Audit Efficiency Research Articles

Digital inventory audits: an alternative approach to physical observation in audit evidence gathering

PurposeThis study examines whether digital streaming and observation technologies can serve as an alternative approach for collecting inventory audit evidence, the challenges faced in their adoption and the factors contributing to their non-adoption.Design/methodology/approachThis study adopts a two-stage, mixed-method approach, beginning with pilot study interviews that informed the comprehensive survey with qualitative and quantitative data. Quantitative data were analyzed using descriptive statistics, t-tests and Pearson’s correlation coefficient, while qualitative data were analyzed using qualitative content analysis.FindingsOur findings revealed a positive perspective concerning the effectiveness and reliability of these technologies for inventory audits and the efficiency of internal controls within them, despite challenges such as obtaining a holistic view of the warehouse, observing obsolescence, ensuring inventory completeness and general reliability concerns. Additionally, preferences for physical inventory audits and skepticism about these technologies’ potential to enhance audit quality were identified as factors contributing to their non-adoption.Research limitations/implicationsThese findings have important implications for cost-conscious firms because they reveal that carefully adopting intermediate technologies can enhance the audit process. Our findings are relevant to audit regulators and firms interested in determining whether such technologies enhance audit efficiency and quality. This study highlights the need for updated auditing standards and directives and technologies that meet auditing requirements.Originality/valueThis study contributes to the literature by uncovering whether less advanced technologies can be used as an alternative approach to collect audit evidence. Consequently, the finding adds to the growing body of literature underscoring the potential of technologies, even less sophisticated ones, to enhance the efficiency and effectiveness of audits, despite their challenges. Additionally, it underscores the need for clear regulatory standards, suggests that auditors embrace emerging technologies and acquire relevant skills and offers insights for technology developers on audit firms’ concerns regarding digital technologies.

Application of AI technology in audit risk assessment and control: Taking internal audit of higher education institutions as an example

With the rapid development of artificial intelligence (AI) technology, its application in the field of auditing has gained increasing attention. This paper explores the application of AI technology in audit risk assessment and control (ARAC), aiming to improve audit efficiency and effectiveness. First, the paper introduces the basic concepts of AI technology and its application background in the auditing field. Then, it provides a detailed analysis of the specific applications of AI technology in audit risk assessment and control, including data analysis, risk prediction, automated auditing, continuous monitoring, intelligent decision support, and compliance checks. Finally, the paper discusses the challenges and opportunities of AI technology in audit risk assessment and control, as well as future research directions.

The Impact of Audit Firm Reputation on The Audit Efficiency, The COVID-19 pandemic Does it matter: Evidence from Egypt

The Impact of Audit Firm Reputation on The Audit Efficiency, The COVID-19 pandemic Does it matter: Evidence from Egypt

E-invoicing, tax audits and VAT compliance

Difficult to find another policy shift that has promised as much for tax compliance in developing countries as digitalization. Yet the evidence on its impact is scant. Using the universe of tax filings in Rwanda over the period 2012–2019, this paper investigates the extent to which digitalization (in the form of e-invoicing) has impacted on VAT compliance and in particular the effectiveness of tax audits. The evidence suggests that on the aggregate e-invoicing adoption has increased firms’ net VAT payments and has improved the efficiency of VAT audits. It is also shown that e-invoicing has a sizeable impact on VAT liabilities reported by audited firms, with this impact being attributed to tax audits being more efficient rather than to VAT registered firms becoming more compliant following their adoption of e-invoicing.

Leveraging RPA for enhancing audit efficiency: Insights and challenges in the audit landscape

The adoption of Robotic Process Automation (RPA) in auditing has emerged as a transformative trend, offering significant potential to enhance efficiency, accuracy, and overall audit effectiveness. This study explores the integration of RPA in auditing processes, identifying key areas where automation can streamline workflows and reduce human errors. Drawing from a qualitative research approach, semi-structured interviews were conducted with 15 professionals across diverse audit sectors, uncovering insights into the benefits, challenges, and strategic implications of RPA adoption. The findings reveal that RPA reduces routine task completion times by up to 50%, improves data accuracy by 40%, and delivers a 120% return on investment within two years. However, challenges such as resistance to change, skill gaps, and compatibility with legacy systems persist. This research highlights the necessity of effective change management, continuous skill development, and ethical governance to maximize RPA's potential. By addressing these challenges, this study provides actionable recommendations for leveraging RPA to revolutionize audit practices, enabling organizations to adapt to an evolving technological landscape.

Leveraging technology in internal audit processes for streamlined management and risk oversight

The integration of advanced technologies into internal audit processes has revolutionized organizational management and risk oversight, enabling streamlined, data-driven decision-making. As businesses face increasingly complex regulatory environments and operational risks, traditional audit methods often struggle to keep pace. This paper explores the transformative role of emerging technologies, including data analytics, artificial intelligence (AI), robotic process automation (RPA), and blockchain, in enhancing internal audit efficiency, accuracy, and transparency. By automating repetitive tasks, RPA reduces audit cycle times and minimizes human errors, allowing auditors to focus on value-adding activities. AI and machine learning algorithms enable predictive risk analysis, anomaly detection, and real-time monitoring, strengthening an organization’s ability to identify and mitigate risks proactively. Additionally, data analytics tools facilitate comprehensive assessments of large datasets, uncovering patterns and insights that would otherwise go undetected in manual audits. The paper also examines the role of blockchain technology in fostering transparency and accountability through secure, tamper-proof audit trails. Despite the benefits, the adoption of these technologies presents challenges, including integration costs, skill gaps, and data privacy concerns. Addressing these challenges requires strategic investment, workforce upskilling, and collaboration between audit professionals and IT specialists. By leveraging technology, internal audit functions can evolve into proactive, agile frameworks that align with organizational goals, providing robust risk oversight and contributing to long-term sustainability.

A prediction model to detect non-compliant taxpayers using a supervised machine learning approach: evidence from Tunisia

ABSTRACT This study aims to develop a tax non-compliance prediction model in Tunisia using supervised machine learning algorithms. A data mining analysis was conducted following the Knowledge Discovery in Databases (KDD) process, utilizing a dataset of 20,930 labeled observations from 2013 to 2017, comprising 110 attributes. We employed supervised learning algorithms, including K-Nearest Neighbors, Decision Trees, Naïve Bayes, Gradient Boosting, and Random Forest, to identify the most accurate model. Notably, Random Forest outperformed the other algorithms, achieving a prediction accuracy of 83%. Furthermore, through a combined interpretation of feature importance derived from Random Forest, SHAP value analysis, and ANOVA, our findings provide tax auditors with insights into the most influential attributes for predicting tax non-compliance. This study holds significant practical implications by enhancing the efficiency of tax audits and supporting tax authorities in their efforts to combat tax non-compliance.

Implementation of the internal auditor policy of the North Sulawesi Regional Police in the South Minahasa Resort Police

This study aims to analyze and evaluate the implementation of internal auditor policies carried out by the Regional Supervisory Inspectorate (Itwasda) of the North Sulawesi Regional Police in the South Minahasa Resort Police. Internal auditors have an important role in ensuring accountability, transparency, and operational effectiveness in the police environment, especially related to budget management, compliance with procedures, and implementation of tasks according to applicable operational standards. This research uses a qualitative approach with descriptive method, which involves data collection through in-depth interviews, observation, and document analysis. The research findings show that the process of implementing the internal auditor policy at South Minahasa Police Station has been running, but there are still some obstacles such as the lack of human resources trained in auditing, less than optimal communication between auditors and audited parties, and limited technology used in conducting audits. Nevertheless, the support from the leadership of the Resort Police and Itwasda North Sulawesi is a significant supporting factor in ensuring that audit recommendations can be implemented. The conclusion of this study emphasizes the need to increase the capacity of internal auditors through continuous training, improvement of supporting technology, and optimization of communication and collaboration between auditors and audited parties. With these corrective measures, it is expected that the effectiveness and efficiency of internal audits within the South Minahasa Police can be further improved, thus helping to achieve better governance in the police institution.

The Use of Blockchain Technology in Improving the Reliability and Security of Accounting Information Systems: Impacts and Challenges

The use of blockchain technology in the context of Accounting Information Systems (SIA) has become an important topic in the academic and industry literature. By leveraging blockchain, the Triple Entry Accounting System application can improve information transparency and reliability while reducing fraud in business, improving audit efficiency, and improving data protection. This study aims to analyze the impacts and challenges associated with the implementation of blockchain technology in improving the reliability and security of accounting information systems. The research method used in this scientific paper is a type of qualitative method through the Systematic Literature Review (SLR) study. The results of this analysis show that the use of blockchain technology has a significant impact on the reliability and security of accounting information systems. Blockchain allows financial transactions to be recorded transparently, immutable, and trustworthy automatically through network consensus. However, there are several challenges that need to be addressed in implementing this technology, including scalability issues, high transaction fees, complex regulations, and a lack of understanding and awareness of blockchain technology among accounting practitioners. The reason for the choice of the title is that blockchain technology in Accounting Information Systems is not only relevant, interesting, and offers great opportunities, but also has the potential to make a significant contribution to the field of industry practice.

The Role of Artificial Intelligence in Enhancing Global Internal Audit Efficiency: An Analysis

The Role of Artificial Intelligence in Enhancing Global Internal Audit Efficiency: An Analysis

Internal and External Social Capital of Big 4 Audit Offices

SUMMARY This study investigates the impact of social capital within and outside Big 4 audit offices on audit quality. We find that higher levels of internal and external social capital correlate with improved audit quality, indicating that social capital functions as a bond and a bridge in enhancing auditor performance. Additional analysis suggests that audit-office social capital also helps enhance audit efficiency. Furthermore, we examine the interaction between internal and external social capital, revealing that increased external social capital in audit offices with strong internal social capital is associated with higher audit quality. Our research provides valuable insights for audit offices aiming to optimize their performance outcomes effectively. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M42.

INCREASING THE HUMAN RESOURCES POTENTIAL OF STATE AUDIT BODIES AS A BASIS FOR IMPROVING THE EFFICIENCY AUDIT MECHANISM

Recent economic and financial scandals worldwide, the growth of the shadow economy, the increase in funds concealed from the budget, the rise of corruption, and insufficient adherence to financial discipline create very serious problems. The development of an audit system that creates a transparent and comprehensive informational environment for the government and the public, and plays a key role in economic regulation, is aimed at addressing these serious issues and improving the economic and managerial environment. The purpose of the paper is to explore how increasing the human resources potential of state audit bodies serves as a basis for improving the efficiency audit mechanism. The improvement of the functioning of the state audit system and the enhancement of the knowledge and expertise of personnel and specialists working in this field are based on the critical need to assess and refine the existing system. At the current stage of development, improving the mechanisms of state audit and financial control, as well as monitoring the effective use of budget expenditures, has become a priority. In this context, the concept of state budget policy has undergone changes and is now focused on results-based management. To achieve these goals, new approaches to assessing economic efficiency are being developed, with the improvement of the efficiency audit mechanism being the main focus. The development of auditing institutions plays an important role in accelerating the country's socio-economic development. As a result of these institutions' activities, it becomes possible to identify new financial and economic resources necessary for economic growth. Increasing transparency in society and strengthening financial discipline in economic activities are also closely linked to the work of these institutions. The paper examines the issues of enhancing the knowledge and experience of personnel and specialists, who play a key role in the development of the audit institute.

The effect of high-quality information technology on audit quality

Information Technology (IT) is changing the working environment and working process of clients and auditors. High-quality IT can enhance data accuracy, completeness and security, and automate data collection procedures. These attributes are important to auditors as their work highly relies on the quality of data. Using data from 2005 to 2013, this study provides empirical evidence showing that high-quality IT significantly enhances audit quality and reduces audit efforts. This study contributes to the stream of literature on IT quality and audit efficiency and can help managers understand how IT investments improve their data quality and audit quality.

Study on Audit Risk Model Based on Data Mining Algorithm

With the widespread application of modern information technologies such as big data, enterprises have generated a large amount of data in their daily operations. The traditional audit methods have drawbacks such as high cost and high consumption, and can no longer meet the needs of audit work in the digital era. Therefore, it is urgent to adopt audit methods suitable for the digital era to improve audit quality and reduce enterprise Audit risk. For professional auditors in enterprises, it is very important to utilize emerging technologies such as data mining algorithms. The audited enterprise may tamper with its financial statements, and identifying high-quality audit data from massive amounts of data is a huge challenge. Compared to traditional audit methods, data mining algorithms can significantly improve the efficiency and accuracy of audit work. For example, the BP neural network, with its powerful nonlinear mapping ability, can capture complex relationships in data; Support vector machines classify data by finding the optimal hyperplane in high-dimensional space and have good generalization ability; random forest reduces overfitting and improves prediction accuracy by integrating multiple decision trees; Association rule algorithms can discover interesting relationships between data items, helping auditors identify potential fraudulent behavior or abnormal transactions. Therefore, the purpose of this study is to accurately evaluate and reduce the audit risk of enterprises, and to build an audit risk model using computer data mining algorithms. This provides necessary reference and guidance for auditors to conduct data analysis and mine valuable data during the audit process of enterprises, thereby improving audit efficiency.

The Influence of APIP Capabilities in Optimizing Financial Audit Efficiency: Optimal Accountability

Abstract This study aims to analyze the influence of the capabilities of the Government Internal Supervisory Apparatus (APIP) in optimizing the efficiency of financial audits and reducing audit findings to achieve optimal accountability. The study was conducted by collecting annual report documents from the Financial and Development Supervisory Agency (BPKP), the Audit Board of the Republic of Indonesia (BPK), and the Ministry of Home Affairs (Kemendagri). A quantitative approach was used in this study, with data analysis involving 3,252 observations from various government agencies in Indonesia. The data collected included APIP capabilities, financial audit efficiency, and the number of audit findings. The mediating variable used in this study is the follow-up on audit recommendations. The results show that APIP capabilities have a significant impact on the efficiency of financial audits. Increasing APIP capabilities has been proven to significantly enhance audit follow-ups and reduce the number of audit findings. Additionally, the variables of organizational age and geographic factors also significantly affect audit efficiency and the number of audit findings, indicating that these factors are important in achieving better financial accountability. Conversely, the size of the agency negatively affects audit follow-ups and positively affects the number of audit findings. These findings underscore the importance of enhancing APIP competencies and capabilities as a primary strategy in improving the efficiency and accountability of financial audits in the public sector. This study provides significant contributions to the development of internal supervisory policies and the improvement of financial audit quality in Indonesia, as well as encouraging efforts to enhance public sector accountability. Keyword: apip capabilities; financial audit efficiency; audit findings; accountability

Preventing Tax Base Erosion from Tax Treaty Abuse For SDGS in Vietnam

Objective: Tax treaties represent an important aspect of the international tax rules of many countries, especially in globalizing era. The taxing rights of the states is one of the biggest issues in cross border transactions because it decides the budget revenue deriving from tax. Tax base, tax base erosion and tax base erosion prevention are topics that have received a lot of attention recently in Vietnam in order to protect government’s revenue for sustainable development goals (SDGs). Method: By analyzing the current status of Vietnam's double taxation agreements (DTAs), the authors assessed the current situation and identifying risks of tax base erosion from abusing Vietnam's DTAs. The study focuses on analyzing the indicators to assess the content of DTAs such as the Source Index (SI), Permanent Establishment Index (PEI) and Withholding Tax Index (WHT) of Vietnam’s DTAs with the ones of groups of countries. Results: The authors found that there are loopholes in DTAs creating conditions for abuses of the terms of the agreements and causing tax base erosion in Vietnam. Comparing to the average level of developing countries, the DTA system of Vietnam is higher, however, the biggest limitation and the biggest risk from the system of DTAs are these agreements are agreements signed by Vietnam with the countries/territories that have the lowest scores and are in the group of countries/territories with the largest amount of investment capital in Vietnam. Contribution: The study makes some recommendations for Vietnam to prevent tax base erosion from tax treaty abuse by reviewing and considering negotiating to update the content of the bilateral tax agreements, promoting participation in multilateral tax agreement and improving efficiency of tax audit.

The contribution of analytical procedures in supporting corporate governance: A field study in Algeria

Abstract This study aimed to shed light on the contribution of analytical procedures (APs) to supporting corporate governance. This was achieved through a field study in which a questionnaire was created and disseminated to a random sample of external auditors in Algeria. The data collected underwent analysis using the SPSS. The study concluded that APs play a crucial role in bolstering corporate governance by analyzing the company’s continuity capability and identifying financial problems facing the companies. In addition, APs enhance the quality and efficiency of external auditing, especially considering auditing as one of the key mechanisms that support corporate governance.

Research on the Application of AI Technology in Auditing

With the rapid development of AI technology, the application in the field of auditing has become an important means to improve the efficiency and quality of auditing. AI technology has significantly improved the efficiency and quality of audit work by automating data analysis, risk assessment, and audit processes. However, as technology evolves, so do challenges such as data privacy, security, algorithmic transparency, and lack of talent. In order to address these issues, it is recommended to strengthen data protection, improve the accuracy and transparency of algorithms, formulate unified AI audit standards, and focus on cultivating audit talents with AI skills. In the future, the audit industry needs to actively manage and control risks while enjoying the convenience brought by AI, ensure the quality and credibility of audit work, and promote the development of audit services in a more efficient and intelligent direction.

Research on Optimization of Internal Audit Process under the Background of Big Data

In the era of big data, it is especially vital to optimize the internal audit process. Traditional methods are increasingly inadequate to handle the burgeoning volume of data and intricate environments. Consequently, leveraging big data technology to enhance audit processes has become essential. The role of internal audit should evolve from mere supervision to a service-oriented function, aiming to bolster governance, uncover issues, and enhance value. Nevertheless, challenges such as inadequate audit independence and feeble rectification mechanisms persist. The integration of big data technology with internal audit practices can markedly elevate the quality and efficiency of audits, and foster innovation in audit methodologies. To optimize the audit process, it is imperative to define clear objectives, propose practical and viable solutions, and further refine the quality and sophistication of audit work through techniques like data preprocessing and analysis.

Does the adoption of artificial intelligence by audit firms and their clients affect audit quality and efficiency? Evidence from China

PurposeThis study aims to examine whether the adoption of artificial intelligence (AI) by audit firms and their clients affects audit efficiency and audit quality.Design/methodology/approachThis study empirically examines the abovementioned research question based on data from China for the years 2011 to 2020. It uses audit report lag as a proxy for audit efficiency and the likelihood of annual report restatement as a proxy for audit quality. It adopts the propensity score matching and the two-stage OLS regression model to address the endogeneity issue led by firms’ innate complicated functions.FindingsThe findings show that when audit firms and their clients use AI separately, there's a positive link between AI use and audit report lag. However, when audit firms and clients use AI together, there's a negative link between AI use and audit report delays that enhance overall audit efficiency. Next, the authors observe a negative link between AI use and the likelihood of a restatement. Finally, the authors find that the association between AI adoption and audit quality is driven by increased audit effort lag. Results are consistent and robust to endogeneity tests and sensitivity analyses.Originality/valueFindings can complement the audit quality and corporate governance literature by clarifying that external audit must evolve through digitalization and the incorporation of newly developed digital tools, such as AI.