Information System Audit for Investment Decision

Investments in information systems have reached threshold levels that have triggered senior management reactions centred on determining the associated contributions and payoffs. Assessment of information systems value is needed in order to evaluate decisions regarding new technology investment, outsourcing and reorganisation. Evaluating investments in information technology (IT) poses a number of problems that investing in the traditional assets does not present. The focus shifts from measuring hard and quantifiable dollar benefits that will appear on the firm’s income statement to measuring indirect, diffuse, qualitative and contingent impacts that are difficult to quantify well. But the traditional financial investment evaluation methods of net present value and discounted cash flow analysis require numbers. Brynjolfsson observed that business transformation literature highlights how difficult and perhaps inappropriate it would be to try to translate the benefits of IT usage into quantifiable productivity measures of output (1993). The inability to conclusively demonstrate any linkage between the investment in IT and a wide variety of performance measures leaves the central problem of whether information system (IS) really does make a difference to an organization’s performance unanswered. The willingness of industry to continue its investments in the technology suggests that it is convinced that its investment will be profitable.