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An Examination of Contextual Factors and Individual Characteristics Affecting Technology Implementation Decisions in Auditing Mary B. Curtis, Univ of N. Texas Elizabeth Payne, Univ of Louisville. Our motivating question: Why isn’t more software (CAATs) used for audit testing?.
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An Examination ofContextual Factors andIndividual CharacteristicsAffectingTechnology Implementation Decisionsin AuditingMary B. Curtis, Univ of N. TexasElizabeth Payne, Univ of Louisville
Our motivating question:Why isn’t more software (CAATs) used for audit testing?
INTRODUCTION AND MOTIVATION • Audit technology has the potential to increase both effectiveness and efficiency • But, users sometimes resist implementation of new technologies, particularly auditors, and most particularly when software use is optional • There is currently little research in auditing relating to IT implementation or the use of CAATs • Such research is important • Factors not relevant to, or present in, other contexts may influence auditors’ implementation decisions • We examine • Contextual factors • Budget/performance evaluation period • Influence from superiors • Individual differences • Perceived budget pressure • Risk preference
THEORY AND HYPOTHESES We employ: • TAM - technology acceptance literature • Unified Theory of Acceptance and Use of Technology (UTAUT) • Performance Expectancy • Social Influence • Budgeting theory • Bias created by use of single budget for multiple purposes within organizations
Context - PERFORMANCE EXPECTANCY • TAM - Positive relationship between performance expectancy and intention to use technology • In audit, job performance includes budget attainment • Prior research in budgeting indicates that • Budgets typically serve multiple purposes • Multi-use budgets often lead to dysfunctional behavior • Possible solution? Spreading cost of CAATs over multiple years should result in cost of CAATs having less impact on annual budget, and therefore auditor’s evaluation • H1: Auditors with shorter-term (longer-term) budget and evaluation periods will be less (more) likely to implement audit technology
Context - SOCIAL INFLUENCE • Implementation – do important others believe he or she should use technology? • Individual decisions are often influenced by the known views of superiors • We move away from direct influence and examine the impact of remote superiors • Though not likely involved in performance reviews, we expect the remote superior’s preference to affect the implementation decision due to the up-or-out nature of accounting firms • H2: Auditors are more likely to implement technology when a remote superior favors implementation than when they have no knowledge of the superior’s preference.
Individual - RISK PREFERENCE • Technology implementation is risky to the budget and therefore to one’s career • Auditors who are risk-averse may be less inclined to partake of any activity which may increase the uncertainty in their environment, regardless of other external factors • H3a: Auditor risk preference is positively associated with the decision to implement technology • On the other hand, risk preference may moderate the influence of contextual factors on the implementation decision • H3b: Auditor risk preference is positively associated with the decision to implement technology, only in the absence of contextual factors.
Individual - BUDGET PRESSURE • Budgeting literature asserts there is a positive relationship between budget pressure and dysfunctional behavior • Auditors perceive budget pressure differently • Again, this individual difference may be strong enough to override contextual factors, or it may moderate these factors • H4a: Auditors who perceive greater (lesser) levels of pressure are less (more) likely to implement technology. • H4b: Auditor who perceive greater (lesser) levels of budget pressure are less (more) likely to implement technology, only in the absence of contextual factors.
RESEARCH QUESTION • Firms have multi-year commitments from clients, but longer-term budgets are not used • RQ: Do in-charge auditors believe their firms would be willing to use longer-term budgets?
RESEARCH METHOD • In-charge auditors from one Big 4 accounting firm • 139 usable responses • Case study followed by a questionnaire • 2 X 2 between-participants design manipulated • Budget period (1-year or 3-year), and • Influence from remote superior (managing partner encourages use vs. no information) • Measured • Intention to implement technology (dependent variable) • Risk preference • Budget pressure perception
RESULTS – Contextual Factors • H1: Auditors with shorter-term (longer-term) budget and evaluation periods will be less (more) likely to implement audit technology. • Individually correlated • Only marginally significant main effect in the presence of other factors • H2: Auditors are more likely to implement technology when a remote superior favors implementation than when they have no knowledge of the superior’s preference • Significant main effect
RESULTS – Individual Factors • H3a: Auditor risk preference is positively associated with the decision to implement technology • Main effect significant • H4a: Auditors who perceive greater (lesser) levels of pressure are less (more) likely to implement technology. • Main effect significant, but in the opposite direction hypothesized!
RESULTS – Individual Factors • H3b: Auditor risk preference is positively associated with the decision to implement technology, only in the absence of contextual factors. • Partner support – increases likelihood for risk averse • Budget period – doesn’t change behavior driven by risk preference • H4b: Auditor who perceive greater (lesser) levels of budget pressure are less (more) likely to implement technology, only in the absence of contextual factors. • Partner support – increases likelihood for those who perceive budget pressure • Budget period – longer budgetary period increases likelihood when feel pressured
RESULTS – Three way interactions • Partner Influence • Present • Perceptions of budget pressure do not affect intention to use technology for either risk-seekers or risk-averse • Absent • Perceptions of budget pressure • have no affect on intention to use technology for risk-seekers • encourage risk-averse individuals to use the technology • Budget Period • Longer • Perceptions of budget pressure have no affect for risk-seekers or risk-averse • Shorter • Perceptions of budget pressure • have no affect on risk-seekers • encourage risk averse individuals to use the technology
RESULTS – Research Question • RQ: Do in-charge auditors believe their firms would be willing to use longer-term budgets? • On a scale of1 (not at all likely) to 7 (definitely) • Did auditors think their firm would be willing to use long-term budgeting for • project management and cost control – mean = 3.6 • audit team performance evaluation – mean = 3.1 • suggest a somewhat pessimistic response since the means are less than the scale mid-point of 4
CONCLUSION • The use of longer-term budgets in auditing can help to overcome myopic decision making in some situations • Partners have extraordinary influence on individuals at all levels of their firms • Contextual factors appear to be strong enough to overcome individual characteristics • Further research is necessary to identify how fixed and flexible budgets differ • Firm resources and rewards must be aligned with the firm’s long-term interests in order to influence the use of optional software tools