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Unintended spillover effects of enhanced audit firm capabilities

Author

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  • Cheng, Ta-Tung
  • Johnson, Eric N.
  • Witz, Patrick D.

Abstract

In recent years, audit firms have made substantial investments in new technology and have expanded their use of artificial intelligence (AI) and data analytics to enhance audit procedures. This study explores a potential unintended consequence of enhanced audit firm capabilities. It explores whether a combination of current trends in practice may potentially pose a risk to audit firms in ways they may not have considered. Our experiments manipulate the audit firm's perceived technological capabilities in performing audit testing and whether the audit firm makes a greater effort to build the auditor-client relationship. Results of both experiments indicate that the combination of enhanced audit firm capabilities and greater efforts to build the auditor-client relationship can result in spillover effects that might unintentionally increase the risk of material misstatement outside of the audit firm's direct knowledge. Our study contributes to literature on auditor technological capabilities, auditor relationship management, and auditor risk assessment.

Suggested Citation

  • Cheng, Ta-Tung & Johnson, Eric N. & Witz, Patrick D., 2026. "Unintended spillover effects of enhanced audit firm capabilities," Advances in accounting, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:advacc:v:70:y:2026:i:c:s0882611026000179
    DOI: 10.1016/j.adiac.2026.100882
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