How has the digitalization changed the auditing profession? Analysis of the impact of Covid-19 on the auditing profession between Big 4 and small audit firms in Belgium

Abstract

The process of auditing a company has a long-standing history. Auditors have always adhered to principles established decades ago, known as International Standards on Auditing (ISA). However, today, technological advances have greatly increased the interconnectedness of society. One event that has the capacity to accelerate this trend is the COVID-19 pandemic. This global crisis has impacted the processes and work environments of various professions, including external auditors. As a result, we may see an acceleration in the digitalization of the auditing profession due to the adoption of an entirely online way of working. The objective of this thesis is to examine digitalization in the auditing profession, which entails the utilization and sharing of digital tools. The analysis will focus on the digital transformation of large and small audit firms, with an emphasis on the potential acceleration triggered by COVID-19. Whilst writing the thesis, numerous questions arose, such as: when did the Big 4 and small audit firms experience an acceleration of digitalization? What was the job of an external auditor before, during, or after COVID-19? Did they have the right tools to make the transition online? What tools were used? How were inventories conducted during COVID-19? Are they using already emerging technologies? Do ISA need to be updated to align with the evolution of digitalization in society? Within the thesis, insights from literature reviews contribute to the formulation of four hypotheses. Additionally, sixteen interviews conducted with managers and partners from diverse Big 4 and small audit firms serve to validate, challenge, or introduce new ideas to the hypotheses. During the interviews, it was discovered that all audit firms had the required resources for remote work. However, the acceleration of digital transformation occurred at different times among small audit firms and the Big 4. Furthermore, the Big 4 companies had already allocated resources towards emerging technologies before the emergence of COVID-19, in contrast to the smaller audit companies, which had not yet made such investments. In the end, the final conclusion reached was that updating the ISA to align with the ongoing IT evolution in businesses is unnecessary.