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ABSTRACT: We provide an overview of cloud computing: evolution, benefits, and challenges. Then we examine the risk characteristics identified in accounting and auditing literature by comparing a hand-collected sample of cloud computing companies with a matched sample of non-cloud computing companies. The study uses a comprehensive set of factors used in accounting and auditing literature to describe client business risk, audit risk, and auditor-related risk. Unsurprisingly, the findings show that large companies in the historically high-risk information technology industries provide cloud computing. More interestingly, the results show that cloud computing is more leveraged, and more likely to have a material weakness and longer audit tenure. Cloud computing companies are also more likely to restate their financial statement after providing cloud technologies. Some of the risk variables we used in the study are not statistically significant in capturing the risks of cloud providers (e.g., security, privacy, availability, confidentiality). The study contributes to the literature in IT outsourcing in general, and in cloud computing more specifically. The study also responds to the recent call for insightful research in cloud computing.
Keywords: cloud computing; risk characteristics; accounting and auditing research.
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I. INTRODUCTION
The objective of the study is twofold. First, we provide an overview of cloud computing, including a definition, the evolution, and benefits and challenges. Second, we build on existing literature in accounting and auditing to examine risk characteristics of companies that develop or provide servers, applications, platforms, and/or infrastructure technologies for cloud computing. The study is motivated by the increasing use of cloud computing and the evolving related-business models that expose managers and auditors to increased risks (Singleton 2010). In addition, the study is motivated by the lack of research on cloud computing (Grabski et al. 2011). The idea of cloud computing as a utility was first introduced by McCarthy (1961) and subsequently explored by Licklider (1963), who pursued a globally accessible computer network.
Cloud technology has evolved from the costly and complex information technology (IT) solutions and enterprise applications in the 1980s, and is enabled by the recent expansion of the Internet in the 1990s. Moreover, the dramatic drop in the bandwidth costs and other technological advances have contributed to the emergence of cloud computing (Grabski et al....