Management Science

Impact Of Application of ICT In Auditing An Organization

Bachelors Degree

The major aspects of auditing centre on planning, control and decision-making. While these functions require quantitative processing usually carried out employing ICT, they also require qualitative factors. The objective of an audit and the need to assess risks and understand control are not affected by the extent and nature of ICT used by an organisation.


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The practice of formalized auditing as a professional field of accountancy can be traced back to the closing years of the 19th century when professional accounting bodies were founded in several countries and governments began to make audit compulsory as a way of protecting the interests of shareholders. In the 19th and early 20’th centuries, the central theme of auditing was about providing an independent third party opinion on the financial statements of an entity and confirming that the balance sheet was not fraudulently stated while in the latter part of the 20th century and early 21 st century, the (external) audit report has come to be seen as an expert opinion on the quality and compliance of financial information with required accounting standards and company legislation (Cosserat, 2004).

An audit is an examination of the evidence upon which the financial statements of an establishment are based as an independent task, to generate an opinion as to whether the financial statements represent a ‘true and fair view’ and have been prepared in accordance with the applicable reporting framework

While the foregoing relates to what is generally referred to as external audit, the other form of audit (based on primary beneficiaries), internal audit, is “an appraisal or monitoring activity established by management and directors, for the review of the accounting and internal control systems as a service to the entity. It functions by, amongst other things, examining, evaluating and reporting to management and the directors on the adequacy and effectiveness of components of the accounting and internal control systems” (Cosserat, 2004).

An internal audit is usually conducted according to the terms set by management in the internal audit charter. It is conducted either as a continuous activity or a one-off assignment. According to Porter et al. (2003), “they may, for example, be as broad as investigating the appropriateness of, and level of compliance with, the organisation’s systems of internal controls, or as narrow as examining the entity’s policies and procedures for ensuring compliance with health and safety regulations”.

Internal audit Is relatively new compared to external audit. Its role has been changing over the years due to the increased call for a better accountability and effectiveness by the management of business entities with a view to guaranteeing efficient corporate governance practices while promoting operational effectiveness within the business.

Although internal audit emerged as a service to the management, its importance, particularly to large organisations in ensuring good corporate governance, is very significant in modern-day business. This is because internal audit has a key function in guaranteeing effective internal control within an organisation thereby enabling directors to confirm that their organisations comply with the corporate governance required to ensure effective internal controls. In addition, the latest corporate governance report on audit committees (Smith Report, 2003) stipulates that Internal auditors should be responsible to the audit committee rather than the management to ensure independence and effectiveness.

The above descriptions of external and internal audits notwithstanding, both forms of audit are underpinned by a systematic examination and evaluation of evidence to arrive at certain conclusions that are usually presented in the form of reports. For the purpose of this study, therefore, auditing is taken as a composite profession for assurance encompassing both external and internal audits.

Alles et al. (2002) observed that the three main components in the process of providing assurance are: capture by the auditee of the information related to the transactions, processes and environment that are the subjects of assurance; monitoring and analysis by an independent auditor of the transactions, processes and records made by the auditee to ensure the reliability of the information; and communication by the auditor on the outcome of the assurance engagement.

Auditing is an information-intensive activity involving gathering, organising, processing, evaluating and presenting data while the ultimate essence of the auditing process is to generate reliable information (in the audit report) as to the truth and fairness of the financial statements (and their compliance with the required standards and legislation) to the shareholders and other stakeholders. The role currently being played by Information and Communications Technology (ICT) in ensuring the accuracy, timeliness and integrity of such reports cannot be stressed too strongly (Banker et al., 2002) as it is this audit report that in turn strengthens the credibility attached to the financial information being presented to a wide range of users.

Manson et al. (1998) identified two schools of thought on audit methodologies: the organic and the mechanistic. The former sees the audit as mainly a matter of the auditor’s judgement based on an understanding of the particular client while the latter sees the audit mainly as a set of procedures that can be applied to any audit engagement. The latter, Manson et al. believed, is an approach more amenable to computerisation.

Furthermore, the traditional view of the accounting profession (which perceives accounting as all about routine and number-crunching exercises) is being challenged by the diffusion of organisation-wide integrated information systems. This Is evident in the transferability of accounting knowledge and skills to non- accountants (functional managers) through ICT. Today, most of these routine and number-crunching tasks are taken care of by ICT while the modem accountant is being assigned new roles which include strategic decision making, business management and Enterprise Resource Planning (ERP) (Caglio, 2003).

The major aspects of auditing centre on planning, control and decision-making. While these functions require quantitative processing usually carried out employing ICT, they also require qualitative factors. The objective of an audit and the need to assess risks and understand control are not affected by the extent and nature of ICT used by an organisation. The same basic auditing standards and financial reporting objectives apply in all situations. However, the auditor must be aware of the nature of an organisation’s ICT infrastructure because the design and operation of the various systems will have a direct impact on audit risk, the conduct of the audit, the evaluation of processes and the nature of audit evidence to be gathered (Knechel, 2001).

Dangote group of companies is a privately owned company that undertakes manufacturing function in Nigeria. The company has some challenges such as inconsistency in the use of information and communication technology (ICT) in an audition of financial statements and lack of finance. It was on basis of these problems that prompted the researcher to embark on this study in order to suggest a solution to auditing of Dangote Plc.

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