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Audit effort in the digital Era: Uncovering the dynamic interplay of business strategy and digital transformation

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  • Fang, Qiaoling
  • Wang, Zichen
  • Dang, Li

Abstract

This study investigates the impact of business strategy, digitalization, and their interaction on audit effort in the digital transformation era. Our findings reveal that Chinese prospector-type companies require higher levels of audit effort compared to defender-type companies. Furthermore, companies with greater digitalization tend to demand more audit effort due to the increased business risks associated with the adoption of advanced digital technologies. Contingency Theory predicts that a fit between prospector strategies and digitalization leads to more successful transformation outcomes and reduced business risks. Consistent with this theory, we find that the impact of digitalization on audit effort is reduced (increased) for prospector-type (defender-type) companies due to the strategic fit (misfit). This result highlights how the fit/misfit between a company’s strategy and its transformative initiatives can lead to varying levels of business risk, ultimately impacting the audit effort.

Suggested Citation

  • Fang, Qiaoling & Wang, Zichen & Dang, Li, 2025. "Audit effort in the digital Era: Uncovering the dynamic interplay of business strategy and digital transformation," International Journal of Accounting Information Systems, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:ijoais:v:56:y:2025:i:c:s1467089525000235
    DOI: 10.1016/j.accinf.2025.100747
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    References listed on IDEAS

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