The effects of person‐specific, task, and environmental factors on digital transformation and innovation in auditing: A review of the literature

Abstract

This study reviews literature examining digital transformation in the external audit setting. Our review will inform the standard-setting initiatives of the International Auditing and Assurance Standards Board (IAASB) related to the use of technology in auditing.We identified 36 articles on digital transformation in the external audit published between 2000 and 2021 across 20 journals ranked A*, A, B, and C on the Australian Business Deans Council (ABDC) 2021 Journal Quality List. We also identified 18 advanced working papers. These articles cover conceptual frameworks and archival, experimental, interviews, case studies, and survey research methods. Fifty percent of the published articles appear in A* or A journals, of which nine were published in one of the premier six accounting research journals (i.e., A*) since 2020. This trend is a promising sign that there appears to be increasing interest in publishing digital transformationrelated research in these general interest journals. We use the Bonner judgment and decision-making framework, coupled with the four primary data analytic tools, to organize and evaluate the literature. This study examines descriptive and diagnostic analytics; more complex techniques, such as predictive and prescriptive,

Audit evidence, technology, and judgement: A review of the literature in response to ED‐500

“…Relevance refers to the connection between the audit evidence and the management assertion(s) examined in each audit test (e.g., Shelton, 1999). Audit innovation and technology influence appropriateness, such as electronic versus traditional mailed accounts receivable confirmations (e.g., Barr-Pulliam et al, 2022).…”

“…According to ISA 500, sufficiency refers to the quantity of audit evidence. Germane to the proposed amendment of ISA 500, the extent of audit evidence, such as a sample versus a population enabled by the use of technology, influences the auditors' ability to appropriately respond to the risk of material misstatement (e.g., Backof et al, 2018; Barr‐Pulliam et al, 2022). Insufficient evidence could lead to Type I or Type II errors related to the audit opinion.…”

Pursuing Big Issues in Covid-World Accounting Research

“…Digital accounting advances are expected to enhance corporate report quality via improved disclosure, reporting integrity, greater stakeholder engagement and enhanced decision making and judgement by information users including management and financial information users (Locke et al, 2018;Lombardi et al, 2021;Lombardi & Secundo, 2020;Troshani et al, 2019). The technologies offer potential for improving audit and assurance by contributing tools that enable auditors to complete traditional audit tasks more effectively including enhancing capacity to audit larger samples or datasets more efficiently and on a continuous basis (Barr-Pulliam et al, 2022;Kend & Nguyen, 2020), to access new sources of audit evidence (Otia & Bracci, 2022), to distinguish between unintentional errors and intentional financial reporting misstatements (Amani & Fadlalla, 2017), to identify reporting integrity issues including earnings management (Lombardi et al, 2021;Shan & Troshani, 2016), and to facilitate overcoming cognitive errors in auditors' judgement and decision making (Ahmad, 2019).…”

“…Additionally, the inclusion of digital technology in accounting creates scope for new technology-related risks which in turn require adjustments to existing accounting and audit processes or development of new processes and assurance services (Moll & Yigitbasioglu, 2019). For example, greater reliance on technology broadens exposure to new risks to data integrity, security and privacy that can be materialised in new threats of computer fraud and crime including cyber attacks (Barr-Pulliam et al, 2022;Gotthardt et al, 2020;Pizzi et al, 2021;Rikhardsson & Yigitbasioglu, 2018).…”

“…Similarly, Barr-Pulliam et al (2022) argue that firms are concerned that current audit standards insufficiently address technology considerations and that this might be a key reason why some audit firms hesitate to use ADA more broadly: there is exposure to legal liability if audit failure occurs that can be attributable to use of ADA in audit engagements. Accordingly, there are unanswered questions pertaining to the need to consider developing audit standards that are explicitly focused on technology-enhanced audits or whether existing audit standards must be amended to incorporate more broadly the use of digital technology for audit (Barr-Pulliam et al, 2022;Otia & Bracci, 2022).…”