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Introduction
This study examines how the use of technology-based audit techniques (TBATs)
increasingly important aspect of both internal and external audits as clients become
audit fees, and technology is better able to perform audit tasks.2 Although technology is
often adopted with the goal of improving efficiency, effectiveness, and costs, studying
this phenomenon in audit settings is difficult because of the relative lack of archival data
sets. In line with these mixed findings, researchers find there is less adoption of audit
technology at firms than anticipated (Lovata 1990; Janvrin et al. 2008; Vasarhelyi and
Romero 2014; Eilifsen et al. 2020). This gap—technology holding significant promise
but the lack of evidence of the realization of positive audit outcomes—has led to
numerous calls for additional research in this area (Earley 2015; Wang and Cuthbertson
2015; Alles and Gray 2016; Janvrin and Wood 2016; Moffitt et al. 2016; Austin et al.
2021). In my knowledge, this study is among the first to address this issue by
examining a proprietary data set of auditors’ use and perceptions of TBATs and how
Although, at first glance, it would appear relatively obvious that technology should
improve audit outcomes, there are reasons why this may not be the case. First,
technology may enhance the efficiency of the audit, but rather than redeploying the
captured gains into more audit coverage, the organization could reduce audit budgets
(for internal audit) or cut audit fees (for external auditors) so that overall audit quality
does not improve. Second, to be effective, auditors must not only purchase advanced
technology but also have personnel capable of using the technology successfully. The
expertise, given the high demand and pay for individuals with technology skills in other
disciplines (Christ et al. 2021; Maksymov et al. 2021). Third, technology may improve
audit outcomes but at a cost that auditors or companies are not willing to pay. For
example, Christ et al. (2021) demonstrate that automating inventory counts with drones
dramatically improves efficiency and effectiveness; however, there is still relatively little
adoption of this technology in the field because “drones are still expensive” (Vien 2018,
para. 32).
TBATs. First, we conducted a survey of 58 internal auditors, asking their beliefs about
how TBATs influence audit efficiency and effectiveness (perception data) in bpo
industries, the overall use of TBATs in the company’s internal audit function (IAF)
(overall data), the use of TBATs on the respondents’ two most recent audit
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effectiveness of audit tasks. Second, we conducted another survey of 505 CAEs, asking
their beliefs about the costs (in terms of personnel and budget) associated with the
decreases audit costs. Finally, we interviewed 11 CAEs to gain further insight into the
decision process to adopt TBATs and how CAEs evaluate TBATs’ costs and benefits.
Our findings from our first survey show that auditors perceive TBATs make auditors
more efficient and effective—and this result is robust across the amount of TBAT usage
in the respondents’ organization, the rank of the respondent (chief audit executive
(CAE) or not), and the size of the IAF of the respondent. The non-perception data we
collected in the first survey supports these perception findings. We find that a one
standard deviation increase in the usage of TBATs is associated with completing 18.5%
more audits, finding 10.8% more risk factors, providing 12.3% more recommendations,
and decreasing the days necessary to complete an audit by 13.5%. In other words,
higher usage of TBATs is associated with a more efficient and effective audit. When
looking at specific phases of the audit, we find that higher usage of TBATs is associated
with a reduction in the number of days to prepare an audit and the number of days used
in conducting fieldwork, but is not associated with the number of days to prepare audit
reports.
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Although these results show that TBATs can improve the efficiency and effectiveness of
the audit, they do not consider the costs necessary to achieve these benefits.
Therefore, we analyze the results from our second survey wherein we ask CAEs about
the costs associated with TBATs. We find that a one standard deviation increase in
TBAT usage is associated with a 15.5% increase in the size of the IAF (i.e., the number
TBAT implementation, we find that the top five barriers are high implementation costs,
lack of competence of the auditors, data quality issues, high operating costs, and data
access issues. When we split the respondents by TBAT usage, we find that IAFs that
are low in TBAT usage are much more concerned with financial costs than IAFs that are
The results of these two surveys provide both positive and negative findings on TBAT
usage. Although TBATs are associated with greater audit efficiency and effectiveness
(our first survey of auditors), they do come at a higher cost (our second survey from
CAEs). Given the data come from different respondents, we are unable to provide an
overall net benefit to the usage of TBATs. Therefore, to shed additional light on how
auditors decide to invest in and assess the costs and benefits of TBATs, we interviewed
11 CAEs. The interviewees noted that CAEs are largely responsible for deciding
whether to use TBATs (i.e., management or the board does not dictate the decision)
and that the decision process generally results from an informal cost-benefit analysis.
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However, this cost-benefit analysis is quite complicated as auditors have a difficult time
quantifying all the costs and even more difficulty in assessing the benefits of TBATs.
are not always recorded by engagement teams; and costs can sometimes be ignored
when they are indirectly related to technology acquisition and implementation, such as
installation and maintenance, and so on. Furthermore, the interviewees noted that
seeing benefits from implementing TBATs can take a long time, partially because it is
difficult to find auditors with the skill sets to properly implement and use TBATs. Thus,
some IAFs are likely low users of TBATs because of the difficulty in measuring and
observing benefits from TBATs and because of the challenge in hiring qualified auditors
to realize the benefits of using TBATs. Thus, the interviews suggest that the lack of
benefits of technology than concerns over the costs of the technology. Our study helps
address this issue by providing CAEs with measurable benefits of TBATs on audit
engagements.
the costs and benefits of technology in auditing (Lovata 1990; Janvrin et al. 2008;
Vasarhelyi and Romero 2014; Eilifsen et al. 2020). We show that auditors should expect
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however, these benefits may or may not exceed the costs associated with the
technology. Given that large public accounting firms are investing billions in technology
(EY 2018; KPMG 2019; PwC 2019a), our results suggest that we should see
improvements in audit quality, but we will not necessarily see lower audit fees,
especially immediately after introducing new technology. Since many people expect
technology to enhance efficiency and thus lower costs, this sets up an interesting line of
future research that should investigate how key stakeholders (e.g., managers, auditors,
board members, regulators) will respond to the increasing use of technology, especially
if that technology does not result in cost savings that many are likely to expect. The
audit fee setting process may become increasingly adversarial, and it will be important
Second, we identify a reason why technology is not more highly adopted in auditing—
Thus, one important contribution is that this paper identifies objective, quantifiable
benefits to technology adoption in auditing for a large sample of firms. Given accounting
literature for ways to measure costs and benefits to help enable better decision-making
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in audit and governance contexts. This will enhance decision quality around when
Third, we contribute to the literature by gathering propriety data about specific audit
that the decision to use technology in practice is more complicated than many might
expect and that it is not a clear-cut choice to adopt technology. Given the significant
exposure and even hype of emerging technologies for solving accounting problems
(Austin et al. 2021), this study suggests future research can explore the person, task,
and environmental factors that make audit technologies more likely to be used and
impactful and how specific audit technologies can impact specific audit outcomes.
Finally, we inform the increasing number of researchers examining how internal auditing
provides value to the organization (Prawitt et al. 2009, 2012; Ege 2015; Abbott et al.
2016; Bills et al. 2022; Ege et al. 2022; Jaggi 2022). As audit technology implementation
continues to mature in organizations, our work can help launch future research into how
internal auditing can provide more value to the organizations’ operating effectiveness,