A Structural Modelling Approach to The Impact of Electronic Auditing Determinants on The Financial Performance of Islamic Banks in Kurdistan

Bayar Ali Ismael; Azhy Akram Aziz; Omran M.Rashid Abdulqadir; Karwan Ismail Abdulrahman; Sardar Jalal Braim; Barzan Omar Ali; Bayar Gardi

doi:10.25212/lfu.qzj.9.1.45

توێژەران

Bayar Ali Ismael Department of Accounting, College of Business and Administration, Erbil Polytechnic University, Erbil, Kurdistan Region, Iraq
Azhy Akram Aziz Department of Media, College of Business and Administration, Erbil Polytechnic University, Erbil, Kurdistan Region, Iraq
Omran M.Rashid Abdulqadir Department of Accounting, Chamchamal Technical institute, Sulaimani Polytechnic University, Sulaimani, Kurdistan Region, Iraq
Karwan Ismail Abdulrahman Department of Accounting, College of Administration and Financial Sciences, Knowledge University, Kirkuk Road, 44001 Erbil, Kurdistan Region, Iraq
Sardar Jalal Braim Accounting of Department College of Administration & Economics, Lebanese French university, Erbil, Kurdistan Region, Iraq
Barzan Omar Ali Accounting of Department, Aynda Institute, Erbil, Kurdistan Region Iraq
Bayar Gardi Department of Accounting, College of Administration and Financial Sciences, Knowledge University, Kirkuk Road, 44001 Erbil, Kurdistan Region, Iraq

##semicolon##

https://doi.org/10.25212/lfu.qzj.9.1.45

##semicolon##

Audit infrastructure and technical expertise; ethical conduct; financial performance; organizational funding; technological risk.

پوختە

The study aims to develop a model that can effectively capture the impact of internal electronic auditing determinants on the financial performance of Islamic banks. Specifically, the objectives were to (1) determine the effect of technological risk, organizational funding, audit infrastructure and technical expertise and ethical conduct on the financial performance of Islamic banks and (2) ascertain the validity of propositions that moderating ethical conduct moderates the interactive connections linking technological risk, organizational funding, and audit infrastructure and technical expertise with financial performance. Consequently, the study applied a structural equation modelling approach in analyzing 250 questionnaire responses collected from managers, auditors, accountants and other employees of 11 Islamic banks in Erbil Kurdistan. The results of the study revealed that organizational funding, audit infrastructure and technical expertise, and ethical conduct electronic internal auditing determinants distinctively contribute positively toward improving financial performance, but the extent of the impact differs from one internal control component to the other. It was further revealed that technological risk poses huge adverse effects on banks’ financial performance and this demands bank managers to enact effective risk management and mitigation strategies to curb the prevalence of such risks. The study concludes that it is important for bank managers to restructure the banks' internal auditing practices according to the banks’ technological risk, organizational funding, audit infrastructure and technical expertise, and ethical conduct.

##plugins.generic.usageStats.downloads##

##plugins.generic.usageStats.noStats##

سەرچاوەکان

Abu-Musa, A. A. (2004). Auditing e-business: new challenges for external auditors. Journal of American Academy of Business, 4(1), 28-41.

Aburumman, O. J., Omar, K., Al Shbail, M., & Aldoghan, M. (2022). How to Deal with the Results of PLS-SEM?. In International Conference on Business and Technology (pp. 1196-1206). Springer, Cham.

Al-Zoubi, A. M., & Al-Qadi, F. S. (2016). The Effect of Electronic Auditing in Reducing the Burden of Electronic Environment Complexity of Accounting Information System on the Auditor. Research Journal of Finance and Accounting, 7(14), 175-187.

Barrett, P. (2007). Structural equation modelling: Adjudging model fit. Personality and Individual differences, 42(5), 815-824.

Bible, L., Graham, L., & Rosman, A. (2005). The effect of electronic audit environments on performance. Journal of Accounting, Auditing & Finance, 20(1), 27-42.

Braim, s. J. (2020), the role of management accounting in the decision-making process.

Boiral, O., Heras-Saizarbitoria, I., & Brotherton, M. C. (2019). Assessing and improving the quality of sustainability reports: The auditors’ perspective. Journal of Business Ethics, 155 (3), 703–721.

Caers, R., Bois, C. D., Jegers, M., Gieter, S. D., Schepers, C., & Pepermans, R. (2006). Principal‐agent relationships on the stewardship‐agency axis. Nonprofit Management and Leadership, 17(1), 25-47.

Chambers, A., & Rand, G. (2011). The operational auditing handbook: auditing business and IT processes. John Wiley & Sons.

Charlton, G., & Marx, B. (2009). An investigation into the impact of continuous auditing on the external auditors of the four largest banks in South Africa. South African Journal of Accounting Research, 23(1), 45-65.

Etikan, I., & Bala, K. (2017). Sampling and sampling methods. Biometrics & Biostatistics International Journal, 5(6), 1-4.

Fan, X., Thompson, B., & Wang, L. (1999). Effects of sample size, estimation method, and model specification on structural equation modeling fit indexes. Structural Equation Modeling, 6, 56-83.

Fera, P., Pizzo, M., Vinciguerra, R., & Ricciardi, G. (2021). Sustainable corporate governance and new auditing issues: preliminary empirical evidence on key audit matters. Corporate Governance: The International Journal of Business in Society. 2 (1), 194-211.

Flynn, G. (Ed.). (2022). Leadership and business ethics (Vol. 60). Springer Nature.

Gallego, A., Kuo, A., Manzano, D., & Fernández-Albertos, J. (2022). Technological risk and policy preferences. Comparative Political Studies, 55(1), 60-92.

Ghose, A., & Koliadis, G. (2007, September). Auditing business process compliance. In International Conference on Service-Oriented Computing (pp. 169-180). Springer, Berlin, Heidelberg.

Gonzalez, G. C., & Hoffman, V. (2018). Effects on auditees of electronic versus face-to-face interaction in continuous auditing. Journal of Forensic & Investigative Accounting, 10(1), 100-115.

Hair Jr, J. F., Sarstedt, M., Ringle, C. M., & Gudergan, S. P. (2017). Advanced issues in partial least squares structural equation modelling. Sage publications.

He, X. (2021). Sustainability Assurance: A Call for Specialist Standards: Boiral, O. and Heras-Saizarbitoria, I., 2020. Sustainability reporting assurance: Creating stakeholder accountability through hyperreality? Journal of Cleaner Production, 243, 1–17.;

Islam, G. (2022). Business ethics and quantification: Towards an ethics of numbers. Journal of Business Ethics, 176(2), 195-211.

Kaban, I. (2020). Central Audit Activities as a Continuous Audit Approach in the Turkish Banking Sector: A Case Study about Frauds in Savings Accounts. Öneri Dergisi, 15(53), 254-275.

Kahn, K. B. (2022). Innovation Is Not Entrepreneurship, nor Vice Versa. Journal of Product Innovation Management. 39(4), 467-473

Marangunić, N., & Granić, A. (2015). Technology acceptance model: a literature review from 1986 to 2013. Universal access in the information society, 14(1), 81-95.

Maria, E., & Ariyani, Y. (2014). E-commerce impact: The impact of e-audit implementation on the auditor’s performance. Indian Journal of Commerce and Management Studies, 5(3), 01-07.

Martinez, F., & Potluka, O. (2015). Does the EU Funding Increase Competitiveness of Firms by Supporting Organisational Changes? Journal of Competitiveness, 7(2), 1-15.

Omer, R. A., Sourchi, S. M. M., Sabir, S. Y., & Aziz, A. A. (2022). Management Accounting and Electronic-HRM Strategies in Developing of E-Banks Management System in Kurdistan Regional Government. Polytechnic Journal of Humanities and Social Sciences, 3(1), 17-28.

Paniagua, J., Rivelles, R., & Sapena, J. (2018). Corporate governance and financial performance: The role of ownership and board structure. Journal of Business Research, 89, 229-234.

Peykani, P., Namazi, M., & Mohammadi, E. (2022). Bridging the knowledge gap between technology and business: An innovation strategy perspective. PloS one, 17(4), e0266843.

Prabowo, D., & Suhartini, D. (2021). The Effect of Independence and Integrity on Audit Quality: Is There a Moderating Role for e-Audit. Journal of Economics, Business, and Accountancy Ventura, 23, 305-319.

Quero, M. J., & Ventura, R. (2015). The role of balanced centricity in the Spanish creative industries adopting a crowd-funding organizational model. Journal of Service Theory and Practice. 25(2), 122-139.

Samad, A. (2004). Performance of Interest-Free Islamic Banks VIS-Ã€-VIS Interest-Based Conventional Banks of Bahrain. International Journal of Economics, Management and Accounting, 12(2), 1-15.

Sarstedt, M., Radomir, L., Moisescu, O. I., & Ringle, C. M. (2022). Latent class analysis in PLS-SEM: A review and recommendations for future applications. Journal of Business Research, 138, 398-407.

Sarstedt, M., Ringle, C. M., & Hair, J. F. (2021). Partial least squares structural equation modeling. In Handbook of market research (pp. 587-632). Cham: Springer International Publishing.

Shahzad, A., Zulfiqar, B., Ali, M., Haq, A. U., Sajjad, M., & Raza, A. (2022). Mediating role of formalization of RM methods among the perceived business risk and organization performance. Cogent Business & Management, 9(1), 2024116.

Singh, N., Lai, K. H., Vejvar, M., & Cheng, T. E. (2019). Data‐driven auditing: A predictive modeling approach to fraud detection and classification. Journal of Corporate Accounting & Finance, 30(3), 64-82.

Siraj, K. K., & Pillai, P. S. (2012). Comparative study on performance of Islamic banks and conventional banks in GCC region. Journal of Applied Finance and Banking, 2(3), 123-161

Sun, T., Alles, M., & Vasarhelyi, M. A. (2015). Adopting continuous auditing: A cross-sectional comparison between China and the United States. Managerial Auditing Journal, 30(2), 176-204.

Thabit, T. H., Ibrahim, L. K., & Majed, A. W. (2019). Proposed framework for auditing sustainable development practices in Iraq. In 8 th International Scientific Conference, Baghdad College of Economic Sciences University, Baghdad, Iraq.

Wright, P., Mukherji, A., & Kroll, M. J. (2001). A reexamination of agency theory assumptions: extensions and extrapolations. The Journal of Socio-Economics, 30(5), 413-429.