What Do Auditor’s Reports on Internal Control Tell Us About IT Control Weaknesses in Financial Reporting Systems?

CAAA Annual Conference, 2012

AAA Annual Meeting, 2012

AMCIS Annual Meeting, 2012

40 Pages Posted: 19 Jan 2012 Last revised: 7 Jan 2015

See all articles by J. Efrim Boritz

J. Efrim Boritz

University of Waterloo - School of Accounting and Finance

B. Louise Hayes

University of Guelph - Gordon S. Lang School of Business and Economics

Jee-Hae Lim

University of Hawaii, Manoa

Multiple version iconThere are 2 versions of this paper

Date Written: November 6, 2012

Abstract

By analysing auditors’ SOX 404 reports from 2004 to 2011 we find that after 2006 Big 4 reporting of both information technology control weaknesses (ITWs) and non-ITWs in reports with ITWs decreased significantly. This change appears to reflect Big 4 reporting practices in response to a change in auditing standards rather than the nature of Big 4 clients’ internal control systems, suggesting that SOX 404 auditors’ reports have become less informative. We find that associations between ITWs, non-ITWs and financial misstatements are moderated by auditor type and time period (2004-2006 vs. 2007-2011). We identify a small number of ITWs and non-ITWs in SOX 404 reporting that may hold practical implications for an auditor’s consideration of IT control testing, management’s remediation of ITWs, and an educator’s teaching of IT and non-IT controls.

Keywords: SOX 404, IT control weaknesses, determinants of IT control weakness reporting

Suggested Citation

Boritz, Efrim and Hayes, B. Louise and Lim, Jee-Hae, What Do Auditor’s Reports on Internal Control Tell Us About IT Control Weaknesses in Financial Reporting Systems? (November 6, 2012). CAAA Annual Conference, 2012; AMCIS Annual Meeting, 2012. Available at SSRN: https://ssrn.com/abstract=1985823 or http://dx.doi.org/10.2139/ssrn.1985823

Efrim Boritz (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada
519-888-4567 (Phone)
519-888-7562 (Fax)

B. Louise Hayes

University of Guelph - Gordon S. Lang School of Business and Economics ( email )

50 Stone Road East
Guelph, Ontario N1G 2W1
Canada

Jee-Hae Lim

University of Hawaii, Manoa ( email )

2404 Maile Way
Honolulu, HI Honolulu 96822
United States
(808) 956-8503 (Phone)
(808) 956-9888 (Fax)

HOME PAGE: http://shidler.hawaii.edu/directory/jee-hae-lim/soa

Register to save articles to
your library

Register

Paper statistics

Downloads
243
rank
47,971
Abstract Views
1,176
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information