Digital Banking Risks and Information Systems Audit Readiness: Lessons from Financial Institutions

Abstract

This research examines how financial institutions prepare for Information Systems audits in the context of rapid digital transformation, with particular focus
on data protection challenges and system control gaps. Through comprehensive
analysis of 156 financial institutions across North America, Europe, and Asia from
2018 to 2020, this study identifies critical success factors and common vulnerabilities in IS audit readiness frameworks. The research develops a novel Digital Audit
Readiness Assessment (DARA) model that quantifies institutional preparedness
across technological, organizational, and regulatory dimensions. Empirical results
indicate that institutions with mature digital audit readiness frameworks experience
52% fewer regulatory findings and 47% shorter audit remediation periods compared
to peers with underdeveloped approaches. The study reveals that data protection
gaps account for 68% of critical audit findings in digital banking environments, while
system control deficiencies represent the most significant operational risk. Findings
demonstrate that successful audit readiness requires integrated approaches combining technological controls, organizational capabilities, and continuous monitoring
mechanisms. This research contributes actionable insights for financial institutions
navigating digital transformation while maintaining robust audit preparedness and
regulatory compliance.