Digital Audit

The research project Digital Audit focuses on the digital transformation process in the audit industry. Currently the audit firms intensively focus on digitalization of the audit. However, the extent and speed of the audit profession's digital transformation is an open question. The purpose of the research project is to develop deep insight into the audit profession's transformation to a digitalized audit. The research consists of four specific project areas performed by a multidisciplinary team of NHH and international researchers conducted in collaboration with the large international audit firms and the Norwegian Institute of Public Accountants: 1. The first project consists of a broad survey of Norwegian auditors' digital competence and the ongoing digitalization processes in the audit firms. In December 2020 the research article «An Exploratory Study into the Use of Audit Data Analytics on Audit Engagements» based on an extensive survey of Norwegian auditors' use of audit data analytic tools was published in Accounting Horizons (Eilifsen, Kinserdal, Messier, and McKee, 2020). 2. The second project aims at gaining an understanding of the effects, both beneficial and detrimental, of a digitalized environment on auditors' judgments and decision-making. An experimental study ((«Man Versus Machine: Complex Estimates and Auditor Reliance on Artificial Intelligence») published in 2022 in the Journal of Accounting Research examines whether auditors' assessments related to complex accounting estimates are affected by whether audit evidence that does not support management's assessments, comes from an artificial intelligence firm tool (something the large audit firms invest heavily in) or from the firm's human specialists. (Commerford, Dennis, Joe, and Ulla, 2022). Another experimental study examines whether the auditor's reliance on advice from "specialists", which is either human or an artificial intelligence tool, is affected by whether the auditor is given the opportunity to participate with input to the specialists and whether this can counteract algorithm aversion (Commerford, Eilifsen, Hatfield, Holmstrom, and Kinserdal, 2022). A third ongoing experimental study seeks to clarify whether the auditor's lack of use of digital tools is due to the tendency to the status quo rather than other explanations, such as the auditor's lack of experience or familiarity with its use (Christensen, Eilifsen, Messier, and Vandervelde, 2022). A fourth ongoing experimental study examines 1) whether an innovative mindset when using digital tools leads to greater flexibility and better assessments in the audit, 2) whether a goal conflict as a result of increased focus on added value for the client from the insight the digital tool provides weakens the auditor's professional skepticism and 3) whether one of the conflicting effects in 1) and 2) dominates. A fifth ongoing experimental study examines whether inspection risk affects the auditor's choice between using digital tools and traditional audit procedures (Bin Anis, Brown-Liburd, Gaudernack, and Kochetova, 2022). 3. The third project focuses on how digitalization of the audit clients affects the audit. A study examines whether management's voluntary assurance of cyber security systems influences investors' assessments and decisions, and whether it matters whether the assurance is expected or not by investors (Navarro and Sutton, 2020). Another study published in Journal of Information Systems examines the factors in the supply chain and the factors associated with cyber risk that affect the demand for auditor assurance and launches a theory for assurance demand (Hampton, Sutton, Arnold, and Khazanchi, 2021). 4. The fourth project addresses how to train and prepare students for a professional career in a highly digitalized audit environment. The research generates knowledge about the benefits and obstacles resulting from digitalization of the audit which will help guide the audit profession of the digital transformation process. The knowledge facilitates the innovation of the master education of auditors, including establishing digital audit master courses, to prepare students for the new digital professional reality. The course in digital auditing in the master's in accounting and auditing at NHH was built from scratch four years ago in close dialogue and with help from the audit firms. In the course, it has been necessary to develop separate datasets and cases. The case material from the course has been presented at conferences for computer learning aids and published in journals (e.g., McKee, 2020).

Forskningen er utført i tett samarbeid med revisjonsselskapene og resultatene er diskutert og presentert for disse og ellers formidlet i profesjonstidsskrift som Revisjon og Regnskap. Dette har gitt ny kunnskap til revisjonsbransjen som er nyttig for deres omstilling til en digitalisert revisjon. Presentasjon av forskningen på seminarer og forskningskonferanser og publisering i ledende internasjonale forskningstidskrifter har gitt et vesentlig bidrag til forskningen på fagområdet. Kunnskapen fra forskningen har vært sentral for oppbyggingen og innholdet i kurset «Digital revisjon» ved masterstudiet i regnskap og revisjon. Samarbeidet med revisjonsbransjen, presentasjon av forskningen på forskningskonferanser og publisering forskningstidskrifter, samt bruk av forskningen i utdanning av revisorer vil fortsette etter at finansieringen fra Norges Forskningsråd er opphørt.

Big Data is the product of a technological environment in which almost anything can be recorded, measured, and captured digitally, and thereby turned into data, including data relevant for auditors to obtain audit evidence to ascertain the reliability of financial information. Audit data analytics refer to analysis, modeling, and visualization that extract useful information for the audit, including audit evidence. The Digital Audit research project (the Project) aims at providing valuable knowledge to assist the audit profession and educators to confront the pressing challenges of digitalization in the business environment, particularly developing an understanding of the opportunities and obstacles for audit practice and professional master programs for auditors of Big Data and audit data analytics. The Project's research team will be truly multidisciplinary and constitute a unique platform for long-term collaboration between outstanding national and international researchers and collaborators from audit practice. The Project is a close collaboration between researchers and the audit profession. The five largest audit firms in Norway have committed to cooperate and give unique access to data and personnel for the Project. The Project will provide factual knowledge of the current status of the usage of Big Data and analytics in the auditing profession, and fundamental novel insights into adoption, implementation and of the use of Big Data and analytics in audit firms and in training auditors, and how human behavior and social organizations affect the benefits and limitations of the usage of Big Data and analytics both in audit practice and in the training of auditors.