Article

Using Drones in Internal and External Audits: An Exploratory Framework

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Abstract

Recently the FAA relaxed restrictions on the use of drones or Unmanned Aircraft Systems (UASs) for commercial purposes. Markets for commercial drone use are in the technology trigger phase of the Gartner Group's Hyper Cycle with developments occurring rapidly in real estate, agriculture (farming), the film industry, insurance and other areas. Examination and inspection applications of drones have been proposed in heavy industry and cell tower inspection. Previous research suggests an incremental structure for implementing technological innovations such as continuous auditing (CA). In this paper these proposals are expanded to include the additional requirements to add drone technologies. This structure is extended here by: 1) defining the use of drones in audit environments, with emphasis on the continuous versus occasional use of drone technologies; 2) extending the technical adoption architecture to include the use of drones, and 3) considering the types of drone usages amenable to both internal and external audits. A specific architecture is proposed here to prototype inventory counts in large warehouses or open-air inventories and which satisfies the suggested requirements. Additionally, this proposal adds value to the current research by extending the discussion of technology adoption in the Alles et al (2008) paper to include the use of drones in many different audit environments, by enumerating the usage types of drones in audit settings and by considering the prototype of such a system.

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... A growing body of research touts various emerging technologies such as data analytics, artificial intelligence (AI), robotic process automation (RPA), blockchains, drones, and other streaming technologies (Appelbaum and Nehmer 2017;Appelbaum, Budnik, and Vasarhelyi 2020;Cao et al. 2015;Christ et al. 2021;Han, Shiwakoti, Jarvis, Mordi, and Botchie 2023;Kokina and Davenport 2017;Liu, Wu, and Xu 2019;Lombardi, de Villiers, Moscariello, and Pizzo 2022;Moffitt, Rozario, and Vasarhelyi 2018) for their potential to enhance the efficiency and effectiveness of audits (Barr-Pulliam et al. 2022a, 2022bCao et al. 2015;Christ et al. 2021;Eilifsen et al. 2020;Manita et al. 2020;Rakipi, De santis, and D'Onza 2021), enhancing audit payment systems, all of which have transformative effects on auditing and assurance engagements (IFAC, 2020). In this study, we align with this scope of emerging technologies. ...
... Furthermore, auditing can benefit from the potential of drones to collect audit evidence to support particular management assertions examined by auditors during audits. Drones can be specifically used for specific tasks that are not yet automated and that are often costly, difficult, and oftentimes dangerous to complete (Appelbaum and Nehmer 2017). Consequently, drones can improve auditors' abilities to observe, inspect, evaluate, and perform specific tasks (Appelbaum and Nehmer 2017), narrowing human errors during the inventory audit process (Appelbaum and Nehmer 2017;Christ et al. 2021), resulting in the enhancement of audit efficiency and effectiveness, the improvement of documentation quality, and audit quality . ...
... Drones can be specifically used for specific tasks that are not yet automated and that are often costly, difficult, and oftentimes dangerous to complete (Appelbaum and Nehmer 2017). Consequently, drones can improve auditors' abilities to observe, inspect, evaluate, and perform specific tasks (Appelbaum and Nehmer 2017), narrowing human errors during the inventory audit process (Appelbaum and Nehmer 2017;Christ et al. 2021), resulting in the enhancement of audit efficiency and effectiveness, the improvement of documentation quality, and audit quality . Additionally, other advanced technologies with capabilities to facilitate live streams, video, and audio recordings can enable auditors to gather "First person view" (FPV) or "auditor first view" (AFV) inventory-related audit evidence (Appelbaum et al. 2020). ...
... We focus on digital technologies because they have generally been touted for their efficiency and effectiveness in audit processes and procedures (e.g. Appelbaum and Nehmer, 2017;Christ et al., 2021;Chiu et al., 2014). Moreover, inventory audits are still mainly nondigital (Appelbaum and Nehmer, 2017). ...
... Appelbaum and Nehmer, 2017;Christ et al., 2021;Chiu et al., 2014). Moreover, inventory audits are still mainly nondigital (Appelbaum and Nehmer, 2017). There are potential limitations, such as the challenge for auditors to ask follow-up questions with audit clients' staff, reading facial and body expressions, observing internal control verification processes, and verifying the accuracy of financial reports--tasks feasible in physical, in-person audits. ...
... Another integral facet of AI is machine learning, which can expedite the identification of anomalies in large datasets (Kokina and Davenport, 2017) and detecting material misstatements (Bertomeu et al., 2021). Additionally, drones can augment the inventory audit process, particularly in tasks that are not yet automated, are costly, or dangerous to complete (Appelbaum and Nehmer, 2017). For example, Christ et al. (2021) show that drones and automated counting technology can (1) enhance the efficiency of inventory audits, (2) diminish errors, (3) enhance audit documentation quality, and (4) enhance overall audit quality, particularly if auditors possess expertise in using drones. ...
Article
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Purpose This 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/approach This 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. Findings Our 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/implications These 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/value This 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.
... A growing body of research touts various emerging technologies such as data analytics, artificial intelligence (AI), robotic process automation (RPA), blockchains, drones, and other streaming technologies (Appelbaum and Nehmer 2017;Appelbaum, Budnik, and Vasarhelyi 2020;Cao et al. 2015;Christ et al. 2021;Han, Shiwakoti, Jarvis, Mordi, and Botchie 2023;Kokina and Davenport 2017;Liu, Wu, and Xu 2019;Lombardi, de Villiers, Moscariello, and Pizzo 2022;Moffitt, Rozario, and Vasarhelyi 2018) for their potential to enhance the efficiency and effectiveness of audits (Barr-Pulliam et al. 2022a, 2022bCao et al. 2015;Christ et al. 2021;Eilifsen et al. 2020;Manita et al. 2020;Rakipi, De santis, and D'Onza 2021), enhancing audit payment systems, all of which have transformative effects on auditing and assurance engagements (IFAC, 2020). In this study, we align with this scope of emerging technologies. ...
... Furthermore, auditing can benefit from the potential of drones to collect audit evidence to support particular management assertions examined by auditors during audits. Drones can be specifically used for specific tasks that are not yet automated and that are often costly, difficult, and oftentimes dangerous to complete (Appelbaum and Nehmer 2017). Consequently, drones can improve auditors' abilities to observe, inspect, evaluate, and perform specific tasks (Appelbaum and Nehmer 2017), narrowing human errors during the inventory audit process (Appelbaum and Nehmer 2017;Christ et al. 2021), resulting in the enhancement of audit efficiency and effectiveness, the improvement of documentation quality, and audit quality . ...
... Drones can be specifically used for specific tasks that are not yet automated and that are often costly, difficult, and oftentimes dangerous to complete (Appelbaum and Nehmer 2017). Consequently, drones can improve auditors' abilities to observe, inspect, evaluate, and perform specific tasks (Appelbaum and Nehmer 2017), narrowing human errors during the inventory audit process (Appelbaum and Nehmer 2017;Christ et al. 2021), resulting in the enhancement of audit efficiency and effectiveness, the improvement of documentation quality, and audit quality . Additionally, other advanced technologies with capabilities to facilitate live streams, video, and audio recordings can enable auditors to gather "First person view" (FPV) or "auditor first view" (AFV) inventory-related audit evidence (Appelbaum et al. 2020). ...
... 2019 had measured gas both laterally and vertically using a fixed wing and a quadcopter, respectively. Subsequently, [16] have used a SHARP GP2Y10 optical sensor with quadcopter was observed to describe dust clouds. ...
... Research [23,24] also used simulation (Computational Fluid Dynamics (CFD) simulation of a quadcopter). Work of [16,25] shows aerodynamic studies to understand the influence of the air in lab-level experiments. The measurement of quadcopter airflow is done to conclude that the location for sensors on drones should be the center of the top side of the quadcopter. ...
... The study's economic implications depend on instrumentation, software and workforce utilized to conduct any experimental work. Therefore, the cost of the sensors mounted on a drone is important [13,15,16]. The sensor cost is mentioned in Table 5 to understand the commercial viability of LCS-enabled monitoring devices. ...
Article
Full-text available
Drone-aided systems have gained popularity in the last few decades due to their stability in various commercial sectors and military applications. The conventional ambient air quality monitoring stations (AAQMS) are immovable and big. This drawback has been significantly overcome by drone-aided low-cost sensor (LCS) modules. As a result, much research work, media information, and technical notes have been released on drone-aided air quality and ecological monitoring and mapping applications. This work is a sincere effort to provide a comprehensive and structured review of commercial drone applications for air quality and environmental monitoring. The collected scientific and non-scientific information was divided according to the different drone models, sensor types, and payload weights. The payload component is very critical in stablility of the multirotor drones. Most study projects installed inexpensive sensors on drones according to the avilibility of the space on drone frame. After reviewing of multiple environmental applications the common payload range was 0 gm to 4000 gm. The crucial elements are addressed, including their relation to meteorological factors, air isokinetics, propeller-induced downwash, sensor mounting location, ramifications etc. As a result, technical recommendations for AQ monitoring assisted by drones are addressed in the debate part. This work will help researchers and environmentalists choose sensor-specific payloads for drones and mounting locations. Also, it enables advanced methods of monitoring parameters that help policymakers to frame advanced protocols and sensor databases for the environment and ecology.
... Overall, the use of robots and AI in accounting has the potential to improve efficiency, accuracy, and speed. However, it is important to carefully consider the potential risks and ensure that appropriate controls are in place to mitigate them [3,7]. ...
... This study connects accounting for long-term contracts from the perspective of cash flow management with the use of drones to examine the decision of cash outflows disbursements. The technique of employing drones to take high-quality photos and videos to support a variety of complicated corporate activities [3] has been the subject of numerous research projects in a variety of fields. Oksana et al. [9] claimed that drones are regarded as a system of technological sensors for collecting data on IoT technology principles for company management reasons. ...
... For instance, several accounting firms are currently replacing inventory management with drones in order to evaluate ongoing audits. Appelbaum and Nehmer [3] projected that breakthroughs and technologies related to remote-controlled drones will drastically disrupt several old and tedious accounting and auditing duties in the future. Therefore, it is asserted that the accounting profession is on the verge of a technological transformation that will result in "robotic-enabled" processes. ...
Article
The accounting profession is undergoing a significant transformation due to the impact of artificial intelligence, robotic process automation, and big data. One of the latest areas of research in this field is exploring the potential use of drones for accounting and auditing tasks. However, this study takes a different approach by proposing a theoretical framework that utilizes drones for cash flow management in long-term construction projects. The proposed framework suggests that drones can be utilized as a supplementary tool to remotely conduct project site inspections and monitor construction progress. The framework addresses the percentage of completion method for recognizing revenues from long-term contracts and highlights the benefits of using drones, such as improved data quality, cost and time efficiency, increased safety during site inspections, and overall effectiveness
... Furthermore, the lockdown and social distance consequences of COVID-19 have forced auditors to carry out most financial statement audits and nonaudit services remotely (Arnold, 2020;PCAOB, 2020). This is a further challenge for auditors because remote auditing was not common prior to the pandemic (Appelbaum et al., 2020;Appelbaum and Nehmer, 2017;Sharma et al., 2022). Bauer et al. (2022) argue that remote audit prior to COVID-19 is determined for particular audit tasks with considerations such as personal circumstances, task requirements and geographic constraints. ...
... Teeter et al. (2010) consider it as an auditor combining information and communication technology with analytical procedures to collect audit evidence, interact with clients and report on the accuracy of financial information and internal controls without physical presence. Using remote audit offers several advantages that may motivate audit firms to invest more in advanced technologies (Appelbaum and Nehmer, 2017;Raschke et al., 2018). Teeter et al. (2010) stipulate that remote audit is associated with effectiveness and efficiency because it allows the auditor to cover a wider range of audit tests at a low cost and eliminates costs related to travel and entertainment. ...
... For example, in-person meetings are the preferred tool for communication among audit team members and with the client, but COVID-19 forced such communication using video conferencing (Bauer et al., 2022). Drones were used prior to COVID-19 by some of the big 4 audit firms in their audit examination of assets (Appelbaum and Nehmer, 2017), and they will be helpful the COVID-19 for inventory counting or observations (Appelbaum et al., 2020). In sum, COVID-19 made a large number of advanced technologies as extreme for conducting audits (Botes et al., 2022). ...
Article
Purpose: The COVID-19 pandemic has introduced new challenges for auditors to provide high-quality audits. These challenges pose interesting questions about the ability of auditors to obtain audit evidence and ensure appropriate conclusions. In response to these questions, we examined how self-efficacy affects the auditors’ effort and performance during COVID-19 and how remote audit proficiency helps them respond to these challenges, as reflected in more effort and high-quality performance. Design/methodology/approach: To test our hypotheses, we utilized a quantitative approach in which 193 Saudi auditors were surveyed and partial least squares structural equation modeling was used to analyze the data. Findings: We demonstrated that self-efficacy is positively associated with the perceived audit effort and performance during the COVID-19 crisis. Our results also showed that remote audit proficiency plays a significant role during COVID-19 as it can help auditors exert more effort and perform audit activities effectively. We also found that remote audit mediates the association between self-efficacy and both effort and performance during COVID-19. These results are also asserted under several robust analyses. Originality: To our knowledge, these findings provide the first evidence on the effect of COVID-19 on auditors and have implications for both theory and practice.
... Traditional management accounting systems exist with manual data entry challenges which produce delayed and inaccurate financial reports according to Rozario & Thomas (2019). The implementation of blockchain creates real-time financial insight into transactions while it reaches reconciliation management and transaction protection through cryptographic methods (Appelbaum & Nehmer, 2017). Smart contracts enable automatic budgeting while tracking expenses and managing compliance reporting thus both administrative expenses reduce and human mistakes decrease (Carlin, 2019). ...
... Financial management systems using traditional databases need constant verification and reconciliation work before computing results. With blockchain technology financial transactions become visible at the same time to all affected stakeholders without the requirement of middlemen (Appelbaum & Nehmer, 2017). The system provides complete financial visibility and decreases organizational costs while it delivers better predictions about economic performance. ...
Article
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The research surveys the innovative effects of blockchain technology on management accounting alongside auditing operations with emphasis on how it builds transparent systems and efficient operations and data-based decision capabilities. During traditional financial accounting businesses focus on external reporting needs while management accounting serves internal financial planning tasks and strategic evaluation needs. Decision support systems based on blockchain technology allow organizations to define this set of functions by creating instantaneous transaction logs and safeguarding data integrity and executing financial procedures automatically. Auditing professionals experience fundamental changes because blockchain technology delivers operational real-time validation tools and detects fraud as they work to transition from historical retrospective assessments and sampling verifications. Most research in blockchain examines its usage in financial accounting yet neglects to evaluate its impact on management decision conduct and internal controls. A research project develops this gap through concept-to-evidence integration to explore blockchain implementations among management accounting and auditing fields. A systematic examination of blockchain adoption's practical aspects and opportunities draws from insights gathered from industry case studies and professional experts together with cross-industry evaluations. The research examines both regulatory challenges and technical obstacles alongside organizational barriers that organizations face when implementing blockchain systems and presents essential strategic suggestions to governments and corporations and their regulatory institutions. The research delivers a sophisticated assessment of blockchain effects on accounting and auditing which advances our collective understanding about digital transformations in financial management to help direct upcoming advancement of accounting practice
... Drones have traditionally been operated using remote control, but the integration of AI for automating their functions is becoming increasingly common [56]. Although drone models may vary, they all rely on a core operating system where engines drive each propeller. ...
... The battery provides power, and the charger facilitates repeated usage. According to Appelbaum and Nehmer [56], the drone's GPS and camera are managed by its onboard computer, which also transmits data through the radio transmitter. With the assistance of its sensors, the drone can gather environmental data and integrate AI technology. ...
Article
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The delivery industry has experienced rapid expansion, driven by the substantial increase in online shopping and the growing demand for food delivery services. Despite this growth, the last stage of delivery, known as the last mile, continues to pose challenges in terms of cost-effectiveness and operational efficiency. In this manuscript, the potential of autonomous delivery vehicles (ADVs) as a viable solution to these challenges is deeply explored. ADVs have the capability to significantly reduce labor costs, improve overall delivery efficiency, and play a role in decreasing carbon emissions. However, it is crucial to recognize the potential risks that ADVs may encounter, including concerns related to technological reliability, security, and regulatory obstacles. Successfully implementing ADVs will necessitate effective risk management and mitigation strategies. The objective of this research is to investigate the potential for ADV last-mile delivery while minimizing associated risks. In addition to discussing the current state of ADVs, this study underscores the necessity for innovative risk mitigation solutions to optimize last-mile delivery and particularly emphasizes the crucial role of artificial intelligence and machine learning in the realm of route optimization and operational efficiency enhancement.
... It provides information on changes in vegetation, water reservoir levels, air quality, and land usage (Lynch et al., 2013). Drones can monitor inaccessible places, such as narrow spaces, inspection of parts at high altitudes, and remote farms, and can monitor human trafficking (Appelbaum and Nehmer, 2017). Auditing companies rely on drones, e.g., PwC employs drones for monitoring unsafe places, inspecting wind turbines, and assessing roof conditions (Appelbaum and Nehmer, 2017;PwC, 2019). ...
... Drones can monitor inaccessible places, such as narrow spaces, inspection of parts at high altitudes, and remote farms, and can monitor human trafficking (Appelbaum and Nehmer, 2017). Auditing companies rely on drones, e.g., PwC employs drones for monitoring unsafe places, inspecting wind turbines, and assessing roof conditions (Appelbaum and Nehmer, 2017;PwC, 2019). PwC (2019) states that drone-based audits cost half the price of a regular audit. ...
... It details how the land is being used, how much water is stored, how clean the air is, and how the vegetation changes (Lynch et al. 2013). Drones can keep an eye out for human trafficking, examine components at great heights, and keep tabs on distant fields and confined locations (Appelbaum and Nehmer 2017). The technologies listed above are merely examples of what I5.0 can encompass; the specification could contain many more technologies or omit some of those mentioned entirely. ...
Article
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Environmental, social, and governance (ESG) factors are gradually being utilized to assess organizations' long‐term success, drive capital, and inform company decision‐making toward sustainable growth. Despite a few research investigations, studies on ESG are still developing by using a broader range of new technologies to improve ESG transparency; overcoming shortcomings that have arisen have yet to be examined. Industry 5.0 (I5.0) provides an effective paradigm for comprehending the significance of technology in enhancing ESG disclosure and reporting. To handle the critical shift to wider sustainable development goals (SDGs) specifically, SDG 8 (Decent Work and Economic Growth) and SDG 13 (Climate Action) within the ESG monitoring system, this research digs into current ESG reporting concerns and obstacles. The study systematically reviews I5.0 and ESG reporting literature. The study also carries out an extensive content‐centric assessment of relevant sources and information mappings to accomplish the research aims. The findings reveal that the fundamental characteristics of I5.0 are consistent with ESG, while I5.0 may accommodate ESG capabilities by improving ESG disclosure reliability, expanding from retrospective to prospective and real‐time reporting, customizing, broadening the range of reporting, lowering costs, and improving effectiveness. The findings suggest that ESG reporting must expand outside its company‐centric emphasis, altering existing accounting methods to embrace ESG disclosure requirements more appropriately. ESG performance can be improved with clearer representation of environmental and social consequences, guiding both firms' and investors' decisions (double materiality concept) towards SDGs. New or missing (M) scores revealed by I5.0 technologies can assist both investors and company managers.
... The information could significantly assist the auditors in conducting audits, which improves the quality of the audit process. Similarly, Appelbaum and Nehmer (2017) and Suffield (2020) emphasised that the technology infused in the audit process is a value-added process, which enhances audit quality. For instance, utilising drones in conducting inventory inspection, counting, and observation would significantly improve the audit work (PwC, 2019). ...
Article
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Purpose: The current study aims to investigate the important benefits or advantages of digital audit implementation perceived by the internal auditors of the Accountant General's Department of Malaysia (AGD), and examine the significant challenges faced by the AGD auditors in implementing digital audit. Design/ Methodology/ Approach: A focus group discussion was conducted with AGD officers involved in digital audit implementation and a questionnaire survey was distributed to the AGD auditors to achieve the research objectives. All 124 auditors responded and returned the completed questionnaire. Thematic analysis was performed on the transcription of the focus group discussion while descriptive statistics of mean scores, standard deviations, and mean score ranking were utilised to analyse the questionnaire data. Findings: The top five ranked benefits of digital audit implementation perceived by the respondents were improving the quality of audit report, increasing the efficiency of audit, assisting auditors in identifying material misstatements, improving the quality of the audit processes and enhancing audit effectiveness. The top three challenges were requiring additional education and training to acquire the necessary digital skills, high implementation costs and the risk of data security (leakage) and confidentiality.
... The information could significantly assist the auditors in conducting audits, which improves the quality of the audit process. Similarly, Appelbaum and Nehmer (2017) and Suffield (2020) emphasised that the technology infused in the audit process is a value-added process, which enhances audit quality. For instance, utilising drones in conducting inventory inspection, counting, and observation would significantly improve the audit work (PwC, 2019). ...
Article
Full-text available
Purpose: The current study aims to investigate the important benefits or advantages of digital audit implementation perceived by the internal auditors of the Accountant General’s Department of Malaysia (AGD), and examine the significant challenges faced by the AGD auditors in implementing digital audit. Design/ Methodology/ Approach: A focus group discussion was conducted with AGD officers involved in digital audit implementation and a questionnaire survey was distributed to the AGD auditors to achieve the research objectives. All 124 auditors responded and returned the completed questionnaire. Thematic analysis was performed on the transcription of the focus group discussion while descriptive statistics of mean scores, standard deviations, and mean score ranking were utilised to analyse the questionnaire data. Findings: The top five ranked benefits of digital audit implementation perceived by the respondents were improving the quality of audit report, increasing the efficiency of audit, assisting auditors in identifying material misstatements, improving the quality of the audit processes and enhancing audit effectiveness. The top three challenges were requiring additional education and training to acquire the necessary digital skills, high implementation costs and the risk of data security (leakage) and confidentiality. Originality/ Value: The present study contributes to the existing limited empirical evidence on the fundamental advantages and challenges of digital audit implementation despite various conceptual discussions on the two implementation aspects.
... Substantive test (Appelbaum and Nehmer, 2017;Cooper et al., 2019;Moffitt et al., 2018), analytical procedures (Moffitt et al., 2018), internal control assessment (Moffitt et al., 2018) Robotics process automation can automate rule-based auditing tasks that are repetitive and manual. Its use can repurpose the role of the auditor by replacing perfunctory tasks such as analytical procedures, internal control assessment and substantive test (Moffitt et al., 2018). ...
... By the same token, publications delving into how technology stands to gain from non -financial data audits also provide valuable material for this study. Some examples of technologies that might improve the reliability of compliance audits include social media, sensors, blockchain, big data analytics, and satellite imagery [32]. When it comes to audits for social and environmental compliance, this is particularly the case. ...
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Data privacy and regulatory environments change over time hence the need for robust compliance auditing processes. Though traditional methods are useful, we must discover new ideas to handle the limitations of these approaches concerning size and accuracy. In this piece, we focus on how AI may transform the auditing practices that ensure government and private data operations adhere to certain requirements. With the help of machine learning, natural language processing and other AI methods it could be possible to automate processes driving insights from a huge amount of data while also identifying compliance issues at greater efficiency. With examples coming from health care, banking, and government settings we describe a transformation that AI-driven audits can bring to compliance posture and risk mitigation. Finally, we mention ethical issues which arise in this new field and consider the possible directions to further development for it underlining that human control is vital as well as constant research aimed at ensuring an efficient and responsible adoption of compliance driven by AI.
... Furthermore, the potential use of drone technologies to enhance audit quality and efficiency, both in terms of inventory counts and examination and inspection applications, has been discussed in a few studies. For example, Appelbaum and Nehmer [58] examine the feasibility of adopting drones in audit environments and provide a tailored architecture for prototyping inventory counts in expansive warehouses and outdoor stockrooms. Christ et al. [59] determine whether or not adopting drones and automated counting software can improve audit quality. ...
Article
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As an emergent technology, drones have grown increasingly integral to the logistics and supply chain management (SCM) sectors. This review paper seeks to address this gap by analyzing a carefully curated dataset of 96 journal articles, sourced from Scopus and Web of Science, concerning drone applications in logistics and SCM. Our study reveals a rising trend in drone-related logistics and SCM research and highlights the growing significance of this technology. Using latent Dirichlet allocation (LDA), we distilled the corpus into ten distinct topics and provided a comprehensive overview of the field’s thematic landscape. The most prominently studied themes were drones for humanitarian logistics and SCM and optimization of last-mile delivery using drones and trucks in urban logistics. These areas underscore the promise of drones in addressing humanitarian challenges and urban logistics optimization, respectively. Conversely, the least explored topics were drones safety and utility and drone delivery and consumer behavior in food logistics. To our knowledge, this is the first paper applying LDA to examine drone applications in logistics and SCM, offering novel insights into the current state of the literature. Moreover, based on our findings, we propose a future research agenda to encourage further exploration into under-studied areas and to sustain the momentum of this exciting field.
... Besides process mining, imaging technologies (e.g., drones) also provide new sources of information to auditors (Appelbaum and Nehmer 2017). Similar to Issa, Sun, and Vasarhelyi (2016) and Christ, Emett, Summers, and Wood (2021), drones enable access to information without the physical presence of audit teams at the scene for inventory checking. ...
Article
The study at hand develops the Audit and Assurance Value Chain as a structured framework with four categories: accessing information and data, verifying information, protecting information, and assessing internal controls. After development of the Audit and Assurance Value Chain, it was utilized to categorize emerging technologies derived out of investigations of more than 100 technology innovator companies and interviews with 23 organizations comprising audit and assurance practitioners, regulators, associations, and national standard-setters. The study is based on global data coverage to identify emerging technologies that have not been connected to audit and assurance services before, bringing new insights to the field. Additionally, it emphasizes the importance of the International Auditing and Assurance Standards Board convening power and influence in promoting the adoption of emerging technologies. JEL Classification: M40; M41; M42; O30; O32; O33.
... Various other technologies have been proposed in the studies for the automation of some auditing functions through the use of drones and sensor physics for evidence collection during physical inspection and inventory (Appelbaum & Nehmer, 2017). ...
... Future research opportunities are also established which solve the challenges. Many studies have acknowledged significant influences in the adoption of audit technologies from technology readiness and competence (Appelbaum & Nehmer, 2017b;Appelbaum & Smith, 2018;Chen, 2017;Dai & Vasarhelyi, 2016;Kokina, Mancha, & Pachamanova, 2017;Mansour, 2016;Yusof et al., 2018). ...
Chapter
The introduction of blockchain technology has ushered in a new era in the field of auditing. This study explores the multifaceted impact of blockchain technology on auditing practices, emphasizing its potential to revolutionize audit methodologies. The fundamental principles of blockchain and its implications in the auditing domain are explored extensively. Moreover, the chapter also discusses the role of auditors in navigating the complexities of blockchain. As the digital auditing landscape evolves, blockchain emerges as a powerful tool that promises to improve the credibility of financial reporting, making it imperative for professionals, academics, and regulators.
... (Appelbaum et al., 2017;Fotoh & Lorentzon, 2021) " ‫القيمة‬ ‫"وتخصيص‬ ‫بشدة‬ ‫افق‬ ‫او‬ ‫اإلجابة"‬ 4 " ‫القيمة‬ ‫وتخصيص‬ ‫افق"‬ ‫أو‬ " ‫اإلجابة‬ " 3 " ‫اإلجابة‬ ‫إلى‬ " ‫القيمة‬ ‫وتخصيص‬ ‫"محايد"‬ 2 " ‫القيمة‬ ‫تخصيص‬ ً ‫ا‬ ‫أخير‬ ‫و‬ ‫افق"‬ ‫أو‬ ‫"ال‬ ‫اإلجابة‬ ‫إلى‬ " 1 " ‫اإلجابة‬ ‫إلى‬ ‫"ال‬ ‫بشدة‬ ‫افق‬ ‫أو‬ " . ...
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Cet article examine l'intégration de l'intelligence artificielle générative (IAG) dans les processus d’audit de durabilité au sein des cabinets d’audit légal. Dans cette optique, nous avons mobilisé la théorie des capacités dynamiques et conduit quatorze entretiens semi-directifs qui ont été précédés d’observations non participantes. Deux résultats principaux sont mis en évidence. Premièrement les cabinets utilisent l’IAG comme un levier stratégique, qui leur permet de gagner du temps et de renforcer leur avantage concurrentiel face à l’émergence de nouveaux acteurs sur le marché de la certification en durabilité (avocats, sociétés de conseil...). Nous montrons également que la reconfiguration des compétences au sein des cabinets d’audit légal constitue une manifestation des capacités dynamiques des cabinets face à ces changements. Nous observons un mouvement de reprofilage des postes traditionnellement occupés par des comptables et auditeurs, en faveur de spécialistes des données et de leur contrôle. Cela s’accompagne d’une dynamique d’intégration marquée par une forme de coopétition, qui se traduit par l’intégration de nouveaux profils au sein des équipes d’audit. L’IAG permet aux auditeurs de s’engager dans le processus d’acculturation à la durabilité et de conserver leur indépendance vis-à-vis des autres acteurs, tout en maintenant leur compétence.
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This paper tries to explain what phenomena are currently occurring related to audit literature review. Of the 33 articles, 3 articles that did not fit the scope were excluded. From the previous research data of 30 articles sourced from scopus which were converted into RIS format and entered in vos viewer, there were 112 keywords, 112 met threshold, finally the author discarded 41 keywords, 41 met threshold which according to the author were not used as keywords to see the phenomenon of the current audit literature review. This limitation limits the scope of the literature review, especially access to certain literature sources. In addition, it relies on the selection of relevant studies to be included in the analysis and is descriptive in nature. In the future, it can be explored using bibliometrics and nvivo.
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Using survey research, we investigate accountants' self‐rated knowledge of a variety of digital technologies (DTs). We find that accountants' self‐rated knowledge of established DTs is almost in line with IES2 requirements, but their self‐rated knowledge of emerging DTs is significantly below IES2 requirements. Of greater concern, we find that for both established and emerging DTs, accountants' self‐rated knowledge of key DTs anticipated to have a profound impact on accounting practice is quite weak. These findings are consistent for accountants across accounting functions, career levels and practice settings. We discuss the implications of these findings for policy, curricula design and practice.
Book
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The rise in importance of AI-powered accounting tools and software has sparked a discussion among accounting researchers and professionals regarding the possibility of developing AI solutions that mimic human intelligence in the accounting field. AI integration into accounting operations causes the accounting professions to discard old paradigms and spot exciting opportunities in the automation and digitalisation era. AI can help increase the efficacy and efficiency of many tasks, including financial planning, cost control, financial reporting, managing payables and receivables, and documenting repetitive transactions. There are several advantages related to integrating AI into accounting procedures and processes, including increased accuracy, time savings, better reporting and analysis, and increased compliance. AI implementation costs, specialised expertise requirements, data security threats, and problems with system dependability are the main drawbacks. This book presents a critical reflection on the state and perspectives of the accountancy and auditors profession, addresses the AI technology's supportive role in accounting and auditing tasks, reporting processes and reports' attestation, as well as stresses the necessity to modify educational curriculums in business accounting in response to changing circumstances, and set the regulatory frameworks regarding the use of generative AI by academics and students. The considerations covered in the book are timely and can be helpful for business practitioners, academics and students. Moreover, the international context of the publication, reference to the latest literature on AI applications in business accounting, and presented research study can make this work valuable for all those interested in the opportunities and threats that AI may bring into the professional lives of many.
Article
Artificial intelligence is the process by which computer systems are developed and new programs are introduced that make them capable of performing tasks that require the use of human intelligence, such as translation, solving difficult problems, analyzing a huge amount of data, Decision-Making and others. With the increasing size of companies and their complex processes, the auditor is faced with the challenge of lack of time and the need to provide quality reports. AI will revolutionize audits by automating procedures, enhancing quality, and efficiently Analyze large reliable and unreliable data sets to identify anomalies, improve risk assessment and prioritize tasks. The study examines the adoption requirements of AI and obstacles faced by PWC and Grant Thornton audit companies in Algeria. In order to achieve this, we relied on the case study approach using the interview tool in the applied aspect, through which we came to explore the difficulties facing external auditors for the adoption of artificial intelligence in Algeria. The study also called for highlighting the importance of adopting these modern technologies in external audit that contribute to saving time and reducing costs.
Chapter
The use of Artificial Intelligence (AI) in the accounting industry makes the accounting profession more attractive by enhancing the work-life balance of accountants through efficient use of time. But, the threat of AI to employment also leads to a concern of accounting job insecurity and future uncertainty. This research adopts the practice-led research methodology (PLR) in a higher educational setting, to examine accounting students' perception of AI-driven impacts, and their career anxiety and confusion. 20 students are asked to discuss the impacts of AI on their career aspirations after graduation: half of them had visited several accounting firms in China and engaged with the partners/senior managers, but the other half had not. Evidently, those who participated in this research through accounting firm visits have expressed greater clarity in terms of the roles of AI in the accounting industry, and experienced a reduction in perceived accounting job insecurity. This alleviates their AI-related anxiety and confusion, and enhances their career aspirations towards accounting.
Chapter
This research chapter examines strategies to optimize the technology audit lifecycle, focusing on the growing reliance on IT and evolving regulatory demands. It reviews traditional IT audit phases—planning, fieldwork, monitoring, and follow-up—starting with the planning phase, which sets the audit's direction through analysis of standards, economic conditions, and prior findings. Fieldwork involves assessing controls, conducting interviews, and evaluating risks. Monitoring tracks the implementation of recommendations and management responses. Proposed optimization strategies include integrating data analytics in planning, adopting control self-assessment (CSA), utilizing generalized audit software, and enhancing reporting and follow-up. The chapter also explores the impact of artificial intelligence (AI) on auditing, emphasizing the need for effective project management and stakeholder engagement. Additionally, it covers continuous auditing techniques and automation to improve audit effectiveness and efficiency.
Article
In this study, we examine auditors' reliance on artificial intelligence (AI) systems that are designed to provide evidence around complex estimates. In an experiment with highly experienced auditors, we find that auditors are more hesitant to rely on evidence from AI‐based systems compared to human specialists, consistent with algorithm aversion. Importantly, we also find that a small amount of control (i.e., providing input to specialists) can mitigate this aversion, though this effect depends on auditors' personal locus of control (LOC). Providing input increases reliance on evidence from AI systems for auditors who believe they have little control over their outcomes (i.e., an external LOC). In contrast, auditors with an internal LOC are particularly hesitant to rely on AI‐based evidence, and providing input has little impact on their reliance. Interviews with experienced auditors corroborate our findings and suggest auditors feel a greater sense of control working with human specialists relative to AI‐based systems. Overall, our results suggest perceived control plays an important role in auditors' aversion to AI and that auditors' individual traits can affect this aversion.
Article
As environmental, social, and governance (ESG) reporting has become a mainstream channel for companies to communicate their commitment to sustainability issues, the need for reliable and transparent ESG reports is increasing. However, research on ESG assurance is still in its early stages. ESG assurance poses more challenges than traditional financial auditing due to the diverse subjects and types of information in ESG reports. This paper proposes using artificial intelligence (AI) technologies and exogenous data as solutions. It discusses how AI can enhance the efficiency and effectiveness of ESG assurance by assessing vast and extensive data. This paper also explores AI’s application throughout the general ESG assurance process and contributes to the discussion on providing high-quality ESG assurance services. Additionally, it provides practical implications for auditors, regulators, and stakeholders.
Article
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This study explores the emerging role of drones in museum management, with a special focus on the Italian context. Despite their prevalent use in other fields, drones remain underexplored in the museum sector outside of their archaeological applications. This study develops a comprehensive typology of drone applications in museums, with the aim of providing a roadmap for both academics and practitioners. In a multiple case study conducted across 18 Italian museums, the authors interviewed directors and staff involved in 34 drone-based projects. The findings reveal the diverse applications of drones, from marketing and heritage conservation to security and research, highlighting their potential to add value to heritage assets and visitor experiences. This paper also discusses the organisational implications of drone technology in museums, including strategy integration, privacy concerns and opportunities for cross-departmental collaboration.
Article
Purpose This study aims to develop a maturity model designed for assessing the current state of digitization in accounting firms. Design/methodology/approach The authors have developed this index where the maturity levels are defined from the life cycle theory. For the items of a maturity measure, the authors have adopted a multimethodological approach. That approach allows to identify 27 measurement items to cover the three dimensions of audit, reporting and taxation. Findings This research proposes a diagnostic tool specific to accounting firms. The authors have tested this index in the Tunisian context. The results show that there are two types of accounting firms. This study found the first firm in the embryonic phase and the other in the growth phase. This points out the active role of Tunisian accounting firms in technology integration. Research limitations/implications This study highlights the integration of technology in the accounting field. Specifically, it aims to address technology management in accounting firms by measuring the degree of digitization of accounting firms. This research projects the use of information technologies (artificial intelligence, cloud, big data, etc.) in auditing, reporting and taxation. Practical implications On a practical level, this research provides an organizational diagnostic tool to assess the status of their accounting firms in terms of digitization. This will motivate practitioners to make frequent assessments, thus contributing to continuous improvement toward digitization. Originality/value The theoretical foundation of this research is based on the theory of the life cycle of technologies. This study is using this theory to identify and describe the current phase of the organization. And that is by indicating the overall scores on the technological capabilities of the accounting firms.
Article
SYNOPSIS In recent years, there has been an exponential rise in the use of artificial intelligence (AI) systems in the business world. AI has many current and potential uses in accounting and auditing. However, the introduction of AI comes with significant risks. In this paper, we explore the use of AI for repetitive and simple tasks, generative AI to produce new textual content, and predictive AI to help assess future risks. We then consider important aspects in the use of AI, including data ownership, governance, and bias introduced by AI systems. We show how accounting and auditing professionals must understand these issues to effectively use AI. We also consider changes to the profession regarding the potential erosion of professional trust and the deskilling of the profession. In each case, we discuss how risks and adverse effects from AI can be mitigated by new standards and professional control of AI implementation. JEL Classifications: M41; M42; M48.
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ChatGPT frequently appears in the media, with many predicting significant disruptions, especially in the fields of accounting and auditing. Yet research has demonstrated relatively poor performance of ChatGPT on student assessment questions. We extend this research to examine whether more recent ChatGPT models and capabilities can pass major accounting certification exams including the Certified Public Accountant (CPA), Certified Management Accountant (CMA), Certified Internal Auditor (CIA), and Enrolled Agent (EA) certification exams. We find that the ChatGPT 3.5 model cannot pass any exam (average score across all assessments of 53.1%). However, with additional enhancements, ChatGPT can pass all sections of each tested exam: moving to the ChatGPT 4 model improved scores by an average of 16.5%, providing 10-shot training improved scores an additional 6.6%, and allowing the model to use reasoning and acting (e.g., allow ChatGPT to use a calculator and other resources) improved scores an additional 8.9%. After all these improvements, ChatGPT passed all exams with an average score of 85.1%. This high performance indicates that ChatGPT has sufficient capabilities to disrupt the accounting and auditing industries, which we discuss in detail. This research provides practical insights for accounting professionals, investors, and stakeholders on how to adapt and mitigate the potential harms of this technology in accounting and auditing firms.
Article
Site visits allow visitors to physically inspect productive resources and interact with on-site employees and executives face to face. We posit that, by allowing visitors to acquire investment-related information and monitor the management team, site visits offer disciplinary benefits for corporate investments. Using mandatory disclosures of site visits in China, we find that corporate investments become more responsive to growth opportunities as the intensity of site visits increases, consistent with the notion that site visits yield disciplinary benefits. We also find that the positive association between site visits and investment efficiency is more pronounced when visitors can glean more investment-related information and when they have stronger incentives and greater power to monitor managers. This positive association is also stronger among firms with more severe agency problems and higher asset tangibility. The overall evidence supports the notion that site visits serve as a unique venue for institutional investors and financial analysts to acquire valuable information and serve a monitoring function, which generates disciplinary benefits for corporate investments. This paper was accepted by Suraj Srinivasan, accounting. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2022.00302 .
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This study presents a comprehensive bibliometric analysis of the Journal of Emerging Technologies in Accounting (JETA) from 2008 to 2022, the period since its indexing in Web of Science, focusing on authorship patterns, dominant topics, and citation trends. The findings highlight a significant concentration of authorship within JETA, suggesting an opportunity for enhancing diversity and introducing fresh perspectives through expanded authorial engagement. Acknowledging JETA’s significant contributions to blockchain, text analysis/NLP, and AI, this study proposes an exploration into broader, interdisciplinary domains to further enrich the journal’s thematic diversity, in alignment with global academic trends. The study further recognizes an opportunity for JETA to bolster its global impact by inviting contributions from underrepresented regions, such as South America, Australia, and Africa. Additionally, the analysis reveals a commendable trend in JETA toward collaborative and potentially interdisciplinary research, implying that fostering such collaborations could yield innovative research methodologies in the field. Data Availability: The data supporting the findings of this study can be provided upon request by contacting Batuhan Güvemli. JEL Classifications: M40; M41; M42; M49.
Chapter
Robotic process automation (RPA) emerged nearly twenty years ago and has found widespread use across various sectors, including IT and banking industries for auditing purposes. The focus of this chapter is to emphasize that while RPA proves valuable in automating well-defined and repetitive tasks, its adoption in the field of auditing has been limited. In this chapter, the authors propose a solution that underscores the significant advantages of integrating RPA with a hyper-automation platform. This integration enables internal control monitoring, error correction, and the reporting of key performance indicators to evaluate the productivity of the automated processes. By leveraging the advanced capabilities of the hyper-automation platform, this research expands beyond mere RPA usage. Additionally, the authors address the necessity of a well-developed audit management practice within an organization as a prerequisite for implementing automation technology, as well as the role of Risk Management in facilitating the synergistic application of RPA.
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Using a design science approach, I test whether machine learning can replace the first-stage allocation of activity-based costing (ABC). I call this combination machine learning activity-based costing (MLABC). I conduct three numerical experiments using simulated datasets and find evidence that MLABC can produce relatively accurate overhead allocations like ABC if (1) the data include longitudinal correlations between cost drivers and cost resources, (2) correlations between cost drivers and cost resources include interactions, and (3) avoiding ABC’s cost study does not leave the firm ignorant of a cost driver that accounts for a substantial amount of variance between cost drivers and cost resources. I find limited evidence that MLABC can facilitate active experimentation with the firm’s cost function to learn more about it. I also conduct two supplemental mini-cases with data from practice. These mini-cases help test assumptions from my numerical experiments. Data Availability: Some data are protected by a nondisclosure agreement. JEL Classifications: M40; M41; M49; C45; C63.
Chapter
Emerging technologies are envisioned to advance the accounting profession to a new level. The emergence of big data, artificial intelligence, and robotic process automation has profoundly impacted traditional accounting and auditor tasks and procedures. This chapter focuses on a new technology that has recently emerged in business operations: Unmanned Aerial Vehicles (UAVs) or “drones”. This chapter is intended to highlight the role of drones in current accounting practices as well as future opportunities for exploiting the unique capabilities of drones in the accounting profession. In this domain, the potential of utilizing drones in the accounting profession in the areas related to inventory management, revenue recognition, cash flow management, and risk management is presented. However, applying this technology in this domain faces several implementation challenges, which are highlighted and discussed in this chapter. The significance of this chapter stems from the fact that very limited research has been conducted in this area in the accounting literature. This chapter provides a visionary framework that links the asymmetric information dilemma with the utilization of drones in the accounting profession.
Article
There is a substantial body of work on managerial innovations, but less attention has been paid to innovation in regulated professions such as internal audit. The aim of this paper is to identify the sources of knowledge on internal audit innovations. Our model is derived from the work on technological innovation, internal and external learning, search capabilities and related absorptive capacity (AC). We draw on AC theory to consider the arbitrage between standardized knowledge with low value for innovation and up-to-date knowledge which might lead to radical innovation. We exploit organizational theory to examine the effect of hierarchical pressure for compliance with standardized practices. Our econometric results support the idea that our technological innovation model can be applied to audit innovations. We confirm the existence and the dominant role of search activities for audit departments which are not simply innovation adopters and demonstrate the role of external knowledge sources for extending work on open innovation. We identify an adverse role of AC in relation to standardized knowledge which adds to the mixed results in the AC literature. By challenging the dominant view of auditing as purely compliant, we contribute to the emergent stream which considers internal auditing an innovative profession
Chapter
The age of automation has arrived, bringing with it new possibilities for incorporating innovative technologies into IT Audit functions. Various organisations, both major and little, have already started their work by taking a voyage into the world of automation. Departments, which have long been plagued by manual processes and tiresome duties, may now delegate most of the “grunt work” to digital employees who don’t mind working long hours and repeating tasks. The practise of reviewing and assessing an organisation's IT infrastructure, policies, and processes is known as IT auditing. When it comes to auditing especially in the field of Information security, the auditors must go through various monotonous tasks of obtaining details of various workstations and creating checklists, so as to produce findings or artifacts as evidence for an organisation's compliance with a standard. This chapter will present the concept of robotic process automation (RPA) and its effect on the domains of accounting and auditing, with a focus on the necessity for Intelligent Auditing. An explanation of how intelligent audits is done in light of numerous data and security issues, as well as an overview of automation and AI in finance and auditing. Finally, consider how Intelligent Auditing may be expanded with the help of RPA in the future.
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This editorial aims to create a dialogue regarding research to advance audit thinking in light of the new evolving data environment. A “Special Topic” issue is being planned for JETA in 2017.
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This paper outlines an architecture that provides data and software services to enable a set of Unmanned Aircraft (UA) platforms to operate in a wide range of air domains which may include terminal, en route, oceanic and tactical. The architecture allows a collection of command, control, situational awareness, conflict detection and avoidance, and data management elements to be composed in order to meet different requirement sets as defined by specific UA platforms, users, and operating regimes. The architecture discussed is based on a Service Oriented Architecture (SOA) with open standards on the interfaces between elements. Services may include common situational awareness, sense and avoid, weather, data management and flight plan information. Service contracts specify quality of service, interface specifications, service description metadata, security provisions, and governance. Pieces of the architecture have been implemented by MIT Lincoln Laboratory in the form of a Sense and Avoid (SAA) testbed that provides some of the core services. This paper describes the general architecture and a SAA testbed implementation that begins to realize that architecture and quantifies the benefits. The proposed architecture is not directed at a specific program but is intended to provide guidance and offer architectural best practices.
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When implementing continuous auditing, experience indicates that auditors will likely attempt to first automate the processes that they already use, are comfortable with and are already accepted for external auditing and reporting purposes rather than trying to start from scratch, especially when dealing with audits of ongoing operations. However, because of the experience of low productivity and failed expectations with prior technology implementations that gave rise to the argument for business process reengineering in Hammer's (1990) article, "Don't Automate, Obliterate" special care needs to be taken when change is brought about by automation. As we argue in this paper, not only must audit automation be undertaken systematically, it also has to incorporate reengineering in the more limited sense of first transforming manual audit processes to facilitate their automation. This is not full blown reengineering of the clean sheet sort, but this hybrid approach is one that is more manageable—and marketable— from a change management perspective, and more likely to lead to a positive outcome. The key for avoiding the potential downsides of automation, though, is to have a clear understanding of what audit automation is trying to achieve and follow a methodical procedure to achieve those goals.
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In this paper we report on the approach we have developed and the lessons we have learned in an implementation of the monitoring and control layer for continuous monitoring of business process controls (CMBPC) in the US internal IT audit department of Siemens Corporation. The architecture developed by us implements a completely independent CMBPC system running on top of Siemens’ own enterprise information system which has read-only interaction with the application tier of the enterprise system. Among our key conclusions is that “formalizability” of audit procedures and audit judgment is grossly underestimated. Additionally, while cost savings and expedience force the implementation to closely follow the existing and approved internal audit program, a certain level of reengineering of audit processes is inevitable due to the necessity to separate formalizable and non-formalizable parts of the program. Our study identifies the management of audit alarms and the prevention of the alarm floods as critical tasks in the CMBPC implementation process. We develop an approach to solving these problems utilizing the hierarchical structure of alarms and the role-based approach to assigning alarm destinations. We also discuss the content of the audit trail of CMBPC.
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The paper motivates, presents, demonstrates in use, and evaluates a methodology for conducting design science (DS) research in information systems (IS). DS is of importance in a discipline oriented to the creation of successful artifacts. Several researchers have pioneered DS research in IS, yet over the past 15 years, little DS research has been done within the discipline. The lack of a methodology to serve as a commonly accepted framework for DS research and of a template for its presentation may have contributed to its slow adoption. The design science research methodology (DSRM) presented here incorporates principles, practices, and procedures required to carry out such research and meets three objectives: it is consistent with prior literature, it provides a nominal process model for doing DS research, and it provides a mental model for presenting and evaluating DS research in IS. The DS process includes six steps: problem identification and motivation, definition of the objectives for a solution, design and development, demonstration, evaluation, and communication. We demonstrate and evaluate the methodology by presenting four case studies in terms of the DSRM, including cases that present the design of a database to support health assessment methods, a software reuse measure, an Internet video telephony application, and an IS planning method. The designed methodology effectively satisfies the three objectives and has the potential to help aid the acceptance of DS research in the IS discipline.
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Two paradigms characterize much of the research in the Information Systems discipline: behavioral science and design science. The behavioral-science paradigm seeks to develop and verify theories that explain or predict human or organizational behavior. The design-science paradigm seeks to extend the boundaries of human and organizational capabilities by creating new and innovative artifacts. Both paradigms are foundational to the IS discipline, positioned as it is at the confluence of people, organizations, and technology. Our objective is to describe the performance of design-science research in Information Systems via a concise conceptual framework and clear guidelines for understanding, executing, and evaluating the research. In the design-science paradigm, knowledge and understanding of a problem domain and its solution are achieved in the building and application of the designed artifact. Three recent exemplars in the research literature are used to demonstrate the application of these guidelines. We conclude with an analysis of the challenges of performing high-quality design-science research in the context of the broader IS community.
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Technical developments in computer hardware and software now make it possible to introduce automation into virtually all aspects of human-machine systems. Given these technical capabilities, which system functions should be automated and to what extent? We outline a model for types and levels of automation that provides a framework and an objective basis for making such choices. Appropriate selection is important because automation does not merely supplant but changes human activity and can impose new coordination demands on the human operator. We propose that automation can be applied to four broad classes of functions: 1) information acquisition; 2) information analysis; 3) decision and action selection; and 4) action implementation. Within each of these types, automation can be applied across a continuum of levels from low to high, i.e., from fully manual to fully automatic. A particular system can involve automation of all four types at different levels. The human performance consequences of particular types and levels of automation constitute primary evaluative criteria for automation design using our model. Secondary evaluative criteria include automation reliability and the costs of decision/action consequences, among others. Examples of recommended types and levels of automation are provided to illustrate the application of the model to automation design.
Article
After decades of frustration with long “AI Winters,” various business industries are witnessing the arrival of AI’s “Spring,” with its massive and compelling benefits. Auditing will also evolve with the application of AI. Recently, there has been a progressive evolution of technology aimed at creating “artificially intelligent” devices. Although this evolution has been permeated with false starts and exaggerated claims, there is some convergence on the fact that substantive progress has been obtained in the last few years with the adoption of deep learning in conjunction with much faster machines and dimensionally larger storage spaces (and samples). The area of auditing has lagged business adoption in the past (Oldhouser 2016), but is prime for partial automation due to its labor intensiveness and range of decision structures. Several accounting firms have disclosed substantive investments in the AI fields. This paper proposes various areas of AI-related research to examine where this emerging technology is most promising. Moreover, this paper raises a series of methodological and evolutionary research questions aiming to study the AI-driven transformation of today’s world of audit into the assurance of the future.
Conference Paper
Drones are becoming more and more popular for their possible use in different scenarios, not only outdoor, but even indoor. In this context, indoor self-localization may become crucial and, clearly, GPS is not an option. In this poster we discuss a possible strategy for drone indoor self-localization based on printed markers, drone cameras and software that is generally used for augmented reality purposes. Achieved results from a preliminary experimental campaign demonstrate the effectiveness of the approach with localization errors in the order of 20cm.
Article
SYNOPSIS Big Data will have increasingly important implications for accounting, even as new types of data become accessible. The video, audio, and textual information made available via Big Data can provide for improved managerial accounting, financial accounting, and financial reporting practices. In managerial accounting, Big Data will contribute to the development and evolution of effective management control systems and budgeting processes. In financial accounting, Big Data will improve the quality and relevance of accounting information, thereby enhancing transparency and stakeholder decision making. In reporting, Big Data can assist with the creation and refinement of accounting standards, helping to ensure that the accounting profession will continue to provide useful information as the dynamic, real-time, global economy evolves.
Article
SYNOPSIS In this paper we argue for the use of Big Data as complementary audit evidence. We evaluate the applicability of Big Data using the audit evidence criteria framework and provide cost-benefit analysis for sufficiency, reliability, and relevance considerations. Critical challenges, including integration with traditional audit evidence, information transfer issues, and information privacy protection, are discussed and possible solutions are provided.
Article
As internal audit management seeks to control costs, improve quality, and take full advantage of emerging business technology within their organization' the remote audit becomes increasingly sensible. The integrated audit of the future, with real-time evidence feeds and both remote and in loco components, will be very different from the current internal audit work and will eventually be also embraced by external auditors. During a remote audit, internal auditors would interact with different departments and functions of the firm and third parties over long distances using remote communication technology, such as web conferencing and remote access to information system clouds. This paper is designed to 1) synthesize information and literature found in areas from distance learning to operations management, and 2) present a framework for applying this technology to the remote audit. The literature includes items from remote audit, continuous audit, virtual organization theory, distance technology, and value proposition. Our focus is primarily on the technology that enables audit teams to work effectively and efficiently from a remote location.
Article
This article relates belief functions to the structure of audit risk and provides formulas for audit risk under certain simplifying assumptions. These formulas give plausibilities of error in the belief-function sense. We believe that belief-function plausibility represents auditors’ intuitive understanding of audit risk better than ordinary probability. The plausibility of a statement, within belief-function theory, measures the extent to which we lack evidence against the statement. High plausibility for error indicates only a lack of assurance, not positive evidence that there is error. Before collecting, analyzing, and aggregating the evidence, an auditor may lack any assurance that a financial statement is correct, and in this case will attribute very high plausibility to material misstatement. This high plausibility does not necessarily indicate any evidence that the statement is materially misstated, and hence, it is inappropriate to interpret it as a probability of material misstatement. The SAS No. 47 formula for audit risk is based on a very simple structure for audit evidence. The formulas we derive in this article are based on a slightly more complex but still simplified structure, together with other simplifying assumptions. We assume a tree-type structure for the evidence, assume that all evidence is affirmative and that each variable in the tree is binary. All these assumptions can be relaxed. As they are relaxed, however, the formulas become more complex and less informative, and it then becomes more useful to think in terms of computer algorithms rather than in terms of formulas (Shafer and Shenoy 1988). In general, the structure of audit evidence corresponds to a network of variables. We derive formulas only for the case in which each item of evidence bears either on all the audit objectives of an account or on all the accounts in the financial statement, as in Fig. 1, so that the network is a tree. Usually, however, there will be some evidence that bears on some but not all objectives for an account, on some but not all accounts, or on objectives at different levels; in this case, the network will not be a tree. We assume that all evidence is affirmative because this is the situation treated by the SAS No. 47 formula and because belief-function formulas become significantly more complex when affirmative and negative evidence is combined. This complexity is due primarily to the renormalization involved in Dempster’s rule for combining belief functions. The variables in the network or tree represent various audit objectives, accounts, and the financial statement as a whole. We assume these variables are binary. For example, we assume that an account either is or is not materially misstated. This assumption is clearly too restrictive for most audit practice. Often, for example, an auditor must consider immaterial errors in individual accounts that could produce a material error in the financial statement when they are aggregated. We derive formulas for plausibility of material misstatement at three levels: the financial statement level, the account level, and the audit objective level. The formula at the audit objective level resembles the SAS No. 47 formula,^1 but the formulas at the other two levels are significantly different. Because our model does distinguish evidence gathered at the three different levels, audits based on our formulas are sometimes significantly more efficient^2 than audits based on the SAS No. 47 model or on the simpler Bayesian models.
Article
Human Nonverbal Communication Computing aims to investigate how people exploit nonverbal aspects of their communication to coordinate their activities and social relationships. Nonverbal behavior plays important roles in message production and processing, relational communication, social interaction and networks, deception and impression management, and emotional expression. This is a fundamental yet challenging research topic. To effectively analyze Nonverbal Communication Computing, motion analysis methods have been widely investigated and employed. In this paper, we introduce the concept and applications of Nonverbal Communication Computing and also review some of the motion analysis methods employed in this area. They include face tracking, expression recognition, body reconstruction, and group activity analysis. In addition, we also discuss some open problems and the future directions of this area.
Data
Two paradigms characterize much of the research in the Information Systems discipline: behavioral science and design science. The behavioral-science paradigm seeks to develop and verify theories that explain or predict human or organizational behavior. The design-science paradigm seeks to extend the boundaries of human and organizational capabilities by creating new and innovative artifacts. Both paradigms are foundational to the IS discipline, positioned as it is at the confluence of people, organizations, and technology. Our objective is to describe the performance of design-science research in Information Systems via a concise conceptual framework and clear guidelines for understanding, executing, and evaluating the research. In the design-science paradigm, knowledge and understanding of a problem domain and its solution are achieved in the building and application of the designed artifact. Three recent exemplars in the research literature are used to demonstrate the application of these guidelines. We conclude with an analysis of the challenges of performing high-quality design-science research in the context of the broader IS community.
Article
Natural science research follows a stereotypical pattern and such uniformity makes it easier to recognize and evaluate the results of such research. A similar format has been lacking for design science research. This issue was addressed by Peffers et al. (2008) who defined such a template for design science research for information systems: the design science research methodology (DSRM). In this paper, we first discuss design science research and the DSRM. Then, we illustrate the application of the DSRM to AIS research through retroactive analysis. Finally, we integrate the DSRM into the operational specification of artifact networks and use the REA literature for illustration purposes.
Book
Analyzes how successful firms fail when confronted with technological and market changes, prescribing a list of rules for firms to follow as a solution. Precisely because of their adherence to good management principles, innovative, well-managed firms fail at the emergence of disruptive technologies - that is, innovations that disrupt the existing dominant technologies in the market. Unfortunately, it usually does not make sense to invest in disruptive technologies until after they have taken over the market. Thus, instead of exercising what are typically good managerial decisions, at the introduction of technical or market change it is very often the case that managers must make counterintuitive decisions not to listen to customers, to invest in lower-performance products that produce lower margins, and to pursue small markets. From analysis of the disk drive industry, a set of rules is devised - the principles of disruptive innovation - for managers to measure when traditional good management principles should be followed or rejected. According to the principles of disruptive innovation, a manager should plan to fail early, often, and inexpensively, developing disruptive technologies in small organizations operating within a niche market and with a relevant customer base. A case study in the electric-powered vehicles market illustrates how a manager can overcome the challenges of disruptive technologies using these principles of disruptive innovation. The mechanical excavator industry in the mid-twentieth century is also described, as an example in which most companies failed because they were unwilling to forego cable excavator technology for hydraulics machines. While there is no "right answer" or formula to use when reacting to unpredictable technological change, managers will be able to adapt as long as they realize that "good" managerial practices are only situationally appropriate. Though disruptive technologies are inherently high-risk, the more a firm invests in them, the more it learns about the emerging market and the changing needs of consumers, so that incremental advances may lead to industry-changing leaps. (CJC)
A broader view of drones. Realtor Magazine
  • J Boughtin
Boughtin, J. 2016. A broader view of drones. Realtor Magazine (May/June): 10-15.
Drones and Robots in the Warehouse
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