Adoption and use of generalized audit software by Indonesian audit firms

This study investigates the adoption and use of Generalized Audit Software (GAS) by Indonesian audit firms. GAS is specialized software that enables the auditor to automate tasks including client risk assessment. The researcher believed GAS use in Indonesia is not widespread and one explanation for this is the absence of professionally qualified accountants (ADB, 2003) and the World Bank (2011) reported that audit practices in Indonesia face a quality related problem especially in mid-tier and small-sized firms. Audit firms began using IT, including GAS (Braun and Davis, 2003, Coderre, 1996, Debreceny et al., 2005, Lovata, 1990, Junaid, 2005, Alles et al., 2002), during the 1980s to improve effectiveness and efficiency (Fischer, 1996). However, previous studies (Janvrin et al., 2008b, Debreceny et al., 2005) indicate that external auditors used applications infrequently and instead, were likely to depend on unsophisticated analytical review procedures (Fischer, 1996). Traditional analytical review procedures, such as ratio analysis, have limited ability to detect fraud (Hogan et al., 2008) and without rigorous processes, many professionals believe that stakeholders are not adequately informed and therefore the quality of auditing is questionable. Most studies into audit technology or audit software have focused on the largest firms in developed economies (Bedard et al., 2003, Curtis and Payne, 2008, Vendrzyk and Bagranoff, 2003). Studies in developed economies indicate that audit software has been adopted extensively by Big four firms (Janvrin et al., 2008a). <br><br>The results of this study are based on semi-structured in-depth interviews with 27 external auditors from firms of all sizes, a senior member of a professional body, and 6 staff from 2 Government agencies. The interviewees were selected using the snowballing method. The interviews were in-depth, semi-structured and included open-ended questions to elicit views and opinions from participants related to adoption and use of GAS. In addition, archival records and secondary sources were also reviewed to interpret the findings. This study contributes to the literature through its Indonesian focus, deeper insights through use of interview rather than survey data, knowledge of large and small audit firms, and the application of a new theoretical framework to the audit literature, the Technology, Organisation and Environment (TOE) framework.<br><br>Major findings imply that the use of commercially available software remains limited across audit procedures. The TOE framework indicates that the influence of technological, organisational and environmental factors on GAS adoption is spread equally however the findings of this study identify environmental influences as the most important in the Indonesian context. Client related factors such as size, industry sector, needs and expectations and regulator’s and the professional accountancy body’s supports mainly dictated GAS adoption. There was mixed perception between participants regarding the competitiveness of a firm, assured audit quality and working uniformity as benefits of GAS use. However, all participants agreed that improved efficiency and increased audit productivity can be achieved from GAS use.