Empirical Studies on Innovative Technologies in Auditing

The statutory audit enhances the credibility of financial reporting by expressing an opinion on whether a company’s financial statements present a true and fair view in accordance with generally accepted accounting principles. This role can only be fulfilled if audits are performed to a high professional standard, fostering trust, protecting investors, and lowering companies’ cost of capital. Yet, intense competition in the audit market has driven down fees and put pressure on audit quality. To reconcile the need for reliable assurance with cost efficiency, effective and innovative audit methodologies are essential. The adoption of emerging technologies could help sustain this balance. From cloud computing and artificial intelligence (AI) to drone utilization, digital solutions are progressing rapidly. Advanced information technology (IT) can optimize audit procedures by enabling the handling of big data and streamlining control routines. Additionally, adopting such innovations could reduce the need for staff and help address the shortage of audit professionals. However, it is unclear which of the growing number of automated tools and techniques (ATT) will prove relevant in the medium term and demand specialized expertise. Data-driven methodologies often require proficiency in complex (statistical) techniques, posing a challenge to the technical capabilities of audit practitioners. Moreover, the actual application of these technologies remains opaque to external stakeholders. Consequently, while IT-supported procedures may enhance audit quality, they must also be perceived as such by capital market participants. Against this backdrop, my dissertation investigates a set of innovative technologies in auditing. It assesses their future relevance through comparative analysis and evaluates the current level of IT skills among practitioners. This allows for the identification of knowledge gaps, whose closure could improve audit quality and inform future research and practice. Furthermore, I explore how selected technologies influence the perceived audit quality among users of financial statements, acknowledging the audit as a credence good. The findings are presented cumulatively across three empirical studies. The first research project (Paper 1) is based on a survey of 433 external auditors and investigates two aspects: first, which emerging technologies participants believe will be crucial in the medium term, and second, how they assess their current IT skills in utilizing these tools. By comparing both indicators, my study identifies significant gaps between the actual level of expertise and the anticipated relevance of these innovations. The analysis covers 18 technologies, 14 of which are regarded as highly important by the audit profession. However, current IT knowledge is largely insufficient, raising questions about professional development. The smallest gap is observed in online meeting solutions, while the largest deficits appear for prominently discussed technologies like machine learning (ML) and robotic process automation. The IT gaps are notably more pronounced among female and older subjects, whereas a higher level of education correlates with a smaller deficit. Given that the effectiveness and efficiency of external audits also depend on the control processes of the internal audit function, which evolves at its own pace, the second research project (Paper 2) surveys 143 internal auditors to capture their views on the future relevance of emerging technologies and their current expertise. The study analyzes 19 innovations. Respondents rate 15 tools as potentially important, but their self-assessed IT skills are consistently lower. The smallest gaps appear in communication technologies (online meeting solutions and collaboration platforms), which have become well-established since the COVID-19 pandemic. The most substantial gaps concern AI-based applications, particularly ML and natural language processing. Larger deficits are observed among female participants, reinforcing the gender-related disparities noted in the first study and underscoring the need for targeted adult education initiatives. The third research project (Paper 3) is a web-based experiment conducted with 108 financial analysts. It applies a 2×2+1 between-subjects design to explore the impact of audit methodology disclosure (compared to a control group), as well as the influence of advanced IT and shared service centers (SSCs), which increasingly perform IT-enabled audit tasks. Respondents were asked to assess the likelihood of granting credit to a fictitious company, investing in its shares, either professionally or privately, and recommending the shares to third parties. Disclosing audit methodology positively affects their lending and investment decisions. No significant effects emerge for advanced IT or SSCs overall. However, experienced analysts respond more positively to digital innovations when audit procedures are not delegated to SSCs, while information on shared services tends to prompt greater caution. These interaction effects do not appear among novices. The study suggests that advanced technologies are not inherently linked to higher perceived audit quality; rather, their impact depends on who uses the innovation. Taken together, the three studies offer robust empirical insights into the digital transformation of the audit industry and highlight specific areas for regulatory, organizational, academic, and educational intervention to safeguard audit quality and reinforce market confidence.