In recent history there have been many changes in information technology and legislation pertaining to these technologies; this has resulted in a definite growth in the need for IT Auditors. These changes have included not only the changing processes and procedures that organizations have gone through as a result of increased innovation in the technology industry, but also the change in legislation as government has become more involved with the day-to-day business of companies in the United States and across the world. Not only has the government become more involved with the reporting processes of businesses, it has also placed greater responsibility on the business executives that are in charge of the business processes and procedures of the company. In response to this increased responsibility and legislation, top executives have engaged themselves with the reporting processes and requirements of legislation such as the Sarbanes-Oxley Act of 2002.

In addition to the reactive auditing required from this increased legislation there has also been an increase in the need for IT Auditors because concepts of total quality management programs such as Six Sigma require the examination of business processes and procedures in order to improve customer satisfaction and increase productivity and profitability. In-house auditors are very useful when aligning business procedures and reporting to comply with the requirements of the government, but are also useful when applying the concepts of total quality in the processes used for production and services.

Let’s take a look at legislative requirements such as Sarbanes-Oxley to see how the government has increased the need for IT Auditors. The online user-driven encyclopedia, Wikipedia, describes the Sarbanes-Oxley Act of 2002 as a federal law that was passed to protect investors and beneficiaries from major accounting fraud and scandals in businesses such as those that gave reason to pass this law: Enron, Adelphia, and WorldCom. This law contains specific mandates and requirements for financial reporting and disclosures. The idea is that by placing regulations on companies and by assigning responsibility to senior executives future scandals might be controlled (Wikipedia, 2008). By introducing these mandates and requirements, the government has increased the amount of accountability that top executives find themselves responsible for in regards to the company as a whole. Senior executives are no longer able to claim ignorance in regards to the financials of the company and instead are motivated to become informed on all levels. Information systems are the greatest resource for these executives as they continue to become more involved with the processes that are involved with the processing of financial records and reports in the company.

In a BusinessWeek article on the Sarbanes-Oxley legislation and the bind that it places on small businesses, Jeremy Quittner describes that another factor involved with the push for these changes is the market pressure for small companies to comply with legislation such as Sarbanes-Oxley if they are to sign contracts or participate in deal-making with venture capitalists and investors. Financing and business loans are steadily becoming contingent upon documented audits and oversight committees. In fact, Big Four accounting firms have seen so much increased demand for compliance audits that they have had to turn down small clients because they are so overworked (2005). Venture capitalists and investors recognize the importance of this legislation and are now requiring compliance in startups that are looking for the funding and backing they need in order to grow their business. New businesses and private or small businesses interested in going public need to recognize the importance of complying with Sarbanes-Oxley, especially if they want to grow as a company because as the size of their business grows so do the requirements set by this legislation.

While it is true that private or small businesses are able to comply at a lesser rate or at their own pace, legislation like the Sarbanes-Oxley Act is making it difficult for these companies to go public because of the high cost involved with compliance. In order for small businesses to grow they need to focus on the reporting procedures and processes involved with these governmental requirements. These requirements aren’t going to go away anytime soon, in fact they will most likely increase over time as use of information technology and the number of information systems used by businesses grows. The necessity for both outside and in-house auditing will continue to increase as businesses grow and as new information technologies are introduced. This increased necessity for auditing has created a much larger need for IT Auditors especially since more and more startups continue to enter the marketplace and larger numbers of private and small businesses seek to go public.

Sarbanes-Oxley is important because it establishes and assigns the responsibilities for due professional care in regards to corporate governance, accountability, and audit quality in the business environment. As businesses become more and more dependent on computer systems for processing the millions of business transactions executed everyday, it is important for those businesses to recognize the effects of computer processing throughout the entire audit process, and not just during the evaluation of internal control. As a result of the growing use of such computer-based financial systems, the AICPA introduced SAS 48, “The Effects of Computer Processing on the Examination of Financial Statements.” According to SAS 48, the auditor should be familiar with how the audit is affected by various situations including: the extent of computer use in each significant accounting application, the complexity of the organization’s computer operations, the organizational structure of IT activities, the availability of data for audit use, and the use of computer-assisted audit techniques to increase the efficiency of audit procedures (Gallegos, Gonzales, Manson, & Senft, 2004).

In the past, businesses small and large utilized both certified public accountants and large accounting firms to complete reports for their financial transactions. Over the years, computers and information systems have become more cost-effective and easier to implement and now these businesses have begun to use computer-based financial systems because they produce results at a faster, more efficient pace. Businesses have recognized the need for auditors with specialized expertise in IT by recognizing the growing use of computer-based financial systems and the effects of that processing on financial statements and new accounting standards, such as SAS 48, have been set up in response to this trend. As guidelines and standards for computer-based financial systems continue to be issued for those types of activities and the responsibilities involved with rendering an opinion on the financial status of a business continue to be demonstrated, the need for auditors familiar with IT-related systems, procedures, and controls continues to rise. This growth in need will only keep rising as businesses continue to use computer systems for the various processes and procedures involved with the processing and auditing of their financial statements.

As businesses continue to grow and information technologies continue to become a larger part of the company budget, those companies begin to struggle with complying with the legislative requirements involved with such change and growth. Businesses that are realizing increased production and efficiency through information systems will find themselves needing both outside and in-house auditors in order to stay in compliance with legislative requirements. These businesses find that in-house auditors are useful for improving the business processes that are part of the everyday environment of the business. These auditors can be used to maintain control over reporting procedures and the responsibilities that have been handed down by legislation like Sarbanes-Oxley.

After understanding how legislation and the introduction of new information technologies have attributed to an increased need for IT Auditors, it is time to take a look at how businesses have embraced these changes and actually improved their business processes as a result. Many businesses use a Sarbanes-Oxley Compliance Checklist in order to determine how well they are complying with the requirements of the Sarbanes-Oxley Act. Although this checklist is used to determine whether or not specific reports and procedures are in place within the organization, it can also be used as an outline for changing the way a company defines its business from the front-line employee and middle managers to top executives. Applying the ideals behind such legislature to everyday business processes is very useful for those parties responsible for quality management in the organization.

Businesses are constantly changing as they adapt to the environment created by a world-wide marketplace. As businesses change they find themselves constantly building, replacing, and maintaining information systems. Information systems that are effective, efficient, and stable allow for companies to manage and optimize their business as they move towards total quality. In-house auditors in total quality organizations are useful when trying to understand the processes involved with processes in place within the organization. Total quality organizations use auditors in the design process to incorporate new technology into the functional aspects of processes and procedures used to create and deliver products and services. This includes the organizing and streamlining business processes as well as assessing software applications, systems implementation, and defining and assessing potential risks.

Perhaps the most important use for in-house auditors is evident when assessing risks and disaster recovery plans. While information technologies have brought about the possibility for faster, more efficient, and more reliable business processes, they have also brought with them many new risks and operational issues. Such risks include computer viruses, Trojans, power outages, and equipment or system failure. Because businesses are becoming more dependent on information systems it is important to recognize the increased dependence towards utilities and connectivity. Some businesses are solely dependent upon the Internet for completing all financial transactions. These types of businesses have an even greater need for IT auditors.

Recent history has demonstrated that there have been and will continue to be significant changes and innovations in information technologies. These changes and innovations will be accompanied by new and changing legislation for the use of computer systems in financial reporting and processing. Day-to-day business processes involving the use of computers and computer systems for processing financial records and reports have seen an increase in government involvement. As information systems continue to become more widely used for financial transactions and government involvement with computer-based financial reporting becomes more and more difficult to keep up with, the need for auditors with specialized expertise in IT will continue to grow.

References

• (2008). Sarbanes-Oxley Act – Wikipedia, the free encyclopedia. Wikipedia, the free encyclopedia. Retrieved May 5, 2008 from http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act
• Gallegos, F., Gonzales, C., Manson, D., Senft, S. (2004). Information technology control and audit. New York: Auerbach.
• Quittner, Jeremy. (2005). The SarbOx Bind [Electronic version]. BusinessWeek. Retrieved May 5, 2008 from http://www.businessweek.com/magazine/content/05_25/ b3938417.htm?chan=sb