Tax Audit Quality: The Role of Experience and Technology Readiness in a Digitalized World

54 Pages Posted: 16 Apr 2024

See all articles by Maarten Sigle

Maarten Sigle

Nyenrode Business University

Stephan Muehlbacher

University of Vienna - Department of Psychology

Lisette E. C. J. M. van der Hel

Nyenrode Business University

Erich Kirchler

University of Vienna - Faculty of Psychology; Institute for Advanced Studies, Vienna

Date Written: April 16, 2024

Abstract

Society is digitising at a rapid pace and tax authorities have to keep up with profound changes in how companies administer their tax liabilities. Tax auditors must be able to achieve an efficient and effective audit quality regardless of the degree of digitisation and digitalisation implemented by the audited companies. Previous research shows a positive correlation between audit experience and audit quality. However, it is unclear whether more experience – which was most likely acquired in traditional audits of accounting systems with a low level of digitalisation – is also beneficial in a changing environment with more highly digitalised companies. We argue that more experienced tax auditors are only superior to less experienced auditors in this changing environment if they are sufficiently willing and equipped to use new technologies and more digitized data. We expect – and find – that experienced tax auditors with adequate technology readiness achieve a higher audit quality in detecting IT risks than tax auditors with less experience and/or less technology readiness. Our results, however, also show also that more experienced tax auditors do not perform better in detecting traditional risks (i.e., not IT-related risks) than less experienced auditors. Overall, our results suggest that experience without the propensity to embrace and use new technologies and more digitized data might not be enough to achieve the required audit quality levels in the future. We therefore emphasize the importance of appropriate training (to adapt new ways of working and to acquire competencies to understand new technologies) and strategic composition of the tax authorities’ audit teams.

Keywords: Audit quality, Tax audits, Experience, Digitalisation, Technology Readiness

JEL Classification: H2, H26

Suggested Citation

Sigle, Maarten and Muehlbacher, Stephan and J. M. van der Hel, Lisette E. C. and Kirchler, Erich, Tax Audit Quality: The Role of Experience and Technology Readiness in a Digitalized World (April 16, 2024). WU International Taxation Research Paper Series No. 2024-02, Available at SSRN: https://ssrn.com/abstract=4796000 or http://dx.doi.org/10.2139/ssrn.4796000

Maarten Sigle (Contact Author)

Nyenrode Business University ( email )

Stephan Muehlbacher

University of Vienna - Department of Psychology ( email )

Liebigg. 5
Vienna, 1010
Austria

Lisette E. C. J. M. van der Hel

Nyenrode Business University ( email )

Straatweg 25
P.O. Box 130
Breukelen, 3620 AC
Netherlands

Erich Kirchler

University of Vienna - Faculty of Psychology ( email )

Universitaetsstrasse 7
Vienna, A-1010
Austria
+43 1 42 7747332 (Phone)
+43 1 42 7747339 (Fax)

HOME PAGE: http://homepage.univie.ac.at/erich.kirchler

Institute for Advanced Studies, Vienna ( email )

Josefstädter Straße 39
Vienna, A 1080
Austria

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