Digital transformation and the public sector auditing: The SAI's perspective

Abstract

The ongoing transformation of supreme audit institutions (SAIs) external environment is changing the demands and expectations of its stakeholders. The changing environment triggered by technological advancements, increased demand for accountability, and transparency means a change in the way auditing is done. The literature provides evidence of an ongoing technological innovation within the private sector audit. Private sector auditing research has focused mainly on technology adoption and use failing to address the umbrella concept of digital transformation (DT), some even consider processes of DT such as technology adoption and use to be DT. The public sector auditing literature is still yet to commence DT‐related research. This study seeks to fill in this gap and after presenting what DT entails, we applied an exploratory approach through semistructured interview responses, together with other documents from SAIs, to understand how SAIs currently perceive DT and what are their current reactions or actions to transform. The paper analyzes and discusses how SAIs perceive and define the DT phenomenon. The results show that most SAIs still do not master the concept of DT, as they often refer to technology adoption or automation of auditing processes to be DT, notwithstanding a great majority acknowledges the need for DT but lacks the right strategy and resources in place. We saw a few proactive SAIs who are futuristic on the contrary a majority are reacting to change when the need arises, especially during the audit process. The paper provides one of the first empirical investigations into the current DT of public audits. It also proposes a general framework suitable for analyzing the factors involved in the DT in SAIs.

Pursuing Big Issues in Covid-World Accounting Research

“…Digital accounting advances are expected to enhance corporate report quality via improved disclosure, reporting integrity, greater stakeholder engagement and enhanced decision making and judgement by information users including management and financial information users (Locke et al, 2018;Lombardi et al, 2021;Lombardi & Secundo, 2020;Troshani et al, 2019). The technologies offer potential for improving audit and assurance by contributing tools that enable auditors to complete traditional audit tasks more effectively including enhancing capacity to audit larger samples or datasets more efficiently and on a continuous basis (Barr-Pulliam et al, 2022;Kend & Nguyen, 2020), to access new sources of audit evidence (Otia & Bracci, 2022), to distinguish between unintentional errors and intentional financial reporting misstatements (Amani & Fadlalla, 2017), to identify reporting integrity issues including earnings management (Lombardi et al, 2021;Shan & Troshani, 2016), and to facilitate overcoming cognitive errors in auditors' judgement and decision making (Ahmad, 2019).…”

“…The evolution of the role of accountants also calls for additional changes to the broader institutional setting where accountants operate. A critical change pertains to the need for accountants to develop the necessary technology skillset, knowhow, and competencies to be able to use digital technology in key accounting areas including financial accounting, management accounting and audit (Appelbaum et al, 2021;Gotthardt et al, 2020;Kend & Nguyen, 2020;Otia & Bracci, 2022;Rikhardsson & Yigitbasioglu, 2018). Whilst there is agreement that accounting degrees in tertiary education institutions and industry certification programs constitute a key means of providing technology-related skills to accountants, it remains unclear to what extent existing formal education, training and certification programs provide accountants with the technology skills that match current industry requirements.…”

Accounting and accountability for the digital transformation of public services

“…The complexity of digital transformation in professional accounting practices has also been addressed by Otia and Bracci (2022). This paper focuses on the ongoing transformation of the external environment of Supreme Audit Institutions (SAIs) and the possible implications of digital innovation on auditing practices.…”

“…This paper focuses on the ongoing transformation of the external environment of Supreme Audit Institutions (SAIs) and the possible implications of digital innovation on auditing practices. Otia and Bracci (2022) Despite the efforts, the understanding of the meaning of digital transformation and its implications for auditing is not uniform across SAIs. Most of them understand digital transformation as the introduction of a specific technology and not as a holistic cultural and organizational process of change.…”

“…This paper focuses on the ongoing transformation of the external environment of Supreme Audit Institutions (SAIs) and the possible implications of digital innovation on auditing practices. Otia and Bracci (2022) propose a framework for understanding digital transformation in a holistic manner considering the following five factors: strategy, people and culture, technology, organization, and process. In their analysis, they show the limited diffusion of digital transformation in most SAIs.…”