The digital transformation in auditing – an industry undergoing change?

At the Leuphana University of Lüneburg, an interdisciplinary team from the fields of International Business Administration & Entrepreneurship and Information Systems, headed by Prof. Dr. Drews, Prof. Dr. Funk and Prof. Dr. Velte, is conducting research on topics such as the digital transformation. We have been able to enlist the services of the PhD student Felix Krieger to publish a first blog post about an ongoing study on “Digitization and Big Data in auditing” as part of our blog series. We will of course keep you informed and present the results of the study as soon as we receive them.

“The digital transformation requires a rethink in many companies and reveals that there is a great need for action in this area. It is important to understand that digital transformation is not a one-way street and requires agile methods to best respond to continuous changes in the market”.

Prof. Dr. Paul Drews, Leuphana University of Lüneburg

Companies are developing strategies for digital transformation in order to keep pace with developments in technology and thus protect and expand their business at the same time. This also applies to auditing, an industry that is currently struggling with stagnating sales growth. While the use of computer-based auditing tools has long been established, the industry is known for its reluctance and restraint in adapting new technologies [1]. But this mindset is currently giving way to a more open-minded attitude: auditing firms are increasingly recognizing the potential of technologies such as blockchain, software robots, artificial intelligence, big data and data science for the purposes of performing final audits [2]

Against the background of the difficult sales situation and growing cost pressures, auditing companies are on the one hand faced with the question of how these technologies can make the process of auditing financial statements more efficient. Clients are increasingly coming to audit firms with this expectation, so that the pressure is only increasing. On the other hand, the question arises as to whether and how the quality of audit services can be improved in order to offer the client greater added value. In the short to medium term, big data and data science could have an important role to play in this area. Data science methods such as process mining, machine learning and closing statistics can be used to generate more and better information from companies’ financial data than has usually been available up to now [3]. Further potential lies in enriching this financial data with additional, client-internal and client-external data sources, such as sensor data from logistics and production or digitized documents. This allows the auditor to have a more comprehensive view of the company and its economic situation. To cope with the wealth and structural complexity of such data, big data technologies such as NoSQL databases or cluster computing (Hadoop, Spark) are already being used in other branches of industry.

The phenomenon of the digital transformation for the purposes of final audit is extremely multi-faceted and has not been the subject of much scientific research to date. Three topics of interest that we have identified at Leuphana University are the current and future use of technology and the resulting changes in the market, the adaptation of auditing standards and changes in training. So far little is known about which technologies are already used in which application scenarios in auditing and how these are to be evaluated with regard to costs and benefits. Another central question here is the potential changes in the audit market. If one takes a look at the capital that is in theory available to the “Big 4” audit companies for research & development, one might get the impression that medium-sized companies are being left behind. Or is it the smaller, generally more flexible companies or software providers that are shaking up the market with innovative or even disruptive solutions?

In the longer term, there is also the question of adapting auditing standards. Do established and legally binding professional standards allow for the use of these technologies? Will the standards change (or have to change)? If new processes deliver substantially better results, will it become mandatory to use them?

The changes will also lead to a change in training for prospective auditors and the job description. This applies both to training at universities and to training as an auditor. Skills in IT will increasingly become a requirement, or at the very least the ability to master the relevant analysis tools. Audit firms and their employees must be prepared to engage on an ongoing basis with the potential offered by new technologies in programs of further education and training.

These and other topics are the focus of an interdisciplinary research team at the Leuphana University of Lüneburg, headed by Prof. Dr. Drews, Prof. Dr. Funk and Prof. Dr. Velte. In an empirical study, the researchers are currently investigating the current status in practice, current projects and expectations for the future. The aim is to identify interesting fields of application on this basis, for which innovative processes are then to be developed.

We look forward to keeping you informed about the progress of the study and sharing initial results here on zapliance’s blog in the near future. If you are interested in finding out more, please contact Felix Krieger from the Institute of Information Systems at the Leuphana University of Lüneburg (


[1] Alles, M. G. 2015. “Drivers of the Use and Facilitators and Obstacles of the Evolution of Big Data by the Audit Profession,” Accounting Horizons (29:2), pp. 439–449.

[2] Appelbaum, D., Kogan, A., and Vasarhelyi, M. A. 2017. “Big Data and Analytics in the Modern Audit Engagement: Research Needs,” AUDITING: A Journal of Practice & Theory (36:4), pp. 1–27.

[3] Justenhoven, P., Sechser, J., and Loitz, R. 2017. “Digital Audits of Financial Statements: Study on the use of technology in finance and accounting,” PricewaterhouseCoopers GmbH WPG (ed.).

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