Outsourcing of Big Data Analytics by Internal Audit Function (IAF)

• In Event: Breakfast with Research Roundtable Forum Session
  In Paper Session: Audit Experimental and Survey Research Roundtable

Abstract

Big Data Analytics have the potential to fundamentally change the work process of auditors. This research studies the motivations of Internal Audit Function (IAF) to outsource big data analytics. The results of the study suggest, contrary to conventional wisdom, that economic factors, as represented by the sufficiency of the budget allocated to IAFs, are not significant. Rather, strategic and sociological factors are significant in outsourcing of big data analytics. Specifically, IAFs outsource big data analytics when they lack data skills and are tasked with fraud risk management. Additionally, the role Chief Audit Executives (CAEs) is significant. Moreover, there is also cultural variation of the outsourcing decision; IAFs from developing nations are more likely to outsource than are the IAFs from the developed countries. Further analysis of the interaction effects of these significant variables suggests that as the data skills of IAFs increase, the conditional difference of the likelihood of outsourcing decreases, suggesting that IAFs recognize both the value of data analytics and their lack of competencies. The three-way interactions of the variables support the same conclusion. The findings have implications for effective internal controls to manage risks arising from the outsourcing decision. Moreover, external auditors will find the results useful when they evaluate the competence and objectivity of IAFs before they rely on their work.

Authors

• Sharif Islam, Southern Illinois University Carbondale

• Tom Stafford, Louisiana Tech University