Title:  Technology-Based Audit Tools: Implications for Audit Quality

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Dissertation Committee Chair:  Jay C. Thibodeau, Rae D. Anderson Professor of Accountancy and PhD Program Director, Bentley University
Committee Members:  Jean C. Bedard, Professor Emerita, Bentley University; Christine E. Earley, Department Chair and Professor of Accountancy, Providence College

ABSTRACT

Technology as an exogenous shock has proven to have pervasive effects on auditing firms, practitioners, regulators, and global markets. However, the dynamic nature of technology makes it uniquely challenging to articulate its largescale implications on the auditing profession in recent times. Understanding how current technology has helped shape the contemporary auditing profession is vital to identifying points of inflection within the industry (i.e., areas of risk and change), and key to elucidating the future of where the field is going.

In a three-paper dissertation, I contribute to the literature by first reviewing recent publications to develop a working description of the modern technological landscape of auditing in relation to a fundamental audit concept: audit quality.  This review reveals that how audit firms, particularly non-global network firms (NGNFs) (i.e., firms other than the “Global 7”), come to adopt technological processes to support audit quality remains a largely unstudied area. These findings serve as motivation to paper two and paper three. To study how NGNFs respond to technological change, I leverage the theory of institutional work – a change theory under the umbrella of institutional theory. Using this theoretical lens, I examine how two different echelons of auditors contribute to established technology processes to influence the profession and its shared understanding of audit quality by collecting data from in-charge auditors and audit partners in paper two and paper three, respectively.

The first paper (sole-authored) is a literature review that synthesizes auditing studies across methodologies, including archival, experimental, and qualitative methods. Such studies discretely consider technological circumstances unique to the auditing profession; however, to date, no comprehensive review exists that synthesizes what these technological changes mean for audit quality. On one hand, advancements in information technology may support efficient workflow processes in the audit, reduce human error, and increase audit quality. On the other hand, increased use of technology during audit engagements may impede audit quality if its full impact gives rise to unforeseen workflow process risks or spurs quality-threatening behaviors in auditors. To position this literature review within a frame of audit quality, I map prior literature to the Center for Audit Quality’s (CAQ) recommended Audit Quality Indicators: 1) Firm Leadership and Tone at the Top, 2) Engagement Team Knowledge, Experience, and Workload, 3) Monitoring, and 4) Auditor Reporting. My review of the literature also reveals an emerging fifth audit quality indicator, Big Data and Nontraditional Audit Evidence. This research synthesis aims to deliver a comprehensive review of the extant auditing literature to identify how information technology has influenced audit quality to date, while also identifying future directions for research.

In the second paper (sole-authored) I investigate how in-charge auditors in NGNFs engage in institutional work using technology-based audit tools (TBATs) to impact audit quality. Using semi-structured interviews in tandem with institutional theory, I identify factors that contribute to in-charge auditors’ propensity to engage in institutional work, being actions that contribute to the development (i.e., creating works), continuance (i.e., maintaining works), and/or breach (i.e., disrupting works) of established practices. My results reveal patterns of common motivators, resources, and outcomes of in-charges’ institutional work to impact audit quality at a process level. Findings have important implications for theory, as I find evidence that institutional work can arise from nontraditional sources of less powerful and individual actors. I also uncover important practical implications by identifying audit firm culture, engagement budgets, and training experiences as important antecedents to in-charges’ ability to engage in institutional work and effect organizational change.

The third paper (co-authored) investigates what role audit partners of NGNFs play in shaping the technological future of auditing within the bounds of institutional theory. In one respect, institutional theory suggests these audit partners are positioned as empowered leaders and innovators of change in accordance with the theory of institutional work; however, traditional institutional theory paradoxically suggests audit partners will be limited in this capacity due to isomorphic pressures (i.e., forces that promote conformity) of the auditing profession. Using an experiential survey, we explore the nature of these institutional isomorphic pressures as they occur in unison with the theory of institutional work. We uncover a surprisingly synergistic, as opposed to paradoxical, relationship between how isomorphic pressures foster conformity amidst innovation stemming from within these firms. Data suggest partners engage in creating and maintaining acts of institutional work that are motivated by professional marketplace expectations and ambiguity stemming from technology within the field. Although partners largely identify as optimistic regarding the future of TBATs, they also concede there are significant obstacles to overcome regarding the quality of client data, a lack of regulatory guidance, and implementation costs associated with new technologies.