Digital Transformation in the Auditing Environment

Digital transformation (DT) is contemporary and has been a buzzword in recent years. The concept has gripped most economic sectors and regulatory bodies including the International Auditing and Assurance Standards Board (IAASB) to the extent that the board had to call for a research study to examine digital transformation in the external audit space. The purpose of the study was to inform the initiatives of setting standards to guide the employment of technology in audit engagements. One of the things that DT has done in auditing is to change the nature of the data that auditors work with. This stemmed from the soaring digitalisation of business processes. Among other things, auditors found themselves having to work with larger volumes of data than they did before digitalisation. This had a ripple effect on the auditing procedures. The auditing space is highly regulated hence the outset of digital transformation had a destructive effect on the traditional way of doing things in this space. The digital transformation had implications for the regulation of auditing and meant that the existing International Standards on Auditing (ISA) had to be revisited and reviewed. Against this backdrop, this chapter sought to examine the adoption of digital technologies in the auditing environment through the lenses of Technology Task Fit Theory (TTF). The chapter will give a brief background and a definition of digital transformation before describing the audit process. Furthermore, the chapter will describe the factors that affect the adoption of digital transformation in auditing engagements. It will also examine the adoption of digital technologies in the auditing space as well as how auditing has been transformed by digital technologies including implications of DT on International Standards on Auditing (ISA). The chapter ends with a focus on the benefits and challenges of employing digital transformation in auditing.