Financial Auditors’ Knowledge, Experience and Training

Another impact of the spread of using advanced electronic systems is the need for financial auditors to increase their knowledge and experience in dealing with such systems in order to assure the integrity and reliability of the accounting system (Abu-Musa, 2004; Bierstaker et al., 2001; Brazel, 2004; Brazel & Agoglia, 2007; Helms &

Mancino, 1999; Kinney, 2001). The Public Oversight Board (POB) on Audit Effectiveness, in its executive summary report in August 2000, in chapter 2, Improving the Conduct of Audits, confirms that there is an increased need for auditors

„to have a higher level of technology skills and for more effective participation in audits by information technology specialists‟ (POB, 2000:29). This means that although auditors need to improve their technology skills, they still need to determine whether any IT audit specialists (or information system auditors) are needed while performing their external audit. If specialised skills are needed, the auditor would seek the assistance of an expert possessing such skills, who may be either one of the auditor‘s staff or an outside professional.

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To work with IT specialists, auditors need reasonable IT capabilities for conducting their detailed audit and in order to be able to direct, supervise, and review the work of the IT audit specialist and to be able to obtain reasonable assurance that the work performed by IT audit specialists is adequate (Helms and Mancino, 1998). This IT understanding becomes more crucial as auditors are faced with accounting transactions entirely in electronic form, without supporting paper documentation (Pathak, 2003a).

Nearon (2005) indicated that auditors know they have to be more skilled in dealing with electronic systems, as they cannot escape from the effect of the dramatic continuous changes in information technology on their work, however, with few exceptions, this knowledge has not been translated into significant changes in audit procedures (Nearon, 2005: 33). Even though almost all financial accounting records are in digital form, in general, auditors are not trained to collect and evaluate it. Nor, in most cases, do they learn how to do this in practice. This is contrary to the requirements of all the audit standards that require auditors to have adequate technical training and knowledge. Bell et al., (1999) explained this point by indicating that auditors have historically relied on special experts to assess the reliability of computerised accounting information systems and as a result of this dependency, many auditors feel they lack the expertise to evaluate and test automated systems adequately. Nearon (2005) explained it in another way; he indicated that auditors do not really feel the need to enhance their technical skills as many auditors do not realise, despite SAS 94, that hardcopy printouts and listings generated by computers and used for audit tests are only a physical view of digital evidence, which could have been easily altered to deceive them. Therefore, with regard to competence, auditors must have the skills to evaluate the reliability of digital

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evidence used to support their audits. The first step in gaining technical competence is appreciating one‘s limitations and realising that there are some things one does not know. Once an auditor accepts his/her limitations, he/she is obliged to either acquire the necessary skills or hire someone who already has the requisite knowledge and skills, until he/she gains the needed skills (Nearon, 2005).

Technical competence can be gained through determined formal university education for entry into profession, practical training and experience in auditing and continuing professional education during the auditor‘s professional career (Boynton et al., 2001).

As for education, most of the undergraduate accounting programs do not offer curriculums that allow their graduates to deal with advanced electronic systems (Allinson, 2004; Nearon, 20000). Although most of the top business schools offer electronic-business courses, few accounting schools do. Moreover, IT auditing has not been considered a high priority or even part of the IT formal education process (Allinson, 2004). Brazel (2008: 41) emphasized this point by stating that there is:

“…an increasing need to improve the system-related educational experiences of accounting students who will be the IT and financial statement auditors of the future.

Undergraduate and master‟s degree programs in accounting might want to partner with management information system departments, or develop faculty strengths in the field of AIS, in order to incorporate an IT concentration into their programs”

If accounting schools placed greater emphasis on technical competence, clients and regulators would feel more confident that auditors have the requisite skills to deal with advanced electronic systems (Nearon, 2000).

Regarding the training programs, POB (2000) recommended that audit firms have to develop training programs to make auditors more knowledgeable about information technology, and information technology specialists more knowledgeable about auditing by stating that:

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„Information technology specialists should be integrated more effectively and consistently into the audit process. There should be joint training of auditors and specialists, starting at the partner and the manager levels. Firms without such specialized capabilities should develop appropriate cooperative arrangements to ensure that information technology risks and controls are fully addressed in the audit‟ (POB, 2000: 30).

The same idea was suggested by Helms (1999) as he indicated that there should be cross training programs between the IT specialists and external auditors.

However, breadth and depth of training to audit electronic systems should be appropriate to the situation (Brazel, 2008; Pathak, 2003c). It is important to identify whether information system auditors should be in-depth trained in financial auditing techniques, or whether they should be trained as systems professionals with limited knowledge of auditing (Pathak, 2003c). The same applies to the financial auditor; it is important to identify whether he/she needs an in-depth training in information systems or only the knowledge necessary to help him to deal with the IT specialist.

However, it could be argued that financial auditors with in-depth IT training and high experience in dealing with electronic systems could be able to compensate the low level competence of an IT audit specialist, if such is the case, while auditors with limited training and experience may not have the knowledge to do so (Brazel, 2004).

Moreover, auditors with IT knowledge will have a distinct advantage in the future market for financial statement audits (Nearon, 2000) but there will still be a need for IT audit specialists, or information system auditors.