Overreliance on Mathematical Accuracy of Computer Output: An Issue for IT Educators

Introduction

The internationally recognised model of internal control ICEFR¹ (2012) highlights the importance of the information and communication component of an entity’s internal controls. Both in the preparation of financial statements and in their subsequent review, the role of information technology (IT) is critical. Irrespective of the size of an organisation, most accounting functions are now fully computerised. However research demonstrates that information obtained from IT processing is not always error free. Significant errors can occur due to incorrect programming, inputting, converting or even during the outputting of data. IT error issues can arise at any point in an organisation’s processing, from primary or centralized data source points right down to data extraction or re-entry points. Jenne (1996) notes how programs can be developed and implemented with errors embedded therein, due to the increase in end-user applications. These applications have their advantages but can result in non-IT staff creating programs. As a result, standards for software development, testing, and control are not always applied appropriately and errors can ensue. Caulkins et al. (2007) note the prevalence of errors in spreadsheet environments (just one subset of overall information technology environments) and their subsequent impact upon decision making.

It follows therefore that accounting education programs, particularly in the IT area, should be aware of these issues. Elliott (2002) noted how every aspect of the accounting profession is affected by advances in IT. Hence training of future IT users in an accounting/auditing context should be viewed as a critical issue.

Auditors, both internal and external, are there to provide assurance that the information prepared by an entity is reliable (Arens et al. 2011). International auditing standards issued by the International Federation of Accountants (IFAC, 2012) decree auditors shall gather sufficient appropriate evidence to form their opinion. This makes it incumbent upon them to verify, along with everything else, the mathematical accuracy⁴ of the account balances. Essentially this concept involves verifying the additions, extensions and totals of client produced mathematical data via recalculation and/or reperformance of procedures. As mentioned above the vast majority of entity information, both financial and non-financial, is held by IT agents. This then raises the issue of how much reliance reviewers should place upon information produced by an entity’s IT system and how much testing they should do to ensure mathematical accuracy. The purpose of the current study therefore is to evaluate the perceptions of IT users as to the reliability, in relation to mathematical accuracy, of computer produced reports.

Testing mathematical accuracy is obviously significant. But during a busy degree program the possibility exists that this mundane – albeit very important – exercise may not be given the full care and attention it merits. Critics of the accounting education environment, such as Albrecht and Sack (2000) often specifically identify IT as an area where the gap between what is taught and what is needed to be taught can be an issue. Furthermore, the current generation of accounting students have predominantly been reared and educated in highly computerised environments. As a result they may be more prone to accepting what computers provide without query than their predecessors. This provides the motivation for the paper. The auditing profession in particular is currently concerned about a lack of professional scepticism. The International Auditing and Assurance Standards Board (IAASB) recently issued a Q&A Staff Bulletin (IAASB, 2012) for its members addressing the issue. Hence it is hoped this heightened awareness would imply more training in the area of appropriate evidence gathering, and not just acceptance of data presented for review.