IT Does Matter: The Folly of Ignoring IT Material Weaknesses

• In Event: IT Material Weaknesses and IT Risk Management

Abstract

Information technology (IT) has a large and growing impact on the company and its executives. IT also has an impact on the financial reporting system and the quality of its financial reports and forecasts. In a financial reporting system, our analysis of current research suggests that IT Weaknesses (ITMWs) are more pervasive and damaging than non-ITMWs. While more research to date has been performed on non-ITMWs, ITMWs are more impactful, take longer to remediate, and are associated with more subsequent restatements. There is also greater potential impact on the executives of ITMW firms as compared to executives at non-ITMW firms and a greater effort on the part of ITMW firms to repair organizational legitimacy after receiving an ITMW. When it comes to remediating material weaknesses, there is more research on remediating ITMW as compared to non-ITMW. This is particularly noteworthy because it arguably takes longer to plan, rewrite and implement changes to IT than for non-ITMW.

Authors

• Gene Kim, IT Revolution Press

• Vernon J Richardson, University of Arkansas-Fayetteville

• Marcia Weidenmier Watson, Mississippi State University