Investigating the technological, organisational and environmental influences on the adoption of computer-assisted audit tools and techniques among audit firms in Malaysia

In today’s advancement of technology, many businesses use e-business and computerised accounting information systems (AIS) to process business transactions. Particularly in Malaysia, with the implementation of the Goods and Services Tax (GST), businesses need to utilise GST-compliant systems. This phenomenon has challenged public practice audit firms in assessing the businesses’ financial statements because most transaction evidence is electronically processed and stored. Audit firms need to employ Computer-Assisted Auditing Tools and Techniques (CAATTs) to enhance the efficiency and effectiveness of their audit work, and keep abreast with their client AIS. Nevertheless, although auditors acknowledge the benefit of CAATTs, its adoption is low among audit firms. The issues of CAATTs adoption from the organisational standpoint in discovering the reasons influencing audit firms to adopt CAATTs have yet to be studied. Therefore, this study aims to investigate the main factors and mediating factors in predicting CAATTs adoption. The framework of this study stresses on the relationships of technological factors (relative advantage, compatibility, complexity, trialability and observability), organisational factors (top management commitment, employees’ IT competency and firm size), and environmental factors (client’s AIS complexity, competitive pressure and professional body support) on CAATTs adoption. It is argued that the adoption of CAATTs in audit firms is influenced not only by technological characteristics, but also the organisational and environmental factors involving these firms. CAATTs adoption by audit firms is worth studying due to the unique environmental context i.e. the nature of their services in performing audits for clients and the fact that they are regulated by professional bodies. Hence, the original contribution of this study is to extend the literature by providing a better framework in understanding the technological, organisational and environmental factors in predicting CAATTs adoption. Theoretically, this study complements the underlying Diffusion of Innovation Theory, Technology-Organisation-Environment framework, and Institutional Theory with two new factors namely professional body support and client’s AIS complexity. It is hypothesised that these two factors would positively affect CAATTs adoption. This study also contributes to supplement the existing framework with mediating effects of firm size, IT competency and top management commitment in explaining CAATTs adoption. It is anticipated that (1) firm size would mediate the relationship between client’s AIS complexity and CAATTs adoption, (2) employees’ IT competency would mediate professional body’s direct effect on CAATTs adoption, and (3) top management commitment would mediate professional body’s direct influence on CAATTs adoption. Practically, this study contributes towards helping audit firms and regulatory bodies to develop strategies and recommendations to increase CAATTs adoption. Survey questionnaire responses from 158 audit firms were analysed using the Partial Least Squares Structural Equation Modelling. The results revealed that firm size, client’s AIS complexity, professional body support, employees’ IT competency, top management commitment, compatibility, observability, trialability and relative advantage significantly influence CAATTs adoption. It was also found that firm size partially mediates the relationship between client’s AIS complexity and CAATTs adoption. Test on employees’ IT competency as a mediator further found a significant indirect effect between professional body support and CAATTs adoption via employees’ IT competency. This demonstrates that the support of professional body plays an important role in increasing IT competency among audit firm employees, thereby promoting CAATTs adoption. In conclusion, this study suggests that the decision on CAATTs adoption is not merely dependent on CAATTs technological factors, but also contextual factors of organisational and external environmental issues in the auditing profession, such as the influence of client’s AIS complexity and involvement of professional body are indeed important in addressing the adoption of CAATTs.