（2008）The effect of IT controls on financial reporting.pdfVIP

The current issue and full text archive of this journal is available at /0268-6902.htm The effect of IT controls The effect of IT controls on financial reporting Gerry H. Grant California State University, Fullerton, California, USA 803 Karen C. Miller Union University, Jackson, Tennessee, USA, and Fatima Alali California State University, Fullerton, California, USA Abstract Purpose – The purpose of this paper is to examine information technology (IT) control deficiencies and their affect on financial reporting. Design/methodology/approach – This study examines 278 companies reporting IT control deficiencies in the first three years of the SOX 404 requirements (2004-2006). Using quantitative analysis, the study evaluates the impact of IT deficiencies on financial reporting and determines significant differences between companies that report IT deficiencies and companies that do not report IT deficiencies. Findings – Four accounting errors: revenue recognition issues; receivables, investments and cash issues; inventory, vendor and cost of sales issues; and financial statement, footnote, US GAAP, and segment disclosures issues stand out as common financial reporting problems in companies reporting weak IT controls. This study also suggests that companies with IT control deficiencies report more internal control (IC) deficiencies, are smaller, pa