Audit Technology Success Among Malaysian Public Sector Auditors: Key Insights & Future Directions

By Dr. Farida Binti Veerankutty, Head of Internal Audit Department, Ministry of Housing and Local Government of Malaysia

Introduction

The new ways of doing business in the digital environment have implicated the current audit practices, specifically in financial audit and have directed the audit function into a new path. Auditors need to handle the changes caused by technologies (Yen, Huang, Li, & Hsiah, 2006) As such, this has led into the necessity of new audit procedures, techniques and tools to evaluate the control in order to mitigate the new business risk (Masli, Peters, & Richardson, 2010).  Further, audit standards have clearly stated that the computer-based controls and computer-assisted audit techniques need to be conducted once audit clients have used advanced enterprise systems and depend broadly on Information Technology (IT) (Abdolmohammadi & Boss, 2009). 

Auditors need to incorporate ‘state-of-the-art’ auditing software applications (audit technology) in the auditing process. This encourages the auditors to conduct their work in an electronic environment and permit more efficient and effective audit process (Braun & Davis, 2003). 

Recent research highlights a significant competence-perception gap regarding audit technology among practitioners. While auditors acknowledge the strategic importance of these tools, their technical proficiency remains insufficient. Consequently, targeted pedagogical interventions are required to align practitioner capabilities with industry demands (Feliciano, C., & Quick, R., 2022).

Why Audit Technology Matters

While the use of technology by Malaysian public sector auditors during audit task began in 1980, the leadership of National Audit Department of Malaysia (NAD) has expressed concern over the underutilisation of technology among the auditors (Buang, 2015). Despite the usage of technology, public sector auditors still face challenges from what being expected by the management and the professional standard (Veerankutty, 2009). It was noted in a 2015 research paper that public sector auditors do not use analytics on unstructured data in performing data mining and collecting of audit evidence due to limitation of technical expertise and facing problems related to system complexities, data from different sources and platform, human resource capacity and capabilities, liability and compatibility issues (Buang, 2015). 

However, the use of audit technology shows a progress trend after COVID-19. IFAC and CIPFA’s 2022 highlighted that there was a significant shift towards integrated audit technologies usage in public financial management. Therefore, there is a need in assessing the effectiveness of audit technology during the audit task. This can enable audit organisations to ascertain whether the auditors are capable of doing the required task and delivering the quality audit work. For audit technology application to be an effective tool for the audit task, there is a need to develop and better understand the factors that best measure the audit technology success. 

Research Overview

Information Systems (IS) Success Model

As the organisation continue to make substantial investment in information system to improve the service delivery and enhance the individual and organisation performance, evaluating IS investment is key to rationalising the significance and contribution to the quality, competitiveness and efficiency of the organisation. The IS Success Model has three components: the creation of an information system, the use of the system, and the consequences of this system use.

Research Design 

This study aims to understand how the perspective of users on effective technologies can influence the ability of these technologies to increase efficiency of an auditor’s job performance and increase the quality of the audit. 

Audit technology success in this study signifies the effectiveness of technology/system from user perspectives toward user’s job performance, and the dependent variable intends to measure the performance of audit technology in enhancing the auditors’ job performance along with improving quality of technology-enabled auditing. 

Research Method 

Data was collected from public sector auditors who are performing the technology-enabled audit task in National Audit Department of Malaysia in the period of 2016 through personally administered (paper based) and electronically administered questionnaires. Of total 1,504 questionnaires distributed, a total of 309 were deemed valid and used for further analysis. 

Key Findings

From the sample of this study of 309 respondents, about 45.0% have experience using audit technology more than 5 years and 62.1% of the auditors surveyed were perceived to have adequate IT skills. 

The findings showed that system quality, information quality, perceived usefulness, user satisfaction and individual impact are valid and reliable measures of audit technology success. 

Public sector auditors perceived that higher-quality audit technology, such as systems that provide useful and updated information, enhances their perception of the technology’s usefulness. This, in turn, increases their satisfaction and positively affects their job performance.

Professional Implication: Future Road Map For The National Audit Department Digitalisation Project

Under the new leadership of the Auditor-General (A-G) of Malaysia, Datuk Seri Wan Suraya Wan Mohd Radzi, the National Audit Department (NAD) is undergoing its largest digital transformation in its 120-year history. The A-G has committed to a transition from traditional sampling to a data-driven system with a vision for “Full Digitalisation” by 2025–2026, called the PPJ initiative, the Projek Pendigitalan Jabatan Audit Negra, which refers to the National Audit Department Digitalization Project. (National Audit Department, 2026)

The key components of the PPJ initiative are reflected in the rollout of several high-impact digital systems such as:

• e-SelfAudit System: Launched to automate the auditing of nearly 2,000 government-linked companies (GLCs). 

• Auditor-General’s Dashboard (AGD): Providing real-time monitoring of audit issues.

• National Audit “War Room”: The establishment of a central digital “War Room” and similar facilities in all state NAD offices to support real-time data monitoring and high-impact auditing.

• Human Capital Development System (SPMI): A dedicated system to manage the digital upskilling of the NAD’s 2,000+ officers.

The A-G’s commitment is bolstered by the 2024 amendments to the Audit Act 1957 which empowers the A-G to audit any entity receiving public funds. This massive undertaking would be impossible without the e-SelfAudit System under the PPJ initiative. The digital tools are designed to facilitate the “follow the public money” approach, ensuring that every money is tracked across digital platforms to identify leakages and inefficiencies. The Auditor-General’s commitment reflects a strategic pivot towards becoming a “Check and Balance” institution for the digital era, aiming to eliminate human error and manual delays while increasing the deterrent effect against financial mismanagement in the public sector.

With the high commitment of A-G, the system developers of PPJ initiative should focus on the quality of the application related to its attributes and output. System developers should emphasis audit application/technology to be user-friendly, easy to learn and easy to use. 

The PPJ team should focus in developing audit technologies that are able to generate information which appropriately meets the auditors’ requirements. The information should be updated and accurate and provided in a timely manner. Having accurate information will influence the auditors’ perception on the usefulness of the audit application during the technology-enabled auditing. When the auditors perceive that audit technologies enable them to complete their tasks more quickly and efficiently, and improve their job, they will keener in using the audit technology. This will improve the effectiveness of technology in their job function, increase auditors’ satisfaction to use audit technology more frequently, and improve technology enabled auditing performance. In addition, auditors’ satisfaction on the efficiency and effectiveness of audit technology will stimulate the successful utilisation of the technology during the audit task. As a result, the auditors’ use of technology can increase the efficiency, productivity, and effectiveness of auditors’ job performance, which in turn represents the audit technology success. 

The management and PPJ team should emphasize providing awareness to auditors to overcome resistance towards technology. Furthermore, based on the research, sufficient training for auditors should be provided to ensure the capacity development of appropriate knowledge and competencies related to audit technology, which further increases the perception that audit technologies are useful and beneficial to auditors. 

References

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• Braun, R. L., & Davis, H. E. (2003). Computer‐assisted audit tools and techniques: analysis and perspectives. Managerial Auditing Journal, 18(9), 725-731.
• Buang, A. (2015). Leveraging Technology to Enhance Audit Quality and Effectiveness. In 6th ASOSAI Symposium, Kuala Lumpur, Malaysia.
• Feliciano, C., & Quick, R. (2022). Innovative Information Technology in Auditing: Auditors’ Perceptions of Future Importance and Current Auditor Expertise. Accounting in Europe, 19(2), 311–331. https://doi.org/10.1080/17449480.2022.2046283
• IFAC & CIPFA. (2022). International Public Sector Accountability Index: 2022 Status Report. International Federation of Accountants.
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