Perceived importance and actual use of “CAATs” among auditors in Libya

Perceived importance and actual use of “CAATs” among auditors in Libya

Abdelfatah Omran Tumi. (A lecturer at Azzaytuna University)

Abstract:

Previous research suggest that auditors perceive several applications as important, but they use them infrequently (Janvrin, et al., 2008). This research aims to investigate the perceived importance and actual use of Computer Assisted Audit Techniques (CAATs) among auditors in Libya. Sixty two auditors were surveyed in this study, and a cluster sample of nine banks and oil and gas companies were contacted and interviewed. Based on quantitative and qualitative analysis of our data, results show that auditors perceive several applications as important, but use them infrequently. In addition, auditors use CAATs more often in clerical work i.e. reporting and audit documentation than in any other audit tasks. This lack of use of CAATs in other audit tasks can be attributed to auditors’ low levels of information technology (IT) skills.

Introduction:

The adoption of advanced computer and communication technologies has become necessary for businesses to become and remain competitive in today’s marketplace. These technologies bring many advantages to organisations (see: Rezaee et al., 2002). The introduction of an IT- based accounting system will have a major impact on an entity’s internal controls (ICs) and IT- based accounting systems have created opportunities for increasing the reliability of ICs in an IT-based accounting environment (Al-Fehaid, 2003). Although auditors were initially concerned about the implications of IT for assessing risk and planning the engagement (Bell et al., 1998), if ICs are well designed and operate effectively, the auditor can feel reasonably assured that any material errors or irregularities will be prevented, or detected and corrected, as data goes through the system; they can therefore be fairly confident that financial statements will be free of material misstatements (Porter, et al., 2008)

The adoption of IT-based accounting systems has moved the auditing environment away from paper-based and manual systems, and different skills and methods are now required to perform an audit in such an environment (Ariwa and Eseimokumoh, 2008; Janvrin, et al., 2009). Changes in the ways in which external auditors perform their audits, handle electronic audit evidence, consider the use of computer and CAATs and conduct continuous audits (CAs) have led to the need to pay more attention to ICs, the need for more educated and experienced auditors to operate in this new environment and, in some cases, the need for IT audit specialists or information system auditors to be employed (El-Safty, 2009).

The dependence on IT controls has been formally recognised in the Public Company Accounting Oversight Board’s Auditing Standards. ISA 315 and 330 and in the US, Statement of Auditing Standards (SAS) No. 109 requires auditors to understand the risks inherent in the IC environment and to specifically assess the effect of IT on these risks (IFAC, 2012; Rechtman, 2009). Moreover, ISA 315 and SAS No. 94 addresses the effects of IT on IC and on auditors’ understanding of IC, including the necessary evaluation of control risk (IFAC, 2012; AICPA, 2001), and proposes that IT auditors are assigned to assist in the audit of complex computer environments (Brazel and Agoglia, 2007). This may call for the use CAATs to evaluate risks and conduct tests.

The research problem

Business entities, the Audit Bureau (AB) and audit firms (AFs) in Libya, as in many other countries in the region, are increasingly utilising IT solutions to gain a competitive position in the marketplace and to provide better services. Audit clients’ use of IT has raised many issues related to data security and access controls, data integrity, disappearance of (or difficulty of accessing) audit trails and sufficient segregation of duties. Clients’ use of IT may affect auditors in several ways in deciding which audit approaches and methods to use in order to test ICs. One of important considerations is the extent to which they will use CAATs in their audit process.

At present, no Libyan regulations exist which mandate or even suggest acquiring IT qualifications or undergoing continuous training in related skills, deploying IT specialists, conducting CA or the use of CAATs. These choices with regard to the ways in which auditors in AFs and the AB conduct their audits raise the following research questions: How auditors rate the importance of IT applications in audit tasks? To what extent they use them? What are main differences between two groups of auditors (AB and AFs) in dealing with IT? These two areas of investigation were limited to the following questions:

Does the use of IT have a positive impact on auditing?
To what extent has audit automation been adopted within the AB and AFs in Libya?
To what extent is IT utilisation for audit assignments affected by the size of the AFs, the nature of the audit task, and/or the auditor’s affiliation, age and experience?
Are there any differences between the perceived importance and levels actual use of technology in audit tasks?

Aims of the research

This paper seeks to investigate the impact of the current use of IT applications in audit clients’ accounting systems on financial audit processes, and will investigate the contrast of the impact of IT on audit function and on auditors’ behaviour between the two groups of the AB and AFs. Thus, the paper aims to investigate the following areas of interest:

First: The IT adoption by auditors in Libya and its perceived implications on those auditors and audit function, and this area includes investigating auditors’ use of IT, and the possible positive impact which IT may have on the audit function.

Second: Auditors’ behaviour in relation to the adoption of IT and this area of investigation includes: 1- The relationships between the utilisation of IT by auditors, and AF size, audit client size, the nature and complexity of audit task, and auditors’ affiliation (AB/AFs), age and experience.

2- Differences between the perceived importance and levels of actual use of technology, mainly CAATs, in audit tasks.

The literature review:

The use of IT provides opportunities for some accountants, however, it may endanger the practice of others (Xiao, et al., 1996). When considering IT’s impact on ICs and audits, IT can be seen as “a source of increased control over information and business processes or as a potential source of audit problems” (Bell et al., 1998: 13). ISA 215 and SAS No. 94 identifies potential benefits from IT in the effectiveness of ICs, but also recognises that IT poses specific risks to ICs, including a possible over-reliance on systems that process data inaccurately, the processing of inaccurate data, or both; also, the problems of unauthorised access to data; and potential loss of data are apparent (IFAC, 2012; Beard and Wen, 2007). Auditors are increasingly concerned about the implications of IT for assessing risk and planning their engagement: “IT has a direct impact on control risk and may preclude the auditor from performing a purely substantive audit” (Bell et al., 1998: 14).

The adoption of IT-based accounting systems has changed the auditing environment, moving it away from paper-based and manual systems, and requiring different skills and methods to perform an audit in such environments (Ariwa and Eseimokumoh, 2008; Janvrin, et al., 2009). These changes create a need to pay more attention to ICs and a need for more educated and experienced auditors to deal with such an environment and, in some cases, the need for IT audit specialists or information system auditors, reflecting the ways in which external auditors perform their audits, handle electronic audit evidence, and consider the use of computers and CAATs (El-Safty, 2009). The remaining of the literature review part will discuss the CAATs, the association of firm size with IT use and perceived importance, the perceived importance and actual use of technology.

Computer- Assisted Auditing Techniques (CAATs)

Generally, CAATs are defined as techniques that use the computer as an audit tool, and are utilised in conducting auditing procedures (Debreceny et al., 2005). According to Lin and Wang (2011: 777), CAATs refer to “various tools, technologies, and software that help auditors to conduct control and confirmation tests, analysis and verification of financial statement data, and continuous monitoring and auditing”. CAATs are used to capitalise on the advantages they might bring to audit effectiveness and efficiency and to help auditors to overcome the challenges of rapid advances in client IT usage (Curtis and Payne, 2008; Janvrin, et al., 2008). For example, CAATs may automatically execute audit tests which had previously been manual in nature, reducing audit hours for the task, making it possible to test the entire population rather than a sample, and greatly increasing the reliability of conclusions based on that test (AICPA, 2001).

SAS No. 94 states that auditors should use CAATs when testing automated controls in certain types of IT environment (Cerullo and Cerullo, 2003). In addition, ISA 300 appendix provides examples of matters the auditor may consider in developing the overall audit strategy and planning audits, these include the influence of IT on the audit procedures, as well as the accessibility of data and the expected use of CAATs (IFAC, 2012). CAATs can assist auditors in conducting control and compliance tests, the analysis and verification of financial statements data, and CA (Lin and Wang, 2011). Lin and Wang (2011) point out that auditors can be more independent by using CAATs in financial auditing, and less reliant on information and financial personnel. CAATs enable auditors to shorten the auditing hours required, and achieve better cost effectiveness.

The association of firm size with IT use and perceived importance:

The plentiful resources available for big audit firms may enable them to obtain and implement superior IT and employ IT specialist to a larger extent than do non-big audit firms. Thus, these resources should add to and facilitate improved audit process leading to better audits (Janvrin et al., 2008). Riemenscheider et al (2003) find that IT adoption is driven by the availability of firm resources. Previous research find that IT use is more extensive in Big 4 firms compared with smaller firms. Actually, regulators are concerned that small audit firms may not be able to compete with large firms in terms of IT environment, resulting in potential economic barriers, and audit effectiveness and efficiency issues (U.S. General Accounting Office, 2003). Janvrin et al’s (2008) results show that the perceived importance and actual use of IT vary by audit firm size. Their results suggest that auditors employed by Big 4 are more likely to use IT applications and rate their importance higher than auditors from non-big firms for several applications. Similarly, auditors from Big 4 firm are more likely to use some applications and rely on IT specialists than those from non-big firms.

The perceived importance and actual use of technology

As discussed earlier, IT has a significant impact on clients controls, and has its impact on audit process, and several academic papers investigated the use of IT in audit firms. Several studies have investigated auditors’ acceptance and use of IT in emerging countries. Al-Fehaid’s (2003) studied the influence of information technology on audit risk in Saudi Arabia, and his results suggested that auditors with IT-skills can bring many competitive advantages to their AF and to them as auditors and may increase the trust felt by clients and financial report users, in addition to bringing in additional consultation income.

However, Al-Fehaid’s (2003) results suggest that the level of auditors’ IT skills in Saudi Arabia was precluding them from using CAATs, and his results show that 60 per cent of Saudi auditors used auditing around the computer and did not use CAATs. In addition, external auditors thought that IAs were not competent to audit IT-based accounting systems. Al-Fehaid’s (2003) results suggest that small- and medium-sized AFs could not afford the cost of employing IT specialists. Training is another issue as the majority of auditors in Saudi Arabia were found had not attended any training courses related to auditing IT-based accounting systems, and he suggested that the cost of training was not offset by the level of audit fee which could be charged by small- and medium-sized AFs in Saudi Arabia.

Bierstaker et al (2003) examined the trend of internal auditors' use of technology, and they examined the extent to which internal auditors use software for a variety of audit tasks. Results of their research suggest that software is used most frequently for data mining and analysis and tests of online transactions, and least frequently for continuous transaction monitoring, e-commerce privacy and integrity control. Less apparent increase were also identified for most of audit tasks considered.

Debreceny et al. (2005) qualitatively investigated the actual use of Generalised Audit Software (GAS) in substantive testing in audits of banks in Singapore, and used an in depth interview method. They sought to understand the possible reasons for limited usage of GAS in auditors’ substantive testing. Their study concluded that IAs in banks use GAS, but only to a limited extent for the purposes of the extraction of samples, and the verification of the completeness and accuracy of data. GAS is frequently used in special investigation audits. Auditors were found to be more concerned about testing the compliance and effectiveness of IC compared to substantive testing. Difficulties in using GAS along with concerns about its cost- effectiveness were found to hinder usage of GAS. However, it was also found that external auditors tended not to use GAS due to the perceived inapplicability of GAS to the nature of investigating financial statement assertions or the extent or quality of computerised ICs maintained by banks in Singapore (Debreceny et al., 2005).

Ariwa and Eseimokumoh (2008) investigated the impact of IT-based accounting systems on audit risk in Nigeria. Their results suggest that the introduction of IT is linked with the disappearance of the audit trail, making it difficult for auditors to trace the transactions from source documents to financial statements. Their results suggest that some auditors in Nigeria depend on the comparison between input and output of client’s system (auditing around the computer), and that this does not help them to detect program errors which do not appear in the computer output reports.

El-Safty (2009) investigated the auditing practice in electronic environment in Egypt from an actor-network theory perspective, and her results suggest that auditors in Egypt did not consider that they are not competent enough to deal with advanced electronic systems, and therefore they do not often seek IT specialist assistance. Nevertheless, her results indicated that auditors found it difficult to employ qualified IT specialists, and to retain such skilled staff in a problematic job.

However, few studies have been undertaken to compare the perceived importance and actual use of technology among auditors. Janvrin, et al (2008) examined the perceived importance and actual use of IT across a diverse group of audit firm and across several audit applications, and sought to identify and relationship between the audit firm, nature of audit task, and the use of technology. Their results show that auditors use IT specialists infrequently, even by auditors who examine clients with complex IT. In addition, auditors perceive several applications (e.g. fraud review) as important, but use them infrequently.

Research methodology and methods

The intent of this mixed methods study is to investigate the difference between perceived importance of CAATs and actual use of them , and the study utilizes triangulation in different aspects of its investigations. The questionnaire seeks to survey auditors’ opinions and attitudes towards IT and its impact on their audits, to identify any positive impact of IT on the audit function, to discover any relationship between the audit firms’ size and the auditors’ experiences with the use of IT in their audits, and to investigate whether the use of IT is related by following factors: the AF’s size, the audit client’s size, the auditor’s affiliation, age and experience, and the audit task and its complexity. At the same time, conducting interviews is deemed to be important in raising the validity and reliability of the findings, by minimizing the bias of either of the quantitative and qualitative methods. The reason for combining both quantitative and qualitative data and methodology is to reach more participants and better understand this research problem through a convergence of both quantitative, broad numeric trends, and the detailed views offered by qualitative interviews.

As the current research involves collecting data from auditors, who are usually very busy professionals, it was decided that a combination of both qualitative and quantitative research approaches was the most appropriate way to increase the chance of collecting large volume of data, due to being able to offer options (e.g. either a questionnaire or an interview) for respondents to opt for as they deem suitable. Bryman and Bell (2011) state that a qualitative method can offer significant contextual information that complements the findings of larger quantitative study; in addition a qualitative method may facilitate the interpretation of the relationship between variables. This can be seen in understanding the results of weak correlation between auditors’ self-estimated IT levels, and their use of computers and most advanced CAATs, by the over-confidence of their IT skills which can be suggested by comparing results from questionnaire with those from interviews.

Nevertheless, it has some disadvantages related to the significant effort and expertise needed to adequately study a phenomenon with two separate methods and the difficulties of comparing results and resolving any discrepancies which might arise (Creswell, 2009), and can also be time consuming and expensive (Collis and Hussey, 2009). To limit these disadvantages, in the present study, the questionnaire is designed to be the main instrument distributed to external auditors, and the conducting of semi-structured interviews with other external auditors, IAs, and the acting director of the Libyan Auditors and Accountants Association (LAAA).

Considering possible ways of administering questionnaires, it was felt that conducting an email questionnaire would be the cheapest, and that it also has the advantage of greater speed, in the case of AFs. The agreement of sample members to participate in the survey was requested, and their email addresses were then gathered. By this, it could be certain that the right person had been reached. Moreover, the response rate may be higher using this process.

Table1 Participants in the research

Participants	Data collection method	Number of participants
Audit firms	Online questionnaire	32
Audit firms	Delivery and collection delivery questionnaire	14
Audit Bureau	Delivery and collection delivery questionnaire	26
internal auditors	Face to face, semi-structured interview	9
Audit firms	Face to face, semi-structured interview	5
LAAA – The Acting Director	Face to face, semi-structured interview	1
Total		87

An email invitation was sent to the participant’s email address and the receiver could not redirect the questionnaire link to another person by forwarding the email, meaning that the questionnaire link could only be accessed by the target participant’s email. This offers the assurance that only the research sample members would be reached. Technical issues were also dealt with by emailing or phoning participants during the data collection period. Ethical considerations were taken into account in conducting this research in an honesty and integrity manner.

Semi-structured interviews were also conducted to gather different stakeholders’ perspectives regarding the impact of IT on the audit process. Those parties included IAs, the LAAA acting director. The use of semi-structured interviews enabled the researcher to modify the order and wording of the questions, to give illustration and ask clarifying questions in order to gain more detailed information about a particular answer and to explore new subjects that arose from a certain answer (Collis and Hussey, 2009). Several interviews were conducted via telephone while other interviews were conducted face to face, depending on convenience, as shown in table1.

Results:

By comparing the size of Audit Bureau (AB) and audit firms (AFs), it can be seen in Table 2 that AFs are disadvantaged in terms of their size, compared to the AB. This may mean that they are unable to afford the use of efficient IT. However, the number of employees in the AB and its branches is much larger than the AFs, which may reflect a clear difference in their financial ability. The number of employees in banks is large as well; Jumhouria Bank alone, for example, has around 5,800 employees (Jumhouria Bank, 2013).

Table 2Number of employees in the audit firms

Group identification (Audit Bureau- Audit Firm)			Frequency	Valid Per cent
Audit firms	Valid	Fewer than 5	25	44.6
		5-15	21	37.5
		16-25	4	7.1
		More than 25	6	10.7
		Total	56	100.0

Most AFs are owned by the auditor who manages his/her firm and part of its audit staff is usually outsourced, as stated by three respondents who completed the questionnaire. However, the number of qualified auditors in the AB is much higher than those in the AFs, and may give an advantage to the AB in terms of the number of qualified auditors who can contribute to different audit tasks.

However, 10 IAs, on average, work in each department, which may to some extent reflect the work load they deal with. The number of qualified IAs in these organisations may not precisely reflect their financial ability, but may reflect their reliance on traditional methods in auditing which require more employees to conduct the work, as will be seen later. Nevertheless, the size of these organisations is a reason, in terms of their financial ability and volume of transactions, to use more IT in their accounting systems and also therefore by their IAs.

Previous research has provided different results regarding the impact of firm size on the use of IT. While Omoteso’s (2006) results did not prove any significant correlation to exist between AF size and the use of IT for audit assignments, El-Mnawi (2005), Janvrin, et al (2008), Janvrin, et al (2009), and Manson et al. (1998) linked the use of IT with firm size. In addition, according to Chaney, et al (2004), big AFs are expected to invest more than small firms in IT, training and facilities, enabling them to audit large-scale and complex clients more efficiently. Furthermore, Janvrin, et al (2008) found that auditors in the Big 4 firms are more likely to ascribe greater ratings to performance expectancy and facilitating condition factors than is the case for those in smaller firms.

To explore any relationship between the AF size and the proportion of clients who use IT-based accounting systems, the correlation is measured. The results are shown in the next table. In line with Al-Fehaid’s (2003) study, table3 indicates a positive moderate significant relationship, which suggests that large AFs have more clients who use IT-based accounting systems than smaller firms do. This could be attributed to the nature of the big AFs, which enables them to attract larger and more complex audit clients. This is consistent with the findings by Chaney, et al (2004) which showed that big AFs usually invest more in technology, training and facilities, enabling them to efficiently audit large and relatively complex companies.

Table 3 Correlation between AF size and the proportion of clients who use IT- based accounting systems

			Proportion of clients that uses IT-based accounting systems
Spearman's rho	Number of qualified auditors in the office (firm)	Correlation Coefficient	.310*
		Sig. (2-tailed)	.023
		N	54

*. Correlation is significant at the 0.05 level (2-tailed).

Thus, larger AFs in Libya seem to be superior in terms of having more clients with IT-based systems; this creates a need to allocate more resources to invest more in IT, and suggests individual accountants to consider practicing the profession in medium or large size, and it is important that the LAAA encourages them to do so, in order to afford the investment that enables them to attract big clients with relatively complex systems as more complex IT systems are developed around the globe.

The results in table 4 show that the auditors employed by larger AFs are more likely to rate their IT skills more highly than their counterparts in smaller AFs. This may be due to the relative financial advantage of larger firms, meaning that they are more able to attract and recruit IT-skilled auditors, compared to small firms. In addition, larger AFs made computers more available to auditors, as suggested by a positive correlation coefficient of 0.226 between the AF size and auditors’ access to computers.

Table 4 Correlation between the AF size and auditors’ IT skills level

			Participants' rating of their IT skills
Spearman's rho	Number of qualified auditors in the office (firm)	Correlation Coefficient	.296^*
		Sig. (2-tailed)	.027
		N	56

* Correlation is significant at the 0.05 level (2-tailed).

The differences between the mean of two groups of external auditors were tested by Mann-Whitney U test, which is considered to be the relevant test, as the data is ordinal and the two samples are independent, which suggests the conduct of a nonparametric test.

Table 5 Mann-Whitney U test for differences between the AB and AF auditors’ rating of their IT skills

		N	Mean Rank	Sum of Ranks
Ranks	Audit Bureau	26	34.46	96.00
	Audit Firm	56	44.77	2507.00
	Total	82
Test Statistics^a	Mann-Whitney U		545.000
	Wilcoxon W		896.000
	Z		-2.031
	Asymp. Sig. (2-tailed)		.042

Mann-Whitney U test results show that the difference between the means of the self-rating of IT skills for the auditors in each of the two groups is significant at α= 0.05; this means that auditors in AFs rank their IT skills more highly than their counterparts in the AB do. These results support the relevance of contingency theory in understanding IT skills and suggest that acquiring IT skills is contingent upon the size of AF, as Table indicates, and the auditor’s affiliation (i.e. AB or AF), as shown in Table .

Auditors’ access to computer system

Answers of questionnaire show that 92.8 per cent of the respondents from AFs have access to their own computers, whereas relatively fewer auditors (69.2 per cent) in the AB use computers. Despite considering their IT skills above the averages of others, surprisingly, only 22.2 per cent of IAs have their own computers to use at their desks, meaning that IAs have the lowest average for access to computer systems. One interviewed IA said:“We do not have computers for auditors to work with, even the head of department. There should be computers. We are compelled to use employees’ computers. They are cooperating well, but sometimes they are busy” (IA3).

Table 6 Mann-Whitney U test for difference between the auditors’ average access to computer system
		N	Mean Rank	Sum of Ranks
Ranks	Audit Bureau	26	34.46	896.00
	Audit Firm	56	44.77	2507.00
	Total	82
Test Statistics^a	Mann-Whitney U		545.000
	Wilcoxon W		896.000
	Z		-2.031
	Asymp. Sig. (2-tailed)		.042

Grouping Variable: The group identification (Audit Bureau- Audit Firm)

The difference between the mean of access for external auditors was also tested to find out whether there was a significant difference between the two groups of external auditors. Results from table 6 show that the difference between the mean of access for external auditors was found to be statistically significant at α=0.05. That is, auditors’ access to computers in AFs is higher than that of their counterparts in the AB. This availability of computers for auditors in AFs may partly explain why these auditors consider that they have higher IT skills than those in the AB.

The use of computer in audit tasks

The Man-Whitney U test in this table suggests significant differences between the means of the use of computer in audit tasks by auditors in AFs and by those in the AB. This result validates the finding that the extent of using computers for audit tasks is contingent upon the auditor’s affiliation (AB/ AF), and that auditors in AFs use computers in audit tasks more often than their counterparts in the AB do.

Table 7 Mann-Whitney U Test for differences in computer use in audit tasks between AFs and the AB
		N	Mean Rank	Sum of Ranks
Ranks	Audit Bureau	26	30.06	781.50
	Audit Firm	56	46.81	2621.50
	Total	82
Test Statistics^a	Mann-Whitney U		430.500
	Wilcoxon W		781.500
	Z		-3.072
	Asymp. Sig. (2-tailed)		.002

Grouping Variable: The group identification (Audit Bureau- Audit Firm)

In summary, the results suggest that auditors in AFs rank their IT skills higher than those in the AB and have access to, and use, computers in audit tasks more often than their counterparts in auditors in the AB, which may indicate weaknesses in the AB training and utilisation of CAATs which could help auditors to conduct their audits in a shorter time and to improve audit quality. The AB, in particular, needs to place more emphasis on investment in CAATs and IT related training, as the AB is superior in terms of financial ability, and it deals with large audit clients, which puts more pressure on it to provide professional service, protect its members from litigation risk and to preserve public confidence.

Considering the frequencies of often and always, the responses show that participating AFs auditors use CAATs the most when reporting and documenting audit work, followed by data analysis and substantive testing. This is consistent with Janvrin, et al.’s (2008) results, which suggested that auditors use CAATs more in several specific tasks, including reporting.

Although reporting is at the top of tasks in which CAATs is used in the AB group, it is followed by data analysis, substantive testing, and documentation; when comparing the mean of use, it can be noticed that clerical work, represented in reporting and documentation tasks, is at the top of audit tasks in which CAATs are most used, in both the AB and AF groups.

It is apparent, however, that the mean of use among the AF group is higher than that in the AB, for all audit tasks. To test the significance of such a difference, a Mann-Whitney U test is conducted and the results are presented table 8. This table indicates that the average use of CAATs by AFs auditors is higher than the level of use by the AB auditors. This difference is significant for the use of CAATs in audit documentation, data analysis, and substantive testing, while it is insignificant for other tasks.

Table 8 Mann-Whitney U test for difference between means of AB and AFs’ use of CAATs in several audit tasks

Audit task	Rank				Test Statistics
	Group	N	Mean Rank	Sum of Rank	Mann-Whitney U	Wilcoxon W	Z	Asymp. Sig (2-tailed)
The use of CAATs in audit planning	AB	21	29.29	615.00	384.000	615.000	-1.498	.134
	AFs	47	36.83	1731.00
	Total	68
The use of CAATs in IC assessment	AB	21	28.55	599.50	368.500	599.500	-1.708	.088
	AFs	47	37.16	1746.50
	Total	68
The use of CAATs in audit documentation	AB	20	25.35	507.00	297.000	507.000	-2.465	.014
	AFs	47	37.68	1771.00
	Total	67
The use of CAATs in data analysis	AB	21	26.79	562.50	331.500	562.500	-2.239	.025
	AFs	47	37.95	1783.50
	Total	68
The use of CAATs in performing substantive tests	AB	21	26.98	566.50	335.500	566.500	-2.171	.030
	AFs	47	37.86	1779.50
	Total	68
The use of CAATs in fraud detection and investigation	AB	19	27.29	518.50	328.500	518.500	-1.719	.086
	AFs	47	36.01	1692.50
	Total	66
The use of CAATs in reporting	AB	21	30.26	635.50
	AFs	47	36.39	1710.50	404.500	635.500	-1.249	.212
	Total	68

Thus, it can be said that AFs auditors use CAATs significantly more than AB auditors in audit documentation, data analysis, and substantive testing, and thus, that auditors’ usage of CAATs in audit documentation, data analysis, and substantive testing is contingent upon their affiliation (AB/ AF).

This result has three main implications; first, that the AB may need to be aware of their shortcomings with regard to using CAATs, and make a greater effort to utilise these techniques in the audit process, to improve audit efficiency and effectiveness. Secondly, auditors in the AB and AFs may need to look at the potential of CAATs in further areas than those in which they are currently using CAATs, for example, audit planning, fraud investigation and fraud detection. Thirdly, auditors’ limited use of CAATs in several audit tasks may be due to their low level of IT skills, and their perceptions of the applicability of the CAATs which can and should be used in these tasks, which is consistent with the findings of Debreceny et al. (2005),who suggested that external auditors tended not to use GAS due to the perceived inapplicability of GAS to the nature of investigating financial statement assertions. This result is in line with that of Al-Fehaid (2003), who found that the level of auditors’ IT skills in Saudi Arabia was precluding them from using CAATs.

In general, although the majority of the participating auditors thought that their IT skills were at least adequate, and quite a large proportion of auditors in the AB and AFs have their own computer, the majority of the auditors did not often use the computer in audit tasks in general. As mentioned in the literature review chapter, Venkatesh et al. (2003) developed a model to analyse the reasons behind the low average of IT usage and to develop expectations for future usage. This lack of IT usage will be further investigated later in the present study, utilising the model mentioned.

The perceived positive impact of IT on audit function

Generally, most auditors agree on the positive impact of techniques upon different aspects of auditing, as shown in table 9 and the interviewed academics and auditors also agreed about this positive impact. All the interview responses were in agreement with the positive impact of CAATs on auditors’ performance, and saw CAATs as important tools for risk assessment, fraud detection and investigation. The responses also showed agreement that CAATs could save time and effort for tests of controls and substantive tests.

However, when comparing the agreement percentages with regard to the statements in the table, it can be seen that more AFs auditors expressed positive opinions on the usefulness of CAATs than their counterpart AB auditors, in different areas such as their satisfaction with their performance, their career development, offering auditors competitive advantages over those who do not use CAATs, and saving time devoted to substantive testing. In addition, more auditors in AFs than in the AB thought that refusal to use CAATs could lead to low audit quality, while more auditors in the AB had a positive opinion of the importance of CAATs in risk assessment, fraud detection and fraud investigation, compared to those in AFs.

Table 9 shows the difference between the two groups of auditors with regard to their views on the impact of their use of CAATs from different aspects. Results show that although the auditors’ opinions were not significantly different with regard to most aspects, a statistically significant difference with regard to the impact of CAATs on auditors’ satisfaction about their performance, and on the impact on their career development was shown by the Mann-Whitney U test. Auditors in AFs have a more positive opinion than those in the AB on the impact CAATs on their satisfaction with their performance and career development. Table 9 shows that the respondents had different opinions on these issues; however, several answers validate the others, for example, the impact on audit quality and auditors’ careers. Auditors largely expressed the view that the use of CAATs increases the quality of their audit tasks and increases their professional competence, for example 90.9 per cent of auditors in the AB and 86.3 per cent of those in AFs agreed that CAATs increase the quality of audit function.

To further investigate whether auditors in the AB and those in AFs have significantly different opinions on the positive impact of CAATs, a Mann-Whitney U test was run and its outputs are shown in table9. The results show that the perceived importance of CAATs differs between AB and AFs. There is a significant difference in responses regarding the fourth and sixth questions, at α=0.05. This means that more auditors in the AB thought that audit automation increased auditor independence, while more auditors in AFs thought that the use of CAATs increased the scope of their professional expertise. These two differences are found to be statistically significant. Otherwise, there was no significant difference between auditors in the AB and those in AFs in their perceptions of the impact of CAATs on the other areas. In other words, auditors in the AFs are more cautious when it comes to the use of CAATs, as they seem to believe that this use may undermine their independence. With regard to the impact of CAATs on the scope of their professional expertise, auditors in AFs express more positive opinions than those in the AB.

These differences may reflect the different experiences they have had with CAATs, which is usually reflected in a positive attitude. This is in line with Blank and Dutton’s (2012) results which suggested that some users tend to have less experience with the internet and to be more critical about the role of technology in society.

Table 9 Mann-Whitney U test for the difference between the means of the AB and AFs’ perceptions of the impact of CAATs generally and in several tasks

Audit task	Rank				Test Statistics
	Group	N	Mean Rank	Sum of Rank	Mann-Whitney U	Wilcoxon W	Z	Asymp.Sig (2-tailed)
The refusal of an audit firm to use CAATs could lead to low quality audits	AB	19	31.92	606.50
	AFs	48	34.82	1671.50	416.500	606.500	-.572	.567
	Total	67
The use of CAATs improves auditor's satisfaction about his/her performance	AB	19	23.84	453.00
	AFs	48	38.02	1825.00	263.000	453.000	-3.077	.002
	Total	67
The increased use of CAATs in audit process has aided participant's career development	AB	18	24.97	449.50
	AFs	47	36.07	1695.50	278.500	449.500	-2.388	.017
	Total	65
The use of IT for audit tasks gives you advantages over your colleagues who do not use IT	AB	19	30.50	579.50
	AFs	48	35.39	1698.50	389.500	579.500	-1.034	.301
	Total	67
CAATs are important for risk assessment	AB	24	40.88	981.00
	AFs	52	37.40	1945.00	567.000	1945.000	-.705	.481
	Total	76
CAATs are important for fraud detection	AB	24	42.44	1018.50
	AFs	52	36.68	1907.50	529.500	1907.500	-1.108	.268
	Total	76
CAATs are important for fraud Investigation	AB	23	38.39	883.00
	AFs	52	37.83	1967.00	589.000	1967.000	-.110	.912
	Total	75
CAATs save time and effort devoted to tests of controls	AB	24	39.21	941.00
	AFs	52	38.17	1985.00	607.000	1985.000	-.211	.833
	Total	76
CAATs save time and effort devoted to substantive tests	AB	24	39.29	943.00
	AFs	52	38.13	1983.00	605.000	1983.000	-.243	.808
	Total	76

To conclude, the responses show that auditors regard IT as having a positive impact on audit in general. Although auditors generally have good performance expectations of IT, only around 40 per cent of the participating auditors said they used computers in audit tasks in general. Auditors thought that CAATs have a positive impact on the audit function and on themselves as auditors and agreed that CAATs improve audit quality, and save some of the time and effort devoted to tests of controls and substantive testing.

In addition, auditors generally agree that CAATs bring competitive advantages to individual auditors and their firms, that their use improves auditors’ satisfaction levels with regard to their own performance, increasing the scope of their expertise, and increasing their professional competence.

These findings are in line with Omoteso’s (2006) results, which suggested that IT benefits the audit process and enhances audit efficiency and effectiveness. They are also in line with Janvrin, et al., (2008), as the results suggest that auditors perceive several applications as important, although they infrequently use them. In this regard, auditors show considerable agreement on the importance of CAATs in risk assessment, fraud detection and investigation. However, in line with the previous literature, although most of the auditors in the AB perceived IT as important for fraud detection and investigation, they did not often actually use CAATs for these tasks.

Finally, auditors in both the AB and AFs generally have similar positive opinions on the use of CAATs. With regard to the impact of CAATs, auditors in AFs express more positive opinions than those in the AB. However, although auditors in AFs are more positive about the effects of IT on their satisfaction with their performance, career development, and the scope of their professional expertise, they are more cautious about the impact CAATs may have on their independence.

Discussion:

The results suggest that although the vast majority of auditors thought that their IT skills were at least adequate and they have access to their own computers, only half of the auditors use computers in audit tasks, in general. The correlation results also suggest that the higher the level of IT skills which an auditor possesses, the more often s/he is expected to use a computer in audit tasks. This result highlights the importance of training, which may impact positively on auditors’ IT skills and their use of CAATs to improve audit effectiveness and efficiency, and also validates the result given below regarding the negative impact of the difficulties which auditors may face in their use of CAATs.

In light of contingency theory, the results of this study suggest that several attributes of IT usage are contingent upon several different factors. The results show that the acquisition of IT skills is contingent upon the auditors’ affiliation (AB/ AF) and the size of the AF. Auditors in AFs, on average have a higher level of IT skills than their counterparts in the AB. Moreover, more AF auditors than AB use a computer in audit tasks in general, and this difference is found to be significant. In addition, the results suggest that accessing computers is contingent upon the auditor’s affiliation, and that computers are more available for auditors’ use in AFs than they are in the AB. Furthermore, auditors’ usage of CAATs in conducting several tasks is also contingent upon their working affiliation. Although the average use of CAATs is low, auditors in AFs use CAATs significantly more than those in the AB, in audit documentation, data analysis, and substantive testing. These results raise the question why the AB lags behind AFs in terms of facilitating auditors’ use of computers in audit tasks, despite its superior financial capabilities.

In addition, auditors in larger AFs consider their IT skills to be greater, and use computers, to some extent, more often than those in smaller AFs. This result is consistent with prior studies by El-Mnawi (2005), Janvrin, et al (2008a), Janvrin, et al (2009). For example, Janvrin, et al’s (2009) results show a positive relationship between the size of the AF and the assistance of IT specialists in the US, and suggest that auditors from Big 4 firms use several CAATs and rely on IT specialists more often than their counterparts in non-Big 4 firms. In addition, large AFs are found to have a greater proportion of clients with IT-based accounting systems than small AFs. Thus it is important for individual auditors in Libya to consider working in large audit firms in order to compete with regard to their ability to use CAATs, utilise the assistance of IT specialists, and to attract larger clients with relatively complex IT-based systems. It is also important that the LAAA encourages individual auditors to do so, in order to develop their skills, deliver quality services and maintain public confidence in the accounting profession in general.

In consistent with Omoteso’s (2006) findings, the results of this research suggest that the use of CAATs is contingent upon the audit client’s size, the nature of the audit task, and the task complexity. Auditors were found to use CAATs more often when dealing with larger clients. In addition, auditors found that the clerical work represented in reporting and documentation benefits most from the use of CAATs in both the AB and AF groups. Furthermore, the results suggest that auditors use CAATs more often when undertaking complex audit tasks, compared to simple tasks.

While only around 40 per cent of Libyan auditors surveyed said they used a computer in audit tasks in general, these auditors widely agreed on the positive impact of CAATs on the audit function and on themselves as auditors. Generally, they strongly agreed on the positive impact which CAATs have on saving the time and effort devoted to tests of controls, and agreed on the relative advantage use of CAATs gives to AFs, as well as the competitive advantage IT gives to individual auditors in their professional competence, saving time and effort devoted to substantive tests, assisting auditors in risk assessment and generally furthering their career development. However, the results also suggest that although auditors in the AB perceive CAATs as important for fraud detection and investigation, they do not often use CAATs for these tasks. This result is in line with that of Janvrin, et al (2008), who found that despite the fact that auditors perceived several applications as important, including fraud review, they did not frequently use them. Thus, these results suggest auditors in the AB and AFs need to be more familiar with CAATs and to use them in different audit tasks including tests of controls, substantive tests, data analysis, and fraud detection and investigation, especially in complex IT environments, in order to develop the quality of their audits and to meet international standards and public expectations.

More specifically, a large proportion of auditors need to become more aware of the positive and negative impact on their independence when using CAATs in their audits, as most auditors look at CAATs from one side only. Some auditors agree on the positive impact of CAATs on auditors’ independence and admire the advantages audit automation gives to auditors to make decisions more objectively. Others may be aware of the probable dependency on the client’s system, when conducting some automated audit work, and its consequent negative impact on their independence. Thus, it is useful for auditors to become aware of independence issues related to the use of CAATs and that their conduct of CA addresses these issues.

The results suggest that AFs are trying to overcome the lack of training among their staff by requiring them to acquire the IT skills needed, in order to take part in auditing in an IT environment, while the AB needs to make more effort to catch up. A number of auditors, including the acting director of the LAAA, pointed out that Law 116 does not require auditors to have continuing training in IT or any other fields; in addition, the LAAA does not assist auditors in receiving valuable training, and these are two additional perceived reasons why many auditors do not take IT related training (Acting director of the LAAA, interview).

To conclude, the AB, the LAAA and academics should take heed of their responsibilities in developing the accounting and auditing profession in Libya in order to catch up with new technologies by facilitating access to suitable IT related training. In addition, local auditing standards should be issued to fill the gap in the accounting and auditing standards.

Conclusion:

This research contributes to the debate in the literature regarding the impact of IT on auditing, and provides a thorough insight which brings together issues related to the ways in which auditors deal with their clients and the skills required. This study is presumed to be useful to auditors and might help to provide an understanding of the perceived impact of CAATs on audit tasks and auditors, and the actual use of CAATs, which may help improve the quality of financial audits in Libya and other developing countries. The knowledge from this research adds to work by Omoseto (2006), Janvrin et al. (2008) and Ahmi and Kent (2013), which has previously suggested that auditors are using CAATs more in clerical work i.e. reporting and audit documentation than in any other audit tasks. This lack of use of CAATs in other audit tasks can be attributed to auditors’ low levels of IT skills, a finding which is consistent with Al-Fehaid’s (2003) results.

The current findings add substantially to our understanding of the impact of IT on the audit process, and it is the first to compare the perceptions of private auditors and public auditors regarding the impact of IT on the audit process, and the results show several significant differences between these groups.

ملخص الدراسة:

الدراسات السابقة تشير إلى أن المراجعين يرون عدداً من تطبيقات الكمبيوتر مهمة، ولكنهم يستخدمونها بشكل متكرر، هذا البحث يهدف إلى استقصاء أهمية تقنيات المراجعة المساعدة بالكمبيوتر لدى المراجعين الليبيين واستخدامهم الفعلي لها. اثنان وسبعون مراجعاً تم استقصاء آرائهم في هذه البحث، بالإضافة إلى خمسة عشر مقابلة شخصية تم إجراؤها مع مراجعين داخليين لشركات كبيرة، وللرئيس التنفيذي لنقابة المحاسبين والمراجعين الليبيين. اعتماداً على التحليل الكمي الذي تم إجراؤه لبيانات الدراسة، تؤكد ما توصلت إليه الدراسات السابقة، حيث تشير النتائج إلى أن المراجعين يرون عدة تطبيقات مراجعة مهمة، ولكنهم لا يستخدمونها بشكل متكرر. بالإضافة إلى ذلك، المراجعين يستخدمون تقنيات المراجعة المساعدة بالكمبيوتر بشكل أكبر في العمل المكتبي، مثل إعداد التقارير والتوثيق مقارنة بغيرها من مهام المراجعة. هذا القصور في استخدام تقنيات المراجعة المساعدة بالكمبيوتر في المهام الأخرى يمكن أن يعزى إلى انخفاض مستوى مهارات المراجعين في استخدام الكمبيوتر.

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