstatements and IT used data that was gathered in 1988. In the intervening period, there have been significant changes in IT, possibly altering the error generation and detection process. Two research questions related to detected misstatements and the effect of IT are examined. The six largest public accounting firms in Norway provided data from 58 engagements. We find that (1) the major causes of misstatements were missing, poorly designed, and improperly applied controls; inadequate methods used to select, train and supervise accounting personnel; and an excessive workload for accounting personnel, (2) missing and poorly designed controls, and excessive workload for accounting personnel were more likely to be causes of misstatements in computerized business processes than those that were not computerized, and (3) the increased use of tests of details over attention directing procedures on audits appears to result from auditors deciding that it is more effective or efficient to conduct such tests than rely upon IT controls. These findings have important implications for both audit practitioners and researchers.

Suggested Citation

  • Austen, Lizabeth A. & Eilifsen, Aasmund & Messier Jr., William F., 2004. "Auditor Detected Misstatements and the Effect of Information Technology," Discussion Papers 2004/1, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2004_001
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    File URL: http://hdl.handle.net/11250/163600
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    Citations

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    Cited by:

    1. Benaroch, Michel & Chernobai, Anna & Goldstein, James, 2012. "An internal control perspective on the market value consequences of IT operational risk events," International Journal of Accounting Information Systems, Elsevier, vol. 13(4), pages 357-381.
    2. Haislip, Jacob Z. & Peters, Gary F. & Richardson, Vernon J., 2016. "The effect of auditor IT expertise on internal controls," International Journal of Accounting Information Systems, Elsevier, vol. 20(C), pages 1-15.
    3. Efrim Boritz, J. & Hayes, Louise & Timoshenko, Lev M., 2020. "How understandable are SOX 404 auditors reports?," International Journal of Accounting Information Systems, Elsevier, vol. 39(C).
    4. Jagdish PATHAK & Mary LIND & Mohammad ABDOLMOHAMMADI, 2010. "E-Commerce Audit Judgment Expertise: Does Expertise in System Change Management and Information Technology Auditing Mediate E-Commerce Audit Judgment Expertise?," Informatica Economica, Academy of Economic Studies - Bucharest, Romania, vol. 14(1), pages 5-20.
    5. Havelka, Douglas & Merhout, Jeffrey W., 2013. "Internal information technology audit process quality: Theory development using structured group processes," International Journal of Accounting Information Systems, Elsevier, vol. 14(3), pages 165-192.
    6. Joseph F. Brazel & Christopher P. Agoglia, 2007. "An Examination of Auditor Planning Judgements in a Complex Accounting Information System Environment," Contemporary Accounting Research, John Wiley & Sons, vol. 24(4), pages 1059-1083, December.
    7. Stoel, Dale & Havelka, Douglas & Merhout, Jeffrey W., 2012. "An analysis of attributes that impact information technology audit quality: A study of IT and financial audit practitioners," International Journal of Accounting Information Systems, Elsevier, vol. 13(1), pages 60-79.
    8. Lineke Sneller & Ries Bode & Arnoud Klerkx, 2017. "Do IT matters matter? IT-related key audit matters in Dutch annual reports," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 14(2), pages 139-151, May.
    9. Huh, Bong Gu & Lee, Sunhwa & Kim, Wonsin, 2021. "The impact of the input level of information system audit on the audit quality: Korean evidence," International Journal of Accounting Information Systems, Elsevier, vol. 43(C).
    10. Boritz, J. Efrim & Hayes, Louise & Lim, Jee-Hae, 2013. "A content analysis of auditors' reports on IT internal control weaknesses: The comparative advantages of an automated approach to control weakness identification," International Journal of Accounting Information Systems, Elsevier, vol. 14(2), pages 138-163.
    11. Masoud, Najeb & Al-Utaibi, Ghassan, 2022. "The determinants of cybersecurity risk disclosure in firms’ financial reporting: Empirical evidence," Research in Economics, Elsevier, vol. 76(2), pages 131-140.
    12. Weisner, Martin M. & Sutton, Steve G., 2015. "When the world isn't always flat: The impact of psychological distance on auditors' reliance on specialists," International Journal of Accounting Information Systems, Elsevier, vol. 16(C), pages 23-41.

    More about this item

    Keywords

    Audit misstatements; Misstatement causes; Audit procedures; and Information technology;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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