Impact of Information Technology on Audit Quality: European Listed Companies' Evidence

Abstract

Introduction: Information technology is a field with particular importance in the activity of companies, which requires additional procedures in the audit of financial statements.

Aim: The purpose of the chapter is to identify the reports in which the financial auditors considered the impact of information technology on the financial statements of companies as a Key Audit Matter (KAM) and what was the approach in assessing this issue.

Method: The sample consists of companies listed on the primary market on European stock exchanges for 2013–2021 from 25 countries. Data were synthesised, systematised and analysed according to auditor type, audit year, countries and industries.

Findings: During the analysed period, 465 KAMs were identified for 174 distinct companies that referred to information technology, of which a Big4 auditor issued 97 per cent. The most KAMs were issued on companies from countries such as the United Kingdom, the Netherlands and Norway, and the least in Austria, the Czech Republic, Hungary and Italy. Also, most KAMs were issued by auditors in 2018 (19 per cent), and the least in 2013 (2 per cent). The industry that recorded the most KAMs related to information technology was finance, insurance, and real estate (64 per cent), and those which identified a single KAM on this topic were agriculture, forestry, fishing.

Conclusion: Information technology and its impact on audit quality and automation remain a growing topic especially in this pandemic period that caused more changes in the financial audit planning and risk assessment. The auditors were forced to perform remote audits and use information technology more than in previous years.

Citation

Crucean, A.C. and Hategan, C.-D. (2023), "Impact of Information Technology on Audit Quality: European Listed Companies' Evidence", Grima, S., Sood, K. and Özen, E. (Ed.) Contemporary Studies of Risks in Emerging Technology, Part B (Emerald Studies in Finance, Insurance, and Risk Management), Emerald Publishing Limited, Leeds, pp. 327-339. https://doi.org/10.1108/978-1-80455-566-820231018