The Data Analytics Transformation: Evidence From Auditors, CFOs, and Standard-Setters
51 Pages Posted: 3 Aug 2018 Last revised: 30 Jun 2019
Date Written: June 28, 2019
Data analytics is transforming our global markets. Auditors, CFOs, standard-setters, and academics recognize this phenomenon and generally agree that data analytics will fundamentally change financial reporting and auditing processes. However, we currently have little empirical research investigating the complexities related to the emergence of this new technology. In this study, we interview company managers (e.g., CFOs), audit partners, data analytics experts, and standard-setters to provide a richer view of the development, use, and diffusion of data analytics within financial reporting and auditing. Using socio-technical systems of innovation theory (S-T theory) to interpret our results, we gain insights into how the interactions of company managers, auditors, and standard-setters with each other and with the technology itself (data analytics) influence the emergence of data analytics. For example, we find that data analytics constrains managers’ and auditors’ actions by requiring uncommon skillsets and changing the team culture. Consistent with S-T theory, we also find that the emergence of data analytics affects interactions between company managers and their auditors. In particular, we find that disagreements about the audit fee model may cause conflict between managers and auditors in the future. Further, we find auditors increasingly provide data-driven insights to their clients and that standard-setters express concern that this practice may lead to impaired auditor independence. Our study contributes to the accounting literature and practice by providing theoretically-based insights about data analytics that are relevant to managers’ and auditors’ practices, standard-setting, and academic research.
Keywords: Accounting; Audit Quality; Financial Reporting Quality; Data Analytics; Fraud; Audit Fees
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