The Consequences of Information Technology Control Weaknesses on Management Information Systems: The Case of Sarbanes-Oxley Internal Control Reports

MIS Quarterly, Forthcoming

Posted: 5 Apr 2011

See all articles by Chan Li

Chan Li

University of Kansas

Gary F. Peters

University of Arkansas at Fayetteville

Vernon J. Richardson

University of Arkansas at Fayetteville

Marcia Watson

affiliation not provided to SSRN

Date Written: April 5, 2011

Abstract

We investigate the association between the strength of information technology controls over management information systems and the subsequent forecasting ability of the information produced by those systems. The Sarbanes-Oxley Act of 2002 highlights the importance of information system controls by requiring management and auditors to report on the effectiveness of internal controls over the financial reporting component of the firm’s management information systems. We hypothesize and find evidence that management forecasts are less accurate for firms with information technology material weaknesses in their financial reporting system than the forecasts for firms that do not have information technology material weaknesses. In addition, we examine three dimensions of information technology material weaknesses: data processing integrity, system access and security, and system structure and usage. We find that the association with forecast accuracy appears to be strongest for IT control weaknesses most directly related to data processing integrity. Our results support the contention that information technology controls, as a part of the management information system, affect the quality of the information produced by the system. We discuss the complementary nature of our findings to the information and systems quality literature.

Keywords: Sarbanes-Oxley, Internal Controls, Information Quality, Management Forecast

JEL Classification: M41

Suggested Citation

Li, Chan and Peters, Gary F. and Richardson, Vernon J. and Watson, Marcia, The Consequences of Information Technology Control Weaknesses on Management Information Systems: The Case of Sarbanes-Oxley Internal Control Reports (April 5, 2011). MIS Quarterly, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1803301

Chan Li

University of Kansas ( email )

Capitol Federal Hall
Lawrence, KS 66045
United States
7857661277 (Phone)
66045 (Fax)

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

Marcia Watson

affiliation not provided to SSRN ( email )

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