Information Systems Auditing Instructor: Chris Westland, PhD, CPA Certified Public Accountant (Texas License 17277) ISMT300T Information Systems Auditing Time: Wed & Fri 10:30am-12noon Venue: Rm Duration: 1 Sep - Dec 6

Week 2 topics What is IS Auditing? oWhat is the Industry Structure? oSurvey of Information Technology oInformation Systems impact on Accounting oAccounting Irregularities and Financial Fraud (Video)

Today’s Topics Preliminaries (Syllabus / Grading / Case Studies) IT Industry Structure How we got here Where we are now Tools of the Trade (HW / SW) Recent Trends, and implications for other industries The Importance of IT Strategy & Business Models How to think about IT value and its sources

Recap: Automated Clerks: Back Office Computers as automated accountants Goals were efficiency and cost control “ Legacy ” systems automated manual tasks … but had no significant effect on management ’ s decision making

Recap: Empowerment: Client / server systems enhanced the productivity of knowledge workers Word processing, spreadsheets, and other tools Fomented a “ white-collar ” revolution

How did we get here? Networking: 1995 onward The Virtual Office (Global Marketplace) Net and Web and internal networks integrate the separate activities of the firm What were “ islands of data ” have become “ knowledge nodes ” accessible to the whole firm … and the global marketplace

Recap: Embedding: Computers grow cheap, small and powerful Morphing into a commodity platform Which substitutes for all sorts of devices

Recap: IT Industry Leaders c. 2005

IT Venture Capital: Where it’s going c. 2004

How much Venture Capital?

Recent Trends: IT’s present impact on Industry

The Revolution in Productivity: post-2000

Applications Software Rules Proportion of total IT industry revenues

IT’s Contribution to US GDP Growth

Where is the growth? The most successful industries ( )

Most of the benefits go to the Consumer Booming Sales / Flagging Stocks

Why are Technology Companies Different? They have shifted away from the economics of scarcity and resource allocation, Away from the past Towards an economics information, attention and coordination Towards the future

The Evidence The end of industry; the rise of ideas

Technology & Work IT is in the process of transforming the familiar envelopes we call “ jobs. ” The “ job ” packaged work before power was portable People were expected to show up for their “ jobs ” when the machines required it. The tasks that need to be done increasingly require creativity and ad hoc response to one-time circumstances. The “ job ” seems increasingly artificial 15% of the US workforce works without a ‘job’

Decline of ‘Sweat Equity’

Financial Reporting misses the Value

Ideas, not Things, have Value Return and fixed asset intensity

How Accounting has had to Change Because of Business Automation

How Does this Influence Auditing?

Take-Aways 1. IT Industry Structure How we got here Where we are now 2. Tools of the Trade (HW / SW) 3. Recent Trends, and implications for other industries 4. The Importance of Business Models in the Information Economy 5. How to think about IT value and its sources

Detecting Corporate Fraud Video