THE EFFECT OF E-COMMERCE ON THE EXTERNAL AUDITORS WORK.

BY

MICHAEL MWAURA

16/05707

RESEARCH PROPOSAL

SUBMITTED IN THE FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF

THE BACHELOR OF COMMERCE DEGREE; ACCOUNTING OPTION

KCA UNIVERSITY, RUARAKA

MARCH, 2020
 DECLARATION
This project is my original work and has not been presented in any educational institution for
the purposes of academic credit.

Signature:…………… Date:…............

Supervisor

Signature......................Date ....................

i
DEDICATION

ii
AKNOWLEDGEMENT

iii
Contents
DECLARATION......................................................................................................................................i

DEDICATION........................................................................................................................................ii

AKNOWLEDGEMENT........................................................................................................................iii

ABSTRACT............................................................................................................................................v

CHAPTER ONE........................................................................................................................................1

1.0 INTRODUCTION.............................................................................................................................1

1.1 Background to the Study:..................................................................................................................1

1.2 Statement of the Problem:..................................................................................................................2

1.3 Research Objectives...........................................................................................................................3

1.3.1 General Objective...........................................................................................................................3

1.3.2 Specific Objectives.........................................................................................................................3

1.4 Research Questions:..........................................................................................................................3

1.5 Justification of the study....................................................................................................................4

1.6 Significance of the study....................................................................................................................4

1.7 Scope of the Study...........................................................................................................................5

CHAPTER TWO.......................................................................................................................................6

2.0 LITERATURE REVIEW................................................................................................................6

2.1 INTRODUCTION.............................................................................................................................6

2.2 Theoretical literature review..........................................................................................................6

2.2.1 Agency theory and the role of audit................................................................................................6

2.2.2 Theory of inspired confidence........................................................................................................7

2.2.3 Stewardship theory.........................................................................................................................8

2.3 EMPIRICAL REVIEW.....................................................................................................................9

2.3.1 E-Commerce Audit Procedures......................................................................................................9

2.3.2 Auditor's Training.........................................................................................................................10

2.3.3 Risk assessment of e-commerce by external auditor.....................................................................11

2.4 CONCEPTUAL FRAME WORK;................................................................................................12

CHAPTER THREE.................................................................................................................................13

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 3.0 RESEARCH METHODOLOGY.....................................................................................................13

3.1 Introduction.....................................................................................................................................13

3.2 Research Design..............................................................................................................................13

3.3 Target Population and Sample Frame..............................................................................................13

3.4 Samples and Sampling Procedures..................................................................................................14

3.5 Instrumentation................................................................................................................................15

3.6 Data Collection................................................................................................................................15

3.7 Data Analysis and Presentation........................................................................................................16

APPENDICES.........................................................................................................................................17

APPENDIX I: COVER LETTER..........................................................................................................17

APPENDIX II: QUESTIONNAIRE......................................................................................................18

REFERENCES........................................................................................................................................22

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ABSTRACT

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vii
 CHAPTER ONE
1.0 INTRODUCTION
1.1 Background to the Study:
The electronic commerce (E-Commerce) represents one of the challenges, which face both
accountants and auditors, since many organizations have changed to adopt E-Commerce.
According to Al Basoos (2009), E-commerce consists of the buying and selling of products
or services overel ectronic systems such as the Internet and other computer networks.
According to Weil and Vitale (2001), from thebusiness process perspective, e-commerce is
doing business electronically by completing business processes over electronic networks,
thereby substituting information for physical business process. Some examples of companies
engaged in e-commerce include: Amazon, Priceline, N-soko, Sokopal among others
(Rigelsford, 2000).

It represents a new type of business economic patterns at the global level, in the information
age, and advanced modern technology in this era where borders disappear in commerce
geography, and has also changed the concept of the determinants of capital (Turban &
Others, 2004).

E-Commerce has become the prime driver of contemporary E-commerce. With the increasing
imperative for the economic units that seek to strengthen its competitive position to adapt the
electronic environment, by changing its accounting system radically or gradually and
focusing on the so-called electronic accounting. After the emergence of new technologies in
the business world as an extension of the electronic environment and development E-
Commerce has become one of the most important challenges in front of the new accounting
and auditing (Zwass, 1996).

The modern revolution in Information Technology has become the backbone of E-

Commerce. With the development of E-Business activities it becomes the perfect computer
and communications network to run, based on its strong dependence on computer systems,
holds a huge threat to the control ineffective. Inappropriate use may result in disastrous
consequences, and the existence of computer viruses and "hackers" wanton attack, computer
crime, and so have led to the risk of E-Commerce information distortion.

The study into the impact of electronic commerce on the external auditors work and the
execution of his duties in ascertaining financial reports and in preparing his report. The
external auditor must carry out such investigations as will enable him to form an opinion as to

1
whether adequate accounting records according to N.D Nzomo (1998), of the businesses
operating in E-commerce have been kept by the company and whether the audit-able part of
the company's directors' remuneration report is in agreement with the accounting records and
returns, has been necessitated by a significant increase in threat to financial reporting
standards, quality of audit reports and disclosure in financial statements due to the very
nature of operations E- commerce businesses more often with respect to firms dealing with
provision on services as compared to firms dealing in sale of products in the industry.

Therefore, auditors need to audit reports and reliability of the received information; therefore
it is important to know how to describe the E-Commerce of audit that affects audit evidence,
audit documentation, identify issues for E-Commerce system and other specialized IT
environment and improve the impact of E-Commerce on the external auditor's work of
International Accounting Firms which works in Kenya. (Haag & Cummings, 2010, P.128)

1.2 Statement of the Problem:

There are many obstacles that limit the applications of E-Commerce audit in Kenya and these
are; Audit procedure that the auditor will come up with. This is due to the dynamic nature of
e-commerce. There may be need for thorough investigation for reliable audit evidence to be
acquired. Therefore after acquiring proper knowledge is when the auditor can be able to get
the appropriate audit procedure.

While the use of technology in the business world has grown exponentially in the past
decades, the extent to which auditors have adopted computer and tools such as computer-
assisted auditing techniques (CAATs) to meet this growth remains an empirical question
(Arnold and Sutton 1998; Curtis and Payne 2008; Janvrin et al.2009). Therefore, it’s essential
that auditors sharpen their skills in the use of computers. Auditors must keep pace with the
changing environment because inevitably there will be occasions when mere working
knowledge of computers will be insufficient. It is vital that in order to ensure quality in
audits, auditors must become experts in applying audit software to be able to tackle E-
commerce. High quality audit refers to the production of financial information without
misstatements, omissions or biases. From an agency theory perspective, Dang (2004) argues
that audited financial statements are a monitoring mechanism to provide assurance for users
of financial information.

As E-commerce continues to have an impact in society, it will be crucial for auditors to

recognize that the traditional annual financial statement audit will be unsatisfactory and

2
insufficient for decision makers. Companies will need a more timely audited financial
statement and auditors should be prepared to offer this service, and auditors that cannot
deliver customized services to each client will incur lost revenue and lost clients (Chen,
2004).

Several studies have been carried out on area of audit quality using a number of variables.
Ulrika (2011) studied two variables that may affect audit quality; Number of audit assignment
and age of the auditor. Jackson, Moldrich & Roebuck (2008) also studied audit E-commerce
from the perspective of mandatory audit firm rotation. Hoitash, and Barragato (2007)
examined if auditors fees has an impact on audit quality and Lennox (1999) used size of the
audit firm as variable to audit quality. None of these studies has given the effect E-commerce
auditing no audit quality.

Although the role of auditing in our country is significant, auditing researchers and

practitioners have little guidance available on the effect of adoption of E-commerce

auditing on audit quality among Kenyan audit firms.This study sought to address this

knowledge gap by trying to answer these the research questions.

1.3 Research Objectives

1.3.1 General Objective
-To identify the impact of E-commerce on external auditors work in the Kenyan accounting
firms.

1.3.2 Specific Objectives

i. To determine the impact of E-commerce audit procedures on the external auditors
performance.

ii. To investigate the risk assessment by the external auditor in E-commerce based
enterprises.

iii. To understand the auditors training on proper audit procedures on E-commerce based
enterprises.

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1.4 Research Questions:
i. What is the impact of E-commerce audit procedures by external auditor?

ii. What is the criteria of risk assessment by the external auditor in e-commerce based
enterprises?

iii. What are the auditor training methods on proper audit procedures on E-commerce
based enterprises?

1.5 Justification of the study

The study is due to the need to define the role auditors of E-commerce and its institutions and
its requirements so that auditors deal with this type of activity efficiently and effectively, and
the need for increased training of scientific, practical and technological auditors will
positively reflect on the process of checking e-business processes, and the need of specialized
courses in the audits of E-commerce by Chartered Accountants, as well as the importance of
educating auditors of E-commerce dangers and how to deal with during the audit process.

1.6 Significance of the study

The study is significant to many stakeholders in the e-commerce world. This includes;
Auditors, scholars and companies.

Companies

E-commerce is a channel that is used by different companies to reach a wider market group at
cheaper and convenient way. Alibaba, E-bay and Amazon companies are the leading
companies in this sector. Not only has it boosted their sales but has gained them a large
market share. Therefore, the need to describe the impact of e-commerce is necessary for the
potential creditors who rely on the auditor’s report to acquire provide capital to companies.

Auditors

Auditors will benefit from the study as well as identify the main difficulties and risks that
prevent E-Commerce based companies from obtaining audit evidence of high quality, as the
results will give indications on the impact of E-Commerce on the external auditor work in
Kenya.

Scholars

Scholars will be able to understand the growth of businesses into e-commerce technology.
This will allow for further research into the skills auditor require to equip themselves so as to
adequately tackle e-commerce based businesses.
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1.7 Scope of the Study
The research is to be conducted in multi-national accounting firms based in Kenya, to
determine the impact of e-commerce on the external auditors work in Kenya. Unlike previous
studies that have used a descriptive approach this study has adopted an integrative approach
of both descriptive and OLS methods based on information and literature gathered for the
period between early 2003 and 2012. The Methodology does not set out to provide solutions
but offers the theoretical underpinning set of methods or so called “best practices” can be
applied (Borg & Gall, 1989). The researcher has adopted the questionnaire method to obtain
information. The research instruments are therefore delimited to questionnaires.

Previous studies in this field have failed to focus directly on the E- Commerce process, where
the researchers gave their attention to E- Commerce business models. The researcher adds
value to his study from others researchers efforts in the same field of search, where E-
Commerce is one of the new sciences in Kenya. The scope of this study also features
additional research variables including the auditor's independence and e-commerce audit
procedures that have not been focused upon previously on other studies as well as the
techniques and systems used by the international accounting firms that follow this field in
Kenya.

5
 CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 INTRODUCTION
Auditing is the accumulation and evaluation of evidence about information to determine and
report on the degree of correspondence between the information and established criteria
(Arens et al, 2012, P.4). Auditing is also the systematic process of objectively obtaining and
evaluating evidence regarding assertions about economic actions and events to ascertain the
degree of correspondence between those assertions and establish criteria and communicating
the results to interested users (Hall, 2007, P.742). According to R. K. Mautz, Auditing is
concerned with the verification of accounting data, with determining the accuracy and
reliability of accounting statements and reports.

2.2 Theoretical literature review

2.2.1 Agency theory and the role of audit
Agency theory proposes that the relationship between an employer (principal) and an
employee (the agent) is represented by an employment contract (Eisenhardt, 1989).

In an audit, partners are the only auditors that have the responsibility to “sign off” their audit
reports on their clients' financial statements. Therefore, Lindberg and Beck (2004) suggest
that in the post‐Enron environment, partners would try avoiding risks to the audit firm's
reputation by exercising more prudent audit judgment to avoid recurrence of corporate
collapse and litigation. Auditors especially partners, are more careful and concerned with the
audit assurance level for the reason of reputation protection and litigation avoidance (Asare
et al., 2005).

Empirical studies have been conducted on auditors of different ranks and produced
inconsistent results. The focus has been on whether auditors of different ranks within firms
entertain different perceptions in identical circumstances. The results are also inconclusive
and frequently inconsistent. Several studies have indicated that auditors of different ranks
have different perceptions of independence (Shockley, 1981; Farmer et al., 1987; Dijk, 2000;

6
Elias, 2004); and others show that auditors of different ranks do not have different
perceptions of independence (Iyer and Raghunandan, 2002; Desira and Baldacchino, 2005).

A principal-agent relationship arises when principals engage another person as their agent to
perform some service on their behalf. Delegation of responsibility is helpful in promoting an
efficient and productive economy, however delegation also means that the principal needs to
place trust in an agent to act in the principal’s best interests. Because of information
asymmetries between principals and agents and differing motives, principals may lack trust in
their agents and may consequently need to put in place mechanisms to reinforce this trust.

Applying ‘executive compensation schemes’ and monitoring through information systems are
examples of mechanisms using in aligning agents’ and principals’ interests. Another
monitoring mechanism is the audit. An audit provides an independent check on the work of
agents and of the information provided by an agent, which helps to maintain confidence and
trust (Audit quality, 2005, 7).

The financial statement audit makes management accountable to shareholders for its
stewardship of the company. “Auditors are engaged as agents under contract but they are
expected to be independent of the agents who manage the operations of the business. The
primary purpose of audited accounts in this context is one of accountability and audits help to
reinforce trust and promote stability” (Audit quality, 2005, 9).

2.2.2 Theory of inspired confidence

The theory of inspired confidence was developed by (Limperg, 1920) The demand for audit
services is the direct consequence of the participation of ouside stakeholders (third parties) in
the economy (Hayes et al., 2005). Therefore, since the information given to the stakeholders
by the management might be biased, an audit of this information is needed. It restrains the
auditor’s responsibilities on “arithmetical accuracy and on the prevention and detection of
fraud” (Hayes et al., 2005). However, after several financial statement frauds and company
collapses in the past this theory has been reconsidered.
The role of the auditor is essential for verifying the accuracy and correctness of the
information provided by corporations. He acts as an intermediary between the management
and the users of this financial information. To reduce the information asymmetry, the auditor
has also to comminicate with those using the information he provides. Thus, it is important

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that the groups involved have an understanding of the audit’s meaning. However, in this case
the opinions are divided. Several attitudes do exist concerning the expectations of the purpose
and operation of the audit.

Humphrey (1997) provides the most notable distinctions between views of auditing: as a
socially oriented function, in which “the auditors are portrayed as ethical, socially responsible
individuals”, and auditing as a monopolistic business.

2.2.3 Stewardship theory

stewardship theory of Donaldson and Davis (1991) was found significant in explaining
external audit the research framework. This is because the theory is mainly concerned with
identification of situations in which the interests of the principal and the steward are aligned.
In fact, Ebimobowei and Binaebi (2013) noted that, auditing exist as result of stewardship
concept and stewardship accounting.

Adoption of stewardship approaches within the government sectors will bring a number of
changes within the sector, because stewardship theory serve as accountability mechanisms for
ensuring good monitoring, good audit and reporting in order to assists in
objectiveachievement (Cribb, 2006).

Equally, Ebimobowei and Binaebi (2013) recommended that, auditing enhance appropriate
stewardship reporting. Therefore, using this kind of theory within the context of government
agencies will lead to the attainment of their respective objective because the stewardship
theory have concerned that might lead to organization success. Stewardship theorists put
down a model of governance which promotes the ability of employees to contribute towards
strategic objectives achievement (Hernandez, 2012).

Stewardship theory concerned with the matters that organizations leaders have the obligation
of ensuring better achievement of such organization activities than any other selfishness
(Donaldson & Davis, 1991). Therefore, if the organization did well, its staff will also do well
thereby investing their energy in their respective organizations success (Davis, Allen &
Hayes, 2010). The same applicable to local government context, if the local government
councils does well therefore, their internal auditors will also did well toward the objective
achievement of the local government.

Donaldson and Davis (1991, 52) pretend that stewardship theory focuses not on motivation of
the CEO but rather facilitative, empowering structures. Contrary to the agency theory,
8
stewardship theory holds that fusion of the roles of CEO (executive management) and chair
of the board of directors will enhance effectiveness and produce superior returns to
shareholders than separation of the roles of CEO and chairman.

Stewardship theory is therefore relevant in the case of e-commerce and auditing in the sense
that it allows for managers to be provided with the relevant information and allow them to
make accurate decisions. Auditors are able to understand e-commerce based businesses and
therefore are able to use relevant procedures to acquire reliable evidence which will lead to
qualification or unqualified of the report.

2.3 EMPIRICAL REVIEW

2.3.1 E-Commerce Audit Procedures
According to Whittington and Pany (2004), audit procedures involve the understanding
of the client, the business, and industry to use it in assessing risks, the understanding of
the internal control environment, the design and performance of controls testing to
assess how effective the controls are in preventing or detecting material misstatements;
and the design and performance of substantive procedures that include analytical
procedures, direct testing of transactions and ending balances.

The audit procedure begins with notification which alerts the audited party about the
date and time of the procedure. Planning, as the next step, is conducted by the auditor
before the audit so as to recognize the main areas of risk and areas of concern. This step
is generally completed in a series of meetings with the auditing staff thus leading up to
the opening meeting between the auditing staff and senior management of the auditing
target and administrative staff.

The process undertaken by the auditor is described by him. Management describes the
areas of concern to them in addition to the schedule of employees which must be
consulted. Fieldwork, the next step, starts after the results of meeting are used to
regulate the final audit plans. Employees are notified about the audit, schedules are
drawn up with regards to the audit staff’s activities, and initial investigation commences
after identification of business procedures. The audit approach in an e-commerce
environment involves the standard six basic steps, namely: Preliminary survey,
documenting the environment, audit planning, audit fieldwork which also involves
interviewing key staff, testing current business practices through sampling, reviewing
the law and testing internal rules and practice for equanimity, Audit reporting

9
2.3.2 Auditor's Training
External auditors of E-commerce enterprises are required to have proper qualifications and
competency before being licensed to perform audits on E-commerce based enterprises and to
take steps to maintain professional competence. Requiring qualifications for auditors ensures
that they have proper competency. Having qualified professionals audit public or private
enterprises operating with E-commerce platforms will improve financial reporting and
enhance investor confidence that the underlying financial statements include full and fair
disclosure.

Carmichael (2004) notes that ‘‘auditing educators need to make sure their students are acutely
aware of the need to obtain a thorough understanding of both the manual and computerized
aspects of the accounting system.’’ Further, both Arens and Elder (2006) and Arnold and
Sutton (2007) propose several curriculum reforms they feel are necessary to meet the
information systems requirements imposed on auditors in the current environment.

Proper qualification of independent auditors can be established a number of ways. For

example, the qualification process should involve concentration in accounting and auditing at
the university level or through a similarly accredited professional body. In addition,
establishing a set period of minimum professional experience is useful in auditors training . A
test for proficiency should be required before a license is obtained. If specialties in specific
areas of auditing (e.g. financial services, taxation) are recognized, consideration might also be
given to testing or requiring experience to ensure reasonable competence in such areas.

The internal auditor is a person with know-how, high level of knowledge, skills and abilities,
and by following international auditing standards, ensures more effective control (McKee,
2006).

Given the speed with which business changes and the need for auditors to ensure that their
skills are up-to-date, consideration also should be given to a requirement that auditors
undertake periodic continuing professional education programs, as well as other means to
maintain professional competence.

Establishing qualification requirements and requiring maintenance of professional

competency will help maintain and enhance the level of expertise of auditors. Moreover, the
risk that authorization can be revoked for failure to have or maintain the necessary
qualification provides an incentive for compliance and adherence to auditing standards.
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2.3.3 Risk assessment of e-commerce by external auditor.
E-commerce is a very new area of business that auditors require sufficient knowledge. The
growth of e-commerce are significantly affecting the traditional business environment. E-
commerce is changing the competitive market and making international trading viable for a
much larger number of businesses.

How Leung et al., [2009] have developed an integrated knowledge-based system that assists
external auditors to determined potential risk factors and the corresponding project risks.
According to this knowledge-base system, most auditor's worry about the time involved in
risk management when it comes to identifying and assessing risks. However, with the aid of
computers and the use of software systems, the time for risk analysis can be significantly
reduced.ever, in the midst of these changes in the business environment, the auditor's
responsibility to provide an opinion on the financial report has remained unchanged.
Although communication and transactions over networks and through computers are not new
features of the business environment, the increasing use of the internet for e-commerce
introduces new variables of risk and control requiring audit consideration.

E-commerce is not clearly defined or constrained, but comes with 'open boundaries' in terms
of scope. The auditor requires appropriate skills to understand how an entity's e-commerce
strategy addresses the business risks that arise. Audit risk assessment for e-commerce
requires a paradigm shift in the way auditors consider client entities and the way auditors
plan audit procedures to reduce audit risk to an acceptable level.

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 2.4 CONCEPTUAL FRAME WORK;
The researcher formulated a conceptual framework for the study as illustrated in Figure
below;

Independent Variable

Auditors training

Dependent variable

Auditor's Work E- Commerce Audit procedures

Risk assessments

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 CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This chapter presents the methodology, which will be used to carry out the study. It
further describes the type and source of data, the target population and sampling methods
and the techniques that will be used to select the sample size. It also describes how data
will be collected and analyzed. The suitable methodology in this study gives the
guidelines for information gathering and processing.

3.2 Research Design

According to Cooper and Schindler (2003), a descriptive study is concerned with finding out
what, where and how of a phenomenon. Descriptive research design is concerned with the
intense investigation of problem solving situations in which problems are relevant to the
research problem.

This research problem will be studied through the use of a descriptive research design. This
is because descriptive research design gives the researcher ability to collect, organize and
compare vast amounts of discreet categorical and continuous non-discreet data in a more
manageable form. Descriptive research design will be used to establish the impact of e-
commerce on the external auditor's work.

3.3 Target Population and Sample Frame

(Kothari, 2006) states population as the entire items or persons that the study will term as the
area of study where a researcher is intending to monitor the behaviors and features.
According to Mugenda & Mugenda (2003) population means a whole group of individual’s
objects or events with identifiable characteristics. The target population should have similar
possible characteristics that a researcher wishes to study on and generalize the results in line
to its (Mugenda & Mugenda, 2003).

The population of this study will constitute auditors and accountants working at KPMG in
Nairobi has a population of 150 members.

13
Table 1: Target Population
Category Population (Frequency)
Top Management 50
Middle level Management 100
Total 150

Source:

3.4 Samples and Sampling Procedures.

The study will Sampling refers to the process of selecting a percentage of a population to
study representing the population as a whole (Fox,Hunn &Martha 2007).Sample defines a
portion of the target population selected to represent the rest in a research (cooper &
schindler 2006).

select a section and particularly the staffs who included departmental heads, assistant
departmental heads and lower cadre staffs like the supervisors, clerks, cashiers and other
employees from KPMG Kenya since they are the ones conversant with the impact of E-
commerce on the work of an external auditor.

Owing to the large number of target population and given the time and resource constraints,
the sampling at least 30 elements will be used. This generates a sample of 30 respondents
which the study sought information from. This made it easier to get adequate and accurate
information necessary for the research.

Table 2: Sampling Frame

Sections Population (Frequency) Sample percentage

Senior auditors 20 4
Audit assistants 30 6
Accountants 50 10
Financial Directors 50 10
Total 150 30

Source:

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3.5 Instrumentation

This study will employ questionnaires to collect data. A questionnaire is an instrument of

collecting data with of a series of set questions and some other stimulates to collect
information from respondents(Shao ,2000).The essence of using a questionnaire is because it
is easy to use and get data and thus processing and analyzing is also made easier(Jackson ,
2009). The questionnaire will assist to gather a lot of information quickly and get immediate
feedback and hence it will minimize errors and be able to obtain accurate and relevant
information of the study.

3.6 Data Collection

The study will use primary data. Primary data was collected by use of a structured
questionnaire and secondary data was drawn from review of organizations’ profiles and
journals, the internet, books, magazines, past research findings among others. Data will be
collected using a questionnaire developed by the researcher drawn from the three research
questions.

With regard to the impact of e-commerce on the work of an external auditor, the study will
use questionnaires administered to each member of the sample population. Dempsey (2003),
argues that questionnaires are effective data collection instruments that allow respondents to
give much of their opinions pertaining to the research problem. Kothari (2004) states that
information obtained from the questionnaires are free from bias and researcher’s influence
and hence accurate and valid data will be gathered.

The questionnaire will be carefully designed and tested with a few members of the population
for further improvements. This will be done in order to enhance its validity and accuracy of
data to be collected for the study.

Validity of questionnaire refers to the degree to which an instrument measures what it is

supposed to be measuring. Validity has a number of different aspects and assessment
approaches. Statistical validity is used to evaluate instrument validity, which include internal
validity and structure validity.

15
3.7 Data Analysis and Presentation
The process of data analysis involves data clean up and explanation. This process includes
several stages. Data preparation entails obtaining information and insights from the data
which has been obtained. Frequency tables and percentages are used to present the findings.

Before processing the responses, the completed questionnaires will be verified for
completeness and consistency. Quantitative data collected will be analyzed by the use of
descriptive statistics . The information was displayed by use of bar charts, graphs and pie
charts and in prose-form. This will done by tallying up responses, computing percentages of
variations in response as well as describing and interpreting the data in line with the study
objectives and assumptions.

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 APPENDICES

APPENDIX I: COVER LETTER

Michael Mwaura

P.O.BOX 557-00900

Kiambu

Dear Respondent,

RE: REQUEST FOR YOUR PARTICIPATION IN MY RESEARCH PROPOSAL

My name is Michael Mwaura a student at KCA University, currently doing my research

project and am pursuing a degree on Bachelor of Commerce.As part of fulfilling the degree
requirements, I am to conduct a study on effect of E-commerce on external auditors work.

You have been selected randomly to participate in this study. Any information you provide
will be treated confidentially. I highly appreciate your participation.

Yours Sincerely,

Michael Mwaura

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APPENDIX II: QUESTIONNAIRE
Section 1: Personal Information:-


Note: Please answer the questionnaire by put a mark ( ) based on your personal
information:

1- Age:
Less than 30 years( ) 30 – Less than 40 years( )
40 – Less than 50 years( ) More than 50 years( )

2- Qualification:
Diploma( ) B.Sc( ) M.Sc( )

3- Specialization:
Accounting( ) Financial and Banking Sciences( )
Economic( ) Other, Identify …………………

4- Job Description:
Accountant( ) Assistant Auditor( ) Senior Auditor()
Audit Manager( ) Other, Identify …………………

5- Years Experience in Auditing Field :

Less than 5 years5 – Less than 10 years( ) More than 10 years( )

6- Numbers of Times that Audited on E-Commerce Processes:

Not there( )
Less than 5 times( )

5 – Less than 10 times( )

More than 10 times( )

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Table No.1 : Impact of E-commerce on Audit Procedures:-


Note: Please answer the questionnaire by put a mark ( ) based on your personal opinion:

Statement Strongly Agree Moderately Disagree Strongly

Agree Agree Disagree

1. The auditor has the ability to determine

the extent of the required procedures
for auditing in the E-commerce
environment
2. When preparing the auditor’s report,
the auditor takes into account the
nature of E-commerce processes
3. The electronic information system is
used in the preparation of the annual
financial statements at the audit process
4. When preparing the external auditors
report, information technology is used
for firms practicing E-commerce
5. It falls to the external auditors full
responsibility to determine whether the
financial data agreed with electronic
financial data

Table No. 2 : Extent of Current Skills and Training :-

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 
Note: Please answer the questionnaire by put a mark ( ) based on your personal opinion:

Statement Strongly Agree Moderately Disagree Strongly

Agree Agree Disagree

1. The auditor has appropriate knowledge

about the Internet and e- commerce

2. The auditor has the ability to understand

the impact of the firm business in
Ecommerce on the financial data
3. The auditor has the ability to understand
the firm which looks for managing of
electronic errors
4. The auditor has the ability to evaluate
electronic audit manual
5. The auditor has the ability to determine
the extent, the nature and timing of audit
procedures
6. The auditor has the ability to understand
the risks involved in audit of electronic
commerce
7. There is an urgent need to attend a
program, rehabilitation and training on
audit of E-commerce

Table No. 3: Impact of E-commerce systems on Auditors Independence :-


Note: Please answer the questionnaire by put a mark ( ) based on your personal opinion:

20
 Statement Strongly Agree Moderately Disagree Strongly
Agree Agree Disagree

1. The use of E-commerce systems in the

audit process leads to reliance
increasingly on devices ad program
abilities
2. Considered, the nature of E-commerce
relatively diminishes auditors
independence
3. E-commerce systems increases the
owners influence on financial data and
consequently diminishing external
auditors independence
4. Internal or external hacking and
manipulation of data on E-commerce
systems could significantly limit
auditors independence

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