Master Thesis, 15 credits, for degree of Master of

Science in Business Administration: Auditing

and Control FE900A VT22 Master Thesis in
Auditing and Control Spring 2022

The Effects of Digitalization on the Audit profession

- A comparative study between one developed and
one developing country

Authors:
Carl Melin
Gertrude D. Toezay
E-mail:
[email protected]
[email protected]
 Abstract

Authors
Carl Melin and Gertrude D. Toezay

Title
The Effects of Digitalization on the Audit profession - A comparative study between one
developed and one developing country

Supervisor
Gert Paulsson

Examiner
Christian Koch

Co-Examiner
Timur Umans

Digitalization is currently changing all areas of society and business. One area of business that
has been significantly impacted by the developments of information technology is auditing.
Currently, audit firms all over the world are implementing tools which increase the capabilities
of auditing to add value. Specifically, big data analytics, artificial intelligence, and blockchain
technology, have gained footing in the auditing field during the last few years. This study
extends the knowledge on the effects of digitalization and emerging technologies on the audit
profession. Existing literature tends to focus on more developed countries and therefore this
study contributes to the existing literature by studying the perceived effects of digitalization on
auditing in one developed and one developing country. To achieve the aim of the study, a
qualitative research method was employed. Semi-structured interviews were conducted with
four Swedish and five Liberian audit professionals. The study shows that digitalization and
emerging technologies have significantly impacted audit quality and audit efficiency in both
Sweden and Liberia. Furthermore, the findings indicate that digitalization is currently also
changing the skills and competences needed within audit firms. The study also demonstrates
the importance of emerging technologies in the context of auditing.

Keywords
Digitalization, Big data, Artificial intelligence, Blockchain, Auditing, Audit process, Audit
quality, Audit efficiency, Auditor skills and competences.

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 Acknowledgment

Firstly, our profound thanks and appreciation to God Almighty for his endless protection
through the entire semester and the opportunity for reaching this far. This project is part of our
research work at Kristianstad University. We are grateful to our master’s thesis supervisor Gert
Paulsson, for his commitment, inspiration, and countless reviews of our work and guidance
throughout the study. We do appreciate his constructive criticism and willingness to make time
for us and provide clarity on issues. We also want to appreciate the auditors who made time for
the interviews and contributed highly to our work by sharing useful insights and practical
experiences on the phenomenon being studied.

As a Swedish Institute Scholarship Holder, I extend my sincere gratitude to the Swedish

Institute for this opportunity and support for my master’s programme at Kristianstad
University. My contribution to this project was made possible through a fully funded support
from the Swedish Institute.

We also want to extend our appreciation to Timur Umans, and our opponents during the
seminars, whose comments were very important and useful during our writing process. And
lastly, we do appreciate our families and friends for their endless support.

30 of May 2022, Kristianstad Sweden

_______________________ _______________________
Carl Melin Gertrude Darlene Toezay

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 Table of contents

1. Introduction 6
1.1 Background 6
1.3 Problematization 9
1.4 Purpose of the study 12
1.5 Research questions 12
1.6 Potential contributions 12
1.7 Structure 12
2. Theoretical framework 14
2.1 Stakeholder theory 14
2.2 Agency theory 15
2.3 Theory of inspired confidence 17
2.4 Technology Acceptance Model 18
2.5 Research model 19
3. Literature review 21
3.1 Auditing and digitalization 21
3.2 The audit process 22
3.2.1 Pre-engagement 22
3.2.2 Planning 23
3.2.3 Evidence 24
3.2.4 Reporting 25
3.3 New technologies in the context of auditing 26
3.3.1 Artificial intelligence 26
3.3.2 Big data and analytics 27
3.3.3 Blockchain technology 28
3.4 Automation 29
3.5 Audit quality 31
3.6 Competencies 32
4. Methodology 34
4.1 Pre-Understanding 34
4.2 Our perspective 35
4.3 Research Philosophy 35

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 4.4 Epistemology Position/ Interpretivism 36
4.5 Ontology Position/ Constructionism 37
4.6 Research Design 38
4.7 Data Collection 39
4.8 Sampling Method 39
4.9 Interview process 40
4.10 Interview Guide 41
4.11 Interpreting the data 42
4.12 Bias in Data Collection 43
4.13 Trustworthiness, Credibility and Authenticity 44
5. Empirical results and findings 45
5.1 General background 45
5.2 The audit process 50
5.3 Usefulness and ease of use of emerging technologies in auditing 53
5.4 Automation 55
5.5 Audit quality 58
5.6 Competencies 64
5.7 Future effects of digitalization 68
6. Analysis and discussion 71
6.1 Differences and similarities in technology 71
6.2 The audit process 73
6.2.1 Planning 73
6.2.2 Evidence 74
6.2.3 Reporting 76
6.3 Perceived usefulness and ease of use 76
6.3.1 Increased audit efficiency 77
6.3.2 Improved audit quality 79
6.4 New competencies 81
6.4.1 Skill sets required to perform audits with advanced technology 81
6.4.2 The need for IT specialists 82
6.4.3 The need to redesign the academic curriculum for Auditors 83
6.4.4 Potential barriers for future auditors 84
7. Conclusion 86

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 7.1 General conclusion 86
7.2 Contributions and implications of the research 88
7.2.1 Theoretical contribution 88
7.2.2 Practical contribution 88
7.2.3 Societal contribution 88
7.3 Limitations 89
7.4 Avenues for future research 89
References 91
Appendix 1: Interview guide 102

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1. Introduction
In the first chapter of this thesis, the research topic is introduced, which ends with a
problematization. This chapter is set to provide the reader with a general understanding of
digitalization and its impact on auditing and related industries. Next, the purpose of the study,
along with the research questions are presented. Finally, the section ends with a presentation
of the thesis’s structure.

1.1 Background

Digitalization refers to the technical advancements that enable the creation of a contemporary
world for individuals (Zuboff, 1988). According to Westerman et al. (2014), digitalization
dates back to the industrial revolution, when new machines enabled a change in the process of
commerce, capitalism, and, indeed, human history. Presently, it’s argued that innovation in
digital tools is moving the world to “the second machine age” (Brynjolfsson & McAfee, 2014).
Digitalization is taking place on a global scale and is significantly transforming society and
business as we know it. Technological developments bring possibilities (Zuboff, 1988),
constantly pushing the boundaries for what's possible (FAR, 2016). Furthermore, digitalization
is vastly transforming industries with the help of digital technology (Majchrzak et al., 2016).
According to Gartner (2020), digitalization is “the use of digital technologies to change a
business model and provide new revenue and value-producing opportunities; it is the process
of moving to a digital business”.

Digitalization has been identified as one of the major trends in society, and in business, and is
arguably the most powerful driver of change in the world right now (Arsenie-Samoil, 2010;
FAR, 2015, Holley, 2004). A contemporary view is that industries, and organizations have to
realize the opportunities brought by digitalization, and modernize their business models, or be
left behind (Arsenie-Samoil, 2010; Tugui, 2005). This shift is developing future-oriented
organizations with practitioners relying even more on information and communication (Iuliana
& Tugui, 2005). Arsenie-Samoil (2010) and Iuliana and Tugui (2005) argue that, whether they
like it or not, companies must adapt to survive in this new age brought by digitalization.
According to Hess et al. (2016), organizations are individually responsible for discovering
means to implement strategies that embrace the implications of the current digital
transformation, and thereby propel better operational performance.

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However, only a few examples of firms that use digital technologies to drive significantly
higher levels of profit, productivity and performance exist (Westerman et al., 2014), even
though the potential benefits of digitalization are high (Parviainen et al., 2017). Thus, many
firms are not prepared for the second machine age and will ultimately fail to thrive in this new
age (Westerman et al., 2014). Companies are increasingly valuing digital information, which
is the essence of today's networked ecosystems. Digitalization connects individuals,
enterprises, governments, and devices, enabling easier interaction, which results in enormous
accessible data sources (Shirky, 2008). Accordingly, digitalization allows organizations,
suppliers, customers, and employees to collaborate in new ways, resulting in new product and
service offerings. Further, Digitalization makes it possible for corporations to process, store
and transmit data on a massive scale at significantly lower costs than before and therefore has
the capacity to change any forms of human labor that is associated with data and cognitive non-
routine processes (e.g., Frey and Osborne, 2013; Rifkin, 2014). At the same time, incumbent
organizations face a challenge because of digitalization, which encourages them to reflect on
their existing strategy and explore new business options (Möller et al, 2020).

Furthermore, emerging technologies have significantly influenced financial reporting in the

last few decades, and the acceptance is currently accelerating (Julie et al., 2019). Artificial
intelligence (AI), Big data and analytics, and blockchain are just a few examples of emerging
technologies that are being implemented, all of which are significantly changing corporations'
business approaches. Following these disruptive technologies auditors have had to adapt,
forcing them to transform their own processes (Julie et al., 2019). Audited financial statements
are intended to meet the information needs of investors and creditors and should be useful in
decision making. For auditing to remain a valuable and relevant service, it must evolve. Thus,
the auditing profession is currently facing a technological transformation (Lombardi et al.,
2014). Following the development of information technology, audit firms are implementing
tools which increase the capabilities of auditing to add value (DeFond & Zhang, 2014).
According to Kokina and Davenport (2017), the audit process is particularly suitable for the
implementation of data analytics and artificial intelligence since it’s become increasingly
difficult to analyze the growing volumes of data. The audit process involves the progression of
activities to transform “input into output'' (Zhang, 2019). The input is the financial information
provided by the auditee, and the output is the auditor's opinion (I.F.A.C., 2019).

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Emerging technologies in the context of auditing have led to changes in the audit process and
streamlined the auditing profession (Kuruppu & Oyelere 2017). According to Banker et al.
(2002), information technology (IT) made streamlining possible by automating parts of the
audit process. Automating parts of the audit process, that were formerly done manually
(Sjöberg & Johansson, 2016), enables a faster and easier completion of audits, while
maintaining the integrity of the data. E.g., A.I can transform the audit through automated
analysis of accounting entries (Baldwin et al., 2006), which is beneficial since it reduces the
risk for human error, and it can effectively detect fraudulent behavior (Moffitt et al., 2018).
According to KPMG (2017), the three main digital trends are: data analytics, robotics, and
artificial intelligence and blockchain. Developments in these emerging technologies have
significantly impacted the auditing profession, since they are changing the responsibilities and
functions of audit professionals (ICAEW, 2017). According to FAR (2015), this continuous
transformation could potentially reshape the whole auditing environment. Digitization is
therefore considered to have a continual role in the development of the auditing profession and
is thus an interesting research endeavor.

Nevertheless, Nearon (2005) and Bierstaker et al. (2001) argue that the auditing profession will
need to adapt even more as a result of information technology's effects (IT). This notion is
supported by Lombardi et al. (2015), who argue that the auditing industry still hasn’t realized
the full potential of digital technologies in auditing. Data review, and data audit are key
difficulties for the audit profession in today's golden age of digitization. Changes in the auditing
profession will continue to be influenced by advancements in digital technology and
information technology. Accordingly, the services and professional practices supplied by audit
companies will also continue to be reshaped because of these changes (Adiloglu & Gungor,
2019). Although several studies have shown that the auditing profession will benefit from the
use of digital technologies in terms of productivity, it’s still important to explore the effects of
digitalization on the auditing profession, since the effects of disruptive technology in the
context of auditing are yet to be fully determined.

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1.3 Problematization

In the contemporary world, digitalization, and big data analytics - or datification - is penetrating
all areas of society and business, creating new ways of working, communicating, and
cooperating (Loebbecke & Picot, 2015). Digitalization connects individuals, enterprises,
governments, and devices, enabling easier collaboration and social interaction, which results
in enormous accessible data sources (Shirky, 2008). Digitalization makes it possible for
corporations to process, store and transmit data on a massive scale at significantly lower costs
than before and therefore has the capacity to change any forms of human labor that is associated
with data and cognitive non-routine processes (e.g., Frey and Osborne, 2013; Rifkin, 2014).
Moreover, increasingly sophisticated software fosters machine-based interpretation of data and
thus enables autonomous decision-making and a deeper integration of big data applications in
traditional value creation activities (Loebbecke & Picot, 2015). According to Varian and Choi
(2009), such data allows for predicting the present and to some extent the future, which has
impacted managerial and other cognitive processes. For instance, data-driven managerial
decision making is seemingly replacing the ‘Highest Paid Person’s Opinion’, which used to be
the norm in the past (Loebbecke & Picot, 2015).

Digitalization has forced businesses to change the way they conduct business, and an area of
business that has been altered by the increased use of information technology (IT) tools is
financial reporting (Julie et al., 2019). According to Mansour (2016) and Shaikh (2005), IT has
changed how businesses record and disclose financial information. Presently, more and more
businesses are compiling and disclosing financial information using various digital tools and
gathering data digitally (Foneca, 2003; Khemakhe, 2001; Mansour, 2016). Accordingly,
auditors of modern firms have encountered huge challenges due to advances in information
technology (Mansour, 2016), since auditors are expected to be equally informed, and equipped
with advanced technology for auditing to continue being a valuable service for investors,
creditors, and other users of financial information (Lombardi et al. 2015; Alles 2015). Hence,
the public accounting industry, which was once a slow-paced and conservative industry, has
been forced to undergo tremendous changes since the turn of the millenium due to rapid
advancements in information technology (Elliott, 1998).

To combat the challenges brought by the advances in information technology, audit firms are
implementing tools which increase the capabilities of auditing to add value (DeFond & Zhang,

9
2014). Specifically, developments in big data analytics (Alles, 2015; Earley, 2015; Alles &
Gray, 2014), artificial intelligence (AI) (Agnew, 2016; Kokina & Davenport, 2017), and
blockchain technology (Liu et al., 2019; Kokina et al., 2017), have influenced the auditing
profession during the last decades. According to Deloitte (2018) these technologies, along with
other advanced technologies, makes it possible to capture and analyze previously unimaginable
types and volumes of data. Several studies have shown that there are many positive effects of
digitization in the auditing industry (e.g., Lombardi et al., 2015; Ghasemi et al., 2011; Raphael,
2017). For example, Lombardi et al. (2015) states that new technology in the auditing field will
make fieldwork more effective and efficient and hence argue that technology will enable
auditors to analyze risk and detect fraud. Lombardi et al. (2015) also argue that technology
provides auditors with means to complete mundane tasks in a timely manner, allowing them to
focus more time on complex judgmental areas. This notion is supported by Tiberius and Hirth
(2019), who argue that automation relieves auditors from routine tasks in favor of more
complex tasks. According to Ghasemi et al. (2011), advancements in information technology
have brought opportunities for companies to perform accounting functions with significant
time and cost savings and allowed companies to progress toward paperless offices which in
turn has been beneficial for auditors since audit trails and details are automatically maintained.
Raphael (2017) believes that digitization does not only increase the efficiency and quality of
an audit, but it also creates value for clients because they can access more relevant and valuable
information. There are, however, a few studies that have reported on the negative aspects of
digitizing the auditing process as well, such as the security risk that companies share sensitive
information online (Ali et al., 2015). It is therefore interesting to consider the negative aspects
of digitalization as well.

Although these technologies exist, and in theory allow for a more comprehensive and
automated audit, the process of implementing these technologies has been long, which is
mainly due to the considerable costs associated with implementing these digital technologies
(Lombardi et al. 2015; Hunton & Rose 2010). Hence, there is reason to believe that the
implementation of digital tools is uneven, depending on the size of the audit firm and perhaps
the geographical contexts in which the audit firm operates. Corporate investment in Big Data
increased from $34 billion in 2013 to $232 billion through 2016, and the Big 4 (i.e the four
biggest accounting firms in the world) declared that they aim to be at the forefront of Big Data
implementations (Alles & Gray, 2016). Small and mid-sized audit firms lack the funds to
implement Big Data to the same extent as the Big four firms and thus, several studies discuss

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the implications of digitalization for small and mid-sized audit firms (e.g., Tiberius & Hirth,
2019; Chaney et al., 2004; Manita et al., 2020). Tiberius and Hirth (2019) suggests that
technological changes in the business environment may displace most small and mid-sized
audit firms, since they will struggle to afford the investments in technological infrastructure
and new competencies needed to remain competitive. This raises the question of whether audit
firms in developing countries are facing the same challenges. According to Petersen (2019) the
worldwide advance of the digitization process is a double-edged sword. On the one hand, it
offers technological advances in productivity that can improve the economic situation for less-
developed countries and reduce poverty and on the other hand there is a danger that these
countries will be technologically left behind and no longer be competitive if they can't afford
to implement the costly technologies. It’s therefore important to explore how digitalization has
impacted the audit profession in less-developed countries as well. There is strong evidence
suggesting that the digital tools that modern audit firms are implementing are increasing the
audit quality and enabling auditors to detect fraud more effectively, which in turn increases
transparency (e.g., Manita et al., 2020). Hence, less-developed countries would certainly
benefit from modern information tools in combating corruption and fraud.

In summary, it’s clear that the audit profession faces both opportunities and challenges
following digitalization, but since it’s a continual transformation, the implications for the
auditing profession are yet to be fully determined. Changes in the audit process are, however,
unavoidable as the profession undergoes a paradigm shift toward a more digital organization
(Breman & Felländer, 2014; Byrnes et al., 2015; Caster & Verardo, 2007; Lombardi et al.,
2015; Spraakman et al., 2015). Scholars have argued that the digital development of the
auditing industry will lead to a changing organizational structure, which also means changing
skills needed within the auditing firms. According to Appelbaum et al. (2017), the increased
digitization and the constantly changing nature of clients’ business models, may result in more
complex auditing and auditor requirements. Hence, more IT specialists and data scientists
might be employed in auditing firms due to the changing requirements. This raises the question
of whether business administration, accounting, or auditing graduates will continue to staff
auditing firms, rather than IT-oriented employees (Tiberius & Hirth, 2019). Nevertheless,
auditors must gain the skills to use computerized accounting systems. Lombardi et al. (2015)
maintain that the rapid advancements of technology has resulted in a gap between the
profession and education that should be shortened in order to properly educate and prepare
students for the audit profession.

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1.4 Purpose of the study

With this background our study seeks to extend the knowledge on the effects of digitalization
and emerging technologies on the audit profession. Furthermore, existing literature tends to
focus on more developed countries (e.g., Tiberius & Hirth, 2019), and therefore this study
intends to contribute to the existing literature by studying the effects of digitalization on
auditing in one developed and one developing country. This study will also seek to examine
auditors' perceptions toward the importance of digital tools in auditing, in a developed and a
developing country.

1.5 Research questions

This study will seek to answer the following research question:

➔ How do Swedish and Liberian auditors perceive the effects of digitalization on the audit
profession?
➔ What are Swedish and Liberian auditors' perceptions toward the importance of digital
tools in auditing?
➔ In what ways, if any, do Swedish and Liberian auditors differ in their perception
towards the effects and importance of digitalization in auditing and why?

1.6 Potential contributions

Despite its importance, technological foresight for the auditing industry in less developed
countries is scarce. While there are many studies investigating auditors' perceptions regarding
the effects of emerging technologies in the audit process, few studies have been directed at less
developed countries. Hence, this study intends to fill the existing gap in the literature and is set
to explore the perceptions of auditing professionals about the effects of digital tools in the audit
process, in the auditing industry of developing countries such as Liberia.

1.7 Structure

The remainder of the paper is organized as follows. The next section presents the theoretical
framework, which ends with a presentation of the research model. The section is followed by
the literature review, which reviews literature relating to the effects of digitalization on the
audit profession. Next, the paper discusses the methodology, which is followed by a

12
presentation of the results of the interviews. Finally, the paper provides a conclusion of the
study, discussing its limitations and offers avenues for future research.

13
2. Theoretical framework
In this chapter, the theoretical framework is presented. The section starts by introducing the
stakeholder theory, which is followed by agency theory. Both theories are commonly used
theories in the auditing literature. Next the theory of inspired confidence is presented. Then the
technology acceptance model is presented. Finally, the research model summarizes the
theories and key concepts.

2.1 Stakeholder theory

Stakeholder theory explains the interaction between organizations and the people affected by
the activities of the business, i.e., the stakeholders. The idea that organizations have multiple
stakeholders has become commonplace in the management literature, according to Donaldson
and Preston (1995). Stakeholder theory suggests that various social contracts have to be
negotiated with different groups of stakeholders due to the fact that different stakeholders have
different views on how the business should be conducted (Harrison & van der Laan, 2015;
Hörish et al, 2020). Thus, stakeholder theory aims to identify these actors to increase the
knowledge of what and who affects the organization's management decisions (Jensen, 2002).
Organizations have both internal and external stakeholder groups, who have an interest in how
the business operates. Internal stakeholders’ groups include employees, managers, and owners,
all of whom have a clear interest in the performance of the firm. The external stakeholders on
the other hand, such as suppliers, customers, creditors, and society constitute a network that
the organization is dependent on (Wicks et al, 1994).

The auditor is ultimately responsible for providing confidence in the quality of the financial
reports produced by businesses, ensuring that they meet the information needs of investors and
creditors (Porter et al., 2014). Hence, satisfying the information needs of the organizations
many stakeholders is the main scope of auditing. Harrison and van der Laan (2015) argue that
the reporting environment has changed dramatically due to the worldwide interest in
environmental sustainability. Conventional accounting has been heavily criticized for being
too focused on financial stakeholders (e.g., Harrison & van der Laan, 2015; Brown & Dillard,
2015; Mitchell et al., 2015). Thus, the notion of stakeholders has been picked up broadly in the
accounting literature during the last decade (Hörish et al, 2020). For instance, stakeholder
theory has been discussed widely in relation to concepts such as Corporate Social

14
Responsibility and Sustainability Reporting (Jachi & Yona, 2019). Silva et al. (2019) maintain
that stakeholder expectations are mostly not considered in the existing performance
measurement of firms, since they do not capture environmental and social topics sufficiently.

Moreover, with the development of information technology, audit firms are implementing tools
which increase the capabilities of auditing to add value (DeFond & Zhang, 2014). According
to DeFond and Zhang (2014) the capability of the audit to add value is determined by the
quality of the audit. Emerging technologies in the context of auditing have made streamlining
possible by automating parts of the audit process (Banker et al., 2002). Automating parts of the
audit process, that were formerly done manually (Sjöberg & Johansson, 2016), enables a faster
and easier completion of audits, while maintaining the integrity of the data. For instance, A.I
can transform the audit through automated analysis of accounting entries (Baldwin et al., 2006),
which reduces the risk for human error, and it can effectively detect fraudulent behavior
(Moffitt et al., 2018). Hence, the digitization of auditing will ultimately improve the
transparency of financial statements, which in turn will enable stakeholders to make more
informed decisions (Manita et al. 2020). According to Jachi and Yona (2019), the use of tools
such as artificial intelligence enhances the effectiveness and quality of the audit, which thus
benefits the stakeholders by increasing the reliability of the financial statements.

2.2 Agency theory

Agency theory is one of the main theories used in auditing literature, and it’s directed at the
ubiquitous relationship between the principal and the agent (Thomsen & Conyon, 2012). The
principal is the party delegating the work to the agent, who performs that work on behalf of the
principal. Agency theory attempts to describe this relationship using the metaphor of a contract
(Eisenhardt, 1989). The relationship between a business owner and his manager is a given
example of an agency relationship. The owner (of the capital) wants the manager (of the
capital), to perform their tasks in a way that maximizes the firm's profits, but the manager may
have their own ideas about how they would like to perform their tasks since their interest is to
get greater compensation, which could result in an agency problem (Thomsen & Conyon,
2012). The conflicting incentives between the principal and the agent is often referred to as a
conflict of interest (De Franco et al., 2014). Conflicts of interest between the principal and the
agent result in problems called agency problems that lead to agency costs, such as moral hazard
and adverse selection (Handoko & Lindawati, 2021).

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According to Eisenhardt (1989), agency theory is concerned with resolving two agency
problems that can arise in agency relationships. The first agency problem is when the desired
goals of the principal conflicts with the agents. The agent may be tempted to act in his own
interest rather than in the principals and only maximizing his own utility. Thus, the problem is
verifying whether the agent is behaving appropriately (Eisenhardt, 1989). The second agency
problem is concerned with the principals and the agents' conflicting attitudes toward risk. The
agent, performing the tasks on the principal's behalf, may prefer different actions because of
different preferences on risk.

As mentioned, the main role of independent auditors is to provide confidence in the quality of
the financial reports produced by businesses, ensuring that they meet the information needs of
investors and creditors (Porter et al., 2014). However, it’s also argued that auditing can be
viewed as a mediator between two parties: the shareholders and the board (Carrington, 2014).
Hence, auditing plays a significant role in resolving agency problems, since it functions to
assure the investors (principal) that their interests are being upheld (Commerford et al., 2019).
According to Handoko and Lindawati (2021) the auditor is responsible for detecting material
misstatements and indications of fraud, which could arise from conflicts of interests between
the principal and the agent.

However, due to the rapid growth of companies it has become increasingly difficult for auditors
to manually analyze the growing volumes of data (Kokina & Davenport, 2017). Thus, auditors
have implemented digital technology in the audit process to ensure that they continue providing
timely and reliable information to investors, and that auditing remains a valuable and relevant
service (Handoko & Lindawati, 2021). Following the development of digital technology new
auditing techniques, such as CAATs, were introduced. These technologies are useful for
auditors in the collection and evaluation of electronic data, or audit evidence. This is where the
auditor can detect fraud in the client’s financial statements and resolve agency problems. This
is supported by Lombardi et al. (2015), who states that new technology in the auditing field
will make fieldwork more effective and efficient and argues that technology will enable
auditors to analyze risk and detect fraud.

Manita et al. (2020) conducted a study assessing how digital transformation of the external
audit has impacted the role of auditing as a corporate governance mechanism, confirming that
the digital technology will enhance the auditor’s role in resolving agency problems in several

16
ways. According to Manita et al. (2020) digital technology will enable auditors to evolve
towards a better control of the client’s data and will improve the relevance and quality of the
audit. Accordingly, new digital technology enables a more relevant analysis of the clients’
processes and data and makes it possible to identify errors and anomalies more effectively,
allowing the audit to fully play its role as a governance mechanism. This is consistent with
prior studies on big data, which shows that digital tools in auditing could improve the quality
of financial statements and anomalies detection (Lombardi et al, 2015; Krahel & Titera, 2015;
Cunningham & Stein, 2018).

Moreover, digital tools have evolved the audit offer towards the validation of forecast data,
which according to Manita et al. (2020) will further reduce the risk of misappropriation and
opportunistic managers. This is in line with prior work on the effectiveness of machine learning
techniques in detecting fraudulent financial statements (Kotsiantis et al., 2006). Finally, the
advances in digital technology will also benefit audit committees since it can help them to
improve internal systems and processes aimed at improving the corporate governance of the
firm, hence limiting the risk of earnings management by opportunistic directors (Manita et al.,
2020).

2.3 Theory of inspired confidence

During the 1920s, Theodore Limperge a Dutch professor, introduced the theory of inspired
confidence also known as the theory of rational expectation (Hayes et al., 2005). This theory
asserts that the demand and supply of audit services are driven by the participation of external
stakeholders who steer the affairs of organizations. Stakeholders who give resources to ensure
the organization's existence and survival demand accountability from those in charge of the
organization's day-to-day operations. Because there is a possibility that management's
information on the organization's activities may not accurately reflect the situation due to
potential conflicts of interest between management and stakeholders and the need for a
financial audit may arise. The theory suggests that the information should be exposed to
independent scrutiny and during such an independent assessment, the auditor should make use
of all resources at his disposal to guarantee that stakeholders' expectations are satisfied by
providing an expected degree of assurance (Mathias & Kwasira, 2019).

17
As the integration of digital applications is making a huge impact on organizations and
companies, the theory of inspired confidence demonstrates that the effects of digitalization in
audit processes are strategic, and it has long-term positive advantages on organization growth.
According to Mathias and Kwasira (2019), most modern companies with large operations have
a huge amount of data to be audited, and since human auditors may not be able to cover the
vast amount of information in each time frame, the audit profession will gradually lose value
and become a failure. As stated by Mathias and Kwasira (2019), the timely provision of
information enhances the quality of audits and the use of digital applications in the auditing
process saves time and enables accurate collection of data. Additionally, digitalization in the
auditing process improves the auditors’ speed to handle and manage huge amounts of data in
real-time and allows auditors to provide significant information to stakeholders and easily
detect irregularities in the financial statements.

2.4 Technology Acceptance Model

The technology acceptance model (TAM) was first developed by Davis (1989) and assumes
that technology will be “accepted” or used if it’s deemed useful and easy to use by the user.
According to Kim et al. (2009) TAM explains the determinants of computer acceptance in
general and uncover the impacts of internal beliefs, external factors, and intentions. It’s argued
that system usage is the primary indicator of technology acceptance (Kim et al., 2009;
Thompson et al., 1991; Adams et al., 1992), which is measured in terms of frequency and time
(Davis et al., 1989). The two belief constructs, i.e., perceived usefulness and perceived ease of
use, are fundamental constructs that influence the decision to use computing technologies,
mediating the influence of external variables of computer usage behavior (Kim et al., 2016).
Davis et al. (1989) states that perceived usefulness is defined by the subjective probability that
the specific application will increase the users job performance, and perceived ease of use is
determined by how free of effort the application is to use. Thus, there is a positive relationship
between the two constructs and technology acceptance (Kim et al., 2016). Accordingly, the
more users who find that the application will make their job easier to perform; the higher the
probability that the technology will be accepted.

According to King and He (2006), TAM is one of the most widely used models for determining
the degree to which a technology is accepted. The model can be found in several auditing
studies (e.g., Kim et al., 2016; Kim et al., 2009; Rosli et al., 2012). Kim et al. (2016) conducted

18
a study exploring the usage of generalized audit software (GAS) features among Egyptian
external auditors, applying the TAM to assess how the complexity of GAS features impact the
usage of GAS. The authors found that Egyptian auditors' usage of GAS is more influenced by
perceived ease of use, rather than perceived usefulness. Consequently, Egyptian auditors are
more likely to use the basic features of GAS, which have low conceptual complexity, than GAS
features with higher conceptual complexity. Hence, complexity is argued to be a significant
obstacle to overcome in the adoption of more sophisticated audit technology, although the
perceived usefulness of such technologies is high (e.g., Rapoport, 2016; Kokina & Davenport,
2017; Earley, 2015). The acceptance of emerging technologies such as AI, Big Data and
Blockchain is evidently high in the field of auditing, especially in Big four audit firms, who are
investing considerable amounts of money to develop and adopt these technologies (Alles &
Gray, 2016). However, several studies have found that the acceptance may be lower in less
developed countries (e.g., Albawwat & Al Frija, 2021; Afroze & Aulad, 2020; Ismail & Abidin,
2009). For example, Albawwat and Al Frija (2021) states that autonomous AI systems are
perceived as complicated to use and hence deemed not useful by auditors in Jordan.
Consistently, Afroze and Aulad (2020) found that audit professionals in Bangladesh have not
realized the benefits of AI in auditing.

2.5 Research model

The theoretical framework presented in section 2, will be used to understand the factors
influencing auditors to implement new technologies (i.e., AI, Big Data and Blockchain) to the
audit process. First, stakeholder theory, which explains the interaction between organizations
and the people affected by the activities of the business, suggests that the implementation of
emerging technologies in the context of auditing will benefit stakeholders through increased
transparency and reliability in the financial statements of organizations. Second, agency theory
recognizes the auditor as a controlling body, assuring the principal that his interests are being
upheld. Third, the theory of inspired confidence reiterates that the auditor should make use of
all resources at his disposal to guarantee that stakeholders' expectations are satisfied. Lastly,
the technology acceptance model is used to determine the degree to which emerging
technologies (AI, Big Data and Blockchain) are accepted in the auditing field, both in Sweden
and in Liberia. The audit process includes a variety of audit procedures, many of which can be
facilitated with new digital technologies. The main benefits of digitizing the audit process
include automation and increased audit quality. Digitalization is, however, changing the

19
auditing industry fast, which has created a gap between the profession and education. Thus,
these variables will also be considered to study the effects of digitalization on the audit
profession. The research model is summarized in the figure below (figure 1)

Theoretical Effects of
framework digitalization on
Stakeholder theory auditing
Agency theory Automation
Theory of inspired Audit quality
confidence Changing
TAM competences

Big data and analytics, AI and

Blockchain

Figure 1: Research model

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3. Literature review
The following sections review the existing literature. First, a brief discussion is provided on
auditing and how it relates to digitalization. Next, the four steps of the audit process are
presented, i.e., pre-engagement, planning, evidence, and reporting. The currently trending
emerging technologies are then discussed in 3.3. Finally, prior studies have shown that the
main effects of digitalization in the field of auditing include, automation, improved audit
quality, and changing skills. These effects will be reviewed in sections 3.4 through 3.6.

3.1 Auditing and digitalization

Kishore and Peshori, (2014) classified auditing as the process to ensure the accuracy, security,
and confidence of the accounts or reports being audited. The initial goal of auditing, according
to Flint (1988), is to determine whether certain responsibilities were carried out honestly,
properly, and in compliance with regulations and specific instructions. Flint (1988), termed
auditing as a type of examination that is used to ensure accountability and is carried out by
someone who is not a party to the transaction, an objective individual who compares
performance to expectations and reports the findings. Additionally, Wallerstedt et al. (2006)
hold the position that auditing is an essential function in society.

According to Gartner (2020), digitalization is “the use of digital technologies to change a

business model and provide new revenue and value-producing opportunities; it is the process
of moving to a digital business”. Currently, the developments in information technology are
transforming all areas of society and business, creating new ways of working, communicating,
and cooperating (Loebbecke & Picot, 2015). Technological advancements and the resulting
digitization of data and processes have had a significant impact on the inputs, tools, and
information available to the auditor during the audit process. Therefore, the advancements in
digital technology during the last decades have significantly transformed the audit processes,
which are now generally carried out digitally with computer aid (Handoko & Lindawati, 2021).
Digitalization allows audit firms to increase their capabilities of adding value for their clients
(DeFond & Zhang, 2014).

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3.2 The audit process

Understanding the audit process is essential for understanding how digitalization has changed
auditing. The main purpose of auditing is to provide confidence in the quality of the financial
reports, ensuring that they are true and without material misstatements (Porter et al., 2014).
Audit processes are the activities undertaken by the auditor to obtain evidence to form
appropriate opinions on the financial statement of an entity. Although audit processes tend to
not look exactly alike, since the procedures involved depend on the client’s risk factors and
effectiveness of their internal control systems (Kearney, 2013), authors tend to agree that there
are some main audit procedures that together constitute the audit process. Authors do, however,
not always agree on how many procedures should be involved in the audit process. According
to Knechel and Salterio (2016), there are seven main steps of the audit process which are pre-
planning (Pre-engagement), planning, understanding the entity, risk assessment,
documentation, completion, and reporting. According to Carrington (2014), however, the audit
process involves only four steps i.e., evaluation of the statements from the management team,
affirmative actions, documentation, and reporting.

3.2.1 Pre-engagement

Several authors do, however, argue that the first step is aimed at getting acquainted with the
potential client and deciding whether it’s prudent to work with the potential client (Porter et
al., 2014). Knechel and Salterio (2016) refers to this step as the pre-engagement. Professional
standards require audit firms to establish policies and procedures for deciding whether a new
client should be accepted or whether a current client should be retained (Eilifsen et al., 2013).
According to Eilifsen et al. (2013), the purpose of such policies is to mitigate the risk that an
auditor will be associated with clients who lack integrity. Hence, auditors will ordinarily confer
with the predecessor auditor and conduct background checks on the top management for a
prospective new client. Equally important, however, is ensuring that the audit team understands
the entity and the environment in which it operates. This includes understanding the industry,
how the entity measures its performance, and the quality of its internal control (Eilifsen et al.,
2013; Knechel & Salterio, 2016). This helps the audit team in assessing the risk of material
misstatements and setting the scope of the audit. Furthermore, it’s important that the client is
not accepted if the audit cannot be adequately staffed with personnel possessing the necessary
levels of independence, competence, and capabilities (Porter et al., 2014).

22
3.2.2 Planning

If the auditor decides to accept the client, the next step of the audit process is to plan the audit,
which is aimed at developing an overall audit strategy (Carrington, 2014; Eilifsen et al., 2013;
Kearney, 2013). The auditor needs to plan what evidence to collect to be able to express an
opinion, amongst other things, on whether the financial statements give a true and fair view of
the state of affairs and profit and loss of the reporting entity, and how and when to collect such
evidence (Porter et al., 2014). According to Carrington (2014) and Eilifsen et al. (2013), proper
planning is important to ensure that the audit is conducted in an effective and efficient manner.
This step involves making a preliminary assessment of the client’s business risks and
determining materiality, based on the auditor's understanding of the entity. The audit team
relies on these judgements to then assess the risk relating to the likelihood of material
misstatements in the financial statements (Eilifsen et al., 2013). According to Porter et al.
(2014), planning the materiality refers to the amount of error the auditor is prepared to accept
in the financial statements while still maintaining that they provide a true and fair picture of
the state of affairs of the reporting entity. This provides a basis for planning the nature, timing,
and extent of procedures to be performed during the audit (Porter et al., 2014).

Furthermore, in the process of planning the audit, the auditor follows a risk assessment process
to identify the risk of material misstatements in the financial statement accounts. This process
is referred to as the audit risk model (Eilifsen et al., 2013; Houston et al., 1999). Audit risk is
the risk that the auditor expresses an inappropriate audit opinion when the financial statements
are materially misstated (Porter et al., 2014). According to Eilifsen et al. (2013), audit risk is a
fundamental concept that underlines the audit process. Auditors are only required to provide
reasonable assurance, as opposed to absolute assurance, that the financial statements are free
of material misstatements. This is due to the nature of audit evidence and the characteristics of
management fraud. Hence, auditors consider audit risk at the relevant assertion level because
this directly assists the auditor to plan the appropriate audit procedures. Moreover, audit risk
comprises three main components i.e., inherent risk, control risk and detection risk (Carrington,
2014; Eilifsen et al., 2013; Porter et al., 2014; Houston et al., 1999). Inherent risk is the
probability that the pre-audited financial statements are materially misstated in one or more
respects, before considering the effectiveness of the entity's internal control. Control risk is the
risk that a material misstatement is not prevented or detected on a timely basis by the entity's
internal control. Lastly, detection risk is the risk that the auditor will not detect a misstatement

23
that exists and that could be material that was not discovered and corrected by the entity's
internal control (Carrington, 2014). The relationship between inherent risk, internal control and
detection risk is demonstrated as follows: Audit risk = Inherent risk • Control risk • Detection
risk (Carrington 2014).

When the auditor has gained an understanding of the client, its internal and external
environment and identified and assessed the risk of material misstatements in the financial
statements, the next step of the audit process is understanding the entity's internal control
(Bailey et al., 2018; Eilifsen et al., 2013; Porter et al., 2014). As indicated by the previous
section, a major part of the auditor's understanding of the entity involves knowledge on the
entity's internal control. Internal controls play a major role in how the management meets its
responsibilities and are designed to provide reasonable assurance that assets and records are
properly safeguarded and to ensure that the entity's information systems generate reliable
information (Eilifsen et al., 2013). The quality of the entity's internal control over their financial
reports is of direct relevance to auditors and usually has a significant impact on the audit. How
the entity’s internal control system is designed will ultimately provide the basis for the auditor’s
preliminary assessment of the internal control risk. If the internal controls are deemed effective,
then the auditor will be reasonably confident that material errors and irregularities in the
accounting data are prevented and in that case the control risk will be fairly low (Porter et al.,
2014). Moreover, many companies have implemented increasingly sophisticated information
systems to their internal control. According to Chen et al. (2014), IT capability can increase
the effectiveness of companies internal control, and thus also decrease the audit risk.

3.2.3 Evidence

The next step of the audit process is to collect audit evidence, which involves performing a
series of tests to gather evidence to support the audit opinion. At this stage, the auditor can
choose to follow two audit strategies: a substantive strategy and a reliance strategy (Carrington,
2014; Eilifsen et al., 2013). A reliance strategy means that the auditor intends to rely on the
entity’s internal controls, and a substantive strategy means that the auditor has chosen to use
substantive procedures as the main source of evidence. The overall objective of substantive
testing is to verify the validity and accuracy of the entity's financial statements (Porter et al.,
2014). According to Porter et al. (2014), the auditor's assessment of the entity's internal control
has a significant impact on the nature and extent of the substantive tests that will be performed.
If the auditor believes that the entity's internal control systems are effective, and the control

24
risk related to the audit is low, the need for more extensive and less timely substantive audit
procedures will be reduced (Bailey et al., 2018). Furthermore, sampling methods allow auditors
to focus on the critical control accounts or areas where weaknesses are common (Shenet al.,
2017). Auditors are not required to be concerned about the statements' absolute accuracy.
Hence, sampling techniques are used to draw conclusions about the population.

3.2.4 Reporting

The final step of the audit process is reporting, where the auditor is expected to assess the
sufficiency of the evidence and if necessary, obtain additional evidence (Żytniewski, 2017;
Eilifsen et al., 2013). The auditor will evaluate the results of the audit tests and identify
contingencies. For the audit to be properly completed, it’s important that the process has been
documented and that the evidence is appropriately organized (Sikka, 2018). The audit process
is summarized in the figure below (see figure 2).

Figure 2: The audit process

25
3.3 New technologies in the context of auditing

3.3.1 Artificial intelligence

Undoubtedly, artificial intelligence, or AI, is one of the most significant and at the same time
intimidating disruptive technologies as of yet (Clifford, 2019). AI was first founded in 1955
and has since then undergone several waves of changes (Huang & Smith, 2006). According to
While O’Leary (1987), AI is a broad term that includes various activities such as deep learning,
pattern recognition and reasoning by computers. Ransbotham et al. (2018) presents a more
contemporary view of AI, arguing that AI is the integration of human-like intelligence in
machines. The basic idea behind AI is that it’s put in a context to make intelligent decisions
based on the information at hand. AI has become an integral part in many industries including
marketing, healthcare, and cybersecurity, etc (Nadikattu, 2016). According to Nadikattu (2016)
AI uses algorithms to execute tasks, which are set on explicit instructions that a computer can
run. Similarly, to when a person uses his intelligence to analyze a situation based on his own
experiences, AI algorithms are capable of learning from data. AI algorithms evolve by
analyzing which strategies have worked well in the past or they can rewrite algorithms all by
themselves (Katsikeas et al. 2016).

Advances in AI are fundamentally transforming the auditing field (Agnew, 2016). In the field
of auditing, the focus of AI capabilities is mainly on the automation of labour-intensive tasks
(Rapoport, 2016). More specifically, structured, and repetitive tasks that are performed as part
of the audit process (Kokina & Davenport, 2017). Agnew (2016) argues that the effects of AI
will be most prominent in audit tasks that were once performed manually but have already been
supported with computer aids. Currently, the impact of AI in audits is especially pronounced
in the process of data acquisition (Brennan et al., 2017). According to Kokina and Davenport
(2017) AI-enabled technology can locate relevant information, process it and make it usable
for the human auditor, who can focus more on complex judgmental areas. For instance, AI
enables full automation of substantive audit tests such as payment transaction testing. Examples
of AI-enabled technology that can be adopted by auditors include deep learning, natural
language processing and machine learning (SAS, 2018). According to Sun and Vasarhelyi
(2018) deep learning can be used to notify auditors of possible threats in the client's internal
control. Natural language processing refers to the capability of computers to understand human
language, which combined with machine learning can be useful in extracting information that

26
is of relevance to the auditor (Yordanov, 2018). The biggest advantage of natural language
processing is that it operates at previously unimaginable speeds. Lastly, machine learning can
be applied in audit tasks such as ratio analysis and journal entry testing (Hoogduin, 2019).

3.3.2 Big data and analytics

Big data is defined as ‘‘high-volume, high velocity, and high-variety information assets that
demand cost-effective, innovative forms of information processing for enhanced insight and
decision-making’’ (Gartner, 2013). According to Alles and Gray (2014), the three Vs of Big
Data, i.e., volume, velocity, and variety, describe the features that make Big Data unique.
However, for Big Data to be relevant and useful for decision making it must be processed and
analyzed in an innovative way (Earley, 2015). Hence, Big Data is often discussed in
conjunction with analysis of the data. As noted by Alles and Gray (2014), Big Data in the
accounting literature is often defined by the types of analysis that can be performed with the
capabilities of Big Data, such as DA and predictive analytics, rather than the type of data
source. Meuldijk (2017) argues that Big Data is a significant tool for auditors that can facilitate
the audit in areas such as scoping, risk assessment, trend analysis, and judgments. According
to Earley (2015), the amounts of computerized data in companies have been steadily increasing
over the years and recent advancements in e.g., processing speed and cloud storage has eased
the access to data and thus enabled companies to capture and store enormous amounts of data
for later use. At the same time, software to analyze large volumes of data, i.e., data mining
tools, have enhanced the capabilities of Big Data to add value (Earley, 2015), by increasing the
ability for companies to understand the story that the data is telling (Capriotti, 2014;
Whitehouse, 2014). Accordingly, Big Data enables auditors to perform prescriptive analytics
(e.g., Holsapple et al., 2014; Delen & Demirkan, 2013; Lee et al., 2014), and implementing
practices to computationally verify existing actions and their outcomes (Lee et al., 2014).
Following several accounting scandals, such as Enron (2001) and WorldCom (2002), auditors
are encouraged to incorporate Big Data to their practices to enhance the success and integrity
of their services (Alles, 2015). According to (Earley, 2015), there are four main benefits of Big
Data in audits. First, Big Data allows auditors to test greater numbers of transactions. Second,
audit quality can be increased since Big Data can provide greater insights into client’s
processes. Third, Big Data enhances auditors’ ability to detect fraud and fourth, Big Data
allows auditors to provide services and solve problems that go beyond current capabilities by
utilizing external data (Earley, 2015). The impacts of data analytics on audit quality are
summarized in the figure below (figure 3).

27
Figure 3: Data analytics – Impact on audit quality
Source: IAASB (2016, p. 7)

3.3.3 Blockchain technology

Blockchain technology has become very popular during the years, as the underlying technology
powering Bitcoin (Bonyuet, 2020). However, the advantages of blockchain technology further
surpass just supporting cryptocurrencies. Blockchain can be defined as a digital ledger that
enables the capture of transactions between several parties in real-time and serves as a
decentralized database where each participant keeps an identical copy of the ledger (e.g.,
Bonyuet, 2020; Jansen et al. 2019; Narayanan et al. 2016). According to Vaidyanathan (2017)
Blockchain allows all parties in the distributed ledger to get a common view of the records. No
intermediaries are needed to settle a transaction and validation is performed by multiple users.
Once a transaction is validated, all copies of the ledger are updated. Multiple transactions form
blocks that “chains” (hence the name “blockchain”), which cannot be altered and deleted. Thus,
there are several benefits with blockchain networks, including authentication of peer-to-peer
transactions and automated, encrypted, and real-time registry of such transactions (Bible et al.,
2017). Further, there are two major classifications of blockchain networks: private and public
(Bonyuet, 2020). A public blockchain can be set up so the data can be shared with anyone who
has access to the internet, this is also referred to as a permissionless blockchain. A private, or
a permissioned blockchain, only allows certain participants with reading and writing rights
(Jansen et al. 2019). While both types of networks are based on the same consensus

28
mechanisms, private blockchain networks such as Hyperledger are designed to be faster than
public networks (Vaidyanathan, 2017). Hyperledger is significant for companies, focusing on
developing an open source DLT network that will facilitate business transactions (Hyperledger,
2018).

Thus, blockchain technology offers a drastically new way to record, process, and store financial
transactions and information (Liu et al., 2019). Accordingly, blockchain has the potential to
create an entirely new ecosystem for the handling of accounting information (Dai & Vasarhelyi
2017; Kokina et al., 2017). The Big Four auditing firms and many institutions have begun to
appreciate the potential benefits of blockchain technology and are actively engaged in its
development (Bajpai, 2017). Deloitte launched their first blockchain initiative in 2014
(Deloitte, 2016). Ernst & Young (EY) became the first advisory firm to accept bitcoin for its
services in 2017 and has since rolled out a number of services and applications to facilitate the
commercial use of blockchain technology (EY, 2017).

Many benefits of blockchain can be found in the accounting and auditing literature. According
to Appelbaum and Smith (2018), blockchain transactions are expected to become the “single
source of truth”, since they are recorded automatically, encrypted, and immutable. Blockchain
technology allows for a detailed audit track (Liu et al., 2019), along with the ability to detect
irregularities from an entire population rather than a sample (Kokina et al., 2017). Thus,
blockchain could fundamentally change the audit process. Blockchain enables auditors to
conduct audits on a continuous basis based on trusted data and therefore tasks such as
reconciliations and confirmations may no longer be needed (Bonyuet, 2020). As a result, the
adoption of blockchain would free up resources and allow auditors to focus more time on
complex judgmental areas.

3.4 Automation

According to FAR (2006), auditing involves several mundane and labour-intensive tasks, such
as reconciliations and confirmations. However, in the auditing literature it’s clear that advances
in technology allows auditors to automate parts of the audit process and thereby eliminate some
standardized and repetitive tasks (e.g., Kokina & Davenport, 2017; Raphael, 2017; Banker et
al., 2002; Agnew, 2016; Lombardi et al., 2015; Tiberius & Hirth, 2019). According to
Lombardi et al. (2015), new technology provides auditors with means to complete mundane

29
tasks in a timely manner, allowing them to focus more time on complex judgmental areas. This
notion is supported by Tiberius and Hirth (2019), who argue that automation relieves auditors
from routine tasks in favor of more complex tasks. According to Ghasemi et al. (2011),
advancements in information technology have brought opportunities for companies to perform
accounting functions with significant time and cost savings and allowed companies to progress
toward paperless offices which in turn has been beneficial for auditors since audit trails and
details are automatically maintained. Therefore, Raphael (2017) believes that digitization does
not only increase the efficiency and quality of an audit, but it also creates value for clients
because they can access more relevant and valuable information.

Specifically, AI in auditing is heavily focused on the automation of mundane and labour-

intensive tasks (Rapoport, 2016). According to Kokina and Davenport (2017) AI-enabled
technology can locate relevant information, process it and make it usable for the human auditor,
who can focus more on complex judgmental areas. For instance, AI enables full automation of
substantive audit tests such as payment transaction testing. However, the benefits of Big data
analytics and Blockchain clearly also include automation capabilities (e.g. Appelbaum &
Smith, 2018; Liu et al., 2019; Earley, 2015). Blockchain transactions are recorded
automatically, encrypted, and immutable (Appelbaum & Smith, 2018), allowing for a detailed
audit track (Liu et al., 2019), along with the ability to detect irregularities from an entire
population rather than a sample (Kokina et al., 2017). According to Earley (2015) Big Data
analytics will also allow auditors to automate transaction testing and similarly to Blockchain
technology, Big Data analytics will also enable testing 100% of the population.

However, there is evidence indicating that auditing professionals in less developed countries
don’t perceive new technologies, like for instance AI, as useful in automating parts of the audit
process (e.g., Albawwat & Al Frija, 2021; Afroze & Aulad, 2020; Ismail & Abidin, 2009).
Hence, the acceptance of such technologies is lower in less developed countries than in
developed countries. For example, Albawwat and Al Frija (2021) states that autonomous AI
systems are perceived as complicated to use and therefore deemed not useful by auditors in
Jordan.

30
3.5 Audit quality

Audit quality can be determined by the timeliness and usefulness of audit reports (IFAC).
Evidently, many scholars argue that a significant benefit of digitalization is increased audit
quality and effectiveness, by enabling smarter analysis and continuous auditing. Manita et al.
(2020) argue that digital technology will allow auditors to get a better control of the client’s
data, and thus improve the relevance and quality of the audit. New digital technology is also
believed to enable a more relevant analysis of the clients’ processes and data, which makes it
possible to identify errors and anomalies more effectively. This is consistent with prior studies
on big data, which shows that digital tools in auditing could improve the quality of financial
statements and anomalies detection (Lombardi et al, 2015; Krahel & Titera, 2015; Cunningham
& Stein, 2018; Earley, 2015). Further, the automation of repetitive and labour-intensive tasks
allows the auditor to focus more time on complex judgmental areas. Hence, digitalization
allows audit firms to increase their capabilities of adding value for their clients (DeFond &
Zhang, 2014). Clearly, digitalization and digital technologies also enable a faster and easier
completion of audits, while maintaining the integrity of the data. Lombardi et al. (2015)
supports this notion, suggesting that new technology in the auditing field will make fieldwork
more effective and efficient. According to Jachi and Yona (2019), the use of tools such as
artificial intelligence enhances the effectiveness and quality of the audit, which in turn increases
the reliability of the financial statements.

Furthermore, professional judgment is a prerequisite for the provision of useful and timely
audit reports (Oleksandr, 2016). According to Adrian and Viorica (2015), professional
judgment is critical for auditors since they are required to make sound and informed decisions
about the courses of action throughout the audit engagement. Professional judgment is highly
subjective and for auditors it means making decisions, analyses, or evaluations on the basis of
knowledge, skills, training and experience. Several accounting standards include specific
sections on professional judgment, discussing the stages in which the auditor must rely on his
professional judgment. For instance, ISA 200 asserts that judgment should be exercised when
making decisions, especially in risk assessment and determining materiality. Furthermore, the
auditor should use his professional judgment when planning what evidence to collect in order
to be able to express an opinion, and how and when to collect such evidence. The auditor is
also expected to use his professional judgment when determining the sufficiency and
appropriateness of the obtained audit evidence, according to ISA 200 (IAASB Handbook,

31
2015). Moreover, existing research indicates that digitalization and emerging technologies may
impact the auditor's professional judgment. According to Brown-Liburd et al. (2015), Big data
and analytics could impair auditors’ professional judgment due to information overload and
ambiguity. Other studies (e.g., Salijeni et al., 2019), provide conflicting results, instead
suggesting that emerging technologies provide auditors with the means to automate some
repetitive and routine tasks, giving the auditor more time to focus on the complex areas such
as risk assessment. In turn, the authors believe that auditors' professional judgment will be
improved following advances in technology.

3.6 Competencies

According to researchers, competence plays a significant role in the field of auditing, directly
impacting the effectiveness and the value of audits (Nearon, 2005). Thus, most auditors agree
that it’s important for them to keep up with the current developments in technology for auditing
to remain a valuable and relevant service (Karlsen & Wallberg, 2017). Therefore, scholars
argue that the digital development of the auditing industry will lead to a changing
organizational structure, which also means changing skills needed within the auditing firms
(e.g., Ghasemi et al., 2011; Appelbaum et al., 2017; Lombardi et al., 2015). According to
Appelbaum et al. (2017), the increased digitization and the constantly changing nature of
clients’ business models, may result in more complex auditing and auditor requirements. For
instance, while blockchain offers a completely new way to record financial transactions and
information, and brings new business to auditors, such as verifying the existence of digital
assets and reviewing certain transactions, it’s believed that these new tasks can be challenging
for auditors who are not IT experts (Earley, 2015). Especially when there are no centralized
authorities on the blockchain. Hence, more IT specialists and data scientists might be employed
in auditing firms due to the changing requirements. This raises the question of whether business
administration, accounting, or auditing graduates will continue to staff auditing firms, rather
than IT-oriented employees (Tiberius & Hirth, 2019). Furthermore, Lombardi et al. (2015)
maintain that the rapid advancements of technology has resulted in a gap between the
profession and education that should be shortened in order to properly educate and prepare
students for the audit profession. Manita et al. (2020) also agrees that it’s important that
auditors possess the technical skills necessary to perform audits with the use of these new
technologies. Thus, Manita et al. (2020) suggests that audit professionals should be properly

32
trained to gain specific technical skills to understand how the client’s data is designed and
generated.

Furthermore, audit firms have generally relied on recent graduates to perform the more
repetitive and administrative tasks in the audit process. However, since disruptive technologies
allow auditors to automate parts of the audit process, thereby eliminating some standardized
and repetitive tasks, it’s argued that audit firms will hire significantly less new audit and
accounting graduates in the future (Kokina & Davenport, 2017). Since the audit industry is
changing in conjunction with digitalization, the universities will also have to change parts of
their curriculum to cater for the new competencies that auditors are expected to have (Issa et
al., 2016). Although senior auditors in large audit firms agree that the need for human auditors
won't go away anytime soon (Agnew, 2016), and that it’s likely that the auditing field, like
many other business fields, will be augmented by technology rather than fully automated
(Davenport & Kirby, 2016), there is evidence indicating that some audit professionals are
worried about the technological developments (e.g., Afroze & Aulad, 2020). While studying
the perception of audit professionals on AI in the context of auditing in Bangladesh, Afroze
and Aulad (2020) found that auditors in Bangladesh believe that AI pose a direct threat to the
jobs of grass-root employees. According to the authors, AI has made manual and repetitive
auditing tasks a lot simpler and quicker which is seemingly intimidating for some auditors.

33
4. Methodology
At the beginning of this chapter, the authors give pre-understandings and a description of
digitalization and auditing. This section also gives a clearer perspective regarding this
research. Furthermore, the research philosophy on the ontological and the epistemological
will be presented. The motivation for this research approach, the design, methods, and
research strategy will be discussed. A detailed explanation of the literature review will be
provided and lastly, a thorough empirical analysis will conclude this chapter.

4.1 Pre-Understanding

As stated by Saunders et al. (2016), researchers should provide detailed motivation and
justification as to why the specific research was proposed. Hence, the following sections will
include clarification of the author’s perspectives and knowledge on how digitalization impacts
the audit profession. The process of digitizing auditing is evolving, and the authors are
interested in learning from audit firms in two different geographical locations developed and
less developing countries' perspectives on how digitalization impacts the audit process and
what insight can improve some audit gaps.

Additionally, the thesis presented an amazing opportunity for the authors to explore their
personal interests in the areas of digitalization and in relation to our studies. We saw this as an
interesting area because the digital world is evolving and there are some challenges that come
with the actual application in the audit process and digitalization in our world today, opens new
opportunities for professionals in every field including auditors. In other to present a clear
understanding of our thesis research, we focus on our master’s level courses in audit and control
to explore the reality of digitalization on the audit profession but not much will be said in the
presentation from the literature review until we carefully listen to audit practitioners from audit
firms in two different geographical setting Sweden and Liberia respectively, to share their
perspectives on the effects of digitalization in on auditing as we are more interested in the
actuality of the practices and the implementation in order to compare and draw a conclusion
for our thesis.

34
4.2 Our perspective

As some challenges in the implementation of digitalization in the audit process were mentioned
in the problematization, the study focuses on the effects of digitalization on the audit profession
and in comparison, with auditor’s perspectives from audit firms in two different geographical
settings. The authors are more interested to understand how audit practitioners within these
firms perceive the audit processes, the changes that come as the result of digitalization, and the
effects of these changes from a personal or holistic perspective. And as the digital era is quickly
developing, we are interested to see how the changes are shaping the future of the audit
profession and present relevant findings for further research. Future researchers can then use
findings and contextualize them when looking at digitalization and other change drivers that
impact the audit profession.

As we conduct a comparison study with auditors from different perspectives, the research will
approach problems related to the continuing change in the audit processes and understand how
auditors perceive these changes from an academic or practical perspective. The findings can
also be employed to learn more about the commonalities that auditors have when it comes to
their perceptions of the future effects of digitization on the audit profession; insights from their
perspective can be useful for both auditors and other stakeholders. The digital effects on the
audit processes can be seen as universally significant from existing research, but it is as well
complex to find an exact prediction of the effects of digitization on the future of audit processes.
Although it might be somewhat difficult to conduct such research from two different
perspectives, we fully understand that the experiences of audit practitioners from these different
perspectives will provide useful insights as to how changes in the audit processes will be
significant in the coming years, and those practical insights can be important from a
researcher’s perspectives.

4.3 Research Philosophy

According to Burrell and Morgan (2017), philosophical assumptions and methodological

assumptions are the foundation when conducting research and the ideas that knowledge
produces are based on realities. Tuli (2010) classified research methodology or research
strategy as concepts that explain epistemology and ontology research studies. The paradigm
that leads the research activity, more particularly, views about the nature of reality and

35
humanity (ontology), the theory of knowledge that informs the research (epistemology), and
how that knowledge may be achieved, all influence research methodology selection. An
examination of the nature of social science research should include a discussion of
epistemology, ontology, and methodology, as these factors influence and define how the
research is conducted. He further added that research methodology in social sciences is related
in the sense that they are all means of soliciting information about human nature from human
participants and there are varieties of research methodologies pointing out quantitative and
qualitative methods. He claims quantitative research methodologies for “uniformities and
principles” and in the analyses, researchers determine based on the overall design, how the
variables describe, compare, predict, and contribute to explaining the analysis to answer the
purpose of the study. On the other hand, he claims that qualitative research seeks out
understanding real-life experiences of concepts experienced by one or more individuals (Tuli,
2010). However, the authors seek to employ the qualitative method for this study as a way of
understanding the actual effects of digitalization on the audit profession. As qualitative
methodologies focus more on a deeper understanding that describes, interprets, and explains a
belief from diverse backgrounds in a unique context, qualitative researchers are less concerned
with generalizability (Tuli, 2010). Mutch (2005) classified these concepts of reality as a human
construct. To carefully answer the research questions, the findings will be shown at the end of
the study after exploring and gathering empirical data from auditors within audit firms in
Sweden and Liberia respectively, who are currently implementing digital applications in their
audit processes. The findings will give a detailed analysis of auditors’ experience and the
effects of digitalization on the audit process in comparison with auditors from developed and
developing countries’ perspectives.

4.4 Epistemology Position/ Interpretivism

Epistemological assumptions consider what knowledge can be and the relationship between
the person who has knowledge and the person who is seeking knowledge (Guba & Lincoln,
1994). In terms of performing social science research, the crucial epistemological question is
whether the social world can be examined using the same principles as the natural sciences
(Bryman, 2001). And there are two main epistemological positions: positivism and
constructivism (interpretivism). The epistemology assumption poses the following questions,
what's the connection between the knower and the thing that's known? What evidence do we
have that we know what we know? What constitutes "knowledge"? The positivists believe that

36
the main purpose of research is for scientific explanation and the belief, largely evolved from
around the nineteenth-century philosophical approach. According to Tuli (2010), positivists
claim that social reality has the following characteristics which include empirical facts that
exist independently of personal ideas or thoughts; they are administered by laws of cause and
effect; social reality patterns are stable, and knowledge of them is additive. As stated by Ulin
et al. (2004), the main assumption for this positivist paradigm is that science's goal is to develop
"the most objective methods possible to get the closest approximation of reality". The emphasis
is on the closest approximation to reality rather than reality itself. With the position that
knowledge is "objective and quantifiable," this paradigm invariably separates people from their
reality (Antwi & Hamza, 2015). Quantitative research is primarily associated with this school
of thought because it is "concerned with investigating things that can be observed and measured
in some way" (Antwi & Hamza, 2015). The interpretivist-constructivist sees the world "as
constructed, interpreted, and experienced by people" in their interactions with one another and
with social systems in general (Tuli, 2010). In this paradigm, the nature of inquiry is
"interpretive, with the goal of understanding a specific phenomenon rather than generalizing to
a population" (Farzanfar, 2005). Conducting interviews to understand everyone’s perspective
aligns more with an interpretivist viewpoint, and because human interpretation will be used,
completely unbiased judgments are difficult to achieve. As a result, interpretivism is the
dominant epistemological position in this study. This is where most qualitative researchers
draw their conclusions (Bell et al., 2019)

4.5 Ontology Position/ Constructionism

Saunders et al. (2009, P.133),” classified ontological assumptions as the nature of realities and
these assumptions shape the way we see and study research objects. The ontological
assumptions, therefore, determine how we see the world in business and management and these
objects include organizations, management, individual working lives, organizational events,
and artifacts”. Additionally, Ahmed (2008), citing (Crotty M, 2003), defines ontology as "the
study of being." It's about "what kind of world we're looking at, the nature of existence, and
the structure of reality as a whole." To further clarify, Guba and Lincoln (1994) define ontology
as the nature of reality and how it is shaped and Knowledge regarding reality will be seen
differently depending on a researcher's ontological assumptions. In our effort to discuss how
digitalization and its effects on audit firms is shaping the audit profession, the authors seek to

37
employ the constructionism position because auditors with the research are social actors that
have different realities or perspectives and are often influenced by social processes.

4.6 Research Design

Researchers are faced with the dilemma of deciding which approach to take in their attempt to
establish a link between theory and research (Awuzie & McDermott, 2017). This is due to the
supposed problems of the two most widely used approaches, inductive and deductive
reasoning. According to Bryman (2012), the task of establishing a clear link between theory
and research remains onerous for qualitative researchers. Eriksson and Kovalainen (2008)
present three research approach that researchers can use: a deductive approach, an inductive
approach, and an abductive approach.

As stated by (Eriksson & Kovalainen, 2008), the fundamental concept of the deductive
approach is that existing theory is the initial source of knowledge, and hypotheses are created
to be tested based on the knowledge gained by previous theories. The deduction is better suited
to quantitative research than qualitative research. Additionally, Saunders et al. (2016), discuss
several distinguishing characteristics of the deductive approach. As the first characteristic of
deduction, relationships and correlations between variables are sought. The second
characteristic is that concepts must be measurable (Saunders et al., 2016). Finally, the findings
presented in a deductive research approach should be generalizable, which would compel a
sufficiently large sample size from a carefully selected sample.

Eriksson and Kovalainen (2008), also classified the inductive research approach as the inverse
of the deductive research approach. And in research, induction implies that the theoretical result
is the result of empirical research. Saunders et al. (2016), added that even though theory is a
product of data collection, the same theory could be the result of research using an inductive
approach as well as a deduction approach and researchers who collect data using qualitative
methods are more likely to use an inductive approach because understanding about
respondents' interpretations of their social world is desired to understand and explain why
certain problems occur. Additionally, Saunders et al. (2016), explained that the advantage of
induction is that researchers can discuss what is going on with multiple explanations rather
than just causes and effects between variables within a stated hypothesis as in a deductive
approach.

38
Saunders et al. (2016) discuss the third approach as an abductive approach, which combines
features from both deduction and induction in the sense that a researcher moves back and forth
between theory and data, rather than just in one direction as the previous two approaches do.
This research follows the abductive research approach to understanding the effects of
digitalization on the audit profession from two different perspectives. And McDermott and
Awuzie, (2017), claim that knowledge never emerges from data alone, but from the relationship
between empirical substance and theoretical models and notions.

4.7 Data Collection

As research is conducted the data collection is one of the significant processes and the data
contribute a better description or understanding of the theoretical framework. As stated by Tuli
(2010), interpretive researchers through research place more emphasis on how the world or
phenomenon can be understood through personal experiences, that incorporate truthful
reporting, and quotations of actual conversation from personal perspectives. The data collection
method for this study were done through interviews with auditors from different audit firms in
Sweden and Liberia respectively where digital audit is being implemented in the audit
processes to give broader insights from developed and less developed country perspectives and
experiences of the phenomenon being studied. The thesis incorporates interviews from nine
practicing auditors from different audit firms. The interview sessions were recorded for
verbatim transcriptions, their names were omitted to ensure anonymity. The interviews were
done via different social media platforms. For the analysis, the interview sessions include the
dates, positions of the auditors at the audit firms, gender, the medium through which the
interviews were conducted, and the length of each interview will be presented in a table format
to ensure credibility of the study. The names of audit firms of the participants were omitted to
ensure anonymity as promised. The interview sessions were done in English and recorded for
proper analysis and reliability.

4.8 Sampling Method

In the process of research, there are several sampling methods researchers can choose from.
And with the aim of the author’s, the thesis explored the effects of digitalization on the audit
profession, which involved interviewing auditors about their expertise in the topic under study.

39
The study targeted respondents are auditors from audit firms in Sweden and Liberia.
Taherdoost (2016), described the sampling frame as a list of the actual cases from which a
sample will be drawn and sampling methods can generally be divided into the probability and
the non-probability methods. Etikan et al. (2016) added that non-probability sampling is said
to have limits due to the subjective nature of sample selection; yet it is very effective when the
researcher has limited resources and time and does not want to generalize the results to the
entire population. In the study of this case, the study used a non-probability sampling method.

This method is deemed necessary for this thesis because the authors aim to collect first-hand
information from auditors’ experiences on the effects of digitalization on the audit process and
how these digital applications are being implemented and its effects on the audit profession.
The targeted participants are auditors from audit firms in Sweden and Liberia that are using
digital applications in their everyday audit activities. It is also necessary that the respondents
possess sufficient knowledge on the audit process and hence we choose to disregard auditors
who have worked in the auditing field for less than a year. Furthermore, the nine respondents
were conveniently sampled, and hence a convenience sampling method (Bell et al., 2019) was
adopted. Initially, two respondents were contacted, and the initial contacts then led to more
auditors being contacted, all of whom accepted.

4.9 Interview process

According to Saunders et al. (2009), research interviews are usually characterized as structured,
unstructured, and semi-structured interviews. Structured interviews, which are known for being
strict, and with the focus of this research, conducting structured interviews will not reveal all
the information needed concerning the effects of digitalization in auditing because they provide
very little opportunity for follow-up questions to probe comments that demand more in-depth
and extensive observations. While the unstructured interview is described as conversational
with the goal but without a list of present questions and it gives the interviewee the opportunity
to discuss whatever questions the interviewer asks. The unstructured interview is also described
as a shared experience because the interviewer and the interviewee work together to create a
background of familiarity in which the respondents are willing to tell their stories. And this
interview appears to be an oddly private process that is half suited for a professional setting
and researchers are interested in getting respondents' opinions in a reasonable amount of time
and avoid wasting their time. Looking at the downsides of both the structured and unstructured

40
interview methods, the semi-structured interview structure will be employed in this research
because it includes the benefits of both. It is also regarded as a flexible strategy that allows the
interviewee to convey additional thoughts on a topic after the question has been posed (Drever,
1995). Its main drawback is that it isn't well suited to studies with a big number of participants.
Because of the limited sample size of this research, it works well for this study.

4.10 Interview Guide

The questions for the interview were developed with the main purpose of having in-depth
knowledge and experience with the interviewees and gathering rich data from the different
interviews. Inspiration and ideas were gathered from other researchers’ work through
systematic literature of related articles in the formulation of the interview guide. The review
process included literature on the importance of digitalization in audit processes, audit
professions, the future of digitalization in future audits, and other related literature were
considered such as: Digitalization in Auditing, (Alexander & Nurnberg, 2019), Digitalization
of Accounting-Trend and Perspectives (Gherman et al., 2019), Qualitative Interview Design
(Turner, 2010, 2021), Qualitative Inquiry and Research Design, (Creswell & Poth,, 2016),
Impact of Digitalization on Auditing, (Tiberius & Hirth, 2019). As the digital phenomenon is
evolving, there is however a growing number of research on the effects of digitalization on the
auditing profession. For the aim of the study, the questions were developed based on
digitalization in each stage during the audit process to gain practical knowledge from the
experience of participating auditors.

The questions were organized into the following categories: the first section focused on the
respondents' background information, including their position at the firm, years of audit
experience, professional qualification, and primary responsibilities. The second section
highlighted the respondent’s competence and their experience level with digital applications
for their work and personal use. The third section focused on auditors’ perceptions of how
digitalization is influencing the audit processes. The fourth section focused on the effects and
the quality of audit reports when digital applications are used to generate findings. The fifth
section highlighted competencies, what skills and training will be better suited in the
preparation of future auditors. The final section was to evaluate the future impacts of
digitalization in the audit process and the ethical concerns of digitalization. These questions
were to understand their perspectives of digitalization as a requirement for accounting/auditing

41
standards and to understand if the digital applications impair the professional judgment of
auditors. Lastly, the questions were also developed to evaluate the positives and negatives of
implementing digital applications in the audit processes and the challenges they have
experienced in the process.

4.11 Interpreting the data

Analyzing the data collected from the interviews is a significant part of the study. As a
qualitative study, the data must be organized in such a way that it follows a pattern and is easy
to comprehend for the readers. During this step, the researcher must make "meaning" of what
has just been discovered and organize the data into sections or groups of information, which
are referred to as themes or codes. These themes or codes are recurring phrases, expressions,
or thoughts that were shared by all participants in the study (Turner, 2010). During the analyses,
the data were divided into separate sections according to the interview guide which was
structured in the research model. Participants, respondents, auditors, or informants were used
interchangeably. The primary information which was significant in the gathering of
foundational knowledge or experience was firstly analyzed and the remaining sections were
checked on the competence of auditors in the use of digital applications in the audit process
and each level of the digital applications process was examined for ethical considerations.
Direct quotations from some respondents were quoted, to represent their viewpoints. The word-
for-word quotation is an underlying strategy that the data are facts and that respondents spoke
for themselves for reliability of the data. (Wolcott, 1994). For proper interpretation, a
discussion is done after each section to point out commonality among themes in respondents’
responses. Additionally, to maintain and include the essential information gleaned from the
data may differ from or add to the prior predetermined framework to build on the framework
and support the abductive approach used in the study. Connecting all pertinent aspects of the
analysis to theories.

According to Saunders et al. (2016), a thematic analysis method can be applied to analyze
qualitative data. Hence, this study will adopt the thematic analysis approach. Braun and Clarke
(2006), states that the thematic analysis is the process of identifying patterns within qualitative
data. The process involves identifying patterns, or themes for further examination and
explanation. Saunders et al. (2016) argues that the thematic analysis approach is a systematic
way to analyze large volumes of qualitative data. According to Braun and Clarke (2006), the
thematic analysis approach involves six steps, which are presented in figure 2:

42
Figure 2: Phases of the Thematic Analysis (Braun & Clarke, 2006, p. 87)

Accordingly, the tape-recorded interviews were first transcribed word by word, to avoid any
misinterpretations. Next, the data was put in a table form, following the structure of the
interview guide, enabling the authors to generate initial codes and identify relevant data. In the
end, this allowed the authors to achieve a precise and logical presentation of the empirical data.

4.12 Bias in Data Collection

In research, bias is described as any tendency that inhibits unprejudiced consideration of a

question choosing or promoting one outcome or response over others. Bias can occur at any
stage of the process of research, such as study design or data gathering, as well as the data
collection and procedure research (Pannucci & Wilkins, 2010). Simundic (2012), also claimed
that we usually examine a phenomenon of interest in a representative sample because
investigating a population is often infeasible due to time and money constraints. We hope that
by doing so, what we will learn from a small sample may be applied to the full population. To
accomplish so, a sample must be representative of the entire population. Additionally, Pannucci
and Wilkins (2010) stated that because every study has some level of bias, reviewers must
assess the impact of bias on the findings and conclusions. During the selection of the population
to be interviewed/explored, selection bias may occur. There was a selection bias in the data

43
gathering for this study. This is because the study seeks a perfect population capable of
achieving the study's goal. The target audience is auditors who have already implemented
digital applications in their auditing processes, rather than auditors in general. The ideal
population is one that is well-defined, dependable, and easily accessible (Creswell, 2007).

4.13 Trustworthiness, Credibility and Authenticity

Guba and Lincoln (1994) pointed out two significant measures that are used in the evaluation
of qualitative research: trustworthiness and credibility. In this case, they classified
trustworthiness as credibility and the transferability of research data. And credibility in this
case simplifies that the interviewee’s contribution to the research was correctly done without
bias. And, to ensure the actual credibility of the study, the interviews were recorded and
transcribed word-for-word for analysis, and the voices of the interviewees were quoted, this is
done to improve the data's credibility by removing any assumptions or prejudice. According to
Gill et al. (2008), for researchers to guide against biases in their data collection and present
evidence as expressed, transcribing interviews as they were recorded is one of the significant
ways of ensuring credibility in the research data and the transferability of the research data in
contexts by other researchers. Malterud (2001) also added that the primary aim of any research
is to produce and share information that is relevant beyond the study settings. Furthermore, he
claims that no study, looking at the method employed can present findings that are universally
transferable. It is usually determined by the research question and what extra information is
required to successfully answer the research question in the environment in which it is being
used. Additionally, Smallbone and Quinton (2004) described the authenticity of the study as
confirming that all opinions in each environment are well represented in a larger context. And
the targeted audience in this study essentially represents all levels of auditors engaged in the
audit process from a developed and less developed country perspective. Fairness in
representation is signified by this term.

44
5. Empirical results and findings

In the following sections, the empirical data from the conducted semi-structured interviews is
presented and discussed. This chapter provides a general background of the respondents, then
the data is presented following a similar structure as the literature review chapter.

5.1 General background

This thesis is set to explore the perceived effects of digitalization on the audit profession in one
developed and one developing country, i.e., Sweden and Liberia. Hence, a series of semi-
structured interviews were conducted to collect the relevant data. The targeted participants
were audit associates with at least more than one year experience to ensure that they were
knowledgeable about the audit processes. We chose to include both Big four audit firms as well
as non-big four audit firms in this study, since this would enable us to determine whether there
are any differences in the implementation of emerging technologies between bigger and smaller
audit firms. In the end, 9 semi-structured interviews were conducted between 3 may and 11
May 2022. Table 1 includes a description of the respondents' respective roles, work experience
and educational background as well as their assigned codes.

45
 Code Role Experience Education Organization Duration (in
(in years) minutes)

R1 Manager 6 Bachelor’s Big four firm 35

degree in in Sweden
accounting
and auditing

R2 Senior audit 3 Master’s Big four firm 40

associate degree in in Sweden
business and
economics

R3 Manager 6 Master’s Big four firm 32

degree in in Sweden
economics

R4 Senior audit 3 Bachelor’s Big four firm 27

associate degree in in Sweden
accounting
and auditing

R5 Internal 5 Master’s Bank 38

auditor degree in
auditing and
control

R6 Audit 3 Bachelor’s Big four firm 40

associate degree in in Liberia
accounting

R7 Audit 6 Master’s Big four firm 36

Manager/ degree in in Liberia
Chartered business and
accountant finance

R8 External 5 Bachelor’s Non-Big four 25

audit degree in firm in
supervisor business and Liberia
economics

R9 Audit 4 Bachelor’s Big four firm 42

associate degree in in Liberia
accounting

Bachelor’s
degree in
management

Table 1: Participants background

46
R1 is a manager, working at a Big four firm in Sweden. R1 has worked at the firm for six years
and is responsible for audits and most of the contacts with the clients. The auditor has a
bachelor's degree in accounting and auditing. R1’s responsibilities also include planning the
audits and setting the risks.

R2 has a master’s degree in business and economics and has been working at a Big four firm
in Sweden for three years. R2 has been a senior audit associate for a year and the auditors
responsibilities include planning the office's resources.

R3 has a master’s degree in economics and works at a Big four firm in Sweden. R3 has been
working at the firm for six years and is also a manager. R3’s responsibilities include managing
the audit team, new recruitments, and wage setting.

R4 is a senior audit associate, working at a Big four audit firm in Sweden. R4 has a bachelor’s
degree in accounting and auditing and the auditors’ responsibilities include performing the
audits, mainly the more difficult tasks in the audit process. As a senior, R4 also reviews the
junior auditors in his audit team.

R5 works as internal auditor at a Bank in Liberia. R5 has a master’s degree in auditing and
control and has been working in the internal audit department for four years. R5 currently
serves as the head of the credit audit and is responsible for reviewing both the credit admin
department and the marketing unit, ensuring that they are in line with bank credit policies, the
various standard operating procedures and best practice. R5 also assesses the various risks i.e
the market risks, credit risks, and liquidity risks.

R6 has a bachelor’s degree in accounting. After working at a non-Big four audit firm for two
years, the auditor started working at a Big four firm in Liberia. R6 has worked at the firm for
almost a year and is currently an audit associate. R6’s responsibilities include preparing and
maintaining the audit budget, planning, and directing the financial audit performance of
substantive tests on lower-risk areas as established by the audit team during the planning stage.
As well as ensuring that the client follows statutory or industry best practices and verifying
companies’ financial information.

47
R7 is an ACCA chartered accountant, working at a Big four audit firm in Liberia. R7 has a
master’s degree in business and finance and has six years of audit experience in Nigeria and
Liberia. Currently, R7 serves as manager for audit services, and provides audit and other
advisory services to a portfolio of clients in Liberia. The auditor handles risk management
across the region in terms of quality management agenda. R7’s responsibilities also include
staff utilization, managing staff resources, learning and development, and business
development, and setting the strategic agenda for the firm.

R8 is an external audit supervisor in Liberia, with a bachelor’s degree in business and

economics. R8 is currently working at a non-Big four firm and has five years of experience in
the field, having several certificates in different auditing programs and a diploma in accounting.
R8 supervises an audit team of four junior auditors.

R9 has two bachelor’s degrees, one in accounting and another in Management. R9 is currently
also an MBA candidate and ACCA student. R9 has four years of practical experience in
external auditing and is an audit associate at a Big four audit firm in Liberia. R9 is responsible
for providing auditing services to clients.

The interviews were tape recorded and ranged from 30 to 45 minutes. The interview guide (see
appendix) was developed to include all aspects of the literature review and to cover the diverse
topics to answer the research questions. The first section focused on the respondents'
background, including their position at the firm, years of audit experience, and primary
responsibilities. The section also contained questions aimed at exploring how familiar the
respondents were with the concept of digitalization. The second section included questions
regarding which technologies the respondents used in their everyday work and the perceived
ease of use and usefulness of emerging technologies in the context of auditing. We also wanted
to explore if and how the respondents had been trained to effectively use these technologies.
The third section revolved around the automation of the audit process using emerging
technologies and the advantages associated with it. Next, we wanted to discuss the effects of
digitalization on audit quality in depth. The fifth section included questions about the changing
skills and competencies auditors are expected to have following the technological
developments and lastly the respondents were asked to look ahead and reflect on the future
implications of digitalization for the field of auditing.

48
When asked to define what digitalization means to them, several respondents agreed that
digitalization involves working on computers and the implementation of technology to existing
tasks:

“That we don’t use papers or that we work more remotely. That we can work from
anywhere we want. You are not tied to a specific location, you can do much via the
computer.” (R1)

“I’m thinking that digitalization is making things that already exist more effectively and
digitized. That you take an existing work task and make it with the help of technology,
try to develop that process with tasks that already exist.” (R2)

“Essentially, you use more digital tools.” (R3)

“That we work almost exclusively on a computer.” (R4)

“I will say, the adaptation of a system, or process, to be operated with the use of
computers and the internet or basically, I would say digitalization is just the conversion
of text or picture into those digital forms. That can be processed by a computer.” (R5)

“Digitalization, basically I will say that it has to do with the complete transformation
of the business process. So that is operations are run using digital technologies, for
example, a food delivery app instead of the traditional way of ordering food.” (R6)

“I will say, digitalization is a medium in which information is communicated or

processed through digital applications.” (R9)

Two respondents discussed the effects of digitalization on the auditing field:

“Digitalization in my view is a new way of defining our audit process in terms of

leveraging technology to provide services to clients, in short, that is my
understanding.” (R7)

“I will say digitalization is a new era, where audit firms are leaving manual paper
audits for more digital and advanced auditing.” (R8)

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5.2 The audit process

Next, the respondents were asked to give a couple of examples of current digital trends in the
context of auditing. AI, blockchain and Big Data were all mentioned by the Liberian
respondents:

“Currently, there are different technological software’s that is used in the audit
process, as per my experience, I will say power BI, AI, and blockchain technologies.”
(R9)

“I will say blockchain, AI, and maybe power BI.” (R8)

“So, for me and from where I come from, we are trained on the usage of different
software’s such as AI, blockchain, and power IB to carry out our audit processes.” (R7)

Interestingly, not one Swedish auditor mentioned these technologies by name when they were
asked to discuss the current digital trends in the auditing field. However, R1, R2 and R3 all
discussed the analysis tools that they use to perform audits, which enables them to capture and
analyze huge amounts of data:

“Otherwise technical trends is that we have left the classic audit behind, which perhaps
the other firms still do, where you take a bunch of samples. We gather all the data from
the client and it can be several systems that interact with each other so we get
connections between the systems which allows us to analyze deviations rather than
looking at individual samples.” (R1)

“... that you can follow the whole population which was not possible before. Perhaps
you tested 50 samples, but we can analyze the whole flow and see maybe we have one
deviation here. Why is that?” (R2)

“... mainly digital analysis tools which we call it and the use of them has increased.”
(R3)

The Swedish respondents focused more on the digital audit approach and the digital
communication that digitalization has enabled:

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 “... file transfers and we document in a system digitally and the client has a portal on
the other side where they add documents. So, we get access to those documents, and
they automatically fall under the right review step when we have linked it.” (R1)

“Emailing and digital communication has increased a lot (…) and the more digital
audit approach has just bloomed now that we work more remotely. Which we are able
to do thanks to digitalization.” (R3)

“… we have always used excel but now it’s used extremely extensively. Our entire
review is done in excel.” (R4)

Evidently, Swedish Big four audit firms have progressed towards fully digital and paperless
audits. R2, who has been working at her firm for three years has not done any audits using pen
and paper.

“... we don’t have any papers at all, everything is digital, and the clients have learned
to work like that as well. So, they have also become very digital.” (R1)

“I have not done any audits using pen and paper.” (R2)

“We do not have any papers anymore, everything is on the computer nowadays, the
whole review so that has done a lot for our way of working.” (R3)

The respondents were then asked if Big data and analytics, Blockchain or AI had been
implemented in their audit department. The findings suggest that there are differences in the
implementation of these technologies depending on firm size and geographical context.
Interestingly, while the Swedish respondents had been trained to use all of the mentioned
technologies, they were essentially only using Big data and analytics in their respective
departments. The respondents did, however, use Big data and analytics very frequently.

“It’s basically everything we do. Especially in bigger engagements but also in smaller.
Especially on earnings we do a lot of analyses and above all on bigger engagements
we can use it on inventory and on fixed assets and we just enter the data we get from
the client in excel which automatically performs several analyses and then we can see
where it deviates and we have a preset expected outcome…” (R1)

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 “We have a lot of analysis tools but also there is a very big engagement throughout the
firm (...) we can analyze the whole stream of transactions to see that it’s actually that
sales is booked against receivables and then receivables is booked against bank for
instance. That you can follow the whole audit trail and a whole population which was
not possible before. Perhaps you tested 50 samples but we can analyze the whole trail.”
(R2)

“Absolutely, analysis in general we have always done either using digital tools or not.
But analysis is a huge part of our work and analyzing trends and such. And that has
been extended a lot and can now be done in a completely new way with the digital
tools.” (R3)

Similarly, all Liberian auditors working at Big four firms had received internal training in Big
data and analytics, Blockchain and AI, and like the Swedish respondents, they were using Big
data and analytics in most of their audits. Unlike the Swedish respondents, the Liberian auditors
were also using Blockchain. Big data and analytics is adopted in a similar way in Liberia, i.e.
to follow audit trails and analyze transactions. Blockchain technology, however, is according
to R6 and R9 used to view colleagues' transactions:

“Blockchain is incorporated in our work and it’s a kind of digital ledger. It is one of
the major online tools where staff from various locations have assigned digital
ledgers.” (R6)

“We have digital ledgers which allow us to view other colleagues’ transactions.” (R9)

Both Swedish and Liberian respondents did, however, agree that the implementation of
advanced technology depends on which clients are being audited. For instance, smaller clients
tend to not have that many transactions to analyze, which mitigates the need for advanced audit
techniques. Smaller clients tend to also have less sophisticated systems, which further mitigates
the need for advanced technologies. Thus, smaller audit firms with smaller clients will have
fewer incentives to incorporate technologies like Big data and analytics, Blockchain and AI.
R1 and R4 did therefore argue that Blockchain and AI are more likely to be used in the bigger
offices:

“Perhaps they are only necessary in Stockholm and Gothenburg.” (R1)

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 “Maybe not as much here in this office but I know that it’s a lot more in the bigger
offices, where they have a bit bigger clients.” (R4)

Accordingly, the demand for advanced technology in a small economy like Liberia may not be
that high as suggested by R7:

“Normally, the series of training is rolled out on a global level, but how it is
implemented at the level of your local firm depends solely on how the market you
operate and how sophisticated the market is. And a small economy like Liberia, we are
aware of these technologies, but we are not using them.” (R7)

Furthermore, the two Liberian auditors working at non-Big four firms were not using any of
the mentioned technologies in their audits, nor had they been trained to utilize them as indicated
by the following quote:

“No, we are a smaller audit firm, and we are still doing audits manually.” (R8)

5.3 Usefulness and ease of use of emerging technologies in auditing

Next, we wanted to explore the perceived ease of use and usefulness of emerging technologies
in the context of auditing. Unsurprisingly, the respondents agreed that digital audit tools are
very useful since they help auditors to perform audits more efficiently and to collect more
relevant audit evidence. The improvements in audit efficiency and quality will be discussed
more in depth in sections 5.4 and 5.5.

“They are fantastic (…) and we evolve from that as well. We have noticed that the staff
evolve way faster from understanding why things are like they are so it’s way better.
You evolve more analytically. So I think that they are fantastic and they save a lot of
time. And we can look at actual deviations instead of looking at individual samples. It
creates more value. (R1)

“It makes my job more fun since they enable us to capture where there are actually
things to review. Rather than just trying to spot-test things and doing very repetitive
tasks for say 3 hours, I can look at the whole audit trail in less than 30 minutes. So,
there is a huge difference. “ (R2)

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 “We would not be able to do the audits we do without the tools that we have.” (R3)

“The technology that we use here has made our work a lot more effective really.” (R4)

“Yes, they are very useful because they help auditors be very effective. When producing
an audit report, with the help of these technologies, reports are more accurate and less
time-consuming.” (R5)

“Yeah, I will classify technologies as very useful to our work because they enhance the
quality of work and with these technologies, we work smart and not hard.” (R6)

“Yeah, so they are very useful and in short, you will be very efficient, and effective and
you will save time and it may have some implication on the clients.” (R7)

“Yes, I see these technologies as very useful, although we are efficient with the ones we
are using, I think if you had some of this technological software, we would do more.”
(R8)

“... they are very useful, they improve the quality of our work, and we save more time
on things like the manual auditing process. For eg. We have this platform where clients
upload documents.” (R9)

The findings suggest that the advanced technologies are also easy to use, as stated by both
Liberian and Swedish respondents. Hence, the acceptance of advanced technology in the field
of auditing is generally high, in smaller as well as bigger economies. The Liberian respondents
added that they were trained on a global level on how to utilize the emerging technologies and
therefore they did not have any difficulties using the technologies once they were implemented.

“Very easy. Very pedagogical. It says what to do under every step. They are connected
to the review tasks that we are doing. We have 7 or 8 different review tasks on inventory
and they automatically fall under their respective tabs with these analysis tools. And it
says what to do (...) So they are very pedagogical.” (R1)

“Yeah I think that they have made the tools very easy to use and there are direct links
too. And via these technologies you can get access to the entire voucher and you don’t
have to work in several different programs. There is a direct link to the client's records.
It’s very easy to use I think.” (R2)

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 “Yeah! They are designed in a way which makes them easy to use. There is always some
form of guide or formula that you can go by. So they are easy to use.” (R4)

“And they are easy to use, once you are trained and you start using them.” (R6)

“In my opinion, yes, once we are trained.” (R8)

“Yes, as I mentioned we are trained on a global level, so they are easy to use as I will
say.” (R9)

5.4 Automation

In order to explore the effects of digitalization on the automation of audit tasks, we asked the
respondents questions about the impacts of emerging technologies on audit tasks and the
advantages associated with it. Generally, the respondents agreed that digitalization and
emerging technologies has and will continue to automate audit tasks that were formerly done
manually. Furthermore, the respondents also agreed that the automation of repetitive and time-
consuming tasks has significant effects on how the service is delivered and the value they can
create for their clients. First, the respondents were asked if they believed or had experienced a
reduction in repetitive audit tasks due to digitalization and emerging technologies. The
respondents all agreed that digitalization had reduced the number of repetitive tasks, as
indicated by the following quotes:

“Yeah absolutely.” (R1)

“Yeah, it's very beneficial to use these tools (...) you streamline in a completely new
way. And it’s only the fun tasks that remain.” (R2)

“Yeah certainly. There are a lot of tools that we can use that basically just do the tasks
for us. So yeah for sure.” (R4)

“Yeah, sure. So that's the essence of digitalization. So, things that we used to do
manually with the evolution of digitalization, I think are moving from one stage to the
other, trying to minimize costs, and maximize productivity.” (R5)

“Yes, with digital technologies responsibilities are allocated per the different line items.
Like my previous job, where we did everything manually, there were days we repeated
tasks several times because we had to be very sure before issuing an opinion. But now

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 the repetition of tasks has reduced following the use of these digital technologies, which
also impacts the effectiveness of the audit process.” (R6)

Next, we proceeded to ask the auditors where advanced technologies are being implemented
in the audit process and how they facilitate audits. The findings indicated that advanced
technologies are used in essentially all parts of the audit process in both Sweden and Liberia,
from the pre-engagement to the completion of the final report. According to respondents R1
and R4, however, advanced audit technologies are especially helpful while analyzing the
heavier accounts:

“Mainly when we do our sampling. Eh mainly on income and inventory. Eh and some
analyses which formerly involved a lot of manual work are done automatically now.
Some analyses which you had to construct manually before are automated. Eh but
mainly it’s income and inventory where we can collect more audit evidence.” (R1)

“Yeah essentially in almost every part I would say. If you look at planning, execution
and conclusion. In the planning phase it’s part of our inquiry work to investigate how
the trails look like. And that’s also what we see when we do these tests. For us to be
able to perform the tests we have to, already in the planning phase, have an expectation
on how we think it’s going to be. And also in our conclusions that we have evidence.
What we get from our data analyses is the basis for our conclusions. That we have not
found an error or that we assess that the risk is very low since we see that the statement
of income has been handled correctly during the year. I would say that it’s something
that we take with us throughout the entire audit.” (R2)

“... it’s mainly in the closing procedures. Or the operative work where we audit the
final accounts. There we have a lot of use for analysis tools in that way. But then you
have to have the data analysis way of thinking throughout the audit. That we can utilize
it in the planning phase as well. Where we can analyze the whole audit trail.” (R3)

“... mostly in the heavier entries like for instance inventories and accounts receivables
and accounts payable. In many cases these entries are material and bigger, there we
have a lot of tools that we can use to make these tasks so that we can focus on the
essential.” (R4)

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 “For me, it is used in every stage of the audit process, the first one is to plan the audit
and then also do the fieldwork. From the planning to the submission of the result, digital
technologies are included in the different stages with the use of different audit
software.” (R5)

“It is being implemented in the entire audit process.” (R6)

“So, I will say, the entire process.” (R7)

“In the entire audit engagement process.” (R8)

“There are notably three levels, namely the planning execution, and the completion, at
each level these technologies are useful.” (R9)

Finally, we wanted to explore how digitalization and the automation of audit tasks impacts
audit efficiency. While R1 and R2 maintained that the time spent on each audit is not
significantly lowered by advanced technology, both Swedish and Liberian auditors tend to
agree that digitalization has improved audit efficiency.

“Yeah. Perhaps we don’t spend a lot less time on the audits. It’s not like we spend 50
hours now on audits that we used to spend 100 hours on. But perhaps we spend 85 or
90 hours now and more importantly we spend time on the things that will result in a
better audit.” (R1)

“Yes, we have become more effective. And above all that we can spend time on other
things as well. As I mentioned, perhaps it’s more fun for the client to pay since they feel
that they actually get something out of it, that we can provide important insights. (...)
Perhaps it’s something that they themselves have not thought about since they can’t do
these types of analyses by themselves. So I would say that we have become more
effective in some tasks and more thorough in others. We can deliver value to the client
in a new way. And also it results in more fun tasks for us.” (R2)

“Absolutely. It has really become way more efficient.” (R3)

“Yeah absolutely they have.” (R4)

“Sure. They have a great impact on the audit quality, and the quality of the audit
reports. Efficiency also helps the auditor to still be effective and efficient because every

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 audit you carry out has a timeline that is attached. So, from the starting period to the
ending period, say anything in the audit cycle starts when probably the engagement is
made.” (R5)

“Yes, it has improved the effectiveness of audits because every information input into
our systems can be traced back even after a very long period. So, if there is a need to
make any adjustment it can easily be done by any team member. Of course, I see that
as accuracy. Again, with these technologies, I sit in my office most of the time and work
on client reports, again I am effective.” (R6)

“Yeah, because in the digital era, with most of these tools’ auditors will work smart
and not hard.” (R7)

To summarize, the automation of repetitive and time-consuming tasks has allowed auditors to
complete mundane tasks in a timely manner, allowing them to focus more time on complex
judgmental areas and on tasks and analyses that will add more value to the client. In the end, a
more extensive and, in essence, better report will be produced, and the client will benefit from
the auditor utilizing advanced technologies.

5.5 Audit quality

As mentioned, financial statements are intended to meet the information needs of investors and
creditors and should also be useful in decision making. The role of the independent auditor is
to provide confidence in the financial reports produced by businesses and thus the quality and
reliability of audited financial statements is key to ensure that the stakeholders information
needs are met. With this background we wanted to explore the effects of digitalization on audit
quality and how advanced technology increases the auditors’ capabilities to add value. First,
the respondents were asked if they believed that the automation of formerly repetitive tasks
impacts audit quality. All respondents agreed that digitalization and advanced technologies has
and will continue to improve audit quality:

“Positively yes.” (R1)

“Yeah I think that we can deliver our audits better and we can also provide more value
for the customers since we perhaps can show them things that they have not thought
about themselves. But I also think that it affects what we do as well but we can provide

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 the client with more information that is of value to them. So I would say that there are
only benefits.” (R2)

“Eh yeah absolutely. That we can get… how do you say it… maybe not better, we did
really good audits before as well but digitalization has facilitated a lot and we can do
more efficient analyses and we can get more concrete analyses and more concrete
answers on our questions with the use of these technologies. So time efficiency
absolutely.” (R3)

“I believe that it’s improved the audit quality. They have allowed us to focus more on
what's essential in our audits and so that we don’t have to spend time on the tasks that
basically anyone can do, which can be automated.” (R4)

“Where your fieldwork is thoroughly reviewed and because of technologies, once I am

done with my work my team leader gets an immediate alert to review my work and the
manager also, because of the systems we are working with, I don’t need to send an
email to my supervisors. So, I will say with these automated systems, the quality of
audit is improved.” (R6)

“Yes, most of the tools we are using have impacted the quality of the audit work and
these tools were great during the covid 19 outbreak, we sat in our homes and the client
logged into the site and uploaded documents on our request and in a few weeks, their
reports were ready. Yes, it impacts audit quality…” (R7)

“... we strive towards efficiency with a higher level of input quality. So, when you have
an automated system or digital system, it increases the quality of the audit work.” (R9)

The two respondents from smaller firms discussed the impacts of automation on audit quality
by referring to the Big four audit firms, suggesting that they can provide higher quality services
since they are able to invest in advanced technologies like AI, Blockchain and Big data and
analytics:

“Yes, big institutions like KPMG, PWC, E&Y, and Deloitte are auditing firms that audit
big financial institutions and are exposed to big data. So, now analyzing big data
manually is time-consuming and the probability of error rate is very high. So with the
use of blockchain, AI, and other digital technologies things where you have big data,
for instance, they are put into computers and then they are running through analysis

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 are provided, I think it is far more very efficient and effective as compared to the manual
form of auditing that was done years back.” (R5)

“Yes, looking at it from the big 4 perspectives, the client prefers big firms rather than
smaller firms, and the explanation there is that clients want quality.” (R8)

Clearly, the respondents tend to agree that audit efficiency and effectiveness and audit quality
are interrelated. Since audit quality is a multidimensional concept a few more questions were
asked to determine whether digitalization and advanced technologies has in fact improved audit
quality or if they, in essence, just make the auditors work easier. Hence, the respondents were
asked if they believe that these technologies have the capability to improve the reliability of
audited reports and the information contained in them. R1 and R2 both discussed the lowered
audit risk that advanced technologies entails, which in turn increases the reliability in the
audited financial statements. According to R4, the increased audit efficiency and the ability to
focus more on complex judgment areas increases the reliability of audited reports and the
information contained in them:

“Yeah absolutely. We have strong evidence supporting that the posts are correct. The
risk for material misstatements is significantly lowered.” (R1)

“Yeah I think so. The computer is usually not wrong compared to humans. Most of the
time it’s humans who make mistakes and not the computer. So I absolutely believe that
it’s improved the quality. The human factor decreases.” (R2)

“Yeah. Since we are now able to spend more time on the essential parts, it enables us
to underline what we do with more certainty, since we only focus on the essential.” (R4)

The Liberian auditors seemed to also agree that digitalization has increased the reliability of
audited reports and the information contained in them, since they are now able to test the client's
internal control systems rather than just testing a statistically generated sample of transactions
according to R7 and R9.

“Yes, even during the audit process, you have a place for the reliability of the
information generated by the client, it is important. What are the systems producing
these balances? How are the controls? Who does what? Can you go to sleep and sleep
knowing that the controls are working? So yes, if you have these systems alone, the
system alone will not improve the reliability, not because of the fact that you have good

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 systems, meaning that if I audit a company and defer those numbers meaning that I can
actually rely on those numbers so, it is a two-way street. I have the systems and you
have your controls and your processes that you would go through. So, to the extent that
I can place reliance on your control or system-generated report, I must test systems.”
(R7)

“Yes, as I indicated, the main aim of auditing is to assess the client’s information and
an opinion that is reliable, with the client’s internal control policies and our digital
systems, the reports can be trusted.” (R9)

Although the technology enabling auditors to test the client's internal controls rather than
testing individual transactions has been around for quite some time, it arguably provides more
reasonable assurance to audited financial statements. Moreover, the Swedish auditors R1 and
R2 argued that the analysis tools that they use today allow them to test 100% of the population
rather than testing statistically generated samples of transactions. According to them this has
increased the quality of their work since they are now able to detect deviations more efficiently.

“We test the whole population now. We gather all the data and look at deviations from
what's expected. We know that the client books income against account receivables and
sales tax and then account receivables against bank. Then we can look at that whole
trail and if we don’t find any deviations then we just test 25 bank payments. Rather than
taking a statistical sample of 450 income posts where we would have to look at the
order, the invoice and how it was booked in the ledger, the payment etc. Rather than
that we look at 25 bank payments. So it’s a little bit better.” (R1)

“We can see where the deviations actually are. We get a greater overview (…) Let’s
say that the client has 300 different earnings in a year. Eh and if you review 50 of these
and test a specific invoice against perhaps bank payments etc. compared to analyzing
all 300. You can see that, yeah it’s as expected. We can see that the bookings are done
as they should be done and if there is anything that’s not correct then we can follow
that up. You can find the actual deviations in a new way, I would say.” (R2)

None of the Liberian Auditors had this technology yet. Most Liberian respondents were aware
that this technology exists but maintained that they are not using it yet. R8, who works at a
non-Big four audit firm, suggested that bigger audit firms may have the technology to test the
whole population but maintained that smaller audit firms don’t. R5, who is also not employed

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by a Big four audit firm, also argued that testing 100% of the population would be time-
consuming and difficult.

“No, and I am speaking from a smaller audit perspective, but I am sure with a
digitalized system auditors can test 100%, looking at the size of the company.” (R8)

“Well, because the auditor is providing reasonable assurance, not an absolute

assurance because there will always be inherent risks. So, whether we do 100%, there
are risks associated with processes and procedures that we do, we know provide
absolute assurance that there are no probably that are fault and that the processes are
void of errors, and we provide reasonable assurance, so even the use of digitalization
for me, I don't think we'll be able to get rid of those inherent risk. For instance, looking
at the size of an organization, testing 100% even with the use of digital technologies
will be difficult and time-consuming.” (R5)

Furthermore, the findings indicated that advanced technologies like Big data and analytics,
Blockchain and AI have the ability to provide shareholders with more timely and useful reports.
R5 and R7 also discussed the benefits of advanced technologies in auditing, in terms of agency
costs. According to the auditor these technologies have the potential to enhance the auditor’s
role in resolving agency problems. Several respondents also suggested that digital tools in
auditing could increase transparency, since they allow for a more effective audit process and
more reliable reports:

“Yes, yeah. Because the thing about it with the use of this technology firstly, it helps
provide an effective and efficient report (...) although they are expensive, they minimize
our time. They are very effective. And they help reduce at least some costs for
shareholders together.” (R5)

“Definitely, that is the essence of auditing, and clients or shareholders make financial
decisions looking at the information contained in the reports.” (R6)

“Yes, I believe that is the essence of digital tools and shareholders can rely on the
financial report to make a business decision.” (R8)

“Yes, the increased transparency looking at your internal control policies and these
technologies will benefit shareholders as well. These technologies will help reduce
agency cost and it also depends on what the company is doing, and how reliable the

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 information you are about to use with these technologies is. Because if I'm a
shareholder, XYZ the managing director and then I have a very strong audit committee
or I have a very strong board with the right people who are managing the board or
these people are making sure that the company does the right things, yes then my
technology will benefit the shareholder in terms that because their controls are
working.” (R7)

“Definitely, and they increased transparency.” (R5)

“Yeah it could (increase transparency). We are able to look at things and analyze these
deviations in all data.” (R3)

Next, we wanted to explore whether the respondents believed that digitalization and advanced
technologies had impaired or promoted the auditor's professional judgment. Professional
judgment is critical for auditors, since it’s required that the auditor makes sound and informed
decisions about the courses of action throughout the audit engagement. Professional judgment
is highly subjective and for auditors it means making decisions, analyses, or evaluations based
on knowledge, skills, training, and experience. Professional judgment is a prerequisite for the
usefulness and timeliness of audit reports. Thus, the respondents were asked if they believe that
advanced technologies impair or promotes the auditor's professional judgment. The
respondents all agreed that advanced technology improves the auditor's professional judgment.
According to R1, digitalization and advanced technologies have evolved auditors' critical and
analytical thinking since they are now required to understand how the tools analyze deviations
etc.

“Yeah now it’s very standardized how many tests should be conducted (...) but we have
gone more towards that we use more professional judgment and you have to think more
about why things are like they are in these analyses. So I would say that it improves
professional judgment.” (R1)

“I would say that it promotes professional judgment. You can support your conclusions
in a completely new way compared to testing a sample from 300 transactions, you can
look at the whole income stream and see that it actually works.” (R2)

“It improves, since we can focus on what's important and the easier tasks are
automated.” (R4)

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 “With these techniques, there are human factors. But you need those human factors for
insight. For eg. If I use Power BI, to detect a company’s strength of sales, let's say last
year and this year, I realized sales have increased 20% but then receivables went down
about 15%. And then the cost of sales increased by 50%. By using Power BI I'll have
insights to know what is the business driver driving the increase in sales by 15% and
why are these increasing? Is that “why” the systems cannot explain. I will say, you
can use these technologies to make you productive, and it promotes judgment.” (R7)

“I will say, they promote professional judgments.” (R9)

5.6 Competencies

Competence plays a significant role in the field of auditing, directly impacting the effectiveness
and the value of audits (Nearon, 2005). Many scholars agree that the digital development of
the auditing industry will lead to a changing organizational structure, which also means
changing skills needed within the auditing firms. Since it’s important for auditors to keep up
with the current developments in technology for auditing to remain a valuable and relevant
service, the respondents were asked what skills and level of expertise they believe are required
to perform an audit following the digital transformation of the auditing industry. Both Swedish
and Liberian auditors agreed that, while there may be a higher demand for IT competencies in
the auditing field today, auditing and accounting graduates will continue to be employed by the
audit firms. According to R2 and R3 newly graduates are only required to have a basic
understanding of computers:

“Of course you need to know computers since it’s a lot of work in excel and macro and
everything. But really we get that delivered to us here. So I would say that the programs
are very user friendly so as long as you have a basic understanding of how to use a
computer you are okay. It’s not that advanced. If you work with the audit you get a lot
of tools from data engineers that have developed the tools.” (R2)

“I think that our generation has grown up using computers so I don't think that any
specific competence or any specific education is required. If you can use a computer
then you have come a long way.” (R3)

The Swedish respondents did, however, suggest that more IT specialists may be necessary for
some audit engagements, when they were asked if more IT specialists are needed. According

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to the respondents, bigger clients with more advanced IT systems sometimes require more
specific IT knowledge:

“We have noticed that during the last few years that it’s a lot of IT… Especially these
big companies, sometimes the systems are so complex that we can’t even acquaint
ourselves with them and then it’s an IT audit that is performed, which we are not even
part of. There we have specialists.” (R1)

“In bigger audits it may become more necessary to have IT specialists (...) it depends
on the client, if they use very advanced systems then we may need to hire IT specialists
to understand where everything comes from.” (R2)

“It depends on the audit. If the client has a very complex IT operation then we need
specialists in certain areas.” (R3)

“Yeah but mostly for the biggest clients. There we have a lot more heavy and big
programs that we can use and there more competence is required than we need here.”
(R4)

The Liberian respondents did not seem to agree that more IT specialists are necessary, rather
they argued that they receive sufficient training at their respective firms. Perhaps the clients in
Liberia do not have as advanced IT systems as the biggest clients in Sweden and therefore the
Liberian auditors have no issues navigating in the clients’ systems.

“We are trained regularly on the usual of these technologies, so I will say no.” (R6)

“In my view not really, because we are trained on a global level on how to work with
these tools.” (R7)

“I will say no.” (R8)

“I will say no, because again we are trained on how to use the technologies, except in
the case of specific work beyond our level.” (R9)

Seemingly, it’s the auditors who drive the digital transformation in Liberia since they, due to
their global network, have grasped the possibilities with digitalization and advanced
technologies. Moreover, the Swedish respondents also seemed to agree that it’s not necessary

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to make any significant changes to the academic curriculum, following the current
developments, rather they suggested that the focus should be on internal training.

“You always get internal training on how you should interpret the data and how you
should analyze it and how you should think. That’s something that cannot be taught at
universities, that has to be developed here.” (R1)

“It’s mainly internal training. We have a lot of workshops to learn how certain systems
are used and how can this analysis be used to review receivables perhaps or how can
this analysis be used to review payables and then maybe that you should be comfortable
using excel. But there are internal training opportunities.” (R2)

“We train our employees so that they can utilize these tools as effectively as possible.
So yeah, internal training is certainly very important.” (R3)

“There is a big difference between the firms. So therefore there is more focus on
internal training within the firms in our own programs rather than focusing on it in the
universities. I’m thinking that it’s more important that every firm has internal training.”
(R4)

The Liberian respondents, however, argued that the academic curriculum in Liberia should be
revised to reflect the current state of the audit profession more accurately.

I think the Liberian Institute of Public Administration should work with the various
Universities to incorporate more accounting or auditing courses in the syllabus. (...)
Yeah, they need to do more and probably need to, although we're not ready, open to it
right now. But you know, the world is evolving, and we Liberians must go along. So, I
think it is time that yeah, these things probably be provided the information provided
to us on the use of these technologies. So, for a new graduate, fresh from the university,
you will have a basic understanding of accounting, auditing skills, and software. And
then, you will already have that foundation. So, if you are opportune to work with some
audit firms, you know exactly what to expect because you already have basic knowledge
of all the things. (R5)

“The accounting books schools in Liberia are using are outdated and you graduate
with almost no first-hand information about what is happening in the real world. The

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 curriculum needs to change by 95% and programs to adequately prepare auditors
should be included.” (R6)

“Looking at it from the Liberian perspective, I think the entire curriculum needs to be
revised, as if I am graduating with a BA degree in accounting, I should have some basic
knowledge about data analytics, and data science is very important. At this stage, young
people should have an idea of what exactly they want to do. Auditors, nowadays, are
not about just reading the accounting books, it is about going beyond the books and
adding other technologies, and schools in Liberia should incorporate other specialized
programs with the accounting programs. During my ACCA studies, I struggled a lot
because of our educational setting. So, I will say more hands-on technologies programs
should be included.” (R7)

Furthermore, the responses also varied somewhat when the respondents were asked if audit
firms will hire less newly graduates in the future. The Swedish respondents agreed that audit
and accounting graduates will continue to be hired by audit firms in the future. Although, R1
argued that the number of new recruitments may decrease somewhat due to AI cancelling out
some tasks, the auditor believed that humans will always be needed in the audit process.

“Perhaps AI will cancel out some tasks but the data still has to be analyzed and we can
do other things so I have a hard time envisioning that the amount of employees in …
would be cut in half. But maybe it would stagnate. So perhaps in the future 3 will be
hired rather than 4. Maybe there will be higher demands on the internal training within
the firms as well. So there will be higher requirements on the newly employed in the
future, on how you interpret data and analyses.” (R1)

“I think that the view of auditing is being updated. There is so much more that we can
do compared to… I understand where you're coming from but it’s more that the role of
the auditor is changing. Time is spent on other things eh. But I don’t see a risk that our
jobs would disappear.” (R2)

“Someone still has to… computers are not in any way doing our jobs for us. They
facilitate the work but I still believe that we will continue hiring audit and accounting
graduates.” (R3)

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 “It feels like people will always be needed although much can be automated, people
will always be needed. So no, I don't think so.” (R4)

Again, the Liberian respondents had different perceptions. R5 argued that this is a negative
effect of digitalization and advanced technology in the auditing field, stating that audit firms
may need less staff with the implementation of digital applications. The other respondents
shared R5’s perceptions, as indicated by the following quote:

“Yeah, I mean, based on the level of technology, and artificial intelligence in our world
today, it is possible that the level of the new hire will decrease. Automation tries to
reduce or get the work done in a lesser time and a lot of work can be done. So looking
from a perspective where you have an automated system to do specific testing that could
be done by two or three existing auditors, I think the opportunity of new roles that will
be created will be less.” (R9)

5.7 Future effects of digitalization

Lastly, we wanted to look ahead and thus we asked the respondents to reflect on the future
implications of digitalization for the field of auditing. It has been suggested that technological
changes in the business environment may displace most small and mid-sized audit firms, since
they will struggle to afford the investments in technological infrastructure and new
competencies needed to remain competitive. Hence, the respondents were asked if they believe
that audit firms will have a hard time to remain competitive if they don’t implement advanced
technologies in the future. All respondents agreed that technology is a prerequisite for auditing
to remain a valuable service and therefore the findings suggested that audit firms, in both
Liberia and Sweden must realize the benefits associated with digitalization and digital
applications or be left behind. R1 mentioned that some audit firms have had to significantly
lower their fees since that’s the only way they can compete with the more technologically
advanced firms. As we have noticed from the findings, technology enables auditors to provide
infinitely better and more extensive audits and according to R1 the clients are willing to pay
for a better service offering. R4 also discussed the audit fees associated with advanced
technologies and R2 discussed the added value they can provide thanks to digitalization.

“Yeah absolutely! They save so much time. And the fees differ so much if the
technologies are not used.” (R4)

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 “Partly because the employees would sit and do these repetitive tasks rather than
creating good analyses and analytically review what is actually happening within the
operations. And I also believe that the client appreciates that they get confirmation that
this is how we perform. Eh and it creates a value for them that we not only test samples
and instead analyze how it’s going in a new way. And if you can’t provide the client
with that then I absolutely believe that you are falling behind.” (R2)

“Sure, sure. You have to implement this technology. Other than that, if you stay using
the old fashioned way because it will take you one month to prepare, a company like

The Liberian respondents also agreed that Liberian audit firms must embrace the changes
brought by digitalization and implement more advanced technologies to remain competitive.
According to the Liberian respondents the clients are expecting that they deliver their services
in a timelier way, which is not possible without advanced audit tools.

“Coca Cola financial statement, and you have PWC that can prepare it with 10 to 15
working days, businesses or companies will want to have the audited financial
statements as soon as possible because shareholders or investors are depending on
them to make financial decisions, so we definitely have to go along.” (R5)

“Definitely, my friends at my previous job are complaining a lot because my office is

taking over the market as a big 4 firm. Smaller audit firms in Liberia should wake up
to the realities or a few years from now, they will be kicked out of the market
completely.” (R6)

“Oh, yes. It is very obvious, For eg, insurance companies in Liberia are now adopting
IFRS 17, and you as an audit firm, if you are not up to speed in terms of some of these
standards you will definitely be left behind. In 2018, when we were adopting IFRS 9
and 15, it was the big 4 firms who were auditing those companies. So, for an audit firm
to stay competitive, you have to invest in your staff and as well invest in these
technologies, thus they are expensive, but the auditing profession is becoming very
competitive and we in Liberia have to go along.” (R7)

“The trends of technologies are moving at a very hard pace and clients don’t want
excuses, for eg, a few years from now the client will start to request financial

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information on a shorter date, and firms that are not up to speed will run out of
business. So, I think firms should upskill to be very competitive in the industry.” (R9)

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6. Analysis and discussion
In this chapter, the empirical data from the semi-structured interviews will be discussed and
analyzed in relation to the theoretical framework and existing literature. The analysis follows
a thematic approach, as suggested by Braun and Clarke (2006).

6.1 Differences and similarities in technology

It’s argued that the auditing profession is currently facing a technological transformation
(Lombardi et al., 2014). Following the development of information technology, audit firms are
implementing tools which increase the capabilities of auditing to add value (DeFond & Zhang,
2014). Unsurprisingly, there are some differences in the implementation of advanced
technologies, like Big data and analytics, Blockchain and AI, between Swedish and Liberian
audit firms. However, the difference is not as significant as we originally assumed. The findings
indicate that Swedish auditors tend to deal with more technologically advanced clients than
Liberian auditors, and therefore more advanced technologies are required to perform high
quality audits in Sweden. Thus, it’s interesting that Liberian auditors, working at Big four firms,
are also using advanced technologies in their audits. While the Swedish auditors, who are all
employed by Big four audit firms, are essentially exclusively using Big data and analytics in
their respective departments, the Liberian auditors working at Big Four firms are using both
Big data and analytics and Blockchain in their respective departments. Big data and analytics
is adopted in similar ways in Liberia and Sweden, i.e to follow audit trails and analyze
transactions. According to Earley (2015), the steadily increasing amounts of computerized data
in companies has made it increasingly difficult for audit firms to analyze client’s data. Hence,
advancements in analysis tools have enhanced the capabilities of auditors to add value
(Capriotti, 2014; Whitehouse, 2014). Accordingly, Big Data enables auditors to perform
prescriptive analytics (e.g., Holsapple et al., 2014; Delen & Demirkan, 2013; Lee et al., 2014),
and implementing practices to computationally verify existing actions and their outcomes (Lee
et al., 2014).

Both Swedish and Liberian auditors agree that Big data and analytics allows them to capture
and analyze previously unimaginable amounts of client data and hence they can deliver their
services in a completely new way. The analysis tools that Swedish auditors use are, perhaps,
even more developed than those used by Liberian auditors, since the Swedish respondents

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suggest that the analysis tools that they use today allow them to test 100% of the population
rather than testing statistically generated samples of transactions. In turn, this has increased the
quality of their work since they are now able to detect deviations more efficiently. The Liberian
respondents are, however, not able to analyze entire audit trails and analyze all client data as
of yet. Perhaps this is not because of geographical differences, but rather because of differences
in the technology available by the different Big four firms. According to Alles and Gray (2016)
the different Big four audit firms are all investing considerable amounts of money to develop
and adopt advanced technologies, like Big data and analytics, AI and Blockchain. However, as
indicated by the findings, some firms are more technologically developed than others and can
thus provide higher quality audits. Nevertheless, both Swedish and Liberian auditors agree that
Big data and analytics is highly useful and key in transforming the audit process, which is in
line with prior research by Early (2015). According to Earley (2015), there are four main
benefits of Big data and analytics in audits. First, Big data and analytics allows auditors to test
greater numbers of transactions. Second, audit quality can be increased since Big data and
analytics can provide greater insights into clients processes. Third, Big data and analytics
enhances auditors’ ability to detect fraud and fourth, Big data and analytics allows auditors to
provide services and solve problems that go beyond current capabilities by utilizing external
data (Earley, 2015).

Even though both Liberian and Swedish auditors, working at Big four firms, receive continuous
training on AI, they are not using AI in their audits, at least not as of yet. The Big four audit
firms are clearly investing considerable amounts of money to augment their services with
advanced technologies, specifically AI, Blockchain and Big data and analytics, but there are
evidently some regional differences in which technologies are necessary. In Sweden, the larger
clients with more complex IT systems tend to have their operations in larger cities, like
Stockholm and Gothenburg and thus more advanced technologies may be needed in the larger
Big four offices, to audit those clients in a timely manner. The Swedish participants therefore
indicate that AI could potentially be used by auditors in Stockholm for its automation
capabilities, but not in smaller offices since it’s not necessary to efficiently audit smaller
entities. Similarly, Big four audit firms in Liberia may not be required to implement AI in their
audits, since they tend to deal with less technologically advanced clients. Evidently, it’s the
auditors who drive the digital transformation in Liberia since they realize the advantages
associated with digitalization.

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Furthermore, Blockchain technology enables the Liberian auditors to view their colleagues'
transactions in a digital ledger, which mitigates errors. This is in line with Vaidyanathan (2017),
who argues that Blockchain allows all parties in the distributed ledger to get a common view
of the records. No intermediaries are needed to settle a transaction and validation is performed
by multiple users and once a transaction is validated, all copies of the ledger are updated. Thus,
the auditors within the distributed ledger can automatically view each other's work, which gives
the senior auditors a greater overview of the assistants work and in turn errors can be detected.
Evidently, blockchain technology has the potential to increase the quality of audits and from a
stakeholder perspective, it’s very beneficial since auditors can underline their conclusions with
more certainty.

Moreover, the findings indicate that there is a significant difference in technology between Big
four audit firms and non-Big four audit firms. The two respondents working at smaller audit
firms, both indicated that they are using far less advanced systems to perform their audits.
Accordingly, they can’t provide as high-quality services as the Big four firms, which
unfortunately means that they are losing clients. This goes in the same direction as prior studies,
which argues that small and mid-sized audit firms may be displaced, since they will struggle
to afford the investments in technological infrastructure and new competencies needed to
remain competitive (e.g., Tiberius & Hirth, 2019; Chaney et al., 2004; Manita et al., 2020).
Hence, all respondents agree that technology is a prerequisite for auditing to remain a valuable
service and therefore the findings suggested that audit firms, in both Liberia and Sweden must
realize the benefits associated with digitalization and digital applications or risk being
technologically left behind.

6.2 The audit process

The findings indicate that advanced technologies are used in essentially all parts of the audit
process in both Sweden and Liberia, from planning the audit to the completion of the final
report. No empirical evidence was found, suggesting that advanced technologies are used in
the pre-engagement and hence it’s not discussed in this analysis.

6.2.1 Planning
In the planning phase, the auditor needs to plan what evidence to collect in order to be able to
express an opinion, amongst other things, on whether or not the financial statements give a true
and fair view of the state of affairs and profit and loss of the reporting entity, and how and

73
when to collect such evidence (Porter et al., 2014). According to Carrington (2014) and Eilifsen
et al. (2013), proper planning is important to ensure that the audit is conducted in an effective
and efficient manner. This step involves making a preliminary assessment of the client’s
business risks and determining materiality, based on the auditor's understanding of the entity.
The audit team relies on these judgements to then assess the risk relating to the likelihood of
material misstatements in the financial statements (Eilifsen et al., 2013). According to Porter
et al. (2014), planning the materiality refers to the amount of error the auditor is prepared to
accept in the financial statements while still maintaining that they provide a true and fair picture
of the state of affairs of the reporting entity. This provides a basis for planning the nature,
timing, and extent of procedures to be performed during the audit (Porter et al., 2014).

The empirical findings suggest that digitalization has streamlined the planning phase, and Big
data and analytics can be very useful at this stage of the audit process. According to R2, Big
data and analytics can be used in the planning phase, as part of the auditor’s inquiry work.
Analysis tools are also useful in assessing the various business risks. Big data and analytics
allow the auditor to collect and analyze all client data, which means that the auditor can
efficiently investigate entire audit trails. In turn, the auditor can more accurately assess the
various risks since he will have a greater understanding of the client. “If you look at planning,
execution, and conclusion. In the planning phase it’s part of our inquiry work to investigate
how the trails look like. And that’s also what we see when we do these tests. For us to be able
to perform the tests we have to, already in the planning phase, have an expectation on how we
think it’s going to be” (R2). This is in line with Meuldijk (2017), who argues that Big Data is
a significant tool for auditors that can facilitate the audit in areas such as scoping, risk
assessment, trend analysis, and judgments. Additionally, this finding is consistent with Earley
(2015), who states that Big Data can provide greater insights into client’s processes.

6.2.2 Evidence
The next step of the audit process is to collect audit evidence, which involves performing a
series of tests to gather evidence to support the audit opinion. At this stage, the auditor can
choose to follow two audit strategies: a substantive strategy or a reliance strategy (Carrington,
2014; Eilifsen et al., 2013). A reliance strategy means that the auditor intends to rely on the
entity’s internal controls, and a substantive strategy means that the auditor has chosen to use
substantive procedures as the main source of evidence. The overall objective of substantive
testing is to verify the validity and accuracy of the entity's financial statements (Porter et al.,

74
2014). According to Porter et al. (2014), the auditor's assessment of the entity's internal control
has a significant impact on the nature and extent of the substantive tests that will be performed.
If the auditor believes that the entity's internal control systems are effective, and the control
risk related to the audit is low, the need for more extensive and less timely substantive audit
procedures will be reduced (Bailey et al., 2018).

The Liberian interviewees argue that digitalization and advanced technologies has made
streamlining possible since they are now able to test the entity’s internal controls, rather than
having to test individual transactions. Although the reliance strategy has been around for quite
some time, advanced technologies have clearly made the collection of audit evidence infinitely
more efficient. The implementation of analytics tools has allowed the respondents to spend
significantly less time collecting audit evidence, enabling them to focus on more complex
judgment areas, which is consistent with Lombardi et al. (2015). The auditors are now also able
to collect more audit evidence to support their opinion. Hence, the digitization of auditing will
ultimately improve the transparency of financial statements, which in turn will enable
stakeholders to make more informed decisions (Manita et al. 2020). Thus, from a stakeholder
perspective, advanced digital technologies are highly beneficial in the context of auditing.

Moreover, Shenet al. (2017) states that sampling methods allow auditors to focus on the critical
control accounts or areas where weaknesses are common. Auditors are not required to be
concerned about the statements' absolute accuracy. Hence, sampling techniques are used to
draw conclusions about the population. However, the findings indicate that sampling
techniques may soon become a thing of the past. The advancements in analytics technology
have made it possible for the Swedish participants to test 100% of the population rather than
testing statistically generated samples of transactions, which has almost completely cancelled
out the need for sampling techniques. Analytics tools allow the auditor to collect all data from
the auditee and automatically identify deviations, rather than using sampling techniques to find
deviations. “We have left the classic audit behind, which perhaps the other firms still do, where
you take a bunch of samples. We gather all the data from the client and it can be several systems
that interact with each other so we get connections between the systems which allows us to
analyze deviations rather than looking at individual samples” (R1). Thus, the Swedish auditors
are now more focused on analyzing the deviations, which is far more valuable for the clients.
As suggested by the respondents, the clients are more willing to pay for digitally augmented
audit services, which helps them strengthen their internal controls and grow their businesses,

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than paying for an auditor whose only focus is finding errors in the statements of accounts. The
theory of inspired confidence supports this notion, which suggests that auditors should make
use of all resources at their disposal to guarantee that stakeholders’ expectations are satisfied
(Mathias & Kwasira, 2019), or the audit profession will gradually lose its value.

6.2.3 Reporting
The final step of the audit process is reporting, where the auditor is expected to assess the
sufficiency of the evidence and if necessary, obtain additional evidence (Żytniewski, 2017;
Eilifsen et al., 2013). The auditor will evaluate the results of the audit tests and identify
contingencies. For the audit to be properly completed, it’s important that the process has been
documented and that the evidence is appropriately organized (Sikka, 2018). According to
Ghasemi et al. (2011), digitalization has allowed companies to progress towards paperless
offices which in turn has been beneficial for auditors since audit trails and details are
automatically maintained. The empirical findings support this notion, indicating that digital
technologies have enabled Swedish audit firms to progress towards a fully digital audit
approach, which according to the respondents is very beneficial. The Liberian auditors are,
however, still doing some audits manually, but have implemented quite sophisticated IT
systems which allows them to automatically maintain audit trails and client data, similarly to
Swedish audit firms. Both Swedish and Liberian audit firms have implemented IT systems, in
which their clients can digitally upload documents for review. Hence, far less paper is needed
throughout the audit process, which is beneficial since it enables a more efficient handling of
client’s documents. There is, however, a potential drawback associated with a fully digital audit
approach. According to Ali et al. (2015) there is a security risk involved with companies
sharing sensitive information online. This opinion is, to an extent, shared by the respondents
but they maintain that the risks associated with a fully digital audit approach are vastly
outweighed by the potential benefits.

6.3 Perceived usefulness and ease of use

According to the technology acceptance model (TAM), perceived usefulness and perceived
ease of use, are fundamental constructs that influence the decision to use computing
technologies. According to Davis et al. (1989) perceived usefulness is defined by the subjective
probability that the specific application will increase the users job performance, and perceived
ease of use is determined by how free of effort the application is to use. Thus, there is a positive
relationship between the two constructs and technology acceptance (Kim et al., 2016).

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Accordingly, the more users who find that the application will make their job easier to perform;
the higher the probability that the technology will be accepted.

The technology acceptance model is used in several auditing studies exploring the acceptance
of emerging technologies among auditing professionals (e.g., Kim et al., 2016; Kim et al., 2009;
Rosli et al., 2012). Kim et al. (2016), Albawwat and Al Frija (2021), Afroze and Aulad (2020)
and Ismail and Abidin (2009), all study the acceptance of different auditing software’s in
developing countries. The studies provide similar results, indicating that the complexity of
advanced technologies is a significant obstacle to overcome in the adoption of more
sophisticated audit technology, although the perceived usefulness may be high (e.g Rapoport,
2016; Kokina & Davenport, 2017; Earley, 2015). The study at hand contradicts prior research,
rather we contend that advanced technologies, especially Big data and analytics and Blockchain
are useful and also easy to use, as stated by both Liberian and Swedish respondents. Hence, the
acceptance of advanced technology in the field of auditing is high, both in Liberia and Sweden.
According to the respondents, basic computer knowledge is sufficient to understand the tools
that they use, and the internal training that they receive at their respective firms is adequate to
learn how to efficiently navigate in the systems. The tools that the participating auditors use
are developed, and continuously updated, in a way that ensures that auditors who are not IT
experts can easily navigate in the systems, as indicated by the following:” They are designed
in a way which makes them easy to use. There is always some form of guide or formula that
you can go by. So, they are easy to use” (R4).

In the following sections, the other construct influencing the decision to use computing
technologies i.e., usefulness, will be discussed. The findings indicate that emerging
technologies have had significant effects on audit efficiency and audit quality, and therefore
they are considered as useful by the respondents.

6.3.1 Increased audit efficiency

The overarching purpose of this study is to explore the perceived effects of digitalization on
the auditing profession in one developed country and one less developed country. In the
auditing literature it’s clear that advances in technology allows auditors to automate parts of
the audit process, thereby eliminating some standardized and repetitive tasks, which in turn
increases auditors’ efficiency (e.g., Kokina & Davenport, 2017; Raphael, 2017; Banker et al.,
2002; Agnew, 2016; Lombardi et al., 2015; Tiberius & Hirth, 2019). Although there are some

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differences in technology between Sweden and Liberia, both Swedish and Liberian auditors
agree that digitalization and emerging technologies enables auditors to automate audit tasks
that were formerly done manually. Accordingly, all respondents have experienced a reduction
in repetitive and time-consuming tasks. According to Lombardi et al. (2015), new technology
provides auditors with means to complete mundane tasks in a timely manner, allowing them to
focus more time on complex judgmental areas. Hence, as indicated by R1, new technologies in
the field of auditing will not result in significant time savings on each audit, rather they enable
auditors to reallocate their time. According to Raphael (2017), digitization does not only
increase the efficiency and quality of an audit, but it also creates value for clients because they
can access more relevant and valuable information. Again, this is supported by the empirical
findings which suggests that the automation of repetitive and time-consuming tasks has
significantly impacted how the service is delivered and the value they can create for their
clients.

According to Rapoport (2016), AI in auditing is heavily focused on the automation of mundane

and labour-intensive tasks, eliminating structured and repetitive audit procedures (Kokina &
Davenport, 2017). According to Kokina and Davenport (2017) AI-enabled technology can
locate relevant information, process it and make it usable for the human auditor, who can focus
more on complex judgmental areas. The empirical findings, however, indicate that the adoption
of AI is not particularly widespread in Sweden, nor in Liberia. Even though both groups agree
that AI has the potential to automate repetitive and labour-intensive audit tasks, not one
respondent uses AI in their audits. Prior studies suggest that AI in auditing is not perceived as
useful by auditing professionals in less developed countries (e.g., Albawwat & Al Frija, 2021;
Afroze & Aulad, 2020; Ismail & Abidin, 2009), since they are considered to be complicated to
use. Thus, this study contradicts prior studies, showing that Liberian auditors, working at both
Big four firms and non-Big four firms perceive AI as useful, since it has the potential to enhance
their services.

Moreover, the benefits of Big data analytics clearly also include automation capabilities (e.g.
Appelbaum & Smith, 2018; Liu et al., 2019; Earley, 2015). Both Swedish and Liberian
auditors, especially those working at Big four audit firms, have implemented analysis tools
which automate parts of the audit process. For instance, both Swedish and Liberian audit firms
have implemented IT systems, in which their clients can digitally upload documents for review.
The respondents describe it as a portal in which the client can transfer documents, and the

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documents will “automatically fall under the right review step” (R1). This allows auditors to
collect more audit evidence and since the documents automatically fall under the right review
step, the acquisition of client data will be far more efficient. Hence, the respondents suggest
that Big data and analytics allow for a detailed audit track along with the ability to detect
irregularities from an entire population rather than a sample, which is in line with Kokina et al.
(2017) and Liu et al. (2019).

To summarize, the automation of audit tasks has not resulted in significant time savings on
each audit. However, advanced technologies allow auditors to complete mundane tasks in a
timely manner, allowing them to focus more time on complex judgmental areas and on tasks
and analyses that will create more value for the clients. In the end, a more extensive and, in
essence, better report will be produced, and the client will clearly benefit from the auditor
utilizing advanced technologies. Moreover, agency theory suggests that auditing plays a
significant role in resolving agency problems, since it functions to assure the investors that
their interests are being upheld (Commerford et al., 2019). The findings suggest that advanced
technologies have the potential to enhance the auditor’s role in resolving agency problems,
because of the provision of more timely and useful reports. Further, two Liberian respondents
maintain that advanced technologies in audits may reduce agency costs that could arise from
conflicts of interests between the agent and the principal. In line with Moffitt et al. (2018), the
respondents suggest that advanced technologies in auditing can effectively detect fraudulent
behavior. This is also supported by Manita et al. (2020), who argue that new digital technology
enables a more relevant analysis of the clients’ processes and data and makes it possible to
identify errors and anomalies more effectively, allowing the auditor to fully play its role as a
governance mechanism.

6.3.2 Improved audit quality

Financial statements are intended to meet the information needs of investors and creditors and
should also be useful in decision making. Stakeholder theory explains the interaction between
organizations and the people affected by the activities of the business, i.e., the stakeholders.
Stakeholder theory suggests that various social contracts have to be negotiated with different
groups of stakeholders due to the fact that different stakeholders have different views on how
the business should be conducted (Harrison & van der Laan, 2015; Hörish et al, 2020). The
role of the independent auditor is to provide confidence in the financial reports produced by
businesses, assuring the stakeholders that the financial statements give a true and fair view of

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the state of affairs and profit and loss of the reporting entity, and that they are free of material
misstatements. However, due to the rapid growth of companies it has become increasingly
difficult for auditors to manually analyze the growing volumes of data (Kokina & Davenport,
2017). Thus, both Swedish and Liberian participants agree that audit firms must implement
digital technology to ensure that they can continue providing timely and reliable information
to investors, consistent with Handoko and Lindawati (2021).

The empirical findings indicate that digitalization and advanced technologies have increased
audit quality, since they enable a more relevant analysis of the clients’ processes and data,
making it possible for auditors to identify errors and anomalies more efficiently. In line with
Raphael (2017), the respondents suggests that advanced technologies allow them to provide
higher quality services, as indicated by the following quote: “Yeah I think that we can deliver
our audits better and we can also provide more value for the customers (…) we can provide
the client with more information that is of value to them” (R2). The findings also support prior
research by Manita et al. (2020), which shows that digital technology will allow auditors to get
a better control of the client’s data, and thus improve the relevance and quality of the audit.

Furthermore, both Swedish and Liberian auditors agree that digitalization and advanced
technologies, like AI, Big data and analytics and Blockchain, have the capability to improve
the reliability of audited reports and the information contained in them. According to two
Swedish respondents, the risk for material misstatements in audited financial statements will
be significantly lower if the auditor uses digital analytics tools. From a stakeholder perspective,
this is very beneficial since the audited reports will be more useful in decision-making. This
notion is supported by Jachi and Yona (2019), who argue that digital tools can enhance the
effectiveness and quality of the audit process, in turn increasing the reliability of audited
financial statements. Moreover, the findings suggest that the risk for human errors in the audit
process is significantly lowered with advanced technologies, as indicated by the following:
“The computer is usually not wrong compared to humans. Most of the time it’s humans who
make mistakes and not the computer. So I absolutely believe that it’s improved the quality. The
human factor decreases” (R2). This is consistent with (Moffitt et al., 2018), which shows that
advanced technologies can transform the audit through automated analysis of accounting
entries, which in turn reduces the risk for human errors.

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Moreover, professional judgment is critical for auditors, since it’s required that the auditor
makes sound and informed decisions about the courses of action throughout the audit
engagement. Thus, professional judgment is a prerequisite for the usefulness and timeliness of
audited reports. Professional judgment is highly subjective and for auditors it means making
decisions, analyses, or evaluations on the basis of knowledge, skills, training and experience.
The respondents all agree that advanced technology improves the auditor's professional
judgment, since they allow them to focus more time and resources on complex judgment areas.
This goes in the same line as Brown-Liburd et al. (2015), which suggests that Big data and
analytics could potentially enhance the auditors professional judgment and decision making.
According to Salijeni et al. (2019), Big data and analytics provides auditors with the means to
automate some repetitive and routine tasks, giving the auditor more time to focus on the
complex areas such as risk assessment. Thus, this study does not support the notion that
advanced technologies may have an adverse effect on professional judgment because of
information overload etc. (eg. Brown-Liburd et al., 2015).

6.4 New competencies

6.4.1 Skill sets required to perform audits with advanced technology
Competence plays a significant role in the field of auditing, directly impacting the effectiveness
and the value of audits (Nearon, 2005). Many scholars agree that the digital development of
the auditing industry will lead to a changing organizational structure and hence a notable effect
of digitalization is the changing skills needed within audit firms (e.g., Ghasemi et al., 2011;
Appelbaum et al., 2017; Lombardi et al., 2015). The participants of this study tend to agree
with this notion, suggesting that auditors today are expected to have more IT and computer
knowledge than before because of the extensive use of excel applications throughout the audit
process. Karlsen and Wallberg (2017) and Manita et al. (2020) agree that it’s important that
auditors possess the technical skills necessary to perform audits with the use of these new
technologies. In line with Karlsen and Wallberg (2017) and Manita et al. (2020), the
respondents also argue that auditors must keep up with current developments for auditing to
remain a valuable and relevant service and therefore auditors have an individual responsibility
to familiarize themselves with the currently trending technologies.

Moreover, the Swedish participants also suggest that analysis tools in auditing, place more
emphasis on auditors’ analytical skills. As indicated by the participant’s, auditing today is not
about performing the same standardized tasks over and over, rather auditors collect and analyze

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client data using advanced analysis tools and hence they need to have a deep understanding of
how the client’s data is designed and generated. This is consistent with prior research by
Appelbaum et al. (2017), who argues that the increased digitization and the constantly changing
nature of clients’ business models, may result in more complex auditing and auditor
requirements. However, most respondents seem to agree that, while there may be a higher
demand for IT competencies in the auditing field today, a basic understanding of computers is
sufficient in most audit engagements. Furthermore, Manita et al. (2020) suggests that audit
professionals should be properly trained to gain specific technical skills to understand how the
client’s data is designed and generated. The findings support this notion, indicating that the
internal training that audit firms provide is paramount for the proper application of advanced
technologies in audits. Both the Swedish and the Liberian respondents, working at Big four
firms, receive continuous training to ensure that they can efficiently use the advanced
technologies to perform audits. Hence, this study argues that internal training is the most
effective way to ensure that today's auditors are kept up to date with the current developments
in technology, and that they can continue to provide timely and useful reports.

6.4.2 The need for IT specialists

According to Appelbaum et al. (2017), the increased digitization and the constantly changing
nature of clients’ business models, may result in more complex auditing and auditor
requirements. For instance, while blockchain offers a completely new way to record financial
transactions and information, and brings new business to auditors, such as verifying the
existence of digital assets and reviewing certain transactions, it’s believed that these new tasks
can be challenging for auditors who are not IT experts (Earley, 2015). Especially when there
are no centralized authorities on the blockchain. Hence, more IT specialists and data scientists
might be employed in auditing firms due to the changing requirements. This raises the question
of whether business administration, accounting, or auditing graduates will continue to staff
auditing firms, or if they will be replaced with more IT-oriented employees (Tiberius & Hirth,
2019).

The Swedish participants suggest that more IT specialists may be necessary for some audit
engagements. According to the respondents, bigger clients with more advanced IT systems
sometimes require more specific IT knowledge. The Liberian respondents do not seem to agree
that more IT specialists are necessary, rather they argue that they receive sufficient training at
their respective firms. Perhaps the clients in Liberia do not have as advanced IT systems as the

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biggest clients in Sweden and therefore the Liberian auditors have no issues navigating in the
clients’ systems. Nevertheless, the findings suggest that it’s important for audit firms to have
the in-house experience to utilize the available technologies, for auditing to evolve and remain
a valuable and relevant service (Lombardi et al., 2014). This is supported by the theory of
inspired confidence, which suggests that auditors should make use of all resources at their
disposal to guarantee that stakeholders’ expectations are satisfied by providing an expected
degree of assurance (Mathias & Kwasira, 2019). Most modern companies with large operations
have a huge amount of data to be audited and since human auditors won't be able to cover the
vast amount of information in each time frame without the use of digital applications, the audit
profession will gradually lose value (Mathias & Kwasira, 2019).

6.4.3 The need to redesign the academic curriculum for Auditors

Academic institutions play a major role in preparing future auditors. According to Lombardi et
al. (2015), the rapid advancements of technology has resulted in a gap between the profession
and education that should be shortened in order to properly educate and prepare students for
the audit profession. Additionally, Issa et al. (2016) suggests that the audit industry is changing
in conjunction with digitalization and the universities will therefore have to change parts of
their curriculum to cater for the new competencies that auditors are expected to have. This is
especially true in Libera, as indicated in the interviews. According to the Liberian auditors, the
academic curriculum in Liberia should be revised to reflect the current state of the audit
profession more accurately. Findings from the empirical results indicate that the academic
curriculum in Liberia is not keeping pace with the technological advancements in the field of
auditing and the requirements of the current job market. This is in line with prior research by
Cao (2015) and Earley (2015), which suggests that academic curriculums should make room
for the recent developments in technology to prepare future auditors. According to Early
(2015), the auditing curriculum should be changed to combat the shortage of skills required to
perform audits using analytics tools. Early (2015) do, however, maintain that there is no need
to completely restructure the curriculum, rather it should be redesigned to accommodate the
changes in technology. The Liberian respondents seem to disagree with this notion, suggesting
that more significant changes should be made to the curriculum. According to R7, the entire
curriculum needs to be revised. R7 suggests that the accounting curriculum should, at the very
least, provide basic knowledge about data analytics and data science. “Auditors, nowadays, are
not about just reading the accounting books, it is about going beyond the books and adding
other technologies, and schools in Liberia should incorporate other specialized programs with

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the accounting programs. During my ACCA studies, I struggled a lot because of our
educational setting. So, I will say more hands-on technologies programs should be included”
(R7).

Furthermore, the findings suggest that there is no need to significantly change the academic
curriculum for Swedish auditors following the advancements of technology. According to the
participants, different audit firms have different procedures and hence it’s far more important
that auditors receive continuous internal training at their respective firms. This allows audit
firms to shape their employees, which will make them more effective in their work. If the
academic curriculum was too focused on specific technologies and how they are used, there
would be a risk that audit firms would have to re-educate auditing graduates, if the training
provided at the universities weren’t properly aligned with the audit firm’s procedures. This
would clearly take more time than internally training auditors with no prior experience.
Although the findings indicate that there is no need to significantly change the academic
curriculum for Swedish auditors following the advancements of technology, two Swedish
respondents suggested that the universities failed to provide them with a good understanding
of what auditors actually do. The expectation gap that exists between what the public believes
that auditors do and what they actually do has been discussed by many scholars, in many
different contexts (e.g., Koh & Woo, 1998; Nazri Fadzly & Ahmad, 2004; Woodhead &
Sohliman, 2006). This study confirms that there is an expectation gap, which should be closed.
In line with prior studies, we argue that universities have a role in closing the existing gap, and
they should provide more information regarding the role of the auditor.

6.4.4 Potential barriers for future auditors

Furthermore, audit firms have generally relied on recent graduates to perform the more
repetitive and administrative tasks in the audit process. However, since disruptive technologies
allow auditors to automate parts of the audit process, thereby eliminating some standardized
and repetitive tasks, it’s argued that audit firms will hire significantly less new audit and
accounting graduates in the future (Kokina & Davenport, 2017). Although senior auditors in
large audit firms agree that the need for human auditors won't go away anytime soon (Agnew,
2016), and that it’s likely that the auditing field, like many other business fields, will be
augmented by technology rather than fully automated (Davenport & Kirby, 2016), there is
evidence indicating that some audit professionals are worried about the technological
developments (e.g., Afroze & Aulad, 2020). While studying the perception of audit

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professionals on AI in the context of auditing in Bangladesh, Afroze and Aulad (2020) found
that auditors in Bangladeshian audit firms agree that AI pose a direct threat to the jobs of grass-
root employees. According to the authors, AI has made manual and repetitive auditing tasks a
lot simpler and quicker which is seemingly intimidating for some auditors.

On the one hand, the Swedish participants argue that advanced technologies are no threat to
the continuous availability of jobs for auditors, stating that technology is more likely to change
the existing role of the auditor rather than eliminating it, which is in line with prior research by
Agnew (2016) and Davenport and Kirby (2016), who suggests that the need for human auditors
won't go away anytime soon and that it’s likely that the auditing field, like many other business
fields, will be augmented by technology rather than fully automated. On the other hand, the
Liberian auditors argue that audit firms needing less staff is a negative effect of digitalization
and advanced technology in the auditing field. Hence, the findings support existing studies on
the perceptions of auditing professionals in developing countries on the effects of digitalization
on auditing (Afroze & Aulad, 2020), who found that auditors in Bangladeshian audit firms
view AI as a direct threat to the jobs of grass-root employees. According to the authors, AI has
made manual and repetitive auditing tasks a lot simpler and quicker which is seemingly
intimidating for some auditors.

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7. Conclusion
The following sections conclude this study, summarizing the key takeaways from the empirical
findings and analysis. This chapter also includes theoretical, practical, and societal
contributions of the study. Limitations of the study and avenues for future research are also
discussed.

7.1 General conclusion

The purpose of this study was to explore the effects of digitalization on the auditing profession
in one developed and one developing country, answering three research questions. First, we
sought to explore how Swedish and Liberian auditors perceive the effects of digitalization on
the audit process. We found that, although there are some differences in which tools are used,
both Swedish and Liberian auditors had experienced significant changes in how they perform
their audits, following the advances in digital technology. Both Swedish and Liberian audit
firms have implemented digital tools which increase their capabilities to add value for their
clients. Among other things, both Swedish and Liberian Big four audit firms have implemented
IT systems which allows their clients to digitally transfer documents for review, which will
enable them to progress towards paperless offices. In line with prior research (e.g., Banker et
al., 2002), we also found that advanced technologies, especially Big data and analytics, have
streamlined the audit process, by automating formerly repetitive and routine tasks. In turn,
modern auditors can collect more relevant audit evidence, with significant time-savings,
allowing them to spend more time on complex judgment areas. Hence, we argue that
digitalization, and the implementation of increasingly advanced technologies have had a
significant and positive impact on audit quality in both Liberia and Sweden.

Furthermore, this study is consistent with prior studies (e.g., Moffitt et al., 2018; Manita et al.,
2020), which suggest that advanced digital tools enable auditors to provide more useful and
timely reports, containing more reliable information. Moreover, prior studies have argued that
a potentially negative effect of digitalization is that the digital development of the auditing
industry will lead to changing skills needed within audit firms (e.g., Appelbaum et al., 2017;
Tiberius & Hirth, 2019). This is especially true in Liberia. The Liberian respondents argued
that the academic curriculum in Liberia is not keeping pace with the technological
advancements in the field, and the requirements of the current job market. Thus, the academic
curriculum in Liberia should perhaps be revised to reflect the current state of the audit

86
profession more accurately. Further, a concern was raised by the Liberian respondents that the
continuing digitization of the audit profession will result in audit firms hiring less new auditing
graduates, since advanced technologies allow them to automate audit tasks that were formerly
done by junior staff. The Swedish respondents, however, did not share this opinion, stating that
technology is more likely to change the existing role of the auditor rather than eliminating it.
Hence, new staff will continue to be employed by Swedish audit firms.

This study also intended to answer what Swedish and Liberian auditors’ perceptions are toward
the importance of digital tools in auditing. Prior studies have argued that, due to the rapid
growth of companies, it has become increasingly difficult for auditors to manually analyze the
growing volumes of data in a timely manner (e.g., Kokina & Davenport, 2017). Hence, audit
firms must implement tools which allow them to analyze the growing volumes of data, for their
services to remain valuable and relevant. We found that this view is widely shared by both
Swedish and Liberian auditors who argue that digital tools are essential in evolving the audit
profession. This study suggests that more technologically advanced audit firms are able to
provide significantly better audit services than less technologically advanced firms. Auditing
today is not just about finding errors in the client’s financial statements. Clients today are
seemingly more interested in how they can improve their internal controls and procedures and
the auditor can, with the use of analytics tools, provide his clients with valuable analyses, which
could help them grow their businesses. The findings indicate that smaller audit firms, using
less advanced systems to perform their audits, can’t provide as high-quality services as the Big
four firms, which unfortunately means that they are losing clients. This goes in the same
direction as prior studies, which argues that small and mid-sized audit firms may be displaced,
since they will struggle to afford the investments in technological infrastructure and new
competencies needed to remain competitive (e.g., Tiberius & Hirth, 2019; Chaney et al., 2004;
Manita et al., 2020). Thus, we argue that audit firms that fail to implement advanced
technologies in time, especially analytics tools, will struggle to stay competitive, in developed
as well as developing countries.

Lastly, this study strived to explore if, and in what ways, Swedish and Liberian auditors differ
in their perception towards the effects and importance of digitalization in auditing. Overall, this
study shows that Swedish and Liberian auditors tend to agree that the effects of digitalization
are significant and positive for the auditing profession, enabling auditors to provide higher
quality services more efficiently. Thus, audit firms in developed as well as developing countries

87
would benefit from implementing digital tools. In the end, analytics tools enable auditors to
detect fraudulent behavior more effectively.

7.2 Contributions and implications of the research

7.2.1 Theoretical contribution

Digitalization and emerging technologies in the context of auditing is a currently trending topic,
generating a lot of interest from scholars, auditors, regulators, and users of financial statements.
In this era of digitalization, this study adds to the existing literature, complementing some of
the previous studies and providing more insights on how digitalization and currently trending
technologies are transforming the audit profession. This study also contributes to the available
literature by studying the effects of digitalization on auditing in one developed and one
developing country. While there are many studies investigating auditors' perceptions regarding
the effects of emerging technologies on auditing, few have been directed at less developed
countries. Hence, this study fills the existing gap in the literature. In line with prior studies, we
found that digitalization has positively impacted audit quality and audit efficiency in both
Liberia and Sweden, providing auditors with tools that increase their capability to add value.

7.2.2 Practical contribution

There are several practical implications of this thesis, relevant for various stakeholders.
Foremost, audit firms will have to realize the benefits of digitalization and implement emerging
technologies, especially analytics tools, to ensure that their services remain valuable and
relevant in the future, although there are significant costs associated with the implementation
of the mentioned emerging technologies. Further, this research provides valuable insights into
how the audit process is transforming, following digitalization, and emerging technologies and
what skills and competences are necessary to perform audits today. This will be helpful for
future auditors as well as the recruiting audit firms.

7.2.3 Societal contribution

Lastly, this study is relevant for academic institutions and regulatory bodies. The findings
indicate that digitalization may result in changing skills and competences needed within audit
firms, and hence more IT specialists may be needed within Swedish audit firms. In Liberia,
less new audit graduates may be needed, and the academic curriculum should be revised to

88
reflect the current state of the audit profession more accurately. Therefore, academic
institutions and regulatory bodies can use the findings to determine the required adjustments.

7.3 Limitations
Although the aim of the study was achieved, there are bound to be some limitations. First, the
nature of qualitative research does not allow for generalizations. In this study, a qualitative
research approach was adopted to explore the effects of digitalization in one developed and one
developing country, which provided a rich, contextual understanding of the topic. Second, the
study was conducted during the busy season for auditors and hence it was difficult to obtain
participants. Time constraints were also a limiting factor and thus only nine interviews were
conducted in the end. This could have possibly resulted in less diverse perspectives in the
empirical findings. Third, the mix of participants did not include Swedish auditors from small
and mid-sized audit firms. Hence, we were not able to explore how Swedish small and mid-
sized audit firms differ from the Swedish Big four firms, with regards to technology. A
comparison between Swedish and Liberian small and mid-sized audit firms was not possible
either. Fourth, we were only able to interview one Audit Manager/Chartered accountant. More
interviews with senior managers or even partners would certainly have provided interesting
information, particularly regarding professional judgment. Fifth, the participants were
essentially only using Big data and analytics (and Blockchain to some extent) in their respective
departments and hence not much insight was provided into how AI, for instance, is changing
the audit profession. Sixth, since this study sought to explore the perceptions of Liberian
auditors, five interviews had to be conducted over zoom and teams This meant that we were
not able to capture the Liberian interviewees body language to enrich the analysis. Furthermore,
the four interviews with Swedish auditors were conducted in Swedish, at the respondents'
request. Thus, the interviews had to be translated to English. Therefore, there is a potential risk
of misinterpretations in the empirical data. Given these points the reader may have to consider
the findings considering the limitations.

7.4 Avenues for future research

Given the limitations of this study, there are several avenues for future research. Foremost,
future research should further explore the effects of digitalization and emerging technologies
on small and mid-sized audit firms. Although two Liberian respondents worked at non-Big four
audit firms, this study did not include Swedish auditors from smaller firms. The findings may

89
not be transferable to Swedish non-Big four audit firms and hence further investigation is
required. Moreover, it would be interesting to include more senior auditors, including senior
managers, authorized public accountants, and partners, since this could result in more nuanced
findings regarding how digitalization and emerging technologies impact professional judgment
and decision making in auditing. Further, the empirical findings suggest that audit professionals
believe that digitalization positively impacts audit quality. Hence, future research could explore
the perceptions of perhaps clients, regulators, and other users of financial statements. Further
investigation is also needed regarding AI, and its impact on auditing. The empirical findings
indicate that the bigger Big four offices in Sweden are using more advanced technologies to
deal with the more complex clients, and hence it would be interesting to focus more on the
bigger cities. Lastly, more research is required on developing countries, to validate the findings
of this study.

90
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Appendix 1: Interview guide

Warm-up Questions
1. Could you tell us about yourself? Education background, experience?
2. What is your current position and responsibilities within the organization?
3. What do you know about digitalization? How would you define it?
4. Could you give some examples of current technological trends in auditing?
5. Is big data and analytics incorporated in your auditing department? If yes, how? If no,
why not?
6. Is blockchain technology incorporated in your auditing department? If yes, how? If
no, why not?
7. Is Artificial intelligence (& RPA) incorporated in your auditing department? If yes,
how? If no, why not?

Usefulness and implementation levels

8. How familiar and confident do you feel using these technologies?
9. Did you receive any prior training on how to use them from your former education or
your workplace? If yes, in what ways?
10. Do you perceive these technologies as useful? In which contexts are they useful?
Can you give some examples?
11. Are these technologies easy to use? Please elaborate.
12. Do you think that digitalization will enable auditors to test 100% of the population
rather than testing a sample? What are the effects of that?

Automation
13. Do you think that digitalization has reduced the number of repetitive/many tasks in
the audit process?
14. In which parts of the audit process are these technologies being implemented?
15. How are these technologies changing the audit process?
16. How could these technologies impact the auditors work, i.e., audit tests, audit
procedures, sampling, control, and substantive testing, etc.?
17. Do you believe that the automation of audit tasks has impacted the audit quality? If
yes, how?

Effects and quality of audits

18. Do you think that these technologies have improved the effectiveness of audits?

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19. Do you believe that these technologies have the capability to improve the reliability of
audited reports and the information contained in them? How?
20. Do they increase transparency? Does the implementation of these technologies?
benefit shareholders?
21. Would you say that it impairs or promotes professional judgment of auditors?
22. Do these technologies have the potential to help auditors to identify risk and material
misstatements?

Competencies
23. What skills and level of expertise do you think are required to perform an audit
today?
24. Do you think more IT specialists are required in the audit team?
25. What kind of training programs do auditors need to utilize new technology i.e., AI, Big
Data, Blockchain
26. What changes do you think the academic and professional curriculum could make to
prepare future auditors?
27. Do you believe that less new audit and accounting graduates will be hired by audit
firms in the future?

Reflections on the future of auditing

28. Do you believe that audit firms will have a hard time to stay competitive if they don’t
implement these technologies in the future?
29. What is the motivation behind the implementation of these technologies? What
factors affect the implementation?
30. How do you envision digitalization’s future impact on your field? What changes will it
bring?
31. What are the benefits, opportunities and risks that you think digitalization brings on
auditing?
32. Do you believe that these technologies are a threat to continuous availability of jobs
for auditors? If yes, how?
33. Is there anything we haven’t discussed that you think is important to know?

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