Data Analytics and Audit Quality

42 Pages Posted: 2 Nov 2021

See all articles by Ru Gao

Ru Gao

The University of Queensland

Sterling Huang

Singapore Management University - School of Accountancy

Rencheng Wang

Singapore Management University - School of Accountancy

Date Written: September 10, 2020

Abstract

We examine the impact of data analytics on audit quality. Using hand-collected information on data analytics skills of employees of audit firms, we find that human capital investment in data analytics improves audit quality. The analytics capability of both frontline and back-office employees contributes to audit quality. The effect is more pronounced for audit clients with complex business operations, for clients with complicated accounting estimates, and for clients that are more digitalized. Taken together, our findings suggest that an audit office’s analytics capability represents an important office attribute that can affect audit quality.

Keywords: audit quality, data analytics, human capital investment

JEL Classification: M40, M42, M48, J24, L84

Suggested Citation

Gao, Ru and Huang, Sterling and Wang, Rencheng, Data Analytics and Audit Quality (September 10, 2020). Singapore Management University School of Accountancy Research Paper No. 2022-151, Available at SSRN: https://ssrn.com/abstract=3928355 or http://dx.doi.org/10.2139/ssrn.3928355

Ru Gao

The University of Queensland ( email )

Colin Clark, 39 Blair Dr,
St Lucia QLD
Brisbane, Queensland 4607
Australia
61 07 3443 4502 (Phone)

Sterling Huang (Contact Author)

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore
6808 7929 (Phone)

Rencheng Wang

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

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