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Enterprise digital transformation and audit quality: Empirical evidence from annual reports of Chinese listed companies

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  • Fang Fang
  • Dongyan Mo
  • Ruyi Chen

Abstract

This study explores how enterprise digital transformation affects audit quality. The results show that the relationship between enterprise digital transition and audit quality takes on a U‐shaped. Mechanism test results indicate that during the initial stages of digitization, the restrictive effect of auditor's professional competence mismatch predominates. Conversely, during the mature stages of digitization, the promotion effect of improved auditor's substantive independence predominates. Heterogeneity tests demonstrate that this U‐shaped relationship is significant primarily within the sample set of short audit tenure and state‐owned enterprises. The study reveals the internal mechanism of the impact of enterprise digital transition on audit quality, offering empirical evidence to comprehend the incremental dynamic effects of enterprise digitalization and mitigate potential adverse consequences throughout the transformation process.

Suggested Citation

  • Fang Fang & Dongyan Mo & Ruyi Chen, 2024. "Enterprise digital transformation and audit quality: Empirical evidence from annual reports of Chinese listed companies," Economics and Politics, Wiley Blackwell, vol. 36(2), pages 1056-1075, July.
    • Handle: RePEc:bla:ecopol:v:36:y:2024:i:2:p:1056-1075
    DOI: 10.1111/ecpo.12280
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    References listed on IDEAS

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    3. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
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