An investigation of the influence of information technology on audit risk : an empirical study in Saudi Arabia
The impact of the adoption of IT-based accounting systems on the audit function and the potential risks that are associated with auditing in such an environment have been recognised by the literature relating to developed countries. However, the direct impact of these risks on the level of audit risk in an IT-based accounting environment has not been investigated. Accordingly, this study attempts to fill this gap by investigating empirically the impact of the adoption of IT-based accounting systems on the level of audit risk in a developing country, namely Saudi Arabia (SA). In particular, it seeks to explore whether the level of audit risk has increased or decreased after the adoption of these systems by auditors' clients. Due to the lack of literature relating to auditing IT-based accounting systems within the Saudi context, and also because of the lack of a theory which can be utilised to examine the impact of the adoption of such systems on the level of audit risk in a developing country like SA, the grounded theory (i.e. inductive) approach was employed to establish a theoretical model for this study. The study started with a review of the literature which covers this issue in developed countries. Then interviews were carried out with some representatives of audit firms in SA with the objective of collecting data to obtain insights into the experience of these firms regarding the audit of such systems. The findings from the literature study and the interviews were combined to develop a theoretical model for the purpose of elucidating the variables that were thought to have an influence on the level of audit risk in an IT-based accounting environment in SA. Finally, a questionnaire was used to test this model in order to support or refute theoretical propositions. The findings supported the study's theoretical model of the variables that influence the level of audit risk in an IT-based accounting environment in SA. In particular, the results supported the expected relationships among variables as depicted in the model of the research. Finally, in the light of the findings of this research, it can be concluded that the adoption of IT-based accounting systems by clients of audit firms in SA has contributed to a possible increase in audit risk. This can be explained, on the one hand, by the existence of some risks in the clients' IT-based accounting environment such as clients' accounting software which is often unsuitable, clients' staff are often insufficiently competent in dealing with IT-based accounting systems, and also clients' internal control systems in such an environment may be weak. On the other hand, there appear to be a number of audit firms which are insufficiently qualified to audit in an ITbased accounting environment. Problems identified included firstly, applying an unsuitable audit approach when examining the reliability of IT-based accounting systems, and secondly, a lack of competence in auditing such systems.