CHAPTER 6 THE IMPACT OF EFD USE ON AUDIT EFFECTIVENESS,
6.3. Transparency in audit process
6.3.1 Demographic variables and audit transparency
This subsection determines the relationship between demographic variables and the perceived transparency in tax auditing. Based on the results presented in Figure 6-3, the
“perceived audit transparency” had very few counts in one of its categories: those who strongly disagree that there is audit transparency had few counts (5 out of 279 counts).
Therefore, the study remodelled the scale to combine those who strongly agree with those who agree, and the scale for those who disagree and strongly disagree, before applying advanced analytical methods. Further to this, the study used the remodelled scale to test the significance of the categorical relationship between demographic variables and the perceived audit transparency, and Table 6-5 presents the result of the analysis.
Table 6-5: Demographic variable and audit transparency
Input variable Descriptive information One Way ANOVA P-Value
Scale Mean Freq.
Age 18-30 2.58 98 0.014
31-40 2.30 96
41-50 2.22 68
51 and above 2.94 17
Overall 2.42 279
Gender Female 2.38 173 0.368
Male 2.49 106
Overall 2.42 279
Education Primary Education 2.67 79 0.001
Secondary Education 2.37 90 Certificate or Diploma 2.14 88 Degree and above 2.86 22
Overall 2.42 279
Business experience
2 years and below 2.29 148 0.081 Between 3 and 5 years 2.59 78
6 years and above 2.53 53
Overall 2.42 279
Source: (Author’s Design, 2020)
It will be recalled that the intention of the analysis presented in Table 6-5 was to determine the categorical relationship between demographic variables and the perceived transparency in an audit exercise. In the first part of analysis, the study determined the significance of the relationship between the age of respondents and the perceived audit transparency.
According to results presented in Table 6-5, the observed p-value is 0.014, which is less than the threshold (0.05). Based on this observation, the study confirms a significant categorical relationship between the age of respondents and their perception of the level of audit transparency in EFD enabled environment. An additional description of the analysis suggests that respondents in the age category of 31–40 and 41–50 are more inclined to perceiving transparency than those less than 30 years in age, and those older than 50 years.
According to observations by Charness and Boot (2009), this scenerio is likely to show that those with the lowest age category have low experience with business and EFD use.
On the other hand, the studies by Vaportzis, Clausen and Gow (2017) reported that the senior respondents are reluctant to learn new things, especially those involving the use of modern technologies; this is likely to be the reason for their poor perception of the level of transparency.
Furthermore, the analysis was extended to determine the impact of the age of respondents on the perceived level of transparency in auditing. According to the results of the ordinal regression analysis presented in Table 6-6, the model-fitting information p-value was 0.011. It was further observed that respondents within the age categories 31–40 and 41–50 showed a significant difference in their perceived audit transparency. In this case, the perception of respondents on the audit transparency is scaled as very high, high, moderate,
and low. The difference is observed when “low” is set as a reference value. The p-values for the 31–40 and 41–50 age categories were less than 0.05. Collectively, those aged below 30 years and those ages above 50 years displayed no difference in their responses. Based on these results, the age of respondents has a significant impact on the perceived audit transparency, whereas those aged between 30 and 50 years perceived more transparency than the other age categories.
Table 6-6: Demographic variables and the perceived audit transparency ordinal regression table
Input variable
Element of
measurement
Value Parameter estimates for respective input variables
Input variable scale P-value Gender Model-fitting
information
p-value = 0.431
Female 0.433
Nagelkerke Pseudo r- square
r2 = 0.002 Male Ref. value
Education Model-fitting information
p-value = 0.001
Primary education .374 Secondary education .033 Nagelkerke Pseudo r-
square
r2 = 0.059 Certificate and Diploma .002 University Degree and
above Ref. value
Business experience
Model fitting information
0.032 Two years or below 0.084 Between 3 and 5 years 0.738 Nagelkerke Pseudo r-
square
0.026
6 years or above Ref. value Age Model-fitting
information
0.011 18-30 years .208
31-40 years .020
Nagelkerke Pseudo r- square
0.042 41-50 years .010
Above 51 years Ref. value
Source: (Author’s Design, 2020)
Accordingly, the study used the One Way ANOVA to test the categorical relationship between the gender of respondents and the perceived audit transparency. According to the results in Table 6-5, the observed p-value was 0.368, which is greater than the threshold.
Responses for both gender categories were close to each other. In addition, the study tested the significance of the impact of gender to the perceived level audit transparency through ordinal regression. Based on Table 6-6, it was evident that in the study the relationship was not fitting the Ordinal regression model because its p-value was 0.431. Furthermore, the Nagelkerke r-square value was 0.002 (2%), and all p-values for parameter estimates were above the 0.05. Based on this information, there was no significant difference in the perception of respondents about the audit transparency, across the two-gender group.
Furthermore, the study tested the categorical relationship between business experience and the perceived level of audit transparency using the One Way ANOVA. Table 6-5 indicated that the observed p-value was 0.081. Since the p-value is greater than the threshold, is it confirmed that the business experience does not have a significant categorical relationship with the perceive level of transparency. In addition, the study used the ordinal regression to test the impact of the business experience on the level of audit transparency, and results are noted in Table 6-6. Although the relationship fits the ordinal regression model (model- fitting information has the p-value = 0.032), all the parameter estimates had the p-value greater than the threshold (0.05), and the Nagelkerke r-square value is very low (0.026 or 2.6%). Based on these observations, the current study confirms that the business experience did not yield a significant impact on the perceived level of transparency in tax processes.
Furthermore, the study used the One Way ANOVA to test the significant of the categorical relationship between the level of education possessed by the respondent and the perceived level of transparency in tax process. According to results in Table 6-5, the observed One Way ANOVA p-value was 0.001. This p-value suggests a significant categorical relationship between the level of education and the perceived audit transparency. The results reveal that those respondents with primary education and those with college degrees, showed some similarities. Their response was more inclined to a moderate position compared to others who were more inclined to accepting that EFD enhanced transparency in tax processes. Accordingly, upon engaging the ordinal regression model for analysis, the study observed that data was fitted to the ordinal model since the model-
fitting information p-value was less than the threshold; the p-value was 0.001 as shown in Table 6-6. Moreover, the analysis observed that Nagelkerke r-square value was 0.059 (5.9%); this is the highest value in all the analysis including demographic variables in this section. Based on parameter estimates provided, those with secondary and college education are more inclined to perceive transparency compared to those with primary education and university degrees. This observation confirmed that the level of education significantly impacts the perceived transparency.