Examining the Potential Benefits of Internal Control Monitoring Technology

The Accounting Review, Vol. 85, No. 3

44 Pages Posted: 15 Aug 2009 Last revised: 26 Jul 2014

See all articles by Adi Masli

Adi Masli

University of Arkansas - Sam M. Walton College of Business

Gary F. Peters

University of Arkansas at Fayetteville

Vernon J. Richardson

University of Arkansas at Fayetteville

Juan Manuel Sanchez

University of Texas at San Antonio

Date Written: December 21, 2009

Abstract

The purpose of this study is to analyze the potential benefits that firms realize from implementing technology specifically aimed at monitoring and assuring the effectiveness of their internal control systems. As asserted by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), approaches to effective internal control monitoring are expected to enhance the efficiency and effectiveness of the internal control process, and in turn the assurance over such processes (COSO 2009a). We develop hypotheses and test to find whether these potential benefits are realized. Specifically, we employ a natural experiment whereby we identify a sample of firms that implemented specific internal control monitoring technology (ICM technology) in response to the internal control requirements of the Sarbanes-Oxley Act (SOX). Consistent with our hypotheses, and after controlling for factors identified by recent research, our analysis documents that implementation of ICM technology is associated with lower likelihood of material weaknesses, smaller increases in audit fees, and smaller increases in audit delays during the post-SOX time period. We discuss the potential implications of our findings on the research areas of continuous monitoring/auditing, client-provided assurance assistance and IT governance.

Keywords: Internal Control Monitoring, Material Weakness, Audit Fees, Audit Delays

Suggested Citation

Masli, Adi and Peters, Gary F. and Richardson, Vernon J. and Sanchez, Juan Manuel, Examining the Potential Benefits of Internal Control Monitoring Technology (December 21, 2009). The Accounting Review, Vol. 85, No. 3. Available at SSRN: https://ssrn.com/abstract=1448920

Adi Masli

University of Arkansas - Sam M. Walton College of Business ( email )

Fayetteville, AR 72701
United States

Gary F. Peters

University of Arkansas at Fayetteville ( email )

Sam M. Walton College of Business
Department of Accounting
Fayetteville, AR 72701

Vernon J. Richardson (Contact Author)

University of Arkansas at Fayetteville ( email )

401 WCOB
Fayetteville, AR 72701
United States

Juan Manuel Sanchez

University of Texas at San Antonio ( email )

One UTSA Circle
San Antonio, TX 78249
United States

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