The Acceptance and Adoption of Continuous Auditing by Internal Auditors by Vasarhelyi - Article Example

Running Head: Continuous Audit Continuous Audit Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecture Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date Introduction The article by Vasarhelyi et al (2012). The acceptance and adoption of continuous auditing by internal auditors: A micro analysis. International Journal of Accounting Information Systems 13, 267-281 is a research article on the need for continuous auditing and continuous control monitoring. According to the authors the research was motivated by the need to explore the impact of continuous auditing on the internal audit practice. The decision to conduct the research in the field was justified by the fact that field research provides richer and more detailed information on the issue under research (Vasarhelyi et al 2012). Analysis From the abstract of the research one is able to find a lot of valuable information on the research on auditing. From the abstract the authors introduce the concept of advanced technology and how it is used by organizations to gain competitive advantage in the market. The author notes that in most organizations using Information Systems process their information on a real-time basis. Thus, the article shows that auditing of information needs to be done on a continuous basis rather than on a the usual periodic basis. Secondly, Vasarhelyi, M.A et al (2012) introduces the settings of the research as leading edge organizations where IT is widely applied. Thirdly, it also identifies the sample for the research as that staffs who apply technology in monitoring the firm’s activities. These include IT internal auditors and internal audit management. The abstract therefore clearly shows that the research was set out to investigate whether continuous audit and monitoring have kept up with technological advances in Information Systems. The abstract also summarizes the findings of the paper categorizing organizations as traditional audit or in the emerging stage of audit. In the introduction, the article introduces the concept of continuous audit as the practice using technology to automate audit to the maximum possible degree. According to Vasarhelyi (2012) continuous audit is a revolution that needs all aspects of auditing to be fundamentally rethought. An ealier Vasarhelyi and et al (2010a) is used to stress the importance of conducting the present study. According to Vasarhelyi et al (2010a) understanding of the impact of continuous audit is urgent before technologies and practices become more advanced. Vasarhelyi et al (2010a) uses the CICA/AICPA (1999) to provide a definition of Continuous auditing as the concept where independent auditors can assure organizations on a subject matter derived from simultaneously issued audit within a short time of the occurrence of events. Sarva (2007) introduces the other technologies that continuous audit relies on to succeed. In the introduction Vasarhelyi et al (2012) shows that continuous audit is being applied more and more in organizations. They note that a search of the term on Google returns over 7,800,000 hits showing the increasing importance of the concept. Furthermore, Vasarhelyi et al (2012) uses the PricewaterhouseCoopers (2006) to show how the accounting professionals are taking the impact of continues audit on audit practice. The PricewaterhouseCoopers (2006) survey shows that 82 per cent of companies had implemented a measure of continuous auditing or continuous monitoring or were planning to develop such a system in the future. Vasarhelyi et al(2012) quotes directly from IIA (2009) to show that firms were no longer neglecting continuous auditing as they were under pressure from regulatory requirements, financial reporting standards and technology that enable automation of manual auditing to adopt continuous auditing. In the introduction Vasarhelyi et al (2012) presents the purposes of the research as twofold. First, the paper seeks to study the status of continuous auditing adoption and implementation at the micro-level. Vasarhelyi et al (2012) justifies the micro-level studies noting most studies in continuous auditing are micro-level due to the difficulty of collecting data from users of continuous audit. Vasarhelyi et al (2012) note that the present study is unique as it provides the insight of internal auditors in what he terms as “leading edge organizations”. Secondly, the paper seeks to investigate how auditors in pioneer firms are implementing continuous audit. The second objective is aimed at finding out to which degree internal auditors perceive continuous audit as useful, easy to use and whether it is beneficial to organizations. Section 2 of the article referred to as motivation and methodology clearly sets out what motivated the authors to undertake the research and the methodology used in the research. According to Vasahelyi et al (2012) they were motivated by the need to study the impact of continuous audit on the practice of internal auditors. Vasahelyi therefore tries to address the deficiency in continuous audit caused by the fact that most research knowledge in the topic is provided by surveys conducted by external audit firms or software vendors. Vasahelyi et al (2012) uses the directed interviews of the users of continuous audit in organizations that are pioneering the practice. The respondents in these interviews were IT internal auditors, internal audit management and internal auditors. The interviews were in semi-structured format with the aim of identifying and comprehending attitudes, viewpoints and influences of individual respondents. The sample of organizations chosen for the study was drawn from a wide range of business sectors that were experienced in using continuous auditing. The sample consisted of 1 firm from the banking sector, 2 from the banking industry, two technology firms and four from the consumer goods sector (Vasarhelyi et al 2012). In section four the article analyzes literature to outline the models that are used in the study. The Technology Acceptance Model (TAM) previously proposed Davis (1985, 1989) is discussed and adopted in the research as the theoretical framework. Between 1985 and 2007 the TAM model had been utilized in over 700 research papers on the adoption of technology. The TAM model looks at technology acceptance as being defined by the attitude of users towards the technology. In turn, the attitude of users to a technology is driven by the perceived ease of use (PEU) perceived usefulness (PU) (Davis, 1985). The second model utilized in the study is used to measure the degree of continuous audit adoption in internal audit departments. This model is the Technology adoption Lifecycyle (TAL) proposed by Bohlen and Beal (1957) and Rogers (1962). The article adopts this model to try and explain current stage of continuous auditing adoption in the firms under study. Through adoption of the TAL in collaboration with continuous auditing literature the author was able to develop an Audit maturity Model and use it to measure the degree of continuous auditing in the firms involved in the present study. According to Vasahelyi et al (2012) the technology maturity model has four stages like Roger’s technology adoption lifecycle. These stages are; the traditional audit, the emerging audit, the maturing audit and finally the continuous audit. According to the results of the research continuous audit is still in the introductory stage in most organizations (Vasarhelyi et al, 2012). This is contrary to the earlier findings in the PWC and ACL surveys which claim that continuous audit is a mature product that has been widely adopted. Most companies studied in the research either lie in the traditional audit or emerging audit stage of adoption of continuous audit. However, the author notes that the main limitation of this research is generalization which is characteristic of case study research. The article recommends that training of internal auditors is necessary for them to have the necessary knowledge and skills to enhance the effectiveness of continuous auditing in an organization. Analysis of References Vasarhelyi MA, Alles MG, Williams KT (2010). Continuous Assurance for the Now Economy. A Thought Leadership Paper for the Institute of Chartered Accountants in Australia is one of the articles reviewed in the background section of the present study. The authors use this paper to bring into focus the need for continuous auditing in modern organizations. According to Vasarhelyi, Alles and Williams (2010), Continous audit gives a business timely assurance that its information processing functions are in order. This paper argues that a better match between an organizations internal and external audit practices and its It system through continuous audit can enable organizations obtain more timely and accurate results. PriceWaterHouseCooper (2006). State of the internal audit profession study: Continuous auditing gains momentum; a report on the status of the audit in a changing business environment is another article used to set the background of the study. According to this report, continuous audit has been widely adopted in most firms. The author contrasts the Macro-level study reported by this paper with its micro-level approach to investigate the status of continuous audit in organizations. The author also uses the findings of the PriceWaterHouseCoopers (2006) as a basis to compare the present results. However, the results of the present study contrast those of PriceWaterHouse (2006) which had proclaimed continuous audit as a mature product and classifies it as a product still in its introductory stage. The Canadian Institute of Chartered Accountants (1999). Continuous auditing research report. Toronto, Canada also provides a rich background for the present research. Vasahelyi (2012) uses this report to enable his readers better understand the concept of continuous audit. CICA/AICPA (1999) provides a clear definition of the concept of continous auditing as used in the study. The three references above are some of the most important references reviewed for the Vasahelyi (2012) study. They detail the current status of continuous auditing adoption in organization and also introduces the reader to the concept of continuous audit in organizations. Apart from these references used in introducing the research area to the reader, there is another set of references used to formulate the methodology and theoretical framework for conducting the research. Rogers, E.M. (1962). Diffusion of Innovations. New York: Free Press is book that developed one of the mostly applied model in the study of technology development. According to Rogers (1962) a technology goes through four stages in their lifecycle; R&D, Introduction, Growth and Maturity. Drawing from Roger (1962), Vasahelyi came up with the technology maturity model which is used to analyze the level of continous auditing adoption in firms studied in this research. Vasahelyi et al (2012) compares the Rogers (1962) to reflect on the maturity of continuous audit in the sample organizations. Davis FD 1989, Perceived usefulness, perceived ease of use, and user acceptance of information technology. MIS Quartely 13, 319–40 is also one of the articles that form the backbone of the research methodology. From Davis (1989) the author obtains a appropriate model for the study of technology acceptance. This is the Technology Acceptance Model (TAM), previously applied in over 700 papers on technology adoption. The TAM model provides the present research a valuable means of investigating the attitudes, viewpoints and influences of internal auditors on continuous audit as set out in the research methodology. This is particularly true because the TAM model views technology acceptance as being directly related to the attitudes of users towards the technology. The TAM model further introduces the variables; perceived usefulness (PU) and perceived ease of use (PEU) that determines the attitude of a user towards technology. Conclusion Vasahelyi et al (2012) is an article that successfully presents the research conducted on the status of continuous audit adoption in organizations successfully. The abstract of the article is very effective in summarizing the whole research article and also briefly tells the reader about the results of the research. Using the three references discussed above the author is able to introduce the author to the concept of continuous audit and its current state of usage in organizations. The authors also clearly articulate their motivation for carrying out the research in the motivation and methodology section of the paper. The methodology to be used in conducting the research is well laid out and the author justifies the use of interviews and why the particular sample was selected for the research. Variances of the Technology Adoption Model (TAM) and the technology Lifecycle model are successfully utilized in assessing the usage of continuous auditing in the sample firms. The results of the study conclude that continuous audit has lower levels of adoption than previously claimed by Macro-scale studies. Finally, the author recommends the training of auditors to ensure they have the skill and knowledge to enhance continuous audit applications in their firms. References Davis F.D. (1989). Perceived usefulness, perceived ease of use, and user acceptance of information technology. MIS Quartely 13, 319–40 IIA (2009). Recent IIA survey results show many auditors use software to automate key tasks, though a surprising number have yet to adopt popular tools. Internal Auditor. Retreived From http://www.theiia.org/intAuditor/free-feature/2009/august/software-trend-spotting/ in 8th may 2012 PriceWaterHouseCooper (2006). State of the internal audit profession study: Continuous auditing gains momentum; a report on the status of the audit in a changing business environment Rogers, E.M. (1962). Diffusion of Innovations. New York: Free Press Sarva S. (2006). Continuous auditing through leveraging technology. ISACA J Online:1–4. The Canadian Institute of Chartered Accountants (1999). Continuous auditing research report. Toronto, Canada: CICA. Vasarhelyi et al (2012). The acceptance and adoption of continuous auditing by internal auditors: A micro analysis. International Journal of Accounting Information Systems 13, 267-281 Vasarhelyi MA, Alles MG, Williams KT (2010). Continuous Assurance for the Now Economy. A Thought Leadership Paper for the Institute of Chartered Accountants in Australia Read More