Adopting Computer-Aided Risk-Based (CARB) Audit Approach to Reduce Audit Risk: Bangladesh Perspective

Abstract

Purpose of the study: This paper aims to understand how the application of a CARB audit approach practiced by the Big 4 firms can impact the overall audit risk of the engagements, in the context of Bangladesh

Methodology: In this study, data has been collected through an online survey questionnaire from 137 (one hundred and thirty-seven) practitioners currently working for different audit firms in Bangladesh. Besides this, semi-structured interviews have been conducted with 7 (seven) practitioners.

Findings: In Bangladesh, encouraged by the parent office, KPMG have already started using KPMG Clara, to plan and perform specific audit engagements. Other partner firms of the Big 4 audit firms are preparing themselves to embrace such new technologies.  As per the findings, supported by the survey data and opinions of the practitioners collected during the interviews,  transitioning to a CARB audit approach, powered by machine technology, reduces the overall audit risk by reducing the control risk and detection risk in audit engagements. In terms of preparedness to adopting the Computer-Aided Risk-Based audit approach, the local audit practicing firms are behind the local representatives firms of the Big-4s.

Implications: Understanding the implication of the Computer-Aided Risk-Based (CARB) audit approach can help local firms take proactive action that can improve their overall audit quality by reducing the audit risk. However, as the evidence shows, local firms are lagging behind in terms of adopting such practices.

Limitations and Future direction: Further research focusing on comparing the quality of the audit evidences collected through Computer-Aided Risk-Based Approach and Traditional Approach can direct the local audit practicing firm towards adopting practices that can enhance the overall quality of the audit engagements.