Joint Meeting of the Mid-Atlantic and Northeast Regions

The Acceptance and Use of Audit Data Analytic Tools by Small and Mid-Sized Firms

• In Event: Dialogue 1: Audit and Social Responsibility

Abstract

The practitioner press has heralded data analytics and emerging technologies as the future of accounting and auditing. Based on the current business environment with large amounts of available data and the increased use of IT-based data analytic tools by audited entities of all types and sizes, the American Institute of Certified Public Accountants Data Analytics Working Group asserts that the profession needs to transition to the use of advanced audit data analytics in the external audit function. While the largest firms have invested heavily in data analytic technologies, it is unclear to what extent small and mid-sized firms have adopted advanced audit data analytic tools for use in their audit practices.

Data analytic tools were first used extensively in the tax and consulting side of many large accounting firms, however, their use in financial statement audits lagged. Research suggests that these tools will lead to both improved quality and efficiency in financial statement audits. As audit clients themselves utilize emerging technologies in financial reporting, it may become more difficult for auditors to use traditional substantive audit tests to provide sufficient appropriate audit evidence for assertion-level risks. As a result, many industry experts have proposed that to remain competitive, accountants and auditors need to develop expertise in these areas, or risk being left behind.

The goal of this research is to understand (1) the extent to which data analytic tools are used by small and mid-sized public accounting firms in the United States, (2) what technological, organizational, and environmental factors impact small and mid-sized public accounting firms’ acceptance of audit data analytic technologies, and (3) what auditors in small and mid-sized firms see as the future trajectory for the use of these tools.

A mixed method study using an exploratory sequential design is proposed.

Technology adoption by audit firms has been the subject of considerable study. However, little research has been done into how smaller firms are using audit data analytic (ADA) tools in their practices and much of the empirical research around the acceptance and use of ADA to date has focused on subjects outside of the United States. Additionally, the data was gathered prior to the Covid-19 pandemic. The unique economic and regulatory environment in the United States and the focus on smaller audit firms makes this research an important contribution to the field.

Authors

• Bonnie Brayton Kennedy, Salve Regina University

• Qi Liu, University of Rhode Island

• Judy K Beckman, University of Rhode Island