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

• In Event: Audit Innovation and Experience

Abstract

We experimentally investigate whether audit firm efforts designed to increase auditor awareness of blockchain technology can have unintended consequences that threaten audit quality. Leveraging halo theory, we predict these firm efforts can induce a halo effect bias such that auditors will perceive client adoption of blockchain technology positively and in turn, allow this information to bias their complex judgments in unrelated areas. Consistent with our predictions, we find that auditors with greater awareness of blockchain technology evaluate management’s biased projections more favorably and express greater readiness to conclude when information indicates the client does, rather than does not, plan to adopt blockchain technology in an unrelated area. As disruptive technologies transform the auditing landscape, our theory-based findings caution audit firms and regulators navigating these changes that general efforts to increase auditor awareness of disruptive technologies may unintentionally impair audit quality.

Authors

• Ashley Austin, University of Richmond

• Tyler Williams, Bentley University