The Intelligent Enterprise in the Era of Big Data

CHAPTER 7 WILL FINANCIAL AUDITORS BECOME EXTINCT?

7.1 Introduction

External audits are a critical part of the financial framework underlying businesses worldwide. The integrity and thoroughness of such audits have been crucial in promoting investor confidence and in allowing commerce to flourish.

With the pervasive adoption of technology by enterprises, there has been significant interest in leveraging technology in order to make the audit process more efficient and to improve the quality of the audits. In fact, given the high degree of reliance on technology by corporations in general for running their business, it is imperative for audit firms to rely on automation to audit sophisticated technology systems adopted by their clients. Accounting standards now encourage audit firms to adopt IT and use IT specialists when necessary (AICPA 2002b, 2005, 2006b, PCAOB 2004b).

In terms of academic research on audit automation, even in the early days of computing, the potential impact of automation on accounting and auditing was recognized (Keenoy, 1958). Since then, there has been considerable academic research and focus on the subject, from both internal and external audit perspectives. Vasarhelyi (1984) pioneered research on the potential impact of audit automation on audit processes.

The focus of most academic research, and also commercial software, has been on point solutions and fairly rudimentary use of technology such as email Microsoft Office (Janvrin et al., 2008), and on specific ...