The Data Analytics Journey: Interactions among Auditors, Managers, Regulation, and Technology
53 Pages Posted: 3 Aug 2018 Last revised: 3 Apr 2020
Date Written: March 20, 2020
Data analytics is transforming our global markets. Companies’ investments in data analytics are projected to grow to more than $274 billion in the next few years, and audit firms are pledging to invest an unprecedented $9 billion. While auditors, company managers, regulators, and academics agree that data analytics is fundamentally changing the financial reporting and auditing processes, we currently have little empirical research investigating the complexities related to the diffusion of this new technology. In this study, we interview matched dyads of company managers (e.g., CFOs) and their respective audit partners, as well as regulators and data analytics experts to provide a rich understanding of how interactions between these stakeholders affect the dissemination of this innovation throughout financial reporting and auditing. We use socio-technical systems of innovation theory as a lens through which to view our findings as this theory highlights the importance of dynamic interactions between people and their environments, including rules and regulations. We find that managers and auditors see themselves as partners on a journey together exploring new tools, taking new paths, and learning from one another. However, like with any journey into a new frontier, managers and auditors describe pitfalls and struggles along the way due to tensions related to regulatory interactions, independence concerns, strategic negotiations over audit fees, and competitive pressures. Our study contributes to research, practice, and regulation by shining a light on these critical interactions between accounting stakeholders, which shape the diffusion of innovative technologies like data analytics.
Keywords: Accounting; Audit Quality; Financial Reporting Quality; Data Analytics; Fraud; Audit Fees
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