The Impact of Audit Data Analytics Technology on Audit Outcomes

• In Event: Internal Audit and Technology

Abstract

Despite the growth of data analytics and their auditing applications, the implications of client
adoption of audit data analytics within the internal audit function remains unclear. The value
of the adoption of audit data analytics (ADA) technology should manifest themselves within
external audit outcomes by virtue of the relationships with internal audit functions and
financial reporting systems. This study discusses these relationships and offers evidence of
the benefits of ADA technology. Namely we find that the internal audit adoption of ADA is
negatively associated with subsequent external audit fees and audit delays. We further find
that these associations are moderated by the ADA objectives and application type, finding
ADA technology focussed on financial reporting objectives (as compared to operational audit
objectives) were specifically associated with subsequent audit fee decreases as well as audit
lag decreases. With respect to application types we find that diagnostic-focused ADA
applications (as compared to descriptive, predictive or prescriptive) were associated with
audit fee and audit lag decreases. We contribute to the literature by providing evidence that
ADA technology adds to the enhancement of the audit environment, adding to the discussion
on the efficacy of using ADA technology as a potential source of audit evidence by regulators
and external auditors.

Authors

• Jee-Hae Lim, University of Hawaii

• Jongwon Park, Monash University - Caulfield

• Gary Peters, University of Arkansas-Fayetteville

• Vernon J Richardson, University of Arkansas-Fayetteville