Audit Quality and Information Systems Governance: A Study of Fraud Risk Management in Commercial Banks

Abstract

This research examines the intricate relationship between audit quality, information systems governance maturity, and fraud risk management effectiveness in
commercial banking institutions. Through empirical analysis of 127 commercial
banks operating in the United States from 2015 to 2018, this study develops a
comprehensive framework that quantifies the impact of IT governance structures
on fraud risk exposure. The research employs a mixed-methods approach, combining quantitative analysis of regulatory filings, audit reports, and fraud incident
data with qualitative assessment of governance practices. Results demonstrate that
banks with mature IT governance frameworks experience 47% lower fraud-related
losses compared to institutions with underdeveloped governance structures. The
study introduces a novel Integrated Governance-Audit Quality (IGAQ) index that
significantly predicts fraud risk reduction. Findings reveal that audit committee
expertise in information technology and robust cybersecurity oversight mechanisms
are critical determinants of fraud prevention effectiveness. The research contributes
to both academic literature and practical implementations by providing evidencebased guidelines for enhancing audit quality through improved information systems
governance in the banking sector.