Auditors’ Risk Perception of Process Control Deficiencies

This research article investigates auditors' perceptions of risks associated with process control deficiencies through a discrete choice experiment. The study aims to enhance data-driven analysis in risk-based auditing by integrating the risk dimension when presenting process deficiencies. It identifies how different types of deficiencies, such as 'missing' activities or those related to asset-decrementing activities, influence perceived risk. The research involved 58 auditors who evaluated deficiencies in procure-to-pay and order-to-cash processes. Findings indicate that the control activity contributes significantly to risk perception, accounting for 75% of the perception, while the type of deficiency contributes the remaining portion. The study emphasizes the importance of prioritizing deficiencies based on risk to improve the efficiency of auditing processes. It also suggests grouping deficiencies by type and affected activities to manage the overwhelming number of alarms generated by data-driven analyses. This approach aims to streamline the auditing process and enhance the effectiveness of risk assessment in auditing practices.