Audit Quality Review: An Analysis Projecting the Past, Present, and Future

Audit Quality Review: An Analysis Projecting the Past, Present, and Future

Author(s): Niva Kalita, Reshma K Tiwari

Subject(s): Economy, Accounting - Business Administration

Published by: Editura Universităţii »Alexandru Ioan Cuza« din Iaşi

Keywords: audit quality; auditor; bibliometric analysis; content analysis; systematic review;

Summary/Abstract: Literature on audit quality remains plenteous, with researchers contemplating

the area for 'forever and a day’. The present study proposes synthesising the existing literature on
audit quality, discerning the prominent themes and providing future research avenues. This paper
attempts to analyse and synthesise the dynamics of audit quality research by employing the
diminuendos of systematic literature review with bibliometric and content analysis. Scopus database
has been gleaned to systematically retrieve the literature on audit quality from 1981-2022. Analysing
the 1101 relevant articles under review makes the USA the highest contributor. It is, however,
enthralling to note that developing countries have also registered increased interest in the topic.
Apart from the other documented findings, the study concluded that research has witnessed
impeccable growth over the years under various lenses, which have been precisely synthesised into
six clusters. While various reviews have been conducted using innumerable qualitative methods, this
study attempts to employ quantitative methods to synthesise the extant literature, which is a rarity.

Details

Contents

Journal: Scientific Annals of Economics and Business

Issue Year: 70/2023

Issue No: 3

Page Range: 353-377

Page Count: 25

Language: English

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Meditari Accountancy Research

Volume 29 Issue 5

Exploring the relationship between audit and technology. A bibliometric analysis

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Exploring the relationship between audit and technology. A bibliometric analysis

Rita Lamboglia, Domenica Lavorato, Eusebio Scornavacca, Stefano Za

Meditari Accountancy Research

ISSN: 2049-372X

Article publication date: 26 October 2020

Issue publication date: 21 September 2021

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Abstract

Purpose

The purpose of this study is to map the conceptual structure of the body of knowledge linking digital
technologies and auditing, with the aim of contributing to a better understanding of this research
stream.

Design/methodology/approach

This research develops a bibliometric analysis of 256 articles following two steps. The analysis of
descriptive performance indicators identifies the main traits of the community of scholars debating
audit and technology in terms of publications, productive countries and authors, as well as the
publication’s impact of the target journals concerning specific fields, number of citations per country
and most cited articles in the data set. To analyse the conceptual structure of the data set, the study
performs a co-word analysis adopting social network analysis tools.

Findings

The results highlight a growing academic interest in the research topic, especially in the past few
years. The bibliometric analysis reveals three main topics concerning the use and application of
technology in the audit profession: the adoption of continuous auditing and continuous monitoring
in the auditing profession; the use of software tools in the audit profession; the connections
between information systems and audit.

Originality/value

This paper contributes to the field by providing an examination of the current state of the art of
research on the use and application of technology in the audit profession as well as identifying the
current gaps in the literature and, most importantly, propose a research agenda for the field.

Keywords

Citation

Lamboglia, R., Lavorato, D., Scornavacca, E. and Za, S. (2021), "Exploring the relationship between
audit and technology. A bibliometric analysis", Meditari Accountancy Research, Vol. 29 No. 5, pp.
1233-1260. https://doi.org/10.1108/MEDAR-03-2020-0836

Publisher:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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Auditing in family firms: Past trends and future research directions

Miguel Gil

ORCID Icon, Timur Uman

ORCID Icon, Martin R. W. Hiebl

ORCID Icon & Steffen Seifner

Published online: 05 Jan 2024

Cite this article

https://doi.org/10.1080/00472778.2023.2293908

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ABSTRACT

This systematic literature review synthesizes and maps existing research on auditing in family firms
across multiple areas of study. The review includes 71 systematically selected academic articles
published through to 2023. Our findings suggest that many audit-related issues, such as audit fees,
audit quality, and auditor choice, differ significantly among family and nonfamily firms. Our review
suggests that the positioning of the issues across different disciplines adds complexity and, to some
extent, hinders the development of the field. This complexity, resulting from the intermixing of
multiple concepts from different disciplines, pushes the majority of the reviewed articles toward
theoretical singularity rather than a leap forward in terms of empirical relevance or theoretical
plurality. By developing a field map that identifies gaps in current knowledge, our review not only
suggests improvements to the status quo, but provides future research directions inspired by recent
developments in family business and auditing.

KEYWORDS:

Auditingliterature reviewfamily firms

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Introduction

Accounting, auditing, and management accounting have received increasing attention in family
business research (Sandgren et al., Citation2023). Initially, the focus was on issues related to family
ownership, family governance, and succession (Moores, Citation2009; Rovelli et al., Citation2021).
More recently, however, this focus has shifted to other business research topics such as marketing
(Beliaeva et al., Citation2022), finance (Kempers et al., Citation2019), human resource management
(Hiebl & Li, Citation2020; Marler et al., Citation2021), and accounting in general (Quinn et al.,
Citation2018; Salvato & Moores, Citation2010). Within the latter area, financial and management
accounting in family firms has received the most research attention (Salvato & Moores,
Citation2010), as evidenced by a large number of literature reviews (for example, Chalmers et al.,
Citation2019; Heinicke, Citation2018; Kapiyangoda & Gooneratne, Citation2021; Prencipe et al.,
Citation2014; Senftlechner & Hiebl, Citation2015). However, auditing as a subfield of accounting has
been slower to attract attention (Trotman & Trotman, Citation2010), and only recently have scholars
increasingly focused their efforts on gaining knowledge about the role of auditing and auditors in
family firms.

Therefore, compared to other subfields of accounting, there remains a lack of aggregate knowledge
on the development of auditing in family firms, and a more comprehensive review of this topic is
needed (Kraus et al., Citation2023). To fill this gap, this study maps existing research on auditing in
family firms across multiple areas of study, identifies past trends, and suggests an agenda for future
research. There are several reasons why it is important to focus on the specifics of family business
auditing rather than on another subfield of accounting. First, the unique characteristics of family
firms affect the different roles that auditing plays in family firms. For example, family firms are often
characterized by noneconomic aspects, such as family emotions and family relations, that are
reflected in business decisions (Prencipe et al., Citation2014; Rovelli et al., Citation2021). Family
firms have also been shown to be more inclined than nonfamily firms to preserve the firm’s
perceived social reputation to maintain long-term relationships with suppliers, lenders, and
shareholders (Anderson et al., Citation2003; Cui et al., Citation2018; Liu et al., Citation2017;
Prencipe et al., Citation2014). Finally, family firms tend to focus on their going concern status to
ensure that succeeding generations can take over the business (Gomez-Mejia et al., Citation2011).
These characteristics may be reflected in the use of auditing as a tool to mitigate potential
interfamily conflicts arising from strained relationships among family members (Corten et al.,
Citation2017; Siebels & Zu Knyphausen‐Aufseß, Citation2012). Existing research also suggests that
external auditors can be used as a reputation-enhancing tool, assuring the public and business
partners of the accuracy of the firm’s financial reporting (Niskanen et al., Citation2010). Second, in
addition to typical family firm characteristics, other unique aspects related to agency problems may
have implications for audits in family firms. Specifically, family-controlled firms tend to have less
severe Type I agency problems (that is, managers pursuing their own interests rather than those of
shareholders), which typically arise from the separation of ownership and control (Ali et al.,
Citation2007; Khan et al., Citation2015). Given the lower severity of Type I agency problems in family
firms, the demand for audits, especially high-quality audits, is expected to be lower because the
controlling family can ensure monitoring itself, resulting in lower audit fees (Ho & Kang,
Citation2013). However, Type II agency problems arising from a potential conflict of interest
between controlling and noncontrolling shareholders (Ali et al., Citation2007) are more prevalent in
family firms. These types of problems may arise because family members as controlling shareholders
may have incentives to use their position to pursue private interests at the expense of
noncontrolling shareholders (Khan et al., Citation2015; Villalonga & Amit, Citation2006). Given the
higher likelihood of Type II agency problems in family firms, they may be subject to more fraudulent
activities, thereby increasing audit risk. As a result, auditors may need to put more effort into the
audit to mediate these risks and, therefore, charge higher fees (Khan et al., Citation2015). These
characteristics of family firms, combined with the agency-related issues and audit implications, make
research on auditing in family firms an important topic for audit scholars and practitioners.

However, the last review of family business auditing research was conducted more than a decade
ago (that is, Trotman & Trotman, Citation2010), when this research area was still in its infancy, more
traditional, and less systematic in nature. In addition, the research findings tend to be scattered
across several research domains. Thus, the purpose of this article is to conduct a comprehensive and
systematic review (Kraus et al., Citation2020; Sauer & Seuring, Citation2023; Tranfield et al.,
Citation2003) that allows for the synthesis of family business audit research from various disciplines,
including accounting, finance, entrepreneurship, and other business fields. Our review suggests that
the positioning of the issues across different disciplines adds complexity and, to some extent,
hinders the development of the field (Casprini et al., Citation2020; Kumar et al., Citation2021). This
complexity, resulting from the intermixing of multiple concepts from different disciplines, pushes the
majority of the reviewed articles toward theoretical singularity (that is, agency theory) rather than a
leap forward in terms of empirical relevance (that is, Environmental, social, and governance (ESG)
requirements, big data and artificial intelligence [AI] use, nonaudit services) or theoretical plurality
(that is, institutional, stewardship, resource-based, or other perspectives). By highlighting family
firms as an important and idiosyncratic, but somewhat overlooked, type of firm in auditing research,
our review not only suggests improvements to the status quo, but also provides future research
directions inspired by recent developments in the family business and auditing fields, thus extending
the research opportunities that Trotman and Trotman (Citation2010) suggested in their review of
auditing in family firms. Therefore, the research questions we address in our study are: What is the
intellectual structure of auditing in family firms as a research area? What are the most promising and
urgent future research areas?

Review method

In this article, we follow the guidelines for systematic reviews in business and management research,
which include three main steps: planning the review, conducting the review, and reporting and
disseminating the results (Kraus et al., Citation2020, Citation2022, Citation2023; Sauer & Seuring,
Citation2023; Tranfield et al., Citation2003). After the initial planning and developing (the research
motivation in the first step), we conducted a keyword search in the two largest abstract and citation
databases of peer-reviewed literature (Scopus and Web of Science). For an article to be included in
the preliminary sample, it had to contain a combination (AND conjunction) of two keyword groups in
the title, abstract, or keywords (Simsek et al., Citation2021).

The first group concerned family firms; that is, “family firm*” OR “family business*” OR “family
control*” OR “family enterprise*” OR “family led*.” The second group concerned auditing (“audit*”).
For both keyword groups, we used asterisks to include suffixes such as “auditor” or “auditing.” We
placed no restrictions on the publication date, research method, or study type, but excluded
previous nonsystematic literature reviews (Dabić et al., Citation2020; Hiebl, Citation2023).
Therefore, all relevant articles published or available online ahead-of-print up to September 2023
were included in the initial sample.

The database search (Scopus and Web of Science) yielded a total 264 articles and, after removing
duplicates, 184 articles remained. To facilitate the processes of including and excluding articles from
the review, we relied on two well-established definitions of auditing and family firms. A family firm
was defined “as one in which multiple members of the same family are involved as major owners or
managers, either contemporaneously or over time” (Miller et al., Citation2007, p. 836). Auditing was
defined as a process concerned with the verification of accounting data to determine the accuracy
and reliability of accounting statements and reports (for example, Mautz, Citation1958), and
included both external and internal audit functions. Armed with these two broad definitions of the
concepts under study, 97 articles out of the 184 were excluded because they did not contain any
empirical or conceptual content on auditing in family firms.Footnote1 The remaining 87 articles were
read in full and 31 of these were excluded because they did not have auditing and family
ownershipFootnote2 as a focus or did not meet the journal quality criterion (Solomon et al.,
Citation2003). This criterion, a recognized indicator of journal quality used in other systematic
literature reviews (Falkner & Hiebl, Citation2015; Ghadge et al., Citation2012; Kraus et al.,
Citation2020), required their inclusion in the Academic Journal Guide (2021) of the Chartered
Association of Business Schools, or the Australian Dean Council (2021), or both (cf. Sandgren et al.,
Citation2023). Ranking-based quality criteria are discussed vividly in the review methods literature
(for example, Hiebl, Citation2023; Kunisch et al., Citation2023; Tranfield et al., Citation2003). By
relying on the inclusion of the publication outlets in the two mentioned prominent rankings, we
chose to apply the quality criterion in a somewhat relaxed way to not exclude potentially relevant
articles. At the same time, the application of this criterion was important for three main reasons: (a)
the publication of potentially relevant articles in journals that are listed at least in one of the two
mentioned rankings ensures some minimum level of applied research rigor (Kraus et al.,
Citation2020); (b) the use of these rankings thus helps to keep out potentially predatory journals (cf.
Hiebl, Citation2023; Sauer & Seuring, Citation2023); and (c) unlike individual and maybe subjective
assessments of the research quality of potentially relevant articles, the reliance on two prominent
journal rankings fosters the traceability of our inclusion and exclusion choices and, thus, contributes
to the transparency of our applied review methods (cf. Kraus et al., Citation2020).

The final sample of 56 articles based on the systematic database search was supplemented by 15
articles that met the inclusion criteria and were found through bibliometric “ancestry sampling” by
screening the reference lists of recently published articles using Boolean keyword searches (Bodolica
& Spraggon, Citation2018; Hiebl, Citation2023; Kraus et al., Citation2022). Thus, our final sample
consists of 71 articles.

provides a summary of the search process in the form of a PRISMA flowchart (Moher et al.,
Citation2009).
Figure 1. PRISMA chart (cf. Moher et al., Citation2009).

Figure 1. PRISMA chart (cf. Moher et al., Citation2009).

The final 71 articles were mapped in Excel along a number of categories; that is, concept definition,
themes, theoretical perspectives, findings and nonfindings, sample and method characteristics,
among others. This mapping allowed identifying the common patterns among the articles and
clustering them according to different themes (cf. Maley et al., Citation2021; Ponomareva et al.,
Citation2022). To analyze the literature, we used relevant keywords related to the main themes
discussed in the articles. A complete list of the reviewed articles with their respective themes,
keywords, main findings, and theories can be found in Appendix 1.

Review findings

Characteristics of the sample articles

provides bibliographic information on the 71 articles included in the review and published in 37
journals in the four main areas of interest. The majority of the sample articles (36) were published in
accounting journals, some specialized in auditing. Another important source of studies relevant to
family business auditing is family business journals, while other sample articles were published in
business ethics, governance, and finance journals.

shows that all but one of the reviewed articles were published in 1992 or later, with the majority (62
articles) published in 2010 or later. We interpret this finding as a strong indication of the topicality of
this research area.

Table 1. Bibliographical sources of the articles included in the literature review.

Download CSVDisplay Table

Table 2. Research design of the articles included in the literature review.

Download CSVDisplay Table

The research design of the sampled articles is shown in

. The vast majority of the articles included in the review adopt an empirical research approach, while
only two use a purely theoretical/conceptual approach (the article by Ponnu et al. (Citation2009) can
be considered both empirical and theoretical/conceptual). The dominant data collection method (58
articles) is empirical-archival, with data collected from major databases, the financial statements of
the sample firms, or both. The survey method is used in six articles, while two use a combination of
both methods. Finally, three articles rely on case studies and two use experiments to generate data.
Of the empirical articles, 32 were conducted with data from developed countries such as the United
States, France, or Germany. Another 36 focus on economies that can be considered developing such
as Taiwan and Indonesia. The remaining three articles did not examine a specific geographic context.
Thus, there seems to be a good balance between developed and developing countries in research on
family business auditing. Of the articles that examine a geographic context, all focus on a specific
country, with the exception of Chen and Nowland (Citation2010) who analyze several Asian
countries (Hong Kong, Malaysia, Singapore, and Taiwan).

Main topics

In reviewing the sample articles, we identified five main themes (see Appendix 1). First, 28 articles
focus on issues related to family firm audit effort, audit risk, audit fees, or both, often in comparison
to nonfamily firms. Second, 19 articles investigate themes related to audit quality, auditor choice, or
both. Most of these articles examine what type of auditors family firms prefer and whether these
are of higher or lower quality than those chosen by nonfamily firms. Third, 12 articles examine the
effectiveness of audit committees. Fourth, nine articles focus on business risks in family firms such as
earnings management and tax avoidance practices. Finally, three articles focus on auditors providing
nonaudit services.

Audit effort, audit risk, and audit fees

Combining the topics of audit effort, audit risk, and audit fees into one group follows the same
rationale as for audit quality and auditor choice. In other words, audit effort and audit risk are often
proxied by the amount of audit fees paid (Ghosh & Tang, Citation2015; Leung & Wang,
Citation2010). All of the reviewed articles focusing on audit fees agree that family firms pay lower
audit fees than their nonfamily counterparts, and are thus charged less for auditor services (Corten
et al., Citation2017; Ghosh & Tang, Citation2015; Ho & Kang, Citation2013; Khan et al., Citation2015;
Leung & Wang, Citation2010), although Khan et al. (Citation2015) found that it is the other way
around for export-oriented industries. There is also evidence that changes in audit fees after hiring a
new auditor are less severe in family firms than in nonfamily firms (Khalil & Mazboudi, Citation2016).
Abdulmalik et al. (Citation2020) recently found that auditors’ perceived risk associated with CEO
career horizon is lower in family firms. The authors explain that this lower risk perception is higher
for CEOs affiliated with family members.

Within the family business group, audit fees appear to decrease as the number of board members
from the largest owning family increases, while audit fees and audit effort increase when the CEO is
a member of the largest owning family (Ali et al., Citation2020). According to Srinidhi et al.
(Citation2014), the level of governance does not affect audit fees, as strongly governed family firms
opt for higher audit effort by hiring specialists compared with their weakly governed counterparts.
Moreover, Adithipyangkul et al. (Citation2020) conclude that governance tools are effective in
mitigating agency conflicts only in specific circumstances related to the family business context.
The lower audit fees paid by family-controlled firms are consistent with the tendency of family firms
to choose lower-quality audits, which should naturally cost less (Ali et al., Citation2020; Chen &
Nowland, Citation2010). However, another main reason for the lower audit fees is that family-
controlled firms have lower audit risk than nonfamily firms (Ghosh & Tang, Citation2015; Leung &
Wang, Citation2010; Prencipe et al., Citation2011), or at least auditors perceive their audit risk as
lower (Ho & Kang, Citation2013). According to Prencipe et al. (Citation2011), the lower audit risk in
family firms may be due to lower levels of earnings management since low levels of earnings
manipulation are usually associated with lower risk for auditors. According to Ghosh and Tang
(Citation2015), other possible reasons for the lower audit risk of family firms include direct
monitoring by families, higher management integrity, lower operating risk, and superior knowledge
of the business environment. In the face of lower audit risk, auditors need to expend less audit effort
to ensure the desired level of audit quality (Corten et al., Citation2017; Ghosh & Tang, Citation2015;
Leung & Wang, Citation2010). Auditors appear to achieve this by reducing the scope of audit
procedures consisting of the nature, timing, and extent of the audit (Ghosh & Tang, Citation2015),
resulting in lower audit fees for family firms. Similarly, Corten et al. (Citation2017) found that high-
quality (Big 4) auditors can improve audit quality. However, high-quality auditors are also associated
with higher fees. This is in line with Suh et al. (Citation2020), who found that family firms tend to
have lower-quality audits because they choose to pay lower audit fees.

While most studies conclude that family firms pay lower audit fees, recent studies reveal exceptions.
For example, Al-Okaily (Citation2020) found that family firms pay higher audit fees during economic
crises due to the risk of shareholder expropriation. Schierstedt and Corten (Citation2021) argue that
strong family involvement in management and supervisory boards increases audit effort and, thus,
audit fees. Auditors perceive fraud risk to be higher in family firms (Krishnan & Peytcheva,
Citation2019), leading to higher audit effort and fees (Schierstedt et al., Citation2021).

This stream of family business audit research appears to nuance research on audit fees and related
concepts by showing that these can be used as proxies not only for audit quality, but also for the
ability, or lack thereof, of the family(ies) to manage the business. In other words, in the family
business context, audit fees, audit risk, and audit effort are viewed as indicators of family
governance characteristics, their weaknesses, and their potential strengths. Thus, this stream of
research in the family business domain could present a broader view of audit fees and related
concepts than the traditional audit literature, potentially pointing the way forward for research on
the intersection of ownership and auditing in general, and audit fees in particular (cf. Barroso et al.,
Citation2018; Kane & Velury, Citation2005).

Audit quality and auditor choice

In 15 articles, audit quality and auditor choice are the most studied topics in the context of family
firms. In many of the reviewed studies, the authors use the type of auditor chosen by the family-
controlled firm as a proxy for the level of audit quality (Corten et al., Citation2017; Srinidhi et al.,
Citation2014). In most of these articles, higher audit quality reflects the choice of a Big 4 auditor, in
line with DeAngelo (Citation1981), who considers larger audit firms as an indicator of high audit
quality because they have a larger number of clients and, thus, more to lose if audit errors occur.
Only Srinidhi et al. (Citation2014) present an alternative view, using the choice of specialist auditors
as a proxy for high-quality audits.

The majority (nine) of the articles on audit quality found that family firms generally choose lower-
quality audits by using non-Big 4 auditors (Cheung et al., Citation2021; Darmadi, Citation2016;
Francis et al., Citation2009; Ho & Kang, Citation2013; Hsu et al., Citation2018; Husnin et al.,
Citation2016; Kang, Citation2014; Khan et al., Citation2015; Niskanen et al., Citation2010).
Nevertheless, these studies do not provide a definitive explanation for why family firms tend to hire
lower-quality auditors. For instance, Hsu et al. (Citation2018) found that family firms appoint lower-
quality auditors due to low external demand for higher-quality audits. Darmadi (Citation2016)
concludes that family firms hire lower-quality auditors to maintain opacity practices. In another
explanation for the tendency of family firms to hire lower-quality auditors, Francis et al.
(Citation2009) note a reduced likelihood of information asymmetry between managers and owners
because there is less separation of ownership and control in family firms. Ho and Kang (Citation2013)
support this view, arguing that a firm’s tendency to hire lower-quality auditors is even stronger when
family owners actively monitor the firm. Similarly, Kang (Citation2014) found that family firms are
more likely to appoint industry specialist auditors rather than the Big 4. Although Khan et al.
(Citation2015) generally support the idea that family firms hire lower-quality auditors than
nonfamily firms, they found that this relationship is reversed for export-oriented industries. The
main reason for this tendency seems to be the presence of foreign buyers, which creates an
incentive for family firms to choose higher-quality audits to reduce potential agency costs and
eliminate buyer concerns (Khan et al., Citation2015). However, Khan et al. (Citation2015) limit their
findings by mentioning that this may be typical for only developing countries such as Bangladesh.

Although the majority of articles support the notion that family firms are more likely to hire lower-
quality auditors, some also show the benefits of higher-quality audits. For example, Husnin et al.
(Citation2016) found that family-controlled firms are more likely to hire higher-quality (Big 4)
auditors, but limit this finding by mentioning that this relationship is no longer significant when the
internal audit function is mandated. Furthermore, a Big 4 auditor is more likely to become the
successor after the resignation of the previous auditor in family-controlled firms compared to
nonfamily firms (Khalil & Mazboudi, Citation2016). Similarly, Feito-Ruiz et al. (Citation2023) found
that family firms with a higher proportion of long-term debt in their capital structure are more likely
to hire Big 4 auditors. Ali and Ng (Citation2009) claim that Big 4 auditors can mitigate earnings
management in firms with low and high levels of family ownership. In addition, high-quality auditors
may be hired to mitigate intrafamily agency conflicts (Chen et al., Citation2007; Corten et al.,
Citation2017).

While most of the reviewed articles compare family and nonfamily firms, Srinidhi et al.
(Citation2014) examine differences in auditor choice among family firms. They found that strongly
governed family firms are more likely to choose higher-quality audits (specialist auditors) than
weakly governed family firms. Srinidhi et al. (Citation2014) also measure governance strength by
board strength, which depends on board and audit committee size, constrained CEO power, board
independence, board attendance, and the financial expertise of audit committee members.
Research on audit quality and audit choice in family firms appears to follow the general audit
research tradition in juxtaposing audit quality with auditor type (that is, Big 4). Given the tendency in
the field to rely on archival data in empirical research, this may not be surprising. However, given the
growing number of case studies on family firms in general (De Massis & Kotlar, Citation2014), and
auditing and accounting in family firms in particular (Sandgren et al., Citation2023), a more nuanced
understanding of the conceptualization from the firm and auditor side may emerge.

Audit committees

Abdullatif et al. (Citation2015) found that the demand for establishing an audit committee is lower in
family-controlled firms, which in turn can be attributed to the notion that family firms have lower
agency costs due to less separation between ownership and control. However, this is somewhat
surprising given the findings of Chen and Nowland (Citation2010) on the optimal level of monitoring
for family firms at which an audit committee should be present. In their sample of Asian family firms,
this optimal level corresponds to the presence of compensation, audit committees, and 38 percent
board independence when the chairman is not also the CEO (Chen & Nowland, Citation2010).
According to Hashim and Amrah (Citation2016), an effective audit committee seems desirable
because it has a significant and reducing effect on a family firm’s cost of debt. To realize such an
effect, a high-quality audit committee in a family-controlled firm is likely to rely on the efforts of
external auditors to ensure the accuracy and reliability of the firm’s financial statements (Leung &
Wang, Citation2010). Similarly, Al-Okaily and BenYoussef (Citation2020) conclude that family firms
with ineffective audit committees pay higher nonaudit service fees.

Wan Mohammad et al. (Citation2014) found that family ownership has a moderating and negative
effect on the audit committee reducing earnings management and on the overall effectiveness of
the audit committee. Widagdo and Devi (Citation2014) support this view, finding that audit
committees are less effective in family-controlled firms with family members on the board. This
relationship appears to be even stronger when one or more boards are dominated by members of
the controlling family (Jaggi & Leung, Citation2007). Prencipe and Bar-Yosef (Citation2011) went
even further and found no significant relationship between a functioning audit committee and the
financial reporting reliability of family firms. One possible explanation is that the Italian firms they
examined all had a board of statutory auditors alongside the audit committee. This was a legal
requirement in Italy that led to a partial overlap in the activities of the two institutions, which may
explain the lack of significance in the relationship between audit committee presence and financial
reporting quality (Prencipe & Bar-Yosef, Citation2011). In a similar vein, but a different context, Al-
Okaily and Naueihed (Citation2019) analyzed 1,877 firm-year observations from the United
Kingdom. Their findings suggest that audit committee characteristics have a positive and significant
relationship with the performance of nonfamily firms, but this relationship is not significant for
family firms.

Research on audit committees, although one of the smaller streams in the family firm domain, could
be promising, as the empirical evidence (cf. Wan Mohammad et al., Citation2022) suggests that
these committees are increasingly present in the boards of family firms, but their function remains
unclear. While legal requirements may be the reason for their creation, the process of forming these
committees and especially their composition could potentially shed light on their role in family firms.
In particular, qualitative studies could advance our understanding of how these committees function
and how they are used in the family business context.

Business risk in family firms

The articles related to business risk in family firms focus on earnings management and tax audits.
Regarding earnings management, in their study of UK listed firms, Al-Okaily et al. (Citation2020)
found that auditor-client economic ties may jeopardize auditor judgment and threaten the earnings
quality of family firms. Similarly, in their study of 135 Italian firms, Prencipe et al. (Citation2011)
conclude that income smoothing is lower in family firms, which translates into lower audit risk.
However, in their study of Indonesian firms, Suprianto et al. (Citation2019) draw a contradictory
conclusion that audit committee accounting experts negatively influence earnings management in
family firms. One possible explanation for the conflicting results could be the study context. While
European studies suggest that family firms tend to reduce the risk of negative earnings management
practices, the results from developing countries suggest the opposite.

With respect to tax audits, the results are also contradictory. On the one hand, in their study of
3,865 firm-year observations in the United States, Chen et al. (Citation2010) found greater concern
about potential penalties and reputational damage from an Internal Revenue Service (IRS) audit. On
the other hand, in their study of 55 firms in Tunisia, Gaaya et al. (Citation2017) conclude that family
ownership is positively associated with corporate tax avoidance practices. This translates into less
concern about external tax audits. With respect to earnings management, the findings are similarly
contradictory for firms in developed and developing economies (Karjalainen et al., Citation2023).
Therefore, a natural avenue for future research arises from the need to understand the reasons for
the contradictory findings on earnings management and tax-related practices between family firms
in developed and developing economies.

Auditor-provided nonaudit services

Regarding auditor-provided nonaudit services, Kang (Citation2017) found that family firms purchase
more of these services than nonfamily firms. This finding is supported by the higher nonaudit service
fee ratio, meaning that the amount of nonaudit service fees relative to the combined audit and
nonaudit service fees paid is higher for family firms. More or less in line with Kang (Citation2017),
Dobler (Citation2014) found that incumbent auditors are an important source of nonaudit services
for family firms. Although this finding might suggest a threat to perceived auditor independence,
surprisingly it does not necessarily seem to be the case according to Dobler’s (Citation2014) findings
for listed German family firms.

Interestingly, business risk and nonaudit services, topics that are among the most trending aspects
of audit research today (Feito-Ruiz et al., Citation2023), remain prominent in the family business
domain. While these topics may be the most sensitive aspects of auditors’ work in family businesses,
recent research suggests that they are the most commonly offered audit services in family firms.
Therefore, this may be an area where most future research efforts are needed.

Field map
Inspired by the seminal article of Luft and Shields (Citation2003), we mapped the field according to
the research questions addressed in the articles reviewed. In this mapping, we identified two
clusters of studies. The first focuses on family ownership and its characteristics in relation to audit-
specific outcomes. The second examines auditing as an input, focusing primarily on audit committee
effectiveness and auditor choice in relation to other audit-related outcomes. In this second cluster,
family ownership serves as the study context. The two clusters appear to represent two separate
streams of research that rarely meet. While the first cluster is more coherent and examines, for
example, family ownership in relation to audit fees, audit effort, and audit risk, the second cluster
has two subclusters that are not necessarily related. Specifically, within this cluster using family
ownership as the context, the audit committee effectiveness subcluster does not intersect with the
auditor choice cluster and vice versa.

The majority of studies in the first cluster show positive relationships between various dimensions of
family ownership and audit-related outcomes. Only in a few cases did they find that family
ownership has a negative effect on outcomes; for example, with respect to nonaudit fee reductions,
tax avoidance practices, nonaudit services, and auditor choice. Only in one case did our review find
mixed results, where the internal audit function in family-owned firms shows an inconclusive effect
on auditor choice.

The studies in the second cluster only partially follow the patterns in the first cluster. When auditor
choice is the focus, these studies primarily show a positive relationship with outcomes such as
auditor independence, long-term debt, or audit risk reductions. Instead, audit committee
effectiveness seems to yield mixed results.

The gaps identified by the field map highlight opportunities for advancing the field, particularly in
terms of modeling and bridging these gaps, and thus informing future studies. We discuss these
opportunities in the next section.

Future research avenues

In their 2010 article, Trotman and Trotman suggest a number of potential research opportunities
related to auditing in family firms not examined at that time. In addition to potential avenues in
audit judgment research, Trotman and Trotman (Citation2010) identify audit quality and demand
among family firms and between family and nonfamily firms as potential research avenues. In
addition, demand for internal audits, the specifics of smaller family firms, and the differences with
larger family-controlled firms are also suggested as research opportunities (Trotman & Trotman,
Citation2010).

This call for future studies was clearly successful in terms of article quantity, as 62 of the 71 articles
in our review were published in 2010 or later. However, while demand for audit quality became one
of the main areas of study on auditing in family firms, research on demand for internal audits
remains rather underdeveloped. This is evidenced by the limited number of articles with findings in
this area (Carey et al., Citation2000). The same is true for the differences between small and large
family firms. While many articles focus on public or private companies, firm size is rarely explicitly
considered (Aschauer et al., Citation2015).

Instead, most articles focus on the differences between family and nonfamily firms. As our review
shows, these studies mostly conclude that there are significant audit differences between family and
nonfamily firms. This finding warrants further research on the audit-related specificities of family
firms, not least because of their global economic importance. We thus reiterate the research
avenues that Trotman and Trotman (Citation2010) suggested, many of which remain unexplored. In
addition to these important avenues for future research, we identify several research opportunities
related to auditing in family firms, as detailed next.

Modeling and methods in family firm auditing research

The field map suggests a number of gaps and avenues for future research that can inform future
modeling in the field. For example, mediation models appear to dominate the first cluster, while the
application of moderation models remains more limited. To advance theoretical knowledge of the
relationships between family ownership and audit-related outcomes, future research could explore
the conditions under which such relationships are more or less pronounced. Here, the first cluster
could potentially borrow from the second cluster (see

), which examines context-specific dimensions of family ownership such as concentration,

representation on the board and management team, and multiple family owners. It also appears
that in the second cluster, audit committee effectiveness in relation to different outcomes remains a
fruitful area of research, given the mixed results. In this specific area, governance-related
contingencies, such as board composition or function and top management team characteristics,
could be used in conjunction with family ownership characteristics. Similarly, in further exploring
and modeling the auditor choice domain, future research could consider complicating the story by
exploring intermediate auditor choice outcomes, such as audit process implementation, to
understand the intervening role of the auditor’s work on the assignment.

Figure 2. The field map.

Figure 2. The field map.

The findings of this literature review indicate that the vast majority of current research in the field
uses quantitative methodologies and archival data. This homogeneity in research methods may
hinder the possibility of expanding current knowledge in the field of family business auditing. In the
quantitative domain, we identified only a few articles that use surveys as a data collection method.
Nevertheless, surveys can be a powerful method to capture the perceptions of auditors in family
firms (Speklé & Widener, Citation2018), and could help explain how and why auditors perceive
family firms differently from nonfamily firms. Moreover, our search process yielded few studies on
auditing in family firms using qualitative research approaches such as the case study method.
Although the case study method has been instrumental in unpacking and then understanding the
processes at the individual, organizational, and institutional levels (Scapens, Citation2004), they
remain black boxes in the current literature on auditing in family firms. Similarly, experimental
designs and methods (Simnett & Trotman, Citation2018) could further our understanding of the
audit process in a controlled environment. Such methods have been successfully used in the field of
auditing and in multicultural environments (Kachelmeier & Shehata, Citation1997), as well as in
reducing tax evasion (Tan & Yim, Citation2014), which may point to their applicability in family firms.
Finally, we encourage researchers to use mixed methods in their future research on auditing and
family firms, which would allow bridging the two main research paradigms and generate new
insights into the phenomena under study (Modell, Citation2005).

Theorizing on auditing in family firms

Given the homogeneity of methods and data used in research on auditing and family firms, the
theories adopted are similar and few in number. The findings from this literature review indicate a
predominance of agency, alignment, and socioemotional wealth theories. While some articles
incorporate concepts from other theoretical lenses, such as institutional or resource dependence
theory, their main contribution is based on the three aforementioned theories. Therefore, to bring
further insights to the field, we invite scholars to incorporate alternative theories in future studies of
family firms (Chrisman & Patel, Citation2012; Chrisman et al., Citation2004). For example, legitimacy
theory in the context of auditing suggests that organizations tend to use the audit process to
legitimize their behavior to their stakeholders (Power, Citation2003). This assumption may be
particularly relevant in the family firm context and in relation to auditing, as older and larger family
firms are known to seek legitimacy after generational succession, when successors need to
demonstrate that they have a more professional and generally different management style than
their predecessors (for example, Leotta et al., Citation2017). Thus, family firms may show marked
differences in terms of seeking legitimacy with respect to auditing compared to nonfamily firms
(Sageder et al., Citation2016), as family firms may rely on auditors as an important legitimation
mechanism (Collin et al., Citation2017).

Another theoretical avenue for the field is role theory, which states that each organizational
member has a socially constructed role with established rights, duties, expectations, and behaviors
(Biddle, Citation1986). The construction and development of the auditor role is an important topic in
the current literature (Broberg et al., Citation2018). In the context of family firms, it is even more
important to understand how the auditor role is defined, particularly as the nature of the
relationship between auditors and family firms has been shown to differ from other types of firms,
and given the limited understanding of the boundaries of the auditor role in these firms (Collin et al.,
Citation2017).

Institutional theory, to which some of the articles in our review allude, could bring another
theoretical perspective to auditing and family business studies. This theory explains how
organizational behavior is underpinned by schemes, rules, norms, and routines. In the auditing
literature, institutional theory has been successfully used to explain how auditors develop routines
that eventually shape their way of working (Carpenter & Dirsmith, Citation1993). Applying an
institutional theory perspective to auditing in family firms could potentially contribute to
understanding how the family may or may not influence the audit process and routines in the firm.

As we have pointed out, agency theory has dominated the field, but there may be additional
opportunities that the theory offers, especially in combination with stewardship theory (cf. Madison
et al., Citation2016), when studying auditing in family firms. For example, the resourceful,
evaluative, maximizing model (REMM) (Jensen, Citation1994) allows considering the simultaneous
existence and potential alignment between self- and other-interested behaviors (Chrisman,
Citation2019). Given the heterogeneous nature of family firms that auditors deal with, the REMM
perspective could potentially allow for a reconceptualization of the role that auditors play in firms
(Jaskiewicz & Dyer, Citation2017). Moreover, combining the agency perspective with the resource-
based view (RBV) (Barney, Citation1991) could be another way to develop the field. According to
Siebels and Zu Knyphausen‐Aufseß (Citation2012), RBV could complement both the agency and
stewardship perspectives by considering the heterogeneity of family firms in terms of their
resources. The addition of RBV could be especially useful in exploring the relatively underdeveloped
topics of business risk assessment and nonaudit services provided by auditors in family firms. Of
particular interest here could be issues related to role shifts between auditors as external
independent agents and auditors as internal agents who assess and advise family firms on their
resource use and allocation (Suzuki & Takada, Citation2023).

Outcomes of audit choices in family firms

Looking at the overall body of research on family business auditing, studies highlight the
particularities of auditing in family firms, but these are largely descriptive. For example, most of the
articles that focus on audit quality found that family firms opt for lower-quality audits and present
the unique characteristics and dynamics that, at least in theory, enable family-controlled firms to
make this choice. However, there is a noticeable lack of research that focuses on the possible effects
and outcomes of audit choices such as hiring lower-quality auditors. Interesting research questions
in this regard include the possible disadvantages of lower-quality audits in family firms, even if
theoretically mitigated by the characteristics of family firms (for example, less severe Type I agency
problems) (Tuggle et al., Citation2010). Researchers could examine the performance of family-
controlled businesses that choose lower-quality audits to identify the possible drawbacks of their
auditor choice. There may be less visible effects on firm performance, but there are also cases of
family firms going bankrupt because they opted for lower-quality audits. In general, we call for more
research on the consequences of family firms’ audit decisions. Such research would also be of
interest to auditors and family business practitioners, who could then better anticipate the likely
consequences of the auditing choices of family firms (Hay & Davis, Citation2004).

Auditing in family firms in major emerging economies

Although the number of reviewed studies on developed and developing countries is fairly balanced,
the four major emerging economies, namely, Brazil, China, India, and Russia, are not examined in
any of the sample articles. This is unfortunate given the relevance (Martinez & Ramalho,
Citation2014), dominance (Manikutty, Citation2000), and importance for economic growth (Cao,
Cumming, et al., Citation2015) of family businesses in these countries. In addition, there may be
some important differences between family firms in these countries compared to other regions.
Indeed, this is supported by the findings of Ding et al. (Citation2011), who use a sample of Chinese
firms and compare the accounting properties of family and nonfamily firms, finding that family
ownership in Chinese firms is associated with lower earnings quality (Ding et al., Citation2011). They
also found that the accounting earnings of Chinese family firms are not as informative as those of
nonfamily firms (Ding et al., Citation2011). Given that these findings on accounting issues differ
significantly from similar studies in other regions (Cascino et al., Citation2010; Wang, Citation2006),
there may also be differences in the auditing practices of family firms in these countries. Therefore,
given the lack of research (at least in English) on family firm auditing in the four major emerging
economies, it may be interesting to examine these in the context of family firm auditing. In addition,
and given the differences in auditing practices across contexts, future research could consider
conducting comparative studies of these practices, where family firms with multiple offices in
different cultural contexts could be an interesting empirical object.

Family firm heterogeneity

Trotman and Trotman (Citation2010) call for more research focused on smaller family firms, rather
than only large businesses. While size is certainly an important distinguishing characteristic in the
large group of family firms, it is not the only way in which family firms differ from each other (Fang et
al., Citation2016). However, it is important to recognize that audit assignments and the role of
auditors in family firms may depend on the size of the business, which is reflected in the level of
audit fees, the complexity of audit engagements, and audit quality (cf. Alareeni, Citation2019;
Aschauer et al., Citation2015). In the 71 articles included in this review, it is rather evident that most
of the comparative research on auditing in family firms focuses on the differences between family
and nonfamily firms. Given the differences within the group of family firms, which is by no means
homogeneous, it is important to conduct analyses of the heterogeneity of family firms to gain more
precise knowledge about their audit choices, going beyond the treatment of family firms as a
homogeneous group of firms.

Only a small number of articles have analyzed audit-related differences between family firms (Chau
& Leung, Citation2006; Niskanen et al., Citation2010; Srinidhi et al., Citation2014), finding some
important differences. In addition to firm size, business orientation (for example, manufacturing vs.
service, domestic market vs. export orientation), the level of family ownership concentration and
governance are characteristics in which family firms differ from one another and have significant
effects on audit choices. In addition to these factors driving family firm heterogeneity, recent
advances in family business research suggest that the mix of economic and noneconomic goals,
available resources, and different aspects of socioemotional wealth preservation are likely to be
other factors leading to differences among family firms (Chua et al., Citation2012; Wright et al.,
Citation2014). Another important characteristic is the generation that owns the family business. As
supported by the findings of Corten et al. (Citation2015), there may be differences in audit practices
between first-generation family firms and those owned by subsequent generations. In addition to
the impact on audit demand, researchers could focus on the implications of family generation on
other audit characteristics such as audit quality and audit committee effectiveness.
Internationalization is another relevant aspect regarding the heterogeneity of family firms (Arregle
et al., Citation2021; Kontinen & Ojala, Citation2010; Pukall & Calabrò, Citation2014). First,
internationalization and greater exposure to foreign markets increase the complexity of strategy
design and implementation in family firms (Gil & Reyes, Citation2020; Robles, Citation2020). Second,
as more international family firms are audited, assessing materiality and audit risk becomes more
complex due to the increase in the number of factors affecting the business such as macroeconomic
characteristics and unknown regulations in new foreign markets. To illustrate the complexity and its
potential outcome, Temouri et al. (Citation2022) studied what they called “the dark side” of family
firms during internationalization. They found that family firms, influenced by socioemotional wealth
considerations and specific heterogeneity factors, have a lower propensity to engage in corporate
social irresponsibility through the use of tax havens compared to nonfamily firms in the period
2010–2018. From the auditor’s perspective, this increased risk and difficulty in assessing materiality
makes internationalization and foreign market exposure a relevant aspect to study in future
research.

The role of information technology

Interestingly, none of the studies reviewed focus on the role and use of information technology (IT)
(for example, computer-assisted auditing tools and techniques [CAATTs], artificial intelligence, or big
data) in auditing and the family firm context. Numerous recent reviews on IT and AI use in auditing
suggest that these technologies allow auditors to gain efficiency and independence, enabling them
to dedicate more time to interacting with clients and suppliers, and gaining a more holistic picture of
the organizations they audit (Han et al., Citation2023; Lamboglia et al., Citation2021; Lombardi et al.,
Citation2022; Thottoli et al., Citation2022). At the same time, there is growing evidence that the use
of IT and AI differs between family and nonfamily firms. Indeed, family firms have been portrayed in
the recent literature as often being quite resistant to quickly adapt to changing technological trends
and in transforming toward digital business models (for example, de Groote et al., Citation2023).
Given the opposing trends that auditing firms more and more rely on modern IT and AI, and some
family firms remain rather reluctant, the extent to which IT and AI could influence the role of
auditors in family firms could therefore be a worthy area of research (Chan & Kogan, Citation2016;
Earley, Citation2015; Wang & Cuthbertson, Citation2015). Moreover, recent audit research has
explored how data analytics and big data in general are transforming the profession and the extent
to which reliance on such data is reflected in auditor efficiency and effectiveness (for example, Cao,
Chychyla et al, Citation2015; Dagilienė & Klovienė, Citation2019; Eilifsen et al., Citation2020). Given
the ongoing digital transformation of family firms, exploring the use of big data by auditors in such
firms may be a pertinent area for further investigation (cf. De Santis & D’Onza, Citation2021).

Another relevant and underdeveloped topic is the role of ESG and other audit requirements in family
firms. Previous research has examined this relationship, but not specifically in the context of family
firms. For example, Asante-Appiah and Lambert (Citation2022) examine the role of external auditors
in managing ESG reputational risk. In particular, the authors found that external auditors can provide
“their audit clients with pre-assurance services aimed at generating new or improved ESG-related
disclosures” (Asante-Appiah & Lambert, Citation2022, p. 41). Pozzoli et al. (Citation2022) found that
while audit committee independence and expertise have a significant positive effect on ESG
performance, audit committee tenure has a significant negative relationship with ESG performance.
The two perspectives adopted (the role of the auditor and the effectiveness of the audit committee)
show the importance of this emerging research direction in the field of auditing and family firms
(Tyler et al., Citation2023).

Other underdeveloped research topics

While topics such as audit quality, audit fees, audit effort, and audit committees have received
considerable attention in the studies considered in this review, there are some issues that only a
small number of articles address and, thus, represent potential areas on which research on family
business auditing could focus in the future.

One such topic concerns auditor resignation. Interesting research questions in this context that still
need to be investigated in depth are the reasons for auditor resignation in family firms, the
likelihood of auditor resignation, and the type of auditor hired after the incumbent resigns. All these
issues could be examined either by looking at different types of family firms or by comparing family
and nonfamily firms.

Another research topic that appears to be underdeveloped is the nonaudit services provided by
auditors. Only 3 of the 71 articles included in our review focus on this topic. Potential research
avenues in this area include the types of nonaudit services provided by auditors, the amount of
nonaudit services provided, and potential differences between family and nonfamily firms in this
regard. In addition, researchers could focus on the impact on perceived auditor independence when
the same audit firm provides both audit and nonaudit services. While Dobler (Citation2014)
examines this issue, additional validation and results from other regions are needed for comparison.
The same holds for the other research topics mentioned above, as the limited research on these
topics could benefit from replication studies with different samples to corroborate or qualify their
findings.

Such research efforts would likely result not only in a more thorough understanding of auditor
choices in family firms, but also in valuable advice for audit practitioners seeking to increase their
engagement with family firms. In particular, knowing the reasons for auditor resignations in family
firms could assist in the evaluation of potential client firms. In addition, it would be useful to know
about the types of nonaudit services requested by family firms to optimize the service portfolios of
audit firms and tailor key aspects of their services.

Conclusions

By synthesizing and linking the relevant findings, this review provides a comprehensive overview of
research on auditing in family firms. The analysis of the articles identified as relevant to the topic
under review lead to the conclusion that auditing in family firms differs from nonfamily firms in
many important respects. Although the sample includes 71 articles focusing on various topics related
to auditing in family firms, there remain many unanswered questions and underdeveloped research
streams on auditing in family firms. Accordingly, we have provided a number of concrete suggestions
and ideas for future research on auditing in family firms.
In an effort to summarize the findings of this literature review,

presents the themes discussed and links them to the future research directions proposed in this
article. In addition, the table includes a list of useful references from the field map, as well as from
other fields unrelated to family firms but relevant to potential future research avenues.

Table 3. Future research directions.

Download CSVDisplay Table

A key contribution of this systematic literature review is providing an overview of existing research
on family firm auditing, synthesizing and linking the findings beyond Trotman and Trotman
(Citation2010) by analyzing significantly more recent research and not focusing on research on audit
judgment and decision making. Although the review focuses only on articles published in academic
journals, the studies reviewed are not limited to publications in accounting/auditing or family
business journals. Rather, our review includes all relevant articles, thus linking previously unrelated
studies and findings from different fields such as accounting and family business research. In
providing a comprehensive overview of research on family firm auditing and suggesting future
research directions as an extension of Trotman and Trotman (Citation2010), this review lays the
groundwork for shaping future research on auditing in family firms. In addition, this review may
prove helpful to audit practitioners who frequently come into contact with family businesses by
providing them with a synthesized overview of circumstances related to family firms that need to be
considered during the audit process.

However, we also acknowledge several limitations of our review. First, a risk inherent in all
systematic literature reviews is that not all sources relevant to the research topic under review may
have been identified. Although the keywords we used in the search were fairly comprehensive, a
broader or alternative set of keywords may result in a more extensive or different sample.
Furthermore, the scope of the search process for potentially relevant articles was limited to the use
of the databases mentioned. Therefore, a search in other databases or with a different set of
keywords may reveal additional relevant articles. Nevertheless, the main databases selected for this
review cover most of the relevant literature. In addition, after the database search, we checked the
references of the relevant articles to uncover even more articles and we are therefore confident that
we have covered the relevant literature extensively. However, our sample includes only articles
published in scientific journals. We imposed this deliberate limitation because access to journal
articles through a database keyword search is fairly accurate, and scientific journals are the usual
means of communicating current scientific research (Parker et al., Citation1998). Therefore, other
sources, even if potentially relevant for research on family business auditing such as unpublished
working articles or books, were not included to maintain a reasonable quality threshold. However,
these quality criteria may also be a limitation, as they led to the exclusion of some articles from the
sample, but are still a desirable benchmark to ensure the reliability of the included studies. Finally,
another limitation of this review is the language of the articles included in the sample. Specifically, all
articles published in languages other than English were excluded because they are not accessible to
a worldwide research community, even though they may have important implications for the
research topic under review.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 While the abstracts of the articles claimed to study family firms, examination of the articles
suggested that the firms in the sample did not meet our family firm or audit definitions.

2 Similar to the first inclusion wave, a more thorough examination of the articles revealed a
discrepancy between our definitions of the concepts we adopted and those used in the excluded
articles. For example, in some cases, the articles dealt with medical audits performed in family-
owned medical facilities, others claimed to focus on auditing as a corporate governance mechanism
but there was no mention or discussion of auditing elsewhere in the article, and others claimed to
deal with auditing in family firms but a more thorough examination revealed that the firms under
study were sole proprietorships where the owner discussed the possibility of transferring ownership
to the next generation; that is, the firm was not a family firm according to our definition.
The use of big data and analytics in external auditing: Does audit firm size matter? Evidence from a
developing country

Ahmed S. Abdelwahed

ORCID Icon, Ahmad A. Abu-Musa

, Hosam Moubarak

& Hebatallah A. Badawy

Received 03 Jun 2023, Accepted 01 Nov 2023, Published online: 09 Jan 2024

Cite this article

https://doi.org/10.1080/10291954.2023.2279751

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Abstract

Purpose: The aims of this research are to investigate the reasons for adopting big data (BD) and big
data analytics (BDA), determine their extent of usage, and identify potential obstacles to their
adoption in a developing country, Egypt.

Motivation: Prior literature criticized the audit profession for the slow adoption of BDA, and little is
known about the adoption of BD and BDA in developing countries. The reluctance to incorporate BD
and BDA into auditing can be attributed to their potential obstacles. In addition, prior studies
focused on the Big-4 audit firms in developed countries with little known about adopting BD and
BDA in local audit firms and developing countries.

Design/methodology/approach:To achieve the objectives of this study, 16 audit practitioners with

various positions, specializations, and experience levels were interviewed. The 16 participants
belong to audit firms of different sizes: international audit firms, local audit firms, and a
governmental auditing agency. Thematic analysis was employed through using the MAXQDA
software package to analyze the data.

Main findings: The findings revealed that the reasons for using BD and BDA go beyond improving
audit efficiency and effectiveness and satisfying clients. All audit firms collect and analyze large
volumes of traditional accounting data. However, the Big-4 firms manage and analyze non-financial
data and new data items as complementary audit evidence. Also, it was found that the type of audit
firm affects the use of these technologies, with international firms being superior to other firms. The
Accountability State Authority lags behind other audit firms in adopting BD and BDA. Furthermore, it
was found that some obstacles to adopting BD and BDA arise due to the specific characteristics of
the Egyptian context, while others are universal.

Practical implications/Managerial impact: Determining the reasons for and obstacles to adopting BD
BDA is useful for audit firms and regulators to remove these obstacles and encourage using such
new audit technologies. The findings might help developers of BDA software packages to enhance
their packages to meet auditor requirements. Moreover, academic scholars can benefit from the
findings of this study by gaining an understanding of the main differences between developed and
developing countries in relation to adopting BD and BDA.

Novelty/Contribution: This study was conducted in Egypt, a developing country with a an

underdeveloped audit environment. Therefore, this study enriches the relevant literature by
providing information about BD and BDA in an unexplored developing environment. Besides, it
delves deeper into the reasons and obstacles to using BD and BDA in external financial auditing in a
developing country. Also, it adds to the literature by identifying the most common BDA software
packages and techniques that auditors use in a developing country. Moreover, it considers audit
practitioners’ viewpoints on audit firms of various sizes.

Keywords:

adoption of BDAaudit firm sizereasons for BDA adoptionexternal financial auditingobstacles to

BDA adoptionqualitative research

Previous article

1. Introduction

Audit firms in developed countries have invested substantially in adopting big data analytics (BDA) to
expand their ability to analyse clients’ big data (BD) (Salijeni et al., Citation2019; Alrashidi et al.,
Citation2022). According to Alles (Citation2015), BD refers to more non-financial, unstructured, and
external data that are far beyond the current technical capability of the audit profession. The
American Institute of Certified Public Accountants (AICPA) (Citation2014, p. 5) defines the BDA as
“Discovering and analysing patterns, deviations, and inconsistencies and identifying anomalies, and
extracting other useful information from data related to the subject of an audit through analysis,
modelling, and visualization for planning or performing the audit.” According to Appelbaum et al.
(Citation2017) and Joshi and Marthandan (Citation2020), BDA involves complicated techniques, such
as mathematical, statistical, machine learning, and other complex computer science techniques, to
reveal and interpret patterns, trends, and relationships among different data items. Nonetheless,
Eilifsen et al. (Citation2020) and Liew et al. (Citation2022) indicate that auditors could perform data
analytics using Microsoft Excel®. Thus, this study uses the term BDA to refer to any data analytics
tool, ranging from the simplest (e.g., Excel®) to the most advanced (e.g., Alteryx and Python).

This study explores the reasons for using BD and BDA in external financial auditing (auditing,
hereafter). Many theoretically based prior studies argued that BDA is incorporated into auditing to
enhance the efficiency and effectiveness of the audit process (Earley, Citation2015; Dagilienė &
Klovienė, Citation2019), but recent empirical studies have provided contradictory findings (Chang &
Luo, Citation2021; Holt & Loraas, Citation2021; Koreff et al., Citation2021). In addition, Werner and
Gehrke (Citation2019) argue that the efficiency and effectiveness of audit procedures decrease with
an increase in automation, transaction volume, and system heterogeneity. Therefore, there is a need
to understand the reasons that drive audit firms to use BD and BDA in auditing.

Hezam et al. (Citation2023) stressed that prior studies focused on the Big-4 audit firms with little
known about adopting BD and BDA in local audit firms. Hence, this study examines the use of BD,
BDA software packages, and BDA techniques by different audit firms in Egypt. Exploring the adoption
of BD and BDA in a developing country such as Egypt is motivated by the claim of Abdelwahed et al.
(Citation2023) that prior studies focused more on studying BD and BDA in developed countries, with
insufficient attention directed to developing countries. In addition, Tarek et al. (Citation2017)
revealed that audit firm size does not significantly influence the use of new audit technologies in the
Egyptian context. Lukka and Kasanen (Citation1996, p. 75) also argued that “research in accounting
can be viewed as a rather local discipline by nature.” Thus, this study attempts to compare the
adoption of BD and BDA by big audit firms with that of local audit firms in Egypt, a developing
country.

Prior literature criticized the slow integration of BDA into audit practices (Lowe et al., Citation2018;
Buchheit et al., Citation2020; Abdelwahed et al., Citation2023; Hezam et al., Citation2023). Several
prior studies found that adopting BDA in auditing is still in its early stages and is considered a ‘black
box’ (Alles, Citation2015; Eilifsen et al., Citation2020). Perkhofer et al. (Citation2019) consistently
argue that new audit innovations are still not used at the optimum. The reluctance to incorporate BD
and BDA into auditing can be attributed to their potential obstacles. Ahmi and Kent (Citation2013)
and Vasarhelyi and Romero (Citation2014) stated that obstacles arising from adopting new audit
technologies usually delay their large-scale adoption. Understanding and overcoming such
challenges encourages the widespread diffusion of these technologies (Alles & Gray, Citation2016).
Therefore, this study explores the obstacles to adopting BD and BDA in the Egyptian audit market.
This study contributes to the scarce but increasing body of literature in several ways. First, this study
delves deeper into the reasons for and obstacles to using BD and BDA in external financial auditing in
a developing country. Second, this study adds to the literature by identifying the most common BDA
software packages and techniques that auditors use in a developing country. Third, the findings of
this study help in understanding the type of data auditors use to conduct their engagements. Fourth,
this study was conducted in Egypt, a developing country with an underdeveloped audit
environment. Therefore, this study enriches the relevant literature by providing information about
BD and BDA in an unexplored developing environment. Fifth, this study used a qualitative empirical
methodology (semi-structured interviews) to provide evidence-based insights. Sixth, this study
considers audit practitioners’ viewpoints on audit firms of various sizes: local firms, a governmental
audit agency, and international firms.

The findings of this study will benefit various stakeholders. The study provides evidence-based
findings regarding adopting BD and BDA in a developing country, Egypt. Such findings will benefit
audit practitioners and standard-setters who seek insights into the status quo of using BD and BDAs
in auditing. In addition, determining the reasons for and obstacles to adopting BDA is useful for audit
firms and regulators to remove these obstacles and encourage the use of such new audit
technologies. Additionally, the findings are valuable to developers of BDA software packages, who
might use auditor feedback to enhance their software packages to meet auditor requirements.
Moreover, academic scholars can benefit from the findings of this study by gaining insights into
adopting BD and BDA in an unexplored developing environment and gaining knowledge of the
potential gaps that need further research.

The remainder of this paper is organized as follows. The next section encompasses related literature
and research questions. The third section illustrates the methodology, data production, and analysis
procedures. Section 4 presents the results of the study. The final section concludes the study and
presents research limitations and future research opportunities.

2. Literature review and research questions

This section presents and synthesizes prior literature on BD and BDA in auditing. It also analyses
prior studies that examine the audit profession and the use of IT in the Egyptian context. This section
aims to identify research gaps and formulate research questions.

2.1. BD and BDA in auditing

Several studies have been conducted over the past 13 years to examine the integration of BD and
BDA in auditing. Prior literature criticized the audit profession for reluctance and slow adoption of
technology in general (Ahmi & Kent, Citation2013; Vasarhelyi & Romero, Citation2014) and BD and
BDA specifically (Lowe et al., Citation2018; Eilifsen et al., Citation2020; Buchheit et al., Citation2020;
Abdelwahed et al., Citation2023; Hezam et al., Citation2023). The literature on using BDA in auditing
can be grouped into three main strands (Abdelwahed et al., Citation2023). The first group focuses on
the impact of BD and BDA on the audit process. For instance, Wadesango et al. (Citation2021)
investigated the impact of BD and BDA on the audit evidence's nature, reliability, and quality. Chang
and Luo (Citation2021) and Koreff et al. (Citation2021) examined how BD and BDA affect audit
judgements. In addition, Hoelscher and Shonhiwa (Citation2021) examined how using BDA enhances
the fraud detection function when conducting financial audits. The second group addresses the
adoption rates of BDA among audit firms and the reasons for and obstacles to adopting BDA. Finally,
the third strand discusses the potential impact of BDA on audit education. This group attempted to
suggest updating and incorporating BDA into auditing curricula (e.g., Sledgianowski et al.,
Citation2017; Blix et al., Citation2021).

This study focuses on the second group, which examines the reasons for, barriers to, and adoption
rates of BD and BDA in auditing. Previous studies showed that using BD and BDA in auditing is still in
its early stages (Lowe et al., Citation2018; Buchheit et al., Citation2020; Hezam et al., Citation2023)
and revolves around simple tools, such as spreadsheet tools, with infrequent use of other advanced
analytics tools (Schmidt et al., Citation2020; Eilifsen et al., Citation2020; Cristea, Citation2021).
However, recent studies have shown a promising growth in adopting BD and advanced BDA in
financial audits in the UK, Belgium, and Italy (Salijeni et al., Citation2019), the USA (Walker et al.,
Citation2019), New Zealand (Liew et al., Citation2022), and the Middle East (Alrashidi et al.,
Citation2022).

Many prior studies examined BD and BDA in large audit firms (e.g., Walker et al., Citation2019;
Eilifsen et al., Citation2020; Austin et al., Citation2021; Liew et al., Citation2022). Other studies
attempted to compare the adoption of BD and BDA by audit firms of different sizes. De Santis and
D’Onza (Citation2021) argued that the Big-4 firms are leading BDA-based audits. Lowe et al.
(Citation2018) and Buchheit et al. (Citation2020) found that the adoption rates of BDA in local audit
firms are lower than those in other large audit firms. Buchheit et al. (Citation2020) suggested that
the low usage rates of BDA among local audit firms are attributed to the unsuitability of such
technology for their clients. They showed that small clients audited by local firms did not appreciate
using BDA in their audits. Additionally, Oyewo et al. (Citation2021) compared the adoption of BDA in
internationally affiliated and local audit firms. They found that internationally affiliated audit firms
have higher adoption rates of BDA than local firms.

Regarding the reasons behind using BDA in auditing, some studies found that using BDA in auditing is
driven by demand-related factors. For instance, Dagilienė and Klovienė (Citation2019) revealed that
large clients with analytics capabilities were the main drivers of using BDA in auditing. De Santis and
D'Onza (2020) consistently indicated that clients’ digital immaturity is a significant obstacle to
legitimizing BDA within the Italian audit market. Also, Handoko et al. (Citation2020) claimed that
audit firms might adopt BDA to satisfy their clients by providing improved services and new insights.
Additionally, Alles and Gray (Citation2016) reported that adopting BDA requires direct access to
clients’ data, which is difficult to obtain. Therefore, clients can be viewed as two sides of the same
coin: reasons and obstacles to adopting BDA.

Other studies have found that supply-related factors drive the use of BDA in auditing. Prior
conceptual studies argued that auditors adopt BDA to enhance the audit process's efficiency,
effectiveness, and quality (Earley, Citation2015; Alles & Gray, Citation2016; Salijeni et al.,
Citation2019; Dagilienė & Klovienė, Citation2019). However, recent empirical studies have provided
opposing evidence. For instance, Chang and Luo (Citation2021) and Holt and Loraas (Citation2021)
found that using visualizations and unstructured data as audit evidence adversely affects the
auditor’s judgement and decision-making ability, negatively affecting the audit process and quality.
Koreff et al. (Citation2021) indicated that using algorithms in audits negatively affects an auditor’s
behaviour (abuse of power) and judgement (the tendency to rely on the results of algorithms
without judging them). Such results highlight the potential negative impact of BD and BDA on
auditor objectivity, judgement, and scepticism, making the quality of such audit processes
questionable.

Oyewo et al. (Citation2021) found that organisational factors (audit firm size, affiliation with
international audit firms, and scope of operations) significantly affect the BDA adoption rate.
Similarly, Krieger et al. (Citation2021) indicated that adopting BDA relies on audit firms (establishing
technological infrastructure, attracting competent auditors, and providing proper training). Besides,
Al-Htaybat and Von Alberti-Alhtaybat (Citation2017) argued that audit firms’ lack of competent
professionals inhibits BDA adoption. Jacky and Sulaiman (Citation2022a) found that supply factors
(reliance on IT specialists, auditors’ skills and knowledge, storing and retaining data, and quality
controls) affect BDA usage more than demand factors (clients) in the Malaysian audit context.

Other studies indicated contextual factors are not trivial when adopting BD and BDA. Austin et al.
(Citation2021) and Jacky and Sulaiman (Citation2022b) indicated that adopting BD and BDA depends
on updating auditing standards to provide sufficient guidance regarding how to use BD and apply
BDA in different phases of audit engagements. Further, Handoko et al. (Citation2020) claimed that
audit firms might use BDA to enhance their reputation as early adopters of innovation, thereby
strengthening their position in the audit market ahead of competitors.

Based on the issues outlined in the above discussion, prior studies have focused on drivers,
obstacles, and BD and BDA adoption rates in developed countries (e.g., Salijeni et al., Citation2019;
Walker et al., Citation2019; Liew et al., Citation2022). It was also found that many prior studies drew
their conclusions based on conceptual methodologies (e.g., Alles & Gray, Citation2016; Dagilienė &
Klovienė, Citation2019; Wadesango et al., Citation2021). Moreover, most prior empirical studies
concentrated on studying the Big-4 audit firms, with little attention paid to smaller ones (e.g., Eilifsen
et al., Citation2020; Austin et al., Citation2021; Liew et al., Citation2022). Additionally, prior studies
have shown that using BDA revolves around simple tools, such as spreadsheet tools (Schmidt et al.,
Citation2020; Cristea, Citation2021). Besides, there is debate among prior studies on the reasons for
using BD and BDA in financial audits. Prior conceptual studies argued that auditors should adopt BDA
to enhance their audit quality, but recent empirical studies provided opposing evidence. Also, the
results related to obstacles to adopting BDA are inconclusive. Thus, further research is needed to
update the prior literature by obtaining a clearer picture of BD and BDA adoption by audit firms of
different sizes in a developing environment.

2.2. Auditing and technology in Egypt

The Egyptian auditing profession is one of the earliest auditing professions in the Arab Middle East
region (Elbayoumi et al., Citation2019). The Egyptian Royal Society for Accountants and Auditors was
established under Law No. 32 of 1946. During the 1960s, the Accountability State Authority (ASA)
was established as the only audit organisation in the country responsible for auditing all public and
governmental entities (Dahawy et al., Citation2011). The Companies Law was enacted in 1981,
making it mandatory for private companies to be subject to audits. This development paved the way
for “Big Eight” firms to operate in Egypt, which facilitated the implementation of International
Accounting Standards (IAS) and International Standards on Auditing (ISA) (Wahdan et al.,
Citation2006). In 1992, the issuance and implementation of the Capital Market Law necessitated that
listed companies adhere to the IAS while their auditors were required to comply with the ISA
(Elbayoumi et al., Citation2019).

The Egyptian auditing market needs to overcome several challenges. Wahdan et al. (Citation2006)
revealed that audit engagements don’t conform with the governing laws, auditors don’t have
sufficient expertise and experience, there is a high level of market concentration, current auditors
receive insufficient training, and prospective auditors receive weak accounting and auditing
education. Mohamed and Habib (Citation2013) found that auditors working in Egypt lack
independence. These challenges threaten the quality of audit engagements. El-Dyasty and Elamer
(Citation2021) found that the Big-4 audit firms and the ASA do not provide high-quality audits. They
also revealed a negative association between local firms and audit quality. However, they found that
international non-Big-4 audit firms provide high-quality audits. According to Eldaly et al.
(Citation2022), the Egyptian audit market witnessed several improvements owing to the
introduction of foreign direct investments (FDI). The Egyptian audit market witnessed an
amelioration in local accounting and auditing standards, more regulatory inspections of audit firms,
and the imposition of regulatory sanctions. However, Eldaly et al. (Citation2022) indicated that the
audit market still required improvements.

In developing countries with such challenges, using modern audit technologies is not expected to be
a priority for audit firms (Siew et al., Citation2020). To explore the use of audit technology in the
Egyptian auditing context, Kim et al. (Citation2016) examined the use of generalized audit software
(GAS). They articulated that auditors depend on the basic features of GAS (e.g., database queries,
ratio analysis, and audit sampling) with infrequent use of advanced features (e.g., regression/ANOVA
and data mining classification). This is attributed to the auditors’ tendency to use simple, easy, and
useful features. Additionally, Tarek et al. (Citation2017) revealed that the audit firm size does not
significantly influence the use of new technologies or auditors’ IT expertise in the Egyptian audit
market. However, they indicated that firm size significantly affects the extent of IT specialist use; big
audit firms tend to hire IT experts more often than smaller ones.

Based on the above discussion, the authors can conclude that the Egyptian audit market is complex
with special features. First, audit firms in Egypt are classified into three main categories: (1)
internationally affiliated audit firms, (2) Accountability State Authority (ASA), and (3) local audit firms
(El-Dyasty & Elamer, Citation2021). Second, Egyptian audit firms are affiliated with foreign firms to
distinguish themselves from competitors and appear as prestigious audit firms in front of clients
(Eldaly & Abdel-Kader, Citation2017). Third, Egypt’s audit market represents an underdeveloped
audit and legal environment (Wahdan et al., Citation2006; El-Gammal & Gharzeddine, Citation2020;
El-Dyasty & Elamer, Citation2021). Fourth, audit quality is low within audit firms in Egypt and is not
associated with firm size (Mohamed & Habib, Citation2013; El-Dyasty & Elamer, Citation2021). Fifth,
the size of the audit firm does not significantly influence the use of new audit technologies in the
Egyptian audit market (Tarek et al., Citation2017). Sixth, financial auditors have insufficient IT
expertise and use simple and basic features of audit software packages (Kim et al., Citation2016).
Hence, such characteristics represent a motive for studying the adoption of BD and BDA in the
Egyptian audit market.

Given the low adoption rates of BDA by audit firms, the concentration of literature on examining
BDA adoption in big audit firms, the limited research on the use of new audit technologies in
developing countries, and the unique features of the Egyptian audit market, this study aims to
explore the adoption rates of BD and BDA in different audit firms working in Egypt. Therefore, this
study seeks to answer the following research questions: (1) What are the reasons for adopting BD
and BDA by different audit firms working in Egypt? (2) To what extent do audit firms working in
Egypt adopt BD and BDA? (3) What potential obstacles hinder the wide adoption of BD and BDA
among audit firms in Egypt?

3. Methodology

Gao et al. (Citation2022) stated that researchers often lack data to understand how audit firms use
data technology. According to Ledgerwood et al. (Citation2017, p. 45), using qualitative research
methods is suitable for exploratory research in which researchers seek to collect knowledge about a
new scientific area that is not fully understood. Interviews are an important means of qualitative
data collection (Saunders et al., Citation2019). Following the methodology and sample sizes used by
Krieger et al. (Citation2021), De Santis and D’Onza (Citation2021), and Lugli and Bertacchini
(Citation2023), this study conducted 16 semi-structured interviews to collect data from various audit
practitioners with different positions, specializations, experience, academic backgrounds, and
professional certificates, as shown in

3.1. Sample selection

The 16 participants were interviewed between March and August 2022,Footnote1 with follow-up
interviews conducted in November and December 2022. A purposive sampling approach was initially
followed to select the appropriate participants. Saunders et al. (Citation2019) argued that sampling
techniques based on certain criteria provide more value-added when participants have experience in
the examined phenomenon. Then, the snowballing approach was adopted, as the interviewer
developed a network of participants with sufficient knowledge about using BD and BDA in auditing.
The authors attempted to discuss the examined topics with as many participants as possible and
contacted more than 40. However, most contacted practitioners refused to participate due to
unfamiliarity with BD and BDA in audit practices, a disinclination to participate in any empirical
research or not being unavailable at any convenient time.
The authors agreed on the following inclusion criteria to form a sample suitable for this study.
Firstly, selected participants should have a minimum experience of 2 years to ensure they have
practised different audit procedures; 12.5% had less than 5 years of experience, 62.5% had between
5 and 15 years of experience, and 25% had more than 15 years of experience. Secondly, the
participants should cover all hierarchical levels; 12.5% are associate-level, 37.5% are senior-level,
43.75% are manager-level, and 6.25% are partner-level audit practitioners. Therefore, most sample
subjects had adequate experience (5–15 years) and held senior and manager level positions. This can
be attributed to the fact that participants with adequate experience who hold medium-level
positions usually engage deeply in executing various audit tasks and tend to handle and clean large
amounts of raw data. Thirdly, the participants should belong to audit firms of different sizes; 62.5%
belonged to the Big-4 audit firms, 18.75% belonged to international non-Big-4 firms, 12.5% belonged
to local firms, and only 6.25% belong to the ASA.

Most sample subjects belonged to the Big-4 audit firms because, according to their LinkedIn profiles,
they have adequate knowledge about adopting BD and BDA in auditing and presented their
readiness to participate in such a study. The authors tried to interview additional members from the
ASA. However, the contacted ASA members either expressed insufficient knowledge about BD and
BDA or indicated their unwillingness to participate in this study. The authors therefore decided to
use the data obtained from the sole participant from the ASA (P16), premised on the rationale that
all ASA members are compelled to follow the same laws, regulations and guidelines (Law No.
129/1964) to conduct their audits. Thus, there is uniformity in the objective and methodology of
conducting ASA audit engagements regardless of the auditor (Abed, Citation2019). To enhance and
triangulate the findings obtained from interviewing P16, the authors decided to analyse the strategy
set by the ASAFootnote2 for transforming its audit approach from a traditional way into a
computerized method and the strategy set by the Ministry of Public Business SectorFootnote3 to
restructure its subsidiaries (state-owned companies).

Fourth, the authors planned to interview financial auditors only. However, the first six interviewees
strongly recommended the inclusion of other non-financial auditors in the sample because BD and
BDA are not a matter of financial auditors only. Gao et al. (Citation2022) consistently found that
frontline auditors use data analytics to execute their audit tasks. At the same time, back-office
employees (IT and analytics specialists) provide analytics support, customize analytics platforms, and
incorporate analytics tools and platforms into auditing. For the above reasons, the authors decided
to include non-financial auditors [2 IT auditors (12.5%) and 2 data analytics specialists (12.5%)] who
help financial auditors in using BDA, in addition to 12 participants who are involved in financial
audits (75%). It is worth noting that the latter group included 2 consultants who worked previously
as auditors, as shown in

Table 1. Detailed characteristics of the participants.

Download CSVDisplay Table

Measuring the theoretical saturation attained is necessary to determine the sufficiency of the
sample size in qualitative research (Dworkin, Citation2012). According to Guest et al. (Citation2006),
saturation indicates the data collection and analysis stage where the information derived from newly
conducted interviews is of limited value to the research objective(s). This study employed Guest et
al.’s (Citation2020) approach to operationalize saturation. This approach was utilized for its
numerous benefits. It does not postulate the use of random sampling. Neither does it require prior
knowledge about the prevalence of the codes and themes. In addition, it can be easily calculated,
interpreted, and reported. Moreover, it can be used retrospectively to assess the sufficiency of the
sample size, i.e., after data collection and analysis. Furthermore, it is flexible in determining the base
size, the run length, and the new information threshold. Besides, options for each component can be
determined before or after data analysis. Following the recommendation of Guest et al.
(Citation2020), the authors calculated saturation using a base size of five interviews, a run length of
three interviews, and a new information threshold of ≤ 5%. The authors conducted three runs to
obtain an information threshold of 4.76%, which is less than the 5% threshold; hence, the saturation
was reached by the 10th interview.

3.2. Data production

Only one interviewer conducted interviews to ensure the consistency of the interview approach. The
interviewer provided a summarized introduction to big data and analytics and their adoption in
external auditing to ensure that the interviewer and participants spoke the same language and
remove any possible ambiguities. The interviewer used one-to-one semi-structured interviews in all
cases, except for Participants 11 and 12, where a group interview was held due to their limited time.
The interviewer used several interview forms: face-to-face (eight interviews, 50%), phone-based
(four interviews, 25%), and video-based (four interviews, 25%) over Microsoft Teams®. At the
beginning of each interview, the interviewer asked participants to record the interview to transcribe
and analyse each interview's contents. Twelve interviews were recorded, while four interviewees
refused to record their meetings. The interviewer took detailed notes of each unrecorded meeting.
The average duration of each interview was one hour.

3.3. Data analysis

According to Saunders et al. (Citation2019), interviews usually generate substantial analysable

qualitative data. Two authors transcribed recorded interviews in written form for each single
interview. Another author organized and sorted the notes taken in the unrecorded interviews. Then,
the interviewer checked the transcripts to avoid any subjective interpretation. Thereafter, thematic
analysis was employed to deeply analyse interviewees’ observations to reveal patterns, develop
codes, and relate them to each other to identify meaningful themes.

The thematic analysis went through six major phases: (1) Familiarisation with data: two authors read
the transcriptions independently more than three times till they fully understood each transcript. (2)
Developing codes: MAXQDA software was employed at this stage. Following the recommendation of
Guest et al. (Citation2020), the same two authors went through each transcript separately,
highlighted significant statements, ignored irrelevant points, and started labelling each statement
with the appropriate code. Then, they compared their coding, and any variations were discussed and
resolved to reach agreed-upon coded documents. By the end of this step, the two had authors
identified 26 codes. (3) Generating initial themes: after coding, the other two authors jointly
attempted to group similar and related codes under one theme. (4) Developing and reviewing
themes: in this step, the four authors reviewed the developed themes, rearranged the codes into
themes, developed new themes, and removed irrelevant ones. This step ended with constructing a
total of 7 themes. (5) Refining, defining, and naming themes: at this stage, the four authors jointly
started to set a label for each theme depending on the most effective representation of the
underlying data. Then, they linked themes to each other and to the research objectives. They relied
on mental maps built-in MAXQDA software. (6) Writing outcomes: one of the authors started to
write up the results obtained with a reasonable range of quotations to support each theme. This
author attempted to choose the most ‘representative’ or ‘informative’ quotations. Then, the other
authors reviewed the draft and made necessary modifications.

3.4. Ethical considerations

Qualitative research increases concerns about ethical issues (Allmark et al., Citation2009).
Bhattacherjee (Citation2012) advised researchers to take ethical considerations seriously to enhance
the validity and reliability of their research. Following the recommendations of Saunders et al.
(Citation2019), several actions were taken to ensure ethical considerations. The participants were
intentionally and carefully chosen in compliance with the pre-determined inclusion criteria. Then,
the authors sent a well-worded interview guide to interviewees before conducting interviews. In
addition, before beginning the interview, the interviewer told the participants that their
participation was voluntary and oral informed consent was obtained from each participant. During
the interviews, measures were taken to prevent bias, including a neutral tone, precise probing
questions, avoiding lengthy or compound questions, and using jargon familiar to the participants.
Moreover, the locations and timing of interviews were carefully selected to ensure they were
undisturbed and comfortable.

During the data analysis, two authors transcribed and coded the interviews separately and
compared their findings with any variations discussed and resolved. Besides, the authors
anonymized the names of participants and their firms to guarantee the privacy of participants and
firms. The interviewer checked the transcripts to avoid subjectivity in interpretation. After
completing the thematic analysis, all authors carefully discussed the findings to avoid unethical
practices, such as cherry-picking quotes and claiming that they represent the data or trimming data
by judiciously deleting some pieces to reach a certain finding. Finally, the findings reached were
discussed with an audit practitioner (a consulting manager) and an academic staff member (a
colleague of the authors).

4. Findings and discussions

This section presents the findings obtained, aligns them with the research objectives, and compares
them with prior studies.
4.1. Reasons for adopting BDA in auditing

Buchheit et al. (Citation2020) claimed that several pressures might drive audit firms to use BD and
BDA in auditing. Humphrey and Moizer (Citation1990) indicated that audit practices continuously
evolve to satisfy clients’ needs by improving the efficiency and effectiveness of this function. BD and
BDA enable auditors to use previously ignored data types (e.g., videos, images, audio files, texts, and
GPS locations) as audit evidence, scrutinize the entire population instead of sampling, and obtain a
more comprehensive picture of the client’s activities (Earley, Citation2015). They also help auditors
identify and assess risks, better plan and execute audit procedures, direct auditors’ attention to
exceptions and outliers, and enhance audit quality (Joshi & Marthandan, Citation2020). Another
reason for reacting to changes in audit technologies is to sustain the audit profession and to survive
as a professional group (Zeff, Citation1987; Power, Citation1995). Therefore, this section determines
the most important reasons behind adopting BD and BDA.

There is consensus among all interviewed participants that using BD and BDA facilitates and
enhances the efficiency and effectiveness of the audit process. They reported that advanced data
analytics automatically collect, process, and analyse large volumes of data, minimize human effort
and error, reveal potential risky and fraudulent areas, and maximize the accuracy of audit tasks.
Additionally, many participants admitted that the reduced number of hired employees saved costs
(salaries), time, and effort, thus improving audit effectiveness and profitability. So, the authors
believe that it is a “cycle of benefits,” as BDA can help auditors easily understand clients’ businesses,
determine and perform appropriate audit procedures, and reach a more accurate conclusion with
minimal effort, time, and cost, resulting in enhancing efficiency and effectiveness, and positively
affecting the quality and credibility of the audit process. This agrees with the results of Appelbaum
et al. (Citation2017), Kend and Nguyen (Citation2020), and Christ et al. (Citation2021), who claimed
that attaining greater audit efficiency and effectiveness was the main reason for implementing BDA.
This view is borne out by the following verbatim quotes from two participants:

“We [auditors] use audit analytics to provide a bird's eye view of financial statements. For instance,
the [specific audit firm analytics tool] presents the year's total expenses in a one-line trend
visualisation. Exceptional fluctuations reveal areas that need to be thoroughly investigated to
determine why expenses in that month decreased or increased by that amount. Using [this tool], we
can determine the expense account responsible for this fluctuation. We investigate this account in
detail to identify potential outliers and issues. Owing to data analytics tools, this process has become
a matter of a few minutes.” (P6, Senior Financial Auditor)

“[When] we ask why we are using the new audit digital tools or digitising and upskilling our digital
talents, we hear the following three main words: to save time, costs, and effort.” (P10, Deals and
Transactions manager)

Selecting enhancement of audit efficiency and effectiveness as the primary reason for adopting BDA
is consistent with the argument of prior studies that audit firms use new audit innovations mainly to
support audit efficiency, effectiveness, and overall quality (Humphrey & Moizer, Citation1990;
Power, Citation1995; Knechel, Citation2007). Also, this is consistent with Turley and Cooper
(Citation1991), who indicated that the major driver pushing the development of audit approaches
and methods in the late 1980s was the need for cost-effectiveness and efficiency. Similarly,
Matthews (Citation2006) reported that efficiency and effectiveness were the driving forces behind
eliminating some audit techniques (such as the systems approach, third-party confirmation, and
management letters) and the rise of others (such as the risk-based audit approach, the materiality
concept, and analytical review).

Several prior studies emphasized that audit firms adopt BDA primarily to satisfy their clients (Alles,
Citation2015; Walker et al., Citation2019; Buchheit et al., Citation2020; Liew et al., Citation2022).
Consistently, nine interviewed participants argued that audit firms embrace BDA to keep up with
their clients. Advanced digital tools have become common in executing clients’ business processes
and operations. If their auditor were unaware of such technologies, the client would replace the
auditor with a more technologically competent one. In other cases, using advanced data analytics
can be the client’s requirement; thus, the auditor should satisfy the client.

“ … [Another] important reason [behind BDA adoption] is to speak the client's language; for instance,
the client is so advanced and is using Alteryx and Power BI, so how come you – as an auditor – pull
him back to Excel® and other traditional tools?” (P10, Deals and Transactions Manager)

“I used data analytics tools because I audited a subsidiary company whose parent is located and
listed on the New York Stock Exchange. The parent company needed a unified audit methodology to
be followed when auditing the financial statements of its subsidiaries.” (P6, Senior Financial Auditor)

Four participants claimed that gaining a competitive advantage was the potential reason for
adopting BDA. They illustrated that audit firms compete to gain a good reputation regarding the use
of technology in their audits because clients perceive technology-savvy audit firms as superior to
other competitors.

“[Having] a competitive advantage over our competitors and not lagging behind them is most likely a
motive for adopting such tools.” (P5, Strategy and Transactions Manager)

“[Using] such tools can be for branding purposes, as clients in Egypt feel that using technological
tools would provide more trustworthy outputs.” (P14, Financial Audit Partner)

Also, three participants only argued that non-stoppable technological advances forced audit firms to
cooperate with large technology corporations to develop data analytics-oriented platforms and to
outsource significant parts of the audit process to such technology firms. This extensive cooperation
between audit firms and data-driven technology tycoons such as IBM, Google, SAP, and Oracle might
threaten audit firms’ sustainability and survival in an ever-changing work environment. Hence, audit
firms might adopt BDA to keep up with the current global digitalisation trend and protect their
future existence with the emergence of the industry 4.0 revolution.
“Another reason [to embrace BDA] is to sustain the professional identity against the potential
invasion of data-centric companies such as IBM, Google, SAP, and Oracle to the audit profession.”
(P6, Senior Financial Auditor)

Determining competitiveness and survival in IT audit environments as potential reasons for adopting
BDA reflects audit practitioners’ perception of technological advancement as a risk to their
existence. This also reflects their perception that they would be of little value without information
technologies. This is consistent with the argument of Haug (Citation1977) that technological
advancement might lead to providing some professional services by non-professionals or even by
other professional competing groups. Therefore, extending the audit scope by updating the audit
profession with recent innovations might be a means to sustain the audit profession in the face of
potential invasion by non-auditors into the audit profession.

Based on the above discussion, the authors concluded that enhancing the efficiency and
effectiveness of the audit process and satisfying clients are the most important reasons for adopting
BDA in auditing. Manson et al. (Citation1997) indicated that satisfying audit clients is associated with
audit quality, i.e., higher audit quality leads to more client satisfaction. Prior studies indicated that
adopting BDA would automate some routine audit tasks, reduce audit duration, reduce the number
of auditors involved in audit engagements, minimize audit costs, and enhance audit quality
(Appelbaum et al., Citation2017; Christ et al., Citation2021). All these benefits lead to better client
satisfaction. Hence, the first reason (enhancement of audit efficiency and effectiveness) can be
viewed as a coin with two sides. It is also worth noting that the reasons stated by participants reflect
their tendency toward commercialization, i.e., auditors try to use available technological tools to
minimize audit costs, maximize profitability, satisfy their customers, compete efficiently, and ensure
sustainability.

4.2. The extent of adoption of BD and BDA in auditing

This section attempts to determine whether audit firms use BD or not. In addition, it addresses the
BDA techniques and software packages that audit firms adopt in their audit engagements.
Moreover, it tries to present the audit phases in which audit firms adopt BD and BDA.

4.2.1. BD in auditing

Using BD in auditing is challenging due to its complicated characteristics (Brown-Liburd et al.,

Citation2015). Several prior studies have claimed that audit firms use BD in their audit procedures
(e.g., Alles & Gray, Citation2016; Salijeni et al., Citation2019). However, Wadesango et al.
(Citation2021) argue that auditors collect and analyse voluminous traditional accounting data that
cannot be described as BD. Instead, BD refers to large, complex datasets that traditional tools cannot
extract, store, process, and analyse (Brown-Liburd et al., Citation2015). Janvrin and Watson
(Citation2017) and Joshi and Marthnadan (Citation2020) argue that large volume, data variety, high
velocity, and high veracity are the most significant features of BD.

Most participants reported collecting and analysing vast amounts of data when conducting audit
engagements. Nonetheless, most confessed that this data comprises traditional financial
(structured) data with minimal dependence on non-traditional items. This finding is similar to that of
Wadesango et al. (Citation2021). It is worth noting that Labrinidis and Jagadish (Citation2012, p.
2032) argued that “size is the only thing that matters for BD.” However, Gandomi and Haider
(Citation2015) stated that the volume that qualifies data to be big is relative; i.e., what is considered
big data for one industry is not for another. Therefore, the authors concluded that the participants
considered the data they use as voluminous relative to the data collected and analysed in prior
times, considering that there is no settled benchmark for BD volumes.

“We [financial auditors] depend on large volumes of traditional financial and accounting data.” (P16,
Financial Audit Team Supervisor)

Variety can be in the type of data items (numbers, text, voice files, videos, or images), the structure
of the data (structured, unstructured, or semi-structured), and the source of the data (internal or
external) (Gandomi & Haider, Citation2015). Four participants from the Big-4 audit firms reported
using new data items such as images, videos from security cameras, audio files, and textual data as
audit evidence. Additionally, they claimed that they started to consider non-financial data related to
environmental issues, money laundering, after-sales services, and anti-corruption. They attributed
the coverage of such data to the notion that non-compliance with regulations governing such issues
results in the payment of penalties and negatively affects clients’ financial position. Also, non-
compliance with such regulations may negatively affect the audited company as a going concern.

“[We] already use non-traditional data such as photos, videos, and audio files in our engagements.
For instance, we use drones to take pictures of oil and gas platforms in the Mediterranean and Red
Sea as evidence of the existence of assets.” (P10, Deals and Transactions Manager)

“We use an [in-house developed software] in conducting inventory and physical asset inspections. It
is a mobile-based app that scans barcodes, takes photos, and uses voice-to-text technology to record
count results and observations, and variances between recorded and actual balances of inventory
are flagged automatically.” (P6, Senior Financial Auditor)

However, those participants claimed that such new data formats are dealt with as complementary to
traditional audit evidence. It should be noted that auditors usually deal with tabulated data in
spreadsheets and other types of data items on a limited scale, such as contracts, minutes of the
meetings of boards of directors, and images (Brown-Liburd et al., 2015). Thus, using unstructured
data items is not innovative for the auditing profession. However, the new aspects include the
volume and new forms of such data (e.g., audio, video, GPS, and social media data) and the
employment of new analytics tools to leverage the collection and analysis of such data.

Gandomi and Haider (Citation2015, p. 138) defined velocity as data generation and analysis speed.
Some participants reported they were equipped with advanced analytical tools with high processing
capabilities. Such tools enable them to collect, process, and analyse datasets quickly and efficiently.
However, it is worth noting that auditors collect and analyse data in batches at the end of each year;
hence, real-time analytics are not applicable to the current data that auditors collect and analyse.
“We [financial auditors] use voluminous data which cannot be absorbed by any human brain,
therefore, using an analytical tool like [a customised audit and analytics software] would help us
absorb, organise, clean, and analyse this data.” (P1, Senior Financial Auditor)

Gandomi and Haider (Citation2015, p. 139) defined veracity as the unreliability of some data types
and sources. Most participants stated that veracity does not apply to the data they collect and
analyse because they mostly depend on traditional financial and accounting data from the client’s
systems, with minimal or no data from external sources. Nevertheless, a few participants reported
using some data extracted from external sources when deciding to accept a new client, planning the
audit, and assessing the going concern. They indicated that they depend on formal reports issued by
governmental units and internationally-recognized organizations with minimal use of other external
data to ensure the reliability of their assessments. For instance, P9 admitted the automatic collection
and analysis of publicly available governmental tourism reports and plans when assessing the going
concern of a client.

Based on the above discussion, the authors could conclude that all audit firms in Egypt, except the
Big-4, do not use BD, as defined by data science experts (4Vs: volume, variety, veracity, and velocity).
Still, the reality is that they focus on large volumes of “fully structured and financial data.” Also, it
was found that audit firms, except the Big-4 ones, depend mainly on data extracted from the clients’
internal systems with no data collected from external sources. In contrast, the Big-4 audit firms have
begun to use BD in their engagements. They collect and analyse large volumes of non-financial data
and new data types. They consider them complementary to traditional audit evidence. Besides,
participants from the Big-4 audit firms reported their limited dependence on reliable external data
when understanding the client’s business, planning the audit programme, and assessing ongoing
concerns. Therefore, the authors concluded that the Big-4 audit firms are in the early stages of using
BD and are expected to go further. This finding is consistent with those of Alles and Gray
(Citation2016) and Appelbaum et al. (Citation2017), who claimed that using BD in auditing is an
incremental process; that is, firms move gradually towards fully adopting BD in their audit
engagements.

4.2.2. BDA software packages used by audit firms

Collecting substantial volumes of data is useless without advanced analytical tools to unlock value
from that data. Participants from the ASA and local audit firms reported their dependence on
traditional analytics software (Excel®). Participant 16 reported that auditors working for the ASA
depended solely on Excel® when conducting their audits. This is consistent with the finding of
Wahdan (Citation2014) that the ASA used audit technologies minimally. Participants from local firms
reported using Excel’s® simple features (e.g., data filtration, finding duplicate values, calculation
functions, and descriptive statistics) as well as its advanced ones (e.g., macro, pivot tables, and
visualisations) when conducting audit engagements.

“We have no specific audit or analytics software. We depend on Excel® in extracting, cleaning,
processing, analysing data, and reporting and visualising results.” (P7, Financial Audit Manager)

The dependence of local audit firms on Excel® can be attributed to the lack of resources and the
tendency to keep their audit fees affordable for medium- and small-sized clients. This is consistent
with the findings of Ahmi and Kent (Citation2013), Vasarhelyi and Romero (Citation2014), and
Buchheit et al. (Citation2020), who found that local small audit firms do not use advanced audit
technologies because of the belief that the costs of implementing audit technologies outweigh the
benefits, given the small size of their clients and the limited number of clients they have.

Participants from international non-Big-4 audit firms reported their dependence on advanced audit
and analytics tools, in addition to Excel®, to perform audit tasks. These advanced audit tools are a
mix of ready-made software (such as IDEA and ACL) and software packages developed specifically for
certain audit firms (such as APT and Voyager). Notably, both types of software have analytics
capabilities, but the participants from the international non-Big-4 audit firms stated that such
capabilities still need to be fully utilized.

“Although (customised audit and analytics software) includes analytics capabilities, we do not use
such tools.” (P1, Senior Financial Auditor)

Participants from the Big-4 audit firms mentioned that they have taken farther steps in using
advanced analytics tools in addition to traditional ones. This is consistent with the argument of Liew
et al. (Citation2022) that large volumes of data overload basic spreadsheet tools, making them
unsuitable for conducting data analytics. These audit firms employ some software packages to
collect and process data, others to analyse data, and yet others to visualize the results.

“Traditional tools, such as Excel®, are ineffective when dealing with hundreds of thousands or even
millions of transactions. Thus, we rely on more sophisticated analytics tools like the Alteryx
platform.” (P10, Deals and Transactions Manager)

“I usually use a set of software in conducting any engagement; for instance, I use [in-house
developed software] as an audit platform to perform major audit tasks such as business
understanding and audit planning, risk identification and assessment, and determining proper audit
procedures, [in-house developed software] to collect and extract clients’ data, [in-house developed
software] to analyse collected data, and [in-house developed software] to communicate with clients
and teammates.” (P13, Senior Financial Auditor)

It is worth mentioning that the analytics tools used by the Big-4 audit firms are a mix of ready-made
(e.g., Alteryx, Hadoop, Spark, EmEditor, Python, R, Tableau, and Power BI) and developed in-house
(e.g., KPMG Clara, Deloitte Omnia, Deloitte Reveal, EY Helix, PwC Halo, and PwC PDF table extract).
Notably, audit and analytics platforms developed explicitly for the Big-4 audit firms are
comprehensive and multi-tasking; each platform incorporates several libraries of analysts with
various capabilities that support the execution of audit procedures. Similarly, Liew et al.
(Citation2022) found that the Big-4 audit firms in New Zealand have a suite of smart audit tools
developed in-house and other off-the-shelf analytics tools.

“We use a platform called EY Helix that has a set of software such as ‘GL Analyzer,’ ‘Subledger
analyzer,’ ‘GL Anomaly Detector,’ ‘Process Miner,’ and ‘Helix Data Extraction.’ We depend on ‘GL
Analyzer’ and ‘Subledger Analyzer’ to analyse the general ledger journals of any size to test the
completeness assertion. The results of this software come in the form of visualisations that help us
identify outliers or extreme values.” (Anonymous participant,Footnote4 Senior Financial Audit
Manager)

Contrary to the prevailing notion in the literature review, that “audit firms are lagging in using BDA
in audit engagements” (Lowe et al., Citation2018; Eilifsen et al., Citation2020; Kend & Nguyen, 2022;
Hezam et al., Citation2023; Abdelwahed et al., Citation2023), empirical findings show that all audit
firms are using data analytics in one way or another. The authors summarize the employment of
different levels of analytics software packages by different audit firms in

. Using spreadsheet tools in financial audits is unavoidable for all audit firms at different levels. The
ASA uses the basic functions of traditional analytics tools (Excel®). At the same time, local audit firms
took several farther steps towards the more advanced features of Excel® (macros, pivot tables, and
visual basic applications). International non-Big-4 audit firms use Excel® and “Instead of Excel®”
analytics software packages with strong analytics capabilities.

Figure 1. BDA software packages used by audit firms of different sizes. Source: Liew et al.
(Citation2022) (adapted)

Figure 1. BDA software packages used by audit firms of different sizes. Source: Liew et al.
(Citation2022) (adapted)

The Big-4 audit firms are in the “Excel® on steroids” phase, using advanced and sophisticated
analytics tools, whether ready-made or developed in-house. Hence, the authors can conclude that
internationally affiliated audit firms use more advanced analytics software packages than the ASA
and local firms. Also, the Big-4 audit firms’ analytics tools are superior to other audit firms. These
findings are consistent with results obtained from prior literature (e.g., Kend & Nguyen,
Citation2020; Oyewo et al., Citation2021) that the international affiliation of audit firms significantly
determines the adoption rate and usage level of BDA. However, such findings are inconsistent with
the argument of Tarek et al. (Citation2017) that firm size does not affect the use of new audit
technologies in the Egyptian context.

Such findings reflect the importance and impact of international affiliation on audit firms. The
tendency of international audit firms to adopt advanced audit technologies can be explained by
Oyewo et al.’s (Citation2021) claim that affiliation with foreign auditors obligates branches to adhere
to the audit methodology adopted by the parent audit firm. Also, it can be observed that parent
firms are always headquartered in developed countries where advanced audit technologies are
dominant, thus pushing members from developing countries to follow them. Yapa et al.
(Citation2017) indicated that firms in developed countries are leading in adopting innovative audit
technologies to achieve the highest possible audit quality and avoid legal litigation.

4.2.3. BDA techniques used by audit firms

Prior studies have discussed several BDA techniques that are and can be used by auditors, such as
descriptive statistics, data visualizations, time-series analysis, ratio analysis, regression analysis, text
analytics, classifications, clustering, associations, process mining, and others (Appelbaum et al.,
Citation2021). In this section, the authors try to identify the BDA techniques that audit firms use in
financial audits.

It is worth mentioning that P16 from the ASA reported using simple ratios and comparative analyses
in audit engagements:

“We neither consider the statistical methods in selecting the sample, apply advanced analytical
procedures, nor depend on mathematical and statistical models during the audit. We depend only
on simple audit procedures, judgement, and experience.” (P16, Financial Audit Team Supervisor).

However, participants from local audit firms reported using the following techniques: ratio analysis,
comparative analysis,Footnote5 time-series analysis, and simple visualisations (charts and graphs)
generated in Excel®.

On the other hand, participants from international non-Big-4 audit firms asserted they used the
following analytics techniques: ratio analysis, time-series analysis, trend analysis, comparative
analysis, descriptive statistics, and visualisations. Participants from the Big-4 audit firms noted
several advanced analytics techniques that they adopt in financial audits: ratio analysis, time series
analysis, descriptive statistics, simulations (what-if analysis), text analytics (to analyse scanned
contracts, engagement letters, management proposals, internal reports, minutes of the board of
directors’ meetings, and other scanned text-based documents), association rules, clustering analysis,
classification analysis, process mining, and regression analysis. This is captured in the following
quote:

“I [financial auditor] use ratio analysis, comparative analysis to compare between actual against
budgeted and expected numbers, summary statistics to explore and understand clients’ datasets
[descriptive analytics], split accounts receivable into groups according to age, customers, sales reps,
or geographical areas using Tableau [cluster analysis], time series analysis to analyse sales volumes
and values to identify trends and visualisations”. (P13, senior Financial Auditor)

Based on the above, the authors concluded that the ASA depends on primitive auditing techniques.
This finding is consistent with Abed’s (Citation2019) claim that audit procedures executed by
members of the ASA are outdated and need urgent enhancements. Local and international non-Big-
4 audit firms use traditional techniques to conduct their audits. The only difference between these
audit firms is the visualizations they generate and use. Local audit firms generate and use simple
visualizations produced by Excel®, while non-Big-4 internationally affiliated audit firms use more
complicated visualizations produced by CAATs. This indicates that international non-Big-4 audit firms
are superior to local and ASA audit firms.
Conversely, the Big-4 audit firms use more advanced analytics techniques on a small scale. These
findings are similar to those of prior studies that have shown that using advanced BDA techniques
(e.g., clustering, association, process mining, and text analytics) is infrequent (e.g., Schmidt et al.,
Citation2020; Eilifsen et al., Citation2020; Cristea, Citation2021). Additionally, such findings are
consistent with those of Kim et al. (Citation2016), who articulated that Egyptian auditors
infrequently use the advanced and complicated features of audit software packages. However, these
findings contradict the arguments of Alles (Citation2015) regarding the non-use of advanced data
analytics (text mining) by external auditors.

4.2.4. BD and BDA in the audit process

This section discusses interviewees’ perceptions regarding integrating BD and BDA into various audit
procedures. According to Langhein et al. (Citation2018), the audit process can be divided into four
main phases: the client acceptance or continuance phase, the audit planning phase, the testing
phase, and the issuance of the audit report and review phase. Appelbaum et al. (Citation2017) and Li
and Liu (Citation2020) argue that BD and BDA can significantly affect various phases of the audit
process. Nonetheless, this effect differs from one phase to another. Participants from the ASA, local,
and international non-Big-4 audit firms alluded to never using BD and BDA in the client acceptance
phase. However, participants from the Big-4 audit firms reported using non-traditional data items to
decide whether to accept or reject a new client and whether to continue with a client or dismiss it.
These positions are articulated in the quotes below:

“In the client acceptance stage, non-traditional data can be interrogated in addition to traditional
audit procedures (ratio analysis) to make acceptance and continuance decisions, but we rarely use
such tools in this stage.” (P1, Senior Financial Auditor)

“Our audit firm uses [a specific audit firm analytics tool] to help partners make client acceptance and
continuance decisions. This tool collects data from many sources to determine potential
independence issues, conflicts, financial performance indicators, relationships with prior auditors,
conduct money laundering and background checks, and conduct preliminary risk assessments for the
client. If the client is accepted, such criteria are documented and used during the initial audit plan”.
(P13, Senior Financial Auditor)

Another Big-4 participant (P5) confirmed the availability of social media analytics software used in
the client acceptance phase to collect data about clients from different platforms such as Facebook,
X (previously Twitter), YouTube, Linked In, and other social media platforms. However, this
participant admitted to the use of this software for mega engagements only, claiming they did not
use such tools to accept or reject the engagement but to prepare a proposal and impress the client.

In the audit planning stage, participants from all audit firms admitted using ratio analysis, trend
analysis, descriptive summary statistics, regression analysis, and visualizations to identify unusual
growth or profitability rates compared to other entities in the same industry and to determine
unusual transactions and events. Nevertheless, participants from the Big-4 firms indicated that they
used non-traditional data and analytics to perform non-traditional audit procedures to complement
traditional ways of auditing during the planning stage. For example, Participant 11 reported the use
of textual analysis of the minutes of meetings of the board of directors, analysis of customer service
audio files, and process mining for various processes to complement traditional inquiries from
management and other client personnel. Participant 12 reviewed security videos in warehouses and
textual analysis of business plans and manuals of internal controls to complement traditional
observation and inspection procedures. The participants indicated that using such data and analytics
tools helped them make a better initial assessment of material misstatements when conducting
audit engagements.

In the testing phase, participants from the ASA, local audit firms, and international non-Big-4 audit
firms indicated that they did not use BD and BDA to test the controls. However, participants from
the Big-4 audit firms (participants 11 and 15) reported using process mining techniques to identify
abnormal business processes and control deficiencies related to the segregation of duties and
authorisation. They also declared using Power BI visualizations to identify overdue credit sales
transactions or transactions exceeding the credit limit, i.e., testing controls over the sales cycle.

When conducting substantive tests, international audit firm participants reported using CAATs and
other advanced analytics tools to determine “unusual or unexpected relations.” Such tools enabled
these participants to investigate the full population of suspicious accounts, thus improving their
ability to conduct tests of details on a larger scale to test cut-offs of sales transactions, conduct
vouching and tracing, and make recalculations.

Regarding using BD and BDA as audit evidence, participants from ASA, local, and international non-
Big-4 audit firms reported that traditional financial and accounting data, but with large volumes, are
still prevalent audit evidence. Such big volumes of traditional data are analysed using traditional
tools (Excel®) and techniques (e.g., ratio analysis, trend analysis, and descriptive summary statistics).

“We [financial auditors] depend on large volumes of traditional financial and accounting data. We
still depend on traditional types of audit evidence such as observation, confirmation, recalculation,
and inquiry.” (P16, Financial Audit Team Supervisor)

However, participants from the Big-4 audit firms indicated the still tenuous utilisation of non-
traditional data and analytics to perform non-traditional audit procedures to complement traditional
ways of auditing, as noted in the following observations:

“Although we still depend on traditional financial and accounting data as audit evidence, new data
items such as images, audio records, videos, texts, and data from social media are being introduced
as audit evidence on a limited scale.” (P3, Senior Financial Auditor)

“Non-traditional forms of data can be used as complementary audit evidence along with traditional
audit evidence but not standalone audit evidence.” (P10, Deals and Transaction Manager)
In the final review phase, participants from the ASA, local, and international non-Big-4 audit firms
reported the non-usage of BD and BDA in this step. Participants from the Big-4 audit firms, however,
indicated usage of BD and BDA, albeit limited, in assessing the subsequent events and a client’s
going concern assumption.

“Analytics of social media data and public news provide us with insights regarding the subsequent
events such as public news about declining share prices of the audited entity, a fire in the entity's
warehouses, or loss of one of the entity's cargos due to a plane crash or freighter sinking. Such
events will change either the financial statements or require additional disclosures.” (P9, Senior
Financial Audit Manager)

“Such analytics [BDA] provide valuable insights regarding the going concern assessment. For
instance, I am auditing a resort in the Red Sea area. The usual occupancy rate was about 80%, but
this percentage dropped by 70% after the war between Russia and Ukraine. There is a serious issue
regarding the going concern assumption. Collecting data from public news and social media
platforms showed the governmental plans to revive the tourism sector by attracting Gulf tourists.
Such plans might affect our assessment regarding the going concern assumption.” (P9, Senior
Financial Audit Manager)

To summarize the extent to which audit firms adopt BD and BDA in the Egyptian environment, the
authors used Alles & Gray’s (Citation2016) illustration, shown in

. ASA and local audit firms still lie in Cell A, where they depend on traditional data analytics tools
(e.g., Excel®) to analyse samples of traditional financial data using traditional analytics techniques.
International non-Big-4 audit firms have moved to Cell B, where they use more advanced analytics
tools (ACL, IDEA, APT, Voyager) in addition to spreadsheet tools to carry out a mix of traditional and
– to some extent – advanced analytics techniques on large volumes of traditional accounting and
financial data. This transformation is driven by the availability of no-code and low-code analytics
tools (Liew et al., Citation2022).

Figure 2. Current state of adopting BDA by audit firms in Egypt. Source (Alles & Gray, Citation2016)
(adapted)

Figure 2. Current state of adopting BDA by audit firms in Egypt. Source (Alles & Gray, Citation2016)
(adapted)

The findings related to the ASA are interesting because the ASA possesses a high market share in the
Egyptian context (El-Dyasty & Elamer, Citation2021). According to Law No. 129/1964, the ASA aims
to achieve effective oversight over the funds and the performance of the state's funds, authorities,
and companies (Abed, Citation2019). Participant 16 stated that members of the ASA are
governmental employees representing the Egyptian state and cannot be changed or dismissed by
audited companies. Audited companies must also fully consider the audit reports issued by auditors
of the ASA (Wahdan, Citation2014). It can be concluded that an obligatory and monopolistic nature
characterizes the auditing provided by the ASA; hence, it feels no pressure to use IT in its audits
because audit quality, client satisfaction, and profitability are not among its targets.
It is also worth noting that companies owned by the state are subject to political pressures, as they
must follow certain laws and regulations and are required to achieve profits at any expense
(Wahdan, Citation2014). Furthermore, the Ministry of Public Business Sector, which administers
state-owned companies, issued a report titled “The Ministry's strategy for developing its
subsidiaries”, which includes the intended steps to reform state-owned companies by keeping
companies that achieve profits, restructuring those with potential, and disposing of companies that
achieve severe losses. Consequently, the authors concluded that state-owned companies are
conservative in their investments to avoid potential losses. This means they refuse to invest in
innovative technologies and demand basic auditing without additional expensive insights. Thus, the
lack of use of advanced technological tools by the ASA can be justified by the lack of demand and
supply for such advanced services.

Moreover, the findings revealed that the Big-4 audit firms use voluminous structured and
unstructured data to a certain limit and have begun incorporating non-financial data into financial
audits. They also depend on advanced analytics software packages to execute complicated analytics
techniques. Thus, the Big-4 audit firms surpass other audit firms in Egypt and are plotted between C
and D, as shown in

. This superiority of the Big-4 audit firms over other firms is more obvious when analysing the real
integration of BDA at the various stages of the audit process. This is consistent with the findings of
Lugli and Bertacchini (Citation2023) that the Big-4 firms make greater use of audit technologies than
other firms.

The superiority of the Big-4 firms over other audit firms in adopting BD and BDA can be attributed to
the fact that the Big-4 firms provide consulting and internal auditing services to several clients. Alles
and Gray (Citation2016) indicated that offering non-audit services enables auditors to execute
broader activities and access internal BD; hence, they exploit these opportunities to strengthen their
skills in dealing with unstructured non-financial data. Another reason is the features of clients
audited by the Big-4 firms. Gao et al. (Citation2022) indicated that the Big-4 audit firms usually audit
more digitized clients with complex business processes and accounting estimates. Clients with such
features represent a fertile context for successfully adopting BD and BDA.

4.3. Obstacles to adopting BD and BDA

New audit technologies encounter several obstacles that usually delay their wide adoption by audit
firms (Ahmi & Kent, Citation2013; Vasarhelyi & Romero, Citation2014; De Santis & D’Onza,
Citation2021). Understanding and overcoming such obstacles encourages the widespread diffusion
of these technologies (Alles & Gray, Citation2016). Therefore, this section summarizes the
participants’ viewpoints regarding the main obstacles to adopting BD and BDA in Egypt.

4.3.1. Outdated regulatory guidelines

Six participants claimed that the Egyptian auditing standards are outdated and don't explicitly
require the use of advanced audit technologies in audit engagements. They stressed that the
continued use of the current outdated standards discouraged the adoption of audit innovations. The
role of regulatory guidelines in encouraging audit technologies is more obvious in the case of the
ASA. Participant 16 reported that ASA members should follow certain regulations and guidelines
when conducting audit engagements, which do not explicitly demand auditors to use IT. This is
borne out by Wahdan (Citation2014) and Abed (Citation2019) who have called for an urgent need to
change the traditional model of auditing applied by the ASA to cope with the current changes in the
business environment and the ever-changing needs of various stakeholders. This, however, can only
be achieved by entirely changing the guidelines, rules, and regulations governing the work of the
ASA. It is worth noting that the ASA lags in using audit technologies. It held a meeting in February
2023 to discuss the proposed strategy of transforming its traditional way of auditing into a
computer-based way of auditing during the coming years.

“[The] Egyptian auditing standards had not been modified since 2008 and require a minimum level
of assurance, which in turn affects the way audit firms conduct their engagements, and most of
them use no or minimum level of advanced audit digital tools.” (P2, Senior Financial Audit Manager)

This viewpoint is similar to the finding of Matthews (Citation2006) that audit regulations significantly
affect the speed of diffusion of audit technologies among audit firms. Also, such a perception is
consistent with the argument of Walker et al. (Citation2019), Kend and Nguyen (Citation2020), and
Christ et al. (Citation2021) that auditing standards need to be continuously updated to guide the
adoption of BD and BDA in audit practices. They argued that outdated standards and a lack of
appropriate guidance discourage the wide adoption of such technologies among audit firms.

However, two other participants (P3 and P7) claimed that auditing standards are not obstacles to
using new audit technologies. They attributed their opinion to the fact that technology is
continuously changing, and every day, the audit profession witnesses additional innovation. Hence,
it is burdensome to change the standards and regulations to reflect the release of every new audit
innovation. However, the authors believe that at least audit regulators and standard-setters should
issue guidance on how to use BD and BDA in various audit procedures. Participant 3 underestimated
the positive impact of revising auditing standards on the widespread adoption of BDA, as evidenced
by the following quote:

“I believe that modifying auditing standards – as a precondition to the use of technology – would
slow down the use of innovations in auditing. Modifying auditing standards to motivate the
integration of analytics tools in auditing is a waste of time, given the number of standards that are
likely to be impacted, the time required to make reviews and modifications to those standards, and
the fast-paced technological changes.” (P3, Senior Financial Auditor)

This viewpoint is consistent with the argument of Edwards (Citation1989) that accounting and
auditing regulations tend to be behind audit practices rather than leading them. The International
Auditing and Assurance Standards Board (IAASB) indicated that auditing standards neither prohibit
nor encourage the use of data analytics (IAASB, Citation2016). In addition, Salijeni et al.
(Citation2019) pointed out that auditing standards are flexible enough to allow the use of any new
audit technology without worrying about regulatory restrictions. This view supports the claim of
Turley and Cooper (Citation1991) that regulatory forces directly impact the role of audit and auditors
but not the techniques required to fulfil that role.

4.3.2. Clients

De Santis & D’Onza (Citation2021) pointed out that clients’ digital immaturity is an important
obstacle to using BD and BDA in audit firms in Italy. In agreement with such an argument, several
participants highlighted that the auditor is not the sole party responsible for the diffusion of BD and
BDA within the audit profession. The role of audited companies is important because it is a matter of
supply and demand. The client’s role in the BD and BDA diffusion process is multi-dimensional. One
dimension is the volume of data generated by the client. Several participants explained that not all
clients produce a volume of data that can be described as “big,” and using BDA in such engagements
is futile. The second dimension is access to clients’ data. Clients may produce high volumes of data,
making the use of BDA fruitful, but pointless if full access is not provided to auditors:

“[Using] BDA is dependent on the client himself; the volume of the client’s data … and providing us
[auditors] with access to that data.” (P8, Associate IT auditor)

A third dimension is the client’s awareness of the existence and benefits of BD and BDA. Not all
clients know about such tools. Additionally, even if clients knew about BDA, they would not ask
auditors to use such tools in their audits because they require nothing more than traditional audit
reports, without any additional valuable insights. However, clients who are subsidiaries of foreign
parents require auditors to use such tools. These views are supported by the following quotes:

“[Most] Egyptian enterprises listed or not don’t know about the existence of such tools.” (P6, Senior
Financial Auditor)

“I used analytics tools because I audited a subsidiary company whose parent is located and listed on
the New York Stock Exchange. The parent company needed a unified audit methodology to be
followed when auditing the financial statements of its subsidiaries.” (P6, Senior Financial Auditor)

Several participants reported that another obstacle was the client’s industry. Some industries
inherently discourage BD and BDA, while others don’t. For instance, clients working in the
construction industry may conduct fewer transactions with high monetary value during the year, and
little macro data is available about this industry. Thus, using BDA for auditing such clients is
pointless. Conversely, financial services and retail industry clients conduct millions of transactions
monthly, and too much data is publicly available about such clients. Hence, using BD and BDA could
be helpful for auditors. Nonetheless, such a finding contradicts the argument of Tarek et al.
(Citation2017) that the client's industry type does not affect the usage of new audit applications.
“Another point that might affect their [BDA] adoption is the industry in which the client operates.
BDA can add more value when auditing clients in more complicated, digitised industries.” (P14,
Financial Audit Partner).

Moreover, the nature and volume of clients’ data depend on the information systems they use.
Having advanced and integrated information systems across the company can produce large
volumes of data in analysable formats and vice versa. Some participants stressed that most Egyptian
enterprises, whether listed or not, use legacy systems that produce data not qualified to be audited
using the BDA, as attested by the following quote:

“BDA is not being used extensively in the audit process, given that Egypt is an inefficient market,
most clients are using legacy systems … .” (P3, Senior Financial Auditor)

A final dimension is audit fees. Several participants believe using BDA requires substantial
investments to acquire analytics software packages, establish suitable hardware, hire competent
personnel, and train existing auditors. Hence, increased audit fees are expected to trade off the
additional costs incurred. Clients, however, want audit fees to be as low as possible. This issue is
clearer in the case of small local audit firms that provide services to small clients who need help to
afford audit fees, which are generally high, anyway. The quotes below support this assertion.

“The audit fees paid by the client play a significant role in using such advanced analytics tools. If the
client pays little audit fees, using expensive digital tools to analyse this client's data will be illogical
because it is a cost-benefit analysis.” (P7, Financial Audit Manager)

“ … [local] audit firms don’t use BDA in audits because they are trying to maintain their fees as low as
possible to be affordable to small clients who want to pay small audit fees.” (P14, Financial Audit
Partner)

4.3.3. Unavailability of resources

Several participants argued that insufficient financial, technological, and human resources are a
significant obstacle to adopting audit technologies. The need for more resources varies from one
firm to another. Participants from local audit firms pointed out that they use primitive audit data
analytics due to the unavailability of adequate financial resources; thus, they cannot invest in
technological and human resources, a view attested to in the quote below. This is consistent with
the findings of Kend and Nguyen (Citation2020) that small Australian audit firms cannot adopt
advanced audit technologies due to insufficient resources. Similarly, Sanoran and Ruangprapun
(Citation2023) found that small audit firms lack the budget, know-how, and experience to adopt
BDA.

“[Local] audit firms have limited financial and human resources.” (P7, Financial Audit Manager)
Besides, more technologically qualified personnel are needed. The availability of competent human
resources will facilitate the successful and rapid transformation from traditional to data-driven
audits. Alles and Gray (Citation2016) indicated that the success of BDA adoption is dependent on the
analyst/auditor who determines which data to select and how that data is to be analysed. However,
participants agreed that the Egyptian market needs more competent business graduates with
sufficient IT and analytics qualifications. This obstacle is not only a local issue but a universal one too.
Vasarhelyi and Romero (Citation2014) and Schmidt et al. (Citation2020) found a need for IT-related
knowledge among financial auditors and a tendency among audit firms to hire data scientists instead
of accounting graduates to run advanced analytics tools. The relevance of these assertions to the
Egyptian context is supported by the quote below:

“[Using] big data and its analytics in auditing are very limited in the Egyptian context. This might be
attributed to the unavailability of skilled personnel in the local market.” (P15, Associate IT Auditor)

To solve this issue, audit firms could depend on ready-made analytics tools and push traditional
financial auditors to obtain some data-science skills to turn them into citizen data
scientists.Footnote6 In addition, when selecting analytics tools, audit firms should choose tools
convenient for a citizen data scientist (Ogawa, Citation2019). Another solution would be to benefit
from cloud services such as analytics as a service (AaaS) and data as a service (DaaS). Such new cloud
business models allow the use of advanced data management and analytics techniques, and clients
only pay for what is used, thus facilitating the adoption of BDA without the need for extensive
resources.

4.3.4. Resistance of auditors to change

Perkhofer et al. (Citation2019) argued that new audit innovations are still not used at their most
optimum because auditors are still trying to learn how to operate them and are unaware of their full
capabilities. Hence, a lack of awareness about the usefulness and usability of new audit innovations
may drive auditors to resist them, as they prefer to remain in their comfort zones. This view is borne
out by the quote by P15 below, and is consistent with the findings of Schmidt et al. (Citation2020)
and Liew et al. (Citation2022) that auditors still prefer spreadsheet tools and resist the move beyond
Excel® to other advanced analytics tools because they feel that other advanced tools are difficult and
need more effort to learn how to use them.

“People are very averse to change and want to continue doing what they always do. Thus, mentality
is the biggest obstacle. They [auditors] want to do the same as last year because it is easy, and they
do not have much time to think about innovation.” (P15, Associate IT auditor)

In addition, some participants stated that using BDA in audit engagements would disrupt and
confuse them when executing audit tasks.
“The availability of the tremendous amount of financial data would confuse and disturb us while
conducting the audit engagement.” (P7, Financial Audit Manager)

However, the continuous use of such technology would make auditors familiar with it. Alles and Gray
(Citation2016) indicated that resistance to the technological transformation of auditing would be
minimized over time due to the benefits gained from such tools (i.e., perceived usefulness) and
moving forward in the learning curve (i.e., perceived ease of use). Consistent with this notion,
Participant 9 pointed out that financial auditors – in his/her audit firm – perceived advanced
analytical tools as overload and troublesome when they were first introduced. However, with the
passage of time and the continuous adoption of such tools, auditors started to get used to them and
recognize their benefits.

4.3.5. Lack of training among auditors

When introducing new technology to any profession, an issue called technostress might occur.
Technostress results from the inability of people to deal with technologies normally. According to
Parsley et al. (Citation2022), technostress can take several forms. These forms include techno-
complexity (occurs when people feel they are incompetent to learn and deal with new applications),
techno-uncertainty (constant IT changes cause stress and anxiety for users), and techno-overload
(occurs when people feel they must work faster and longer to process more data than they can
effectively handle). Thus, introducing new technologies into financial audits without proper and
adequate training would lead to several negative consequences, such as work-personal life conflict,
burnout, high turnover rates, high stress, and decreased productivity and efficiency. Consistent with
the arguments above, two participants stated:

“Sometimes my audit team and I encounter unstructured data like photos and videos, but we mostly
ignore them because we don’t understand them and don’t know how to integrate them into our
audit programme.” (P4, Senior Financial Auditor)

“Although a [customised audit and analytics software] includes analytics capabilities, we do not use
them because we did not receive sufficient training.” (P1, Senior Financial Auditor)

Hence, increasing organizational support through training and mentoring sessions to make auditors
aware of BDA would mitigate technostress consequences. This is consistent with the findings of Liew
et al. (Citation2022) that auditors preferred to use traditional analytics spreadsheet tools because
they were not forced to use advanced analytics tools for which they had not received training.
Additionally, Ahmi and Kent (Citation2013) found that one of the reasons behind not using audit
technologies is the need for organisational support.

The participants highlighted several obstacles that might hinder the wide usage of BD and BDA.
Some of these obstacles are due to the specific characteristics of the Egyptian context, such as
clients’ unawareness of the existence of such tools, the primitive needs of various stakeholders
(traditional audit reports without additional insights), the unavailability of public data about some
industries, problems related to data circulation, Egyptian auditors’ unawareness of such tools and,
lastly, auditors’ tendency to use the simple and basic features of audit software packages (Kim et al.,
Citation2016). Other obstacles are universal, such as outdated auditing standards (Appelbaum et al.,
Citation2017), the small size and number of clients (Ahmi & Kent, Citation2013), client’s legacy
systems and digital immaturity (De Santis & D’Onza, Citation2021), no full access to their clients’
data (Salijeni et al., Citation2019), unavailability of sufficient resources among small audit firms
(Kend & Nguyen, Citation2020), and lack of IT and analytics training given to auditors (Liew et al.,
Citation2022).

5. Conclusions, limitations, and further research

This study aimed to reveal the significant reasons behind the adoption of BD and BDA by audit firms,
explore the extent of their adoption in financial audits, and identify the potential obstacles hindering
their adoption in a developing country, Egypt. To achieve the objectives of the study, the authors
interviewed 16 participants with different specializations (involved in financial audits, IT auditors,
and analytics specialists), different experience levels (between 2 years and >20 years), and from
audit firms of differing sizes (big, medium, local, and governmental firms) to gain a deeper
understanding of the current state of using BD and BDA in audit firms working in Egypt. The findings
of this study enrich the relevant literature by providing new data about adopting BD and BDA in an
unexplored and developing context.

This study contributed to the auditing literature by offering empirical evidence of the reasons behind
adopting BD and BDA in financial audits. Contrary to prior studies, the findings of this research
indicated that enhancing the efficiency and effectiveness of the audit process is the most significant
reason for using BD and BDA, rather than satisfying the client’s needs. The study revealed other
potential reasons such as audit firms’ desire to survive in an ever-changing IT environment and/or
surpass their competitors using advanced audit technologies.

Contrary to most prior studies that examined the use of BDA in the Big-4 audit firms, this study
considered auditors’ viewpoints from firms of different sizes: internationally affiliated firms (the Big-
4 and non-Big-4), a governmental audit agency, and local audit firms. The findings revealed that the
adoption of BD and BDA differs according to the type of audit firm. International audit firms use BD
and BDA more than the ASA and local audit firms. In addition, the Big-4 audit firms use BD and BDA
in their audit engagements more than international non-Big-4 audit firms in terms of BD collected,
BDA techniques, BDA software packages, and integration of BDA into various audit procedures.

Moreover, this study contributed to the auditing literature by offering empirical evidence regarding
the potential obstacles hindering BD and BDA's wide diffusion among audit firms. Some of these
obstacles are due to the specific characteristics of the Egyptian context, while others are universal. It
is worth noting that clients and outdated standards received the most attention from the
participants belonging to the Big-4 audit firms. However, the unavailability of financial, human, and
technological resources received the attention of most participants from international non-Big-4 and
local audit firms.
The findings reported in this study highlight that audit firms need to exert more effort to remove
obstacles and optimize the benefits they can receive from BDA. In addition, the auditing regulator in
Egypt, the Permanent Committee for Accounting and Auditing Standards, should prepare and issue
guiding materials to help auditors adopt BDA properly in financial audits, such as in the USA, the UK,
Switzerland, India, Singapore, and elsewhere. Furthermore, audit firms should propagandize the
availability of BDA and its benefits to clients and other stakeholders. Moreover, educating existing
auditors and prospective business graduates on dealing with BDA is favourable to sustaining the
audit profession. Hence, audit firms must offer ongoing in-house analytics training courses to
strengthen and increase the application of advanced data analytics tools during audit engagements.
Besides, urgent changes in education need to happen, where data analytics courses should be
injected into the curricula of business schools. Further, accounting graduates should be encouraged
to obtain analytics-related certificates such as CAP (certified analytics professional), Azure data
scientist associate, and the IBM data science professional certificate.

Although this study makes several contributions to the extant literature, it has several limitations.
First, depending on qualitative research constrains the generalizability of the research findings. Thus,
these findings are more relevant to the Egyptian audit market than other markets. Future research
could expand this study by using other data collection methods, such as questionnaires, to collect
the viewpoints of a larger sample to ensure the generalizability of the results obtained. Second, the
study focused on using BD and BDA in the financial audit service line only without considering other
service lines provided by audit firms. Further research could examine the impact of BD and BDA on
other service lines provided by audit firms. Further research could also examine audit practitioners’
viewpoints regarding the most important analytics knowledge and skills areas that auditors need to
acquire. In addition, future research could also address academics’ viewpoints regarding these
knowledge and skills areas since they are responsible for setting and teaching the curricula provided
to business school undergraduates. Furthermore, future research could employ multiple theories
related to digital transformation, such as task technology fit theory and diffusion of innovations
theory, to categorise the adopters and non-adopters and highlight how characteristics of BD and
BDA can explain the adoption and non-adoption among audit firms.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 The exception to this was Participant 16, who was interviewed on 18 January 2023.

2 More details about the ASA strategy are available at https://asa.gov.eg/Page.aspx?id=5_1284.

3 More details are available at

http://www.mpbs.gov.eg/Arabic/AboutMinistry/Pages/MissionAndVision.aspx.
4 The authors made this participant anonymous because his/her quotation could reveal his/her
identity and the audit firm in which he/she works.

5 When participants use the term comparative analysis, they mean setting expectations at the
beginning of the audit, comparing these expectations to actual numbers, and determining variances
as indicators of potential red flags.

6 Citizen data scientists are not advanced experts in data science but have sufficient skills and
knowledge to execute simple and moderately sophisticated analytical tasks that would have
previously required more expertise. Citizen data scientists do not typically have coding skills but can
use no- or low-coding analytics tools.

Previous article

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