Introducing Case C

Audit Firm C is a global network of professional services firms providing Audit, Tax and Advisory services. The Firm has 137,000 staff members who are working in 144 countries all over the world.

5.6.1. Overview of the Egyptian Member

Audit Firm C was established in Egypt in 1940s. It is considered to be one of the leading firms in Egypt as well as the Middle East. The firm currently has about 1000 staff serving clients from two offices: one in Cairo, the capital of Egypt; and the second in Alexandria.

Audit Firm C is a member of one of the Big Four international audit firms. The Egyptian member indicates that this membership provides it the ability to combine both the global experience with the detailed knowledge of local Egyptian laws, regulations, markets and competition.

5.6.2. Professional Services

The firm indicates that its staff can render different services including:

Tax services: the complexity of fiscal legislation and the great emphasis placed upon tax planning have increased the need for tax advisory services. The firm

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indicates that the staff provides the tax services in two phases. The first is tax planning and advice to help clients in evaluating the most effective tax accounting methods and periods, evaluate the effects of the tax law structure, increase the tax benefits or savings, and provide consultation on tax aspects of proposed transaction.

The second phase is tax compliance. According to Egyptian Tax Law, companies are required to present a yearly tax return to the Tax Authorities that shows the taxable profit computed in accordance with the provisions of the law and calculating the tax liability. Towards this, the tax services staff indicates that they can assist in the preparation of the annual tax return in a way that helps clients to minimise their tax liabilities within the limits permissible by the law. Further, the firm can certify to the Tax Authorities that the tax return has been prepared in accordance with the provisions of the Tax Law. If any disagreements arise with the Tax Authorities, the firm can act on behalf of its clients in negotiating tax liabilities. Tax service is an important source of income for the audit firm.

Social insurance services: the firm indicates that its staff can render this service depending on a thorough understanding of the Egyptian Social Security Law and its applications combined with a good working relationship with the Social Insurance Authority in Egypt. This combination allows the firm to provide the social insurance service effectively.

Company formation and advice on Investment Laws: the Investment and Company Formation team assists, or acts on behalf of: the investors; businessmen;

and foreign companies in all matters related to establishing new businesses in Egypt under the companies law or under the investment law.

Financial advisory services: the financial systems department claims that its staff can perform different activities including the design of financial systems and

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financial regulation as well as the review of established financial systems and internal controls. Moreover, they can help clients to develop and implement policies, procedures, and internal audit manuals to help mangers understand and manage risk.

The department indicates that they conduct training courses on financial accounting, cost accounting, and reporting techniques. In addition, it offers long term financial management assistance.

Corporate finance services: the corporate finance team states that they have an extensive background in banking, economic consulting, law, tax planning and accounting. This team can provide advisory services regarding business valuations, privatisation, financial restructuring, corporate transactions, issuance of bonds and research.

Transaction services: most of the major transactions in the Egyptian market are awarded to this firm. Transaction services include transaction evaluation, vendor initiated, pre-deal evaluation, bid services, vendor assistance, transaction structuring, stock exchange reporting, and contract assistance.

Market research and feasibility studies: the firm states that the aims of this service are to conduct customer satisfaction surveys to quantify customer satisfaction with the clients‘ products or services, perform market penetration studies, perform packaging and brand name testing, perform market positioning studies and provide product testing prior to market launch.

Human resources development: the firm indicates that this service aims to help employees focus on job requirements and develop the behaviour to perform their jobs successfully and to redefine the organisational structure and establish core competencies and functions of each business unit. Moreover, it aims to detail management philosophy and establish policies and practices that reflect this

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philosophy and to assist with the management change process. It conducts salary and benefits surveys also.

The two services that are rendered by the Firm C that are related to this research are the auditing and accounting services and the enabling technologies services.

Auditing and Accounting Services

Auditing is the fundamental activity of the firm. Most of the firm‘s clients are joint stock companies, or branches of foreign companies whose audit requirements are prescribed by the Companies Act. Also, the client base of the audit firm includes multinationals, international and local government agencies, non-governmental organisations, and financial institutions.

The firm indicates that its audit approach is based on a consistent methodology developed to comply with the Egyptian Standards on Auditing. It is built on the basis of core principles relating to professional integrity, independence and ethical behaviour with which all partners and staff must comply. The firm claims that this service is enhanced by technologies and tools that assist teams to access knowledge, including the firm‘s computer-assisted audit techniques (CAATs) and Accounting Research Online, all designed to help teams focus on the issues that impact on audit judgments and improve the effectiveness and efficiency of the audit.

Moreover, the firm states that its approach is based on gaining a thorough understanding of the clients‘ business and financial issues in order to perform an effective audit. To achieve this understanding, the firm form specialised audit groups for different industries. Such specialised groups indicate that qualified partners and auditors are involved in conducting the audit. The audit service provided by the firm is considered a dynamic one as it is designed to meet any new requirements and regulations.

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Audit and accounting services provided by the firm include: statutory and non-statutory audits, agreed upon procedures, limited review, compilation services, internal audit engagements, internal control systems reviews and bookkeeping services.

Enabling Technologies Services

The firm states that these services are rendered by eighteen consultants in four inter-dependent divisions who have access to use each other‘s resources and experience.

The main services rendered by these divisions are:

ERP implementation: the firm claims that a team of nine functional and four technical advisors provides services around ERP solutions in different industries.

These services include the selection of the system, its installation and configuration, and provide the training needed to use the system. In addition, the team provides services related to data conversion and the documentation of the system.

IT Strategy and Business Intelligence: this service includes different activities such as software assessment, hardware assessment, setting IT strategy, software selection, and the activities related to security procedures.

Business Processes service: include management change, mapping the client‘s current business process, setting the manual procedures around the ERP‘s, setting the coding structure for master database tables for ERPs and setting the audit/ control during the ERP system implementation.

Technical division: includes database support, optimisation and administration (Oracle/Sybase) for ERPs, customisation and modification of ERPs, data warehousing and data mining. It also includes the LAN/WAN design and hardware procurement.

172 5.6.3. Clients and Expertise

The firm indicates that it has clients who perform in different industries. For that reason the firm is structured into specialised industry groups. The industry focus has enabled it to develop in-depth knowledge of clients‘ businesses and to provide them with an informed perspective on the issues they face. In other words, such groups indicate that qualified staff is involved in conducting the audit. The specialised industry groups are classified into banking and finance, energy and natural resources, building and construction, industrial products, insurance, consumer products, and information, communication and entertainment.

The detailed overview of the three firms A, B, & C ensure their suitability to be chosen as the main cases for this research. This overview shows that these firms deal with different industries and, as a result, they deal with different electronic systems.

In other words, the staff in these audit firms is expected to have the necessary experience to provide the researcher with suitable information for this research.

Further, the three firms have computer divisions that render different services to different clients which indicate that the information system auditors working in these firms will be a reliable source of information.

5.7. Summary

This chapter provided a detailed description of the setting where the fieldwork took place. It started by providing an overview of the audit profession in Egypt by presenting the laws that shape the legal framework of auditing in Egypt, and introducing the professional bodies that play an effective role in shaping the profession. The audit education and the auditing standards in Egypt were also discussed.

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The rationales behind choosing audit firms A, B, & C as the main cases were discussed. Then the chapter presented detailed description of the three audit firms A, B, & C. This description is considered as the first step of achieving the first objective of the study, opening the black box of the audit firms in Egypt. Information about the audit firms, the services they provide and the type of their clients is essential information that can help in opening their black box to understand how they consider auditing in advanced electronic environments. Achieving this objective will be elaborated in Chapter 7.

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6. Chapter Six: Data Collection and Analysis Approach

The aim of this chapter is to present the actual operation of data collection and data analysis carried out in this study. This chapter starts by providing an explanation of the data collection process through its three stages: the preliminary interviews, the pilot case studies, and the main case studies. It then provides a discussion of the design of the interview questions followed by presentation of the main features of the respondents who participated in the three stages of the study. The steps undertaken for preparing the interviews for analysis are discussed. NVivo software was used to help in the analysis of the data. Using NVivo for qualitative data analysis and its use in this research is discussed. The chapter ends by presenting how Miles &

Huberman‘s approach, with the use of NVivo, is adopted for the analysis of this study.