A Comparison of the Information Technology Knowledge of United States and German Auditors

A Comparison of the Information Technology Knowledge of United States and German Auditors 
Marilyn Greenstein-Prosch. Arizona State University. Marilyn.Prosch@asu.edu Thomas E. McKee. Medical University of South Carolina. temckee@musc.edu Reiner Quick, Darmstadt University of Technology. quick@bwl.tu-darmstadt.de Abstract. The International Federation of Accountants has stated that competence in information technology is imperative for the professional accountant due to its pervasive use in the business world. Auditors would normally be expected to have higher knowledge than the average accountant since they must audit the work of many different clients with diverse information systems. We surveyed 2,500 United States and German auditing professionals to determine their self-reported knowledge levels (IT self-efficacy) of 36 information technologies, some of which include various emerging technologies. Responses totaled 587 for a 23.5% overall response rate. A factor analysis of the 36 individual technologies revealed five underlying general constructs. Response statistics indicated both countries lacked significant knowledge for three of these five constructs. Scores were then culturally standardized to appropriately compare United States and German responses. German auditors had significantly higher knowledge for the construct of networking and data transfer. U.S. auditors had significantly higher knowledge for three constructs: ecommerce technologies, general office automation, and audit automation technologies. No differences were found for the construct of accounting firm office automation technologies. This study provides a foundation and methodology by which future researchers can measure whether, as an “emerging technology” matures, greater convergence will occur over time across cultures in factor analysis, as in the case of the more mature construct, general office automations.

1. INTRODUCTION The International Federation of Accountants Education Committee has stated, “Information technology [IT] is pervasive in business, requiring the professional accountant to be competent in this technology” (IFAC 2006b, p. 5). Further, technology will continue to have a “dramatic impact on virtually every phase of the audit process” Bierstaker, et al (2001). Chang and Hwang (2003) comment on whether professional accountants are properly trained in IT, “given the dynamic nature of IT and its widespread adoption in business organizations, many in the accounting profession have voiced concerns over whether college education and professional training effectively and efficiently prepare accountants to meet these challenges.” The accounting profession performs many roles where IT is used. Certainly in light of large scale business failures such as Enron, MCI-WorldCom, Parmalat, Comroad, etc., one of the most critical roles is auditing. Janvrin, et al. (2008) examine the use of audit IT and the perceived importance of IT use. IT knowledge requirements for independent auditors are higher than for the average accountant since they typically serve a wide variety of clients with diverse information systems. The International Education Standard 8 (IFAC, 2006a) states that the knowledge content within the education and development program for audit professionals should include IT. The knowledge content of the IT subject area should include the following: • IT systems for financial accounting and reporting, including relevant current issues and developments, and • Frameworks for evaluating controls and assessing risks in accounting and reporting systems as appropriate for the audit of historical financial information. Lymer and Debreceny (2003) discuss issues that have developed as auditors have moved towards trying to provide assurance on corporate reporting via the Internet. They find gaps between technology utilization and professional responses, leading to the conclusion that, “…the actual pronouncements made thus far by the various bodies around the world fall considerably short as a response to the challenges that arise from current and future Internet reporting technologies.” This suggests that the international audit profession is having a problem adjusting to the rapidly changing technology landscape. “From computer-generated audit programs to audit software capable of testing the entire population of the client’s data, technology is essential for accountants to understand the client’s business processes and contend with the paperless audit environment” (Bierstaker, et al, 2001). The profession can benefit by identifying key technologies and conducting selfassessment to learn how knowledgeable its members are about these technologies. Toward that end, we identify 36 key technologies and survey the self-perceived IT knowledge level (IT self-efficacy) of U.S. and German auditors.

Related Norwegian Prior Study McKee (2000) conducted an information technology knowledge survey of the Norwegian practicing auditing profession during late 1998 and early 1999. The survey encompassed 25 information technologies. Major findings from this survey were:
• A large number of professionals indicated either no knowledge or relatively low levels of knowledge for the 25 information technologies surveyed.
• Female respondents rated their individual and overall knowledge lower than male respondents.
• 71% of the respondents believed they had received less than adequate coverage of information technologies in their college or university careers.
• 17.3% of the respondents self-rated their overall knowledge of information technology as either low or very low.
• “Big 5” audit firm respondents self-rated their overall knowledge of information technology higher than did other respondents [statistically significant at .05 level] in 20 of the 25 technologies surveyed.

Research Limitations
 All survey research has a number of limitations which may affect the usefulness and validity of the results. Some were acknowledged previously while others are discussed below. A general limitation of this type of research is that since the questionnaire asked the respondents to rank their own knowledge there is no way to determine if their rankings are an accurate depiction of actual knowledge. Kennedy and Peecher (1997) find that auditors are overconfident in their technical knowledge when performing self-assessments. Their study examined their self-perceived vs. actual knowledge of GAAP and GAAS, so their results may not be generalizable to the IT domain. However, if auditors are similarly overconfident in their assessment of their IT knowledge, then the need for increased professional development in this area is even greater. Another limitation, as previously acknowledged, is that many of the technologies overlap conceptually. We were not able to find a technology taxonomy which would enable us to select conceptually distinct information technologies with which audit practitioners would be readily familiar. We attempted to overcome this limitation by conducting factor analysis and systematically identifying constructs and by examining aggregated items by construct. Some IT knowledge may be more related to efficiency issues rather than effectiveness. Accordingly, lack of knowledge in some IT areas may not be as significant in terms of society relying on auditor work. One further limitation is that the 36 information technologies examined in this research were subjectively selected by the researchers from English literature. Equally significant technologies may not have been identified or selected. Additional technologies were not sought from the German literature.

CONCLUSIONS
 As widely acknowledged in the literature, appropriate knowledge of information technology is critical for the auditing profession. This research measured IT knowledge for U.S. and German audit professionals via national surveys in each country. A principal finding is that a statistically significantly different knowledge level (IT self-efficacy) is found between the two countries for four of the five constructs identified in the factor analysis using both the raw data and culturally adjusted data: e-commerce technologies, networking and data transfer, general office automation, and audit automation. This raises the question of whether this difference was created by the educational system, firm training, or continuing professional education. Another important finding was that more than 25% of the auditing profession in both countries self-rated their IT knowledge as “Less Than Adequate.” This does not sound like the surveyed professionals believe they are meeting the “advanced level” of IT knowledge suggested by IFAC, and this suggests that the auditing professions in both countries need to address this issue if the profession is to appropriately meet the needs of society. Calibrating self-assessments of IT knowledge is important, and measuring auditors’ knowledge levels of relevant IT knowledge is critical to the audit profession. Continuous improvement is unlikely if auditors are overconfident about their IT skill levels. Further, absent feedback about their true ‘IT” skill levels, auditors will be unlikely to question, and certainly not improve their knowledge (Arkes et al. 1987). Further, the resources used to enhance auditors’ IT skills “needs to be considered an ‘investment’ rather than a ‘cost’” (Nance and Straub, 1996).