A Blockchain Halo? Client Adoption of Disruptive Technology and the Biasing Effects on Auditor Judgment

• In Event: Technology in Auditing

Abstract

Companies are devoting significant resources toward harnessing the power of disruptive technologies, including blockchain. Blockchain adoption will present unprecedented challenges and threats to financial reporting and auditing processes, changing the future of auditing. While audit firms employ specialists to advise on disruptive technologies like blockchain, most audit professionals likely do not fully comprehend such innovative and complex technology—making them more susceptible to the positive hype surrounding the technology. Most auditors likely perceive client blockchain adoption positively, especially when exposed to more blockchain news. However, positive feelings regarding client adoption of blockchain (a “blockchain halo”) should not affect auditor judgments in audit areas unrelated to the technology. We experimentally demonstrate the presence of a blockchain halo and the subsequent biasing effects on complex auditor judgments. Specifically, we find an interactive effect such that auditors with less auditor expertise evaluate management’s biased projections more favorably when exposed to more blockchain news as well as when the client adopts blockchain in an unrelated area. Auditors with more expertise do not exhibit this bias. Thus, we contribute to halo theory and demonstrate to practice the unintended consequences related to client adoption of disruptive technology.

Authors

• Ashley Austin, University of Richmond

• Tyler Williams, Bentley University