The Impact of Firm Characteristics and IT Governance on IT Material Weaknesses

Abstract

Accurate and timely reporting of organizational performance is becoming increasingly important and highly regulated. However, organizations face a variety of challenges in seeking to provide accurate and reliable information due to the existence of IT control problems. Hence it is important for end users including auditors and managers to understand how to manage IT material weaknesses (ITMWs). While there is extensive accounting research on general material weaknesses (MWs), ITMWs are under researched. This article identifies key firm characteristics that appear to be related to ITMWs. In addition, the authors suggest that IT governance may help firms mitigate such problems. To gain a deeper understanding of IT governance effects, this article proposes a model which includes an innovative construct, ITGOV, operationalized using secondary data. The authors empirically validate the proposed model based on a data set of 1,112 firms. Their study illustrates the differences between ITMWs and general MWs. These results can also help end users computing by offering insights into better management of ITMWs.