Fee Assessment: The Audit Price Tag of Innovative IT Solutions

Abstract

ABSTRACTNow in its sixth decade, the field of business information systems continues to advance at an astonishing pace. As information technology (IT) based solutions continue to evolve, they get ever more sophisticated and integral to the operational processes of a company. Investment in information systems (IS) has benefitted companies by facilitating cost savings through implementation of operational efficiencies and adding value through differentiation of offerings and advanced data analysis. IT capabilities have also been credited with the creation of competitive advantage. While business success thrives on innovation and out-of-the-box thinking, financial audit relies on systematic, controlled and measurable processes and reporting. In this paper we explore the intersection of innovative information systems and the financial audit process. As information systems innovate the business strategy, we seek to understand the impact on the audit process. In this study, we capture auditors' perceptions through an analysis of the relationship between innovative IT solutions and audit fees. Findings indicate that sophisticated information systems contribute significantly to increases in audit fees. Seemingly, innovation in IS has induced auditors to expend more effort in minimizing the risk of financial misstatement rather than increasing their confidence in the controls that the systems provide.