Article2004

The Impact of Strategic-Positioning Information on Auditor Judgments about Business-Process Performance

Brian Ballou · Christine E. Earley · Jay S. Rich

57 citations0/0 files storedAuditing A Journal of Practice & Theory

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Auditing, Earnings Management, Governance Accounting and Organizational Management Information Technology Governance and Strategy

Abstract

Strategic-systems auditing (SSA) approaches require auditors to perform analyses of their clients at two levels (i.e., strategic and business-process levels) when conducting audits (e.g., Bell et al. 2002; Lemon et al. 2000). One advantage of using SSA approaches is that through these analyses, auditors gain a complex systems understanding of the client. This understanding enhances decision making in part by recognizing that small actions can have big effects that increase overall business risk (Jacobson 2001; Richmond 2000). This study examines how the two levels of analysis in SSA impact auditor judgments regarding small changes in a business process that can have big (risk-increasing) effects. Specifically, we predict that when strategic-positioning information (contained within the strategic-level analysis) indicates a client is typical of others in its industry, information at the business-process level regarding a small problem in a business process will be weighted less than when the strategic-positioning information indicates the client is atypical. Results support this contention. This behavior may have implications for the effectiveness of SSA approaches under certain conditions.

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