Risk Indicators for Computer Systems Assisted Financial Examination

Abstract

Financial examination is the most important link of financial supervision. In response to increased daily financial transactions, it has become an inexorable trend to apply processing, storage, statistical, and analytical functions of computer information systems and auditing software to assist financial examiners. Based on current computer-assisted financial examination conditions, Basel Accord II, and relevant auditing standards, this study reviews literature, and classifies the risk factors of computer-assisted implementation of financial examination tasks into various basic perspectives: internal, credit risks, operating risks, examination operations, computer-assisted, information system environment, management, and supervision perspectives. Then, by adopting the method of Ou Yang et al. [14], which integrate the DEMATEL (Decision Making Trial and Evaluation Laboratory) and ANP (Analytic Network Process) methods, this study discusses the cause-effect relationship and the relative importance among computer-assisted financial examination risk factors.

The findings of this study suggest that, among all the computer-assisted financial examination risk factors, six indicators, including auditee's operational flow structure, internal auditing performance, selection of risk assessment model, client default risk management, possible errors in omissions in checking transaction tracks by the financial examiner, and lack of a computer-assisted auditing system, are the most important factors, accounting for 50.89% of the significance of all risk factor perspectives. When a financial supervisory unit uses a computer system to conduct financial examinations, experienced financial examiners conduct preliminary checks on the auditee's regulation compliance, organizational management structure, employee risk perception education, and VaR (Value at Risk) method of estimation; and then, the computer-assisted audit system is employed for effective auditing to enhance the quality of financial examination. Besides, strengthening hardware and software equipment, professional training of financial examiners, internal management, and supervision procedures would effectively reduce check risks, and considerably improve the quality of computer-assisted financial examinations.

• Financial examination
• Banking risks
• e-Auditing
• Computer information system
• Computer-assisted audit techniques (CAATs)