Emerging Technology

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Emerging technology and Emerging


technology and
auditing practice: analysis auditing
practice
for future directions
Mohammed Muneerali Thottoli and Essia Ries Ahmed 99
University of Nizwa, Nizwa, Oman, and
Received 19 June 2021
K.V. Thomas Revised 22 January 2022
Marian College Kuttikkanam (Autonomous), Kuttikkanam, India 21 February 2022
23 March 2022
Accepted 20 April 2022
Abstract
Purpose – The purpose of this paper is to explore the effects of emerging technology (technology adoption,
perceived benefits, technological challenges and ease of use) and the auditing practice of accounting
professionals.
Design/methodology/approach – The primary method of data collection was a questionnaire directed to
newly practicing chartered accountants who are partners of sole proprietorship or partnership firms in India.
The data were analyzed by using partial least squares structural equation modeling (PLS-SEM).
Findings – The findings revealed that there is a positive and significant relationship between characteristics
of emerging technology (technology adoption, technological challenges and ease of use) and auditing practice,
while factors of the perceived benefits had a negative relationship with auditing practice.
Research limitations/implications – The study model would aid technology enabled audit research by
giving a platform for a new study to investigate further detailed solutions to emerging information technology
determinants.
Practical implications – This study illustrates how tools technique perceived benefit motivates sole
proprietorship practicing auditors to adopt emerging technology- enabled auditing software for auditing
client’s financial statements. Further, this study has added to the information technology auditing literature
and might add benefits to the numerous other audit firms to adopt in emerging technology tools their
audit firm.
Social implications – Audit firms, generally sole proprietorship and partnership firms, should be given
enough awareness about the latest audit software tools to carry out their audit tasks efficiently.
Originality/value – The study findings highlight benefits of emerging technology-enabled auditing practice
among owners/partners of the sole proprietorship or partnership firms, which is not extensively discussed in
the prior studies. Furthermore, it broadens knowledge of perceived benefit, technological challenges and ease of
use in technology-enabled audit software in the auditing and accounting literature.
Keywords Auditing practice, Technology adoption, Perceived benefit, Technological challenges, Ease of use
Paper type Research paper

1. Introduction
The advances in technology have changed accounting and auditing practices. On the one
hand, accounting professional services provide the preparation of income statements, the
statement of financial position, equity shareholders statements, cash flow statements and
other bookkeeping services. Whereas, on the other hand, the auditing profession provides
services related to the audit of financial statements, taxation services and other audit services
(Phang and Foong, 2010; Albring et al., 2014). Audit firms always try to use advanced audit

© Mohammed Muneerali Thottoli, Essia Ries Ahmed and K.V. Thomas. Published in European Journal
European Journal of Management
of Management Studies. Published by Emerald Publishing Limited. This article is published under the Studies
Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and Vol. 27 No. 1, 2022
pp. 99-119
create derivative works of this article (for both commercial and non-commercial purposes), subject to full Emerald Publishing Limited
attribution to the original publication and authors. The full terms of this licence maybe seen at http:// e-ISSN: 2635-2648
p-ISSN: 2183-4172
creativecommons.org/licences/by/4.0/legalcode DOI 10.1108/EJMS-06-2021-0058
EJMS tools to provide efficient audit services to their clients and thereby maintain a good reputation
27,1 with their stakeholders (Wessels, 2005). One of the most important computer-assisted
auditing tools and techniques (CAATs) is generalized audit software (GAS), which is
considered to be a set of generalized software that permits auditors to cross-examine a variety
of client data and test clients’ accounting software (Debreceny et al., 2005; Thottoli, 2020,
2021d). Technology adoption in auditing is considered to be an essential component to assess
the efficacy and efficiency of audit tasks (Pedrosa et al., 2020; Mansour, 2016). The auditing
100 profession has recently faced various information technology (IT) challenges in conjunction
with the conduct of business using advanced IT-enabled accounting transactions (Byrnes
et al., 2018). Nowadays, it is virtually impractical to carry out a financial statement audit
without using emerging technology tools. Such a debate may perhaps have been acceptable
during the past two decades; however, it is important to know why practicing auditors use
emerging technology tools from an auditing professional perspective and to ascertain how it
might be possible to increase the efficacy and efficiency of external auditors’ tasks (Pedrosa
et al., 2015). Emerging technology tools have remained extensive in the global service
environment over the past two decades, particularly with the rapid shifts in stakeholders’
needs, the timely provision of services and improved service quality at a lesser cost. Auditing
is considered to be a labor-intensive profession, which requires a stable emphasis on
efficiency and competitiveness to increase the productivity of junior auditors during the
auditing process. Accordingly, the implementation of emerging technology tools in the
auditing process leads to an improvement in productivity, a better accumulation of sufficient
and appropriate audit evidence, and provides a more rapid communication with stakeholders
and assures the protection of confidential client data. The publication of the latest audit
proposing rules places more pressure on practicing auditors to become more proficient and to
be better prepared to compete in terms of the cost of audits (Abou-El-Sood et al., 2015).
Emerging technology tools enabled auditing to improve the capability and efficiency of
statutory audits. The use of electronic auditing reduces the amount of time needed to perform
audit tasks and reduces the operational cost of audits. The use of emerging technology tools
has enabled auditing to improve the quality of audit services, increase firms’ operational
profit and reduce audit risks (Okab, 2013). Auditors should thus also adopt the use of more
information communication technology (ICT) tools and techniques in auditing (Ahmi et al.,
2017). A limited number of studies have examined the relationship of emerging technology
tools with audit practices, an example being Thottoli et al. (2019c), which examined the link
between communication technology and auditing practices. The authors found that there is a
relationship between four elements of communication technology and audit practice;
however, this study ignores the main factors of IT. Therefore, there is currently a lack of
knowledge as to how precisely emerging technology tools could influence auditors’ practices.
Just as accountants and auditors need to think about artificial intelligence (AI), they also need
to consider how the cloud deals with big data (Luo et al., 2018). A lack of adequate training in
computerized auditing and a lack of understanding of special functions of audit software by audit
assistants are considered to be the main constraints to adopting emerging technology tools for
audit software in the audit process (Abou-El-Sood et al., 2015; Thottoli, 2021a). Computer-assisted
data mining techniques are still neglected, or are only employed by a small number of practicing
professionals (Pedrosa and Costa, 2014). The key challenges faced by auditors are the
implementation cost of specialized audit tools and staff training (DeLone and McLean, 2003).
Technological challenges have meant that their features and built-in functions have become more
complicated, and internal auditors are not suggested to use such tools on account of the
complexity in terms of the ease of use (Tijani, 2014). It has been seen that a lack of proficiency
exists regarding the relationship between electronic auditing, both in its theoretical and practical
concepts (Okab, 2013). The effectiveness of technical training has been investigated as a
possible intervention for practicing auditors’ use of audit software (Payne and Curtis, 2016).
The key factors are ease of use, technology acceptance model (TAM), unified theory of acceptance Emerging
and use of technology (UTAUT recommends that the adoption of emerging technology tools and technology and
usage is affected by effort expectancy (EE), performance expectancy (PE), facilitating conditions
(FC) and social influence (SI); Venkatesh et al. (2003). Some sole proprietorship and partnership
auditing
audit firms agree that the acceptance of audit software might not be cost-effective. This could be practice
due to a lack of proper awareness of auditing software and its perceived benefit among auditors.
The adoption of emerging technology tools also requires adequate practical skills and training.
Ease of use and TAM may well also compel many audit firms to bring emerging technology tools 101
to the audit firm. However, as no precise studies have been carried out that explore the specific
effects of emerging technology tools factors on auditing practices, there is a lack of clarity
regarding how emerging technology tools enable auditing practice. Accordingly, this research
aims to examine the relationship between emerging technology tools and auditing practice,
namely, technology adoption, perceived benefits, technological challenges, ease of use and
auditing practice.
The rest of the paper is organized as follows: a review of literature, theoretical framework,
methodology, results, conclusions and limitations.

2. Literature review
2.1 Emerging technology and auditing practice
The auditing function is an important activity in any organization, which is designed to
ensure the veracity of financial statements and the need to provide a service in a controlled
and supported environment (Komnenic, 2009). The current widespread use of emerging
technology tools in an organization has had made a critical impact on the auditing profession.
This adoption of technology will have the effect of guaranteeing that accounting data exist
within a safe, regulated, monitored and supported environment. This can be considered to be
a key challenge for practicing auditors. Emerging technology tools enabled environments,
practicing auditors will start by applying business intelligence tools, which are considered to
be a key factor in making business decisions (Ciprian-Costel, 2014). Professional auditors’ IT
and auditing skills are becoming increasingly important for maintaining the integrity of
automated systems (Adeyemi et al., 2014). Manual auditing has transformed noticeably
among auditors as a result of the latest advances in technology. Current innovative enterprise
resource planning (ERP) systems are increasing the usage of online business transactions by
stakeholders, as well as the usage of the cloud and the fast communication and availability of
e-data for use by auditors and boards of directors (Byrnes et al., 2018). According to Costa
et al. (2016), system quality has an important effect on the behavioral intention to use such
systems, as well as the level of user satisfaction. Management support is also very important
for deciding whether to implement ERP, or not.
Previous research findings have shown that the use of technology auditing tools for audit
assignments can aid the sequencing and design of audit objectives (Kacanski, 2016).
Emerging technology has thus enabled audit tools to have the potential to expedite auditors’
views (Thottoli and Thomas, 2020), as such emerging technology tools produce a detailed list
of junior audit tasks that free up the lead auditor to be able to focus on a special task
(Abdolmohammadi and Usoff, 2001). Additionally, the literature review confirms that in
general, predesigned technology (Berg, 1998) stipulates the choice of a wide variety of audit
tools and techniques that can be used to support the majority of audit tasks, ranging from
data mining through to data examination. Technology audit tools add value, productivity
and reduce the burden for auditors, albeit they also diminish the level of auditors’
responsibilities (Pedrosa and Costa, 2012).
The early literature on the adoption and utilization of emerging technology tools and
CAATs found that the usage of technology tools certainly and significantly contributes to the
EJMS efficiency and productivity of junior auditors’ performance when auditing clients’ financial
27,1 statements (Janvrin et al., 2008; Banker et al., 2002; Tottoli, 2021b; Abdolmohammadi and
Usoff, 2001; Elliot et al., 1985), and that they are used to support nearly all audit assignments
(Pedrosa and Costa, 2012). In addition, in a separate stream of research, the effects of audit
technology tools on professional judgment in terms of facilitation and decision-making skills
were discovered (Bell et al., 2002).
102
2.2 Technology adoption
Since the majority of an organization’s business involves emerging technology tools-based
accounting, this obliges audit firms to adopt the usage of audit software to audit financial
statements for their clients. The adoption of IT has facilitated increased performance in auditing
and accounting between practicing professional auditors (Thottoli et al., 2019a). Abreu et al.
(2018) examined blockchain technology and some of its variations, and they found that
blockchain technology has a favorable impact on the auditing environment, and that it can help
existing processes become more efficient. Internal auditors have since begun to recognize the
need to use technology to carry out their auditing tasks. CAATTs, in particular, can help
improve the efficiency and efficacy of auditing. The introduction of IT has been shown to result
in drastic changes in the way of conducting business, where one of the most recent advances in
has been cloud computing. This adoption of IT has brought about a significant change in the
field of the practices of auditing and accounting firms (Soni et al., 2018). Audit firms have been
obliged to use IT in their auditing, as the majority of their clients use IT in their businesses (Rosli
et al., 2013). It is evident that those audit firms that use IT demonstrate better performance than
those audit firms that do not use IT. Audit firms are increasingly using CAATs and audit
software as an essential tool, which helps the auditor attain an increased level of audit quality
and efficiency, which, in turn, improves the reliability of data analysis and the collection of
evidence (Correia et al., 2019). Hence, it is hypothesized that:
H1. Technology adoption is positively associated with auditing practice.

2.3 Perceived benefit


Based on the size of their business, most companies finalize the preparation of their financial
statements at the last minute to file their financial statements with the income tax department.
Auditors use audit software to overcome audit challenges. Big4 audit firms are currently using
audit software for audit tasks, and therefore, the rationale behind sharing technology’s perceived
benefit is crucial, especially for sole proprietorship and partnership firms. The majority of audit
firms are contacted to carry out their audit tasks if their auditors use IT in their professional
services, and it is evident that the quality of the audit mission has increased with less audit risk.
Furthermore, IT helps these firms collect information on time and quicker, and improves their
understanding of the client’s work and environment (Ciprian-Costel, 2014).
Audit software and the adoption of IT in auditing helps auditors to complete their audit
tasks on time in an efficient manner (Mustapha and Lai, 2017). Emerging technology tools,
CAAT and audit software all ensure the high quality of audit reports, and the trend is for the
majority of developing countries to adopt such audit software (Oni, 2015). An audit firm can
enhance the operational performance of its internal audit department (IAD) through the use of
an integrated effective ERP system and proper auditing software. It has been found that
investment in CAAT tools is essential, owing to its immense effectiveness in improving the
performance of internal audits (Al-Hiyari et al., 2019; Tsai et al., 2015). GAS enables an internal
auditor to carry out independent examinations of clients’ data, which are stored on a
computer without any dependence on accountants (Smidt et al., 2021). It can test the
dependability of client accounting software and execute system re-performance, which in
turn leads to ensuring the accumulation of audit evidence and the enhancement of the Emerging
accuracy of audit tests and achieving auditing tasks more efficiently, which results in a more technology and
cost-effective audit. Likewise, CAAT tools provide auditors with the ability to save time in
their auditing tasks. In several instances in the literature, the manual audit testing procedures
auditing
are compared with CAATs-based techniques, where the auditor can save hours in each audit. practice
These perceived benefits of CAAT tools were discovered by Shamsuddin et al. (2015). Hence,
it is hypothesized that:
103
H2. Perceived benefit is positively associated with auditing practice.

2.4 Technological challenges


The audit starts when accounting ends. The majority of audit firms’ clients are capable of
finalize their financial statements at the end of the year, and hence, auditors have just limited
time to complete their auditing tasks. An auditor needs to be vigilant and has to ensure
fairness, accuracy and the reliability of financial statements while carrying out audits within
an ever-shorter period. At the same time, audit firms should consider the cost of the audit
software, the availability of skilled employees and the benefit of using audit software. Cloud
computing-based technology enforces certain threats, such as, for instance, inadequate
protection in terms of data security and confidentiality (Chou, 2015). Internet hackers are
endangering organizations, individuals and other organizations by stealing data or by
triggering business operational disruption that can have a significant effect on the reliability
of source data entered in the financial statements (Barta, 2018; Thottoli, 2021c). The adoption
of technology includes elements such as environmental factors, the non-availability of
technically experienced auditors in the job market, the size of a client’s business, expectations
and the unavailability of GAS in a variety of languages (Widuri et al., 2016). The perceived
risks of audit software or CAATs are the FC, EE and the number of junior auditors, all of
which are the main drivers for the implementation and use of CAATs (Pedrosa et al., 2020).
Pedrosa and Costa (2014) emphasized the importance of the challenges of CAATs, as well as
auditors’ new areas of proficiency and competency. Hence, it is hypothesized that:
H3. Technological challenges are positively associated with auditing practice.

2.5 Ease of use


The ease of use of generalized auditing software by small proprietary practicing audit firms
has recently been studied by Thottoli (2022) who proposed the concept of the TAM. The TAM
framework comprises four sub-components: PE, EE, SI and FC (Venkatesh et al., 2003). The
two TAM components of PE and FC appear to be particularly important determinants for
influencing effective GAS adoption (Mahzan and Lymer, 2014). TAM and ease of use has been
examined from a software-specific perspective, including the associated factors, such as the
use of software, the usefulness of the software and ease of use of software (Kim et al., 2016).
The essential factors that influence internal auditors’ intentions to use technology tools are
PE and FC (Al-Hiyari et al., 2019). Employees’ ability to use evolving technology tools reflects
their technological proficiency in executing desired activities (Chopra, 2019).
Hence, it is hypothesized that:
H4. Ease of use is positively associated with auditing practice.

3. Theoretical framework
This study’s framework explains the underlying structure regarding both the dependent
variable (auditing practice) and the independent variables (technology adoption, perceived
EJMS benefits, technological challenges and ease of use). Rationally, the theoretical framework is
27,1 constructed to explain the connections between the associated variables by means of a
detailed literature review survey. The research hypotheses were then developed to address
the study’s primary research issues. The hypotheses of this study were developed by
examining the direct relationship between the emerging technology characteristics
represented by technology adoption, perceived benefits, technological challenges and ease
of use and auditing practice. This study has opted to concentrate on the four independent
104 variables for certain reasons. Firstly, such variables are important emerging technology
factors that influence auditing practice among small scale audit firms in Kerala, India.
Secondly, the previous studies recommended technology awareness and adoption in the
accounting profession (Sana’a, 2016; Venkatesh et al., 2003; Kim and Crowston, 2011). Finally,
the theoretical framework outlined in Figure 1 shows the relationship between technology
adoption, perceived benefits, technological challenges and ease of use within the auditing
practice.

4. Methodology
4.1 Sample and data collection
In total, a survey was sent out to 350 auditors (owners/partners) of sole proprietorship and
partnership firms in India in 2018. In all, only 321 respondents’ answers were suitable for
analysis, which represents 91.71% of the original surveys distributed. The analyzed data
from the primary data collected were analyzed by using random sampling techniques and
personal interviews with professional practicing chartered accountants. The majority of the
surveys were returned by hand for data collection. In addition, the study also collected data
by using Google Forms. Smart partial least squares (PLS), Version 3 was used for the
quantitative data analysis, with bootstrapping techniques. Structural equation modeling
(SEM) was used to measure the hypotheses, which is considered to be a statistical tool for
analyzing structural theory in social sciences, which uses a confirmatory approach (CFA),
rather than an exploratory approach (EFA) (Byrne, 2013). SEM is a general linear model
(GLM) extension, which enables a researcher to test multiple regressions at the same time
(Hair et al., 2006). Traditional models can be tested with SEM software, although more
sophisticated correlations and models can also be used, such as CFA and time-series studies
(Bollen, 1990).

Technology
adoption

Perceived
benefits

Auditing
Practice

Technological
challenges

Figure 1.
Schematic diagram of
the adopted research Ease of use
framework
4.2 Sample selection Emerging
The sample was collected from chartered accountants who are owners/partners of a sole technology and
proprietorship or a partnership firm. The reason for selecting auditors in India, where the
majority of auditors are sole practices, or have just two or three partners who do not use
auditing
technological tools. Therefore, there is a necessity among small-scale audit firms to be practice
familiar with emerging technology tools to improve their auditing.
105
4.3 Measurements
The survey is based on constructs that have been validated in prior studies (Appendix) and
that have been adapted for this study’s framework. A total of seven demographic questions
are included in Section A, while Section B concerns access to technology adoption. Section C
provides auditing practices, Section D indicates the level of perceived benefits of technology
tools in auditing by auditing professionals, Section E deals with technological challenges and
Section F confronts the “ease of use” of auditing professionals. This survey questionnaire is
adapted from Thottoli et al. (2019c).

4.4 Data analysis


The study analysis was carried out with small sample size. PLS-SEM provides solutions even
for small samples, where models consist of several hypothetical constructs and a larger
number of items in the variables (Hair et al., 2017; Willaby et al., 2015). PLS has been
considered by several scholars as an evolving multivariate data-analysis technique (Wong,
2013). A five-point Likert scale was used to evaluate the questionnaire’s items. The scale
utilized here was from 1 to 5, with 1 being the lowest and 5 being the highest score, where 1
denotes strongly disagree, 2 denotes disagree, 3 denotes neutral, 4 denotes agree and 5
denotes strongly agree.

4.5 Reliability and validity


The reliability and validity tests confirm that the results are error-free to a certain extent, thus
validating consistent measurement across a variety of instruments (Sekaran and Bougie,
2016). The result of the reliability using Cronbach alpha proved that the measures of the
adopted key constructs is supported. The construct’s inner dependability is deemed to be
achieved when the Cronbach’s alpha estimate is 0.7 or higher (Pallant, 2001). Cronbach alpha
values ranging from 0.864 to 0.971 for the five constructs (auditing practice, technology
adoption, perceived benefits, technological challenges and ease of use), all of which are shown
under Table 1, which is considered as being an acceptable level, based on Nunally (1980) and
George and Mallery (2003).

5. Results
5.1 Descriptive statistics
According to the descriptive data in Table 2, the mean average of the study’s dependent
variable of auditing practice is 0.042, with a standard deviation of 1.00, a minimum of 3.337
and a maximum of 2.295. The first independent variable, technology adoption, has a mean
average of 0.210, with a standard deviation of 1.00, a minimum value of 4.709 and a
maximum value of 1.439. The second independent variable, which is perceived benefit, has a
mean average of 0.059, with a standard deviation of 1.00, a minimum value of 4.698 and a
maximum value of 1.248. The third independent variable of technological challenges has a
mean average of 0.134, with a standard deviation of 1.00, a minimum value of 2.140 and a
maximum value of 1.735. The fourth and last independent variable, ease of use, has a mean
average of 0.254, with a standard deviation of 1.000, a minimum value of 4.859 and a
EJMS maximum value of 1.532. The high standard deviation of ease of use highlights the variations
27,1 in the difficulties in understanding defined ease of use factors among junior and lead auditors.
The degree to which a construct is distinctive from other constructs is determined by
discriminant validity (Hair et al., 2010), which is identified by the inevitability of a low
correlation among the measure of concern and other measurements that do not measure the
same concept or variable (Heeler and Ray, 1972). Certain criteria are utilized to analyze
discriminant validity in the SEM-PLS assessment. The square root of each construct’s
106 average (AVE) should be greater than the degree of correlation between them. As a result, the
square root of the AVE is compared to the correlations of the other components to adopt
discriminant validity (Fornell and Larcker, 1981). Table 3 shows the discriminant validity
constructs. With regards the correlation data, all emerging technology variables were
positively correlated, with three of these variables being significantly correlated with
auditing practice.
The heterotrait–monotrait (HTMT) ratio can be used to establish discriminant validity
(Franke and Sarstedt, 2019; Henseler et al., 2015), where each set of reflective constructs has
an HTMT value less than 0.900, as can be seen in Table 4. This indicates that discriminant
validity has been proven to a satisfactory level.
Cross-loading can be performed to test the discriminant validity of a model. The cross-
loading results within each construct are evaluated to determine the discriminant validity,
where the validity is considered to be fair and satisfactory if the item score of every construct
is greater than the item score of the remaining constructs (Farrell, 2010). As seen in Table 5,
each construct’s item score is greater than the remaining constructs’ item score, and therefore,
the study’s analysis substantiates that the validity of the whole constructs between the cross-
loading condition is at a satisfactory level.
After the measurement model evaluation had passed all of the proposed criteria, the
structural model evaluation was then carried out. The investigation of the determination
coefficient (R2) was the starting point for defining the structural model. In this research, the
endogenous variable emerges to have an R2 value of 0.261, recommending that 27.5% of the
variance in auditing practice can be described by technology adoption, technological
challenges, perceived benefit and ease of use.

Variables Number of questions Cronbach’s alpha Result (based on Nunally, 1980)

Auditing practice 10 0.942 Good


Technology adoption 6 0.919 Good
Perceived benefit 5 0.947 Good
Technological challenges 4 0.734 Good
Ease of use 16 0.917 Good
Table 1. Note(s): As the alpha value was more than 0.7, a subsequent analysis was performed (Nunnally, 1980; George
Reliability results and Mallery, 2003)

Variables Mean Std. dev Minimum Maximum

Auditing practice 0.042 1.000 3.337 2.295


Technology adoption 0.210 1.000 4.709 1.439
Perceived benefits 0.059 1.000 4.698 1.248
Table 2. Technological challenges 0.134 1.000 2.140 1.735
Descriptive statistics Ease of use 0.254 1.000 4.859 1.532
The relationship among constructs or latent variables hypothesized in the study model is Emerging
represented by the structural model. Because prediction is the fundamental goal of PLS (Hair technology and
et al., 2010), the significance of the path estimates and the variance explained (R2) of the
endogenous constructs are used to establish the level of quality of the theoretical model (Chin,
auditing
2010). As a result, it is possible to infer that this study meets this requirement in a significant practice
manner. Table 6 shows the variance explained for endogenous construct.
107
5.2 Hypotheses testing
The given hypotheses were tested using the SEM-PLS bootstrapping technique. According to
Lohmoller (1989), a value of path coefficient range of 0.1 has been considered to be acceptable.
Initially, the results of three of the hypotheses (technology adoption, technological challenges
and ease of use) were all shown to be significant, whereas one hypothesis (perceived benefit)
proved to be insignificant. The summarized hypotheses results are shown in Table 7.
Technology adoption, technological challenges and ease of use, all of which had a path
coefficient of 0.000, have a positive relationship with auditing practice, whereas the other
independent variable of perceived benefit has a negative relationship with auditing practice,
with a path coefficient of 0.042 (see Figure 2).
The results of the p-value and t-value are described in Table 7, which shows that
technology adoption has a p < 0.001, and t 5 7.223. These findings suggest that technology
adoption has a significant effect on auditing practice, and it is evident that there are auditors
who are ready to accept technology adoption in auditing practice, and accordingly, H1 is
supported. The results of the p-value and t-value of technological challenges have p < 0.001
and t 5 6.166, respectively, which indicates that technological challenge has a positive impact
on auditing practice, especially as it is evident that a high level of technological challenges
influences the adoption of technology tools by practicing auditors. H3 is thus also supported.
The results of the p-value and t-value of ease of use have p < 0.001 and t 5 4.587, respectively.
This result indicates that ease of use has a positive impact on auditing practice, and it is

Auditing Ease of Perceived Technology Technological


practice use benefits adoption challenges

Auditing practice 0.827


Ease of use 0.282 0.796
Perceived benefits 0.119 0.029 0.908
Technology 0.342 0.100 0.212 0.820
adoption Table 3.
Technological 0.262 0.016 0.321 0.052 0.801 Discriminant validity
challenges constructs

Auditing Ease of Perceived Technology Technological


practice use benefits adoption challenges

Auditing practice
Ease of use 0.298
Perceived benefits 0.123 0.061
Technology 0.358 0.105 0.238
adoption
Technological 0.292 0.129 0.435 0.109 Table 4.
challenges HTMT ratio
EJMS Auditing Ease of Perceived Technology Technological
27,1 practice use benefits adoption challenges

AP_1 0.767 0.271 0.037 0.296 0.194


AP_2 0.851 0.243 0.024 0.284 0.158
AP_3 0.834 0.227 0.069 0.269 0.169
AP_4 0.792 0.207 0.084 0.308 0.165
108 AP_5 0.859 0.218 0.159 0.269 0.248
AP_6 0.857 0.212 0.137 0.311 0.243
AP_7 0.843 0.234 0.129 0.280 0.270
AP_8 0.821 0.231 0.102 0.265 0.250
AP_9 0.811 0.254 0.134 0.262 0.236
EOU_6 0.269 0.832 0.016 0.096 0.013
EOU_7 0.239 0.862 0.029 0.084 0.006
EOU_8 0.246 0.879 0.009 0.126 0.004
EOU_9 0.267 0.851 0.002 0.112 0.040
EOU_10 0.203 0.766 0.062 0.034 0.006
EOU_11 0.198 0.756 0.078 0.005 0.033
EOU_12 0.177 0.694 0.073 0.095 0.076
EOU_16 0.163 0.705 0.031 0.064 0.076
PB_1 0.111 0.052 0.881 0.223 0.258
PB_2 0.065 0.037 0.907 0.203 0.276
PB_3 0.110 0.046 0.922 0.187 0.351
PB_4 0.106 0.002 0.922 0.182 0.291
PB_5 0.126 0.007 0.906 0.173 0.278
TA_1 0.303 0.100 0.031 0.832 0.029
TA_2 0.229 0.022 0.274 0.840 0.043
TA_3 0.201 0.045 0.268 0.800 0.088
TA_4 0.294 0.112 0.212 0.807 0.036
TA_5 0.290 0.069 0.175 0.866 0.057
TA_6 0.265 0.089 0.142 0.830 0.095
TA_7 0.334 0.108 0.166 0.762 0.043
TC_2 0.154 0.118 0.352 0.052 0.778
Table 5. TC_3 0.271 0.073 0.107 0.099 0.854
Cross loading results TC_4 0.170 0.056 0.422 0.037 0.767

Endogenous construct Variance explained (R2)


Table 6.
Variance explained Exogenous variables → Endogenous (auditing practice) 0.261

Path coefficient- p-
Hypotheses Path β Standard error t-value value Decision

H1 TA → AUD_P 0.341 0.047 7.223*** 0.000 Supported


H2 PB → AUD_P 0.042 0.042 0.988 0.324 Not supported
H3 TC → AUD_P 0.297 0.048 6.166*** 0.000 Supported
H4 EOU → AUD_P 0.252 0.055 4.587*** 0.000 Supported
Table 7. Note(s): Significance levels: ***p < 0.001 (t > 3.33), **p < 0.01 (t > 2.33), *p < 0.05, (t > 1.605) (based in one-
Path coefficients tailed test)
TA_1 TA_2 TA_3 TA_4 TA_5 TA_6 TA_7 Emerging
0.832 0.840 0.800 0.807 0.866 0.830 0.762 AP_1 technology and
AP_2
auditing
PB_1 TA practice
0.767 AP_3
PB_2 0.881
0.341 0.851
0.907 AP_4
PB_3 0.922
0.922
0.834

0.792
109
–0.042
PB_4 AP_5
0.906 PB 0.859
0.261
0.857
PB_5 AP_6
0.843
0.297 AP
0.821 AP_7
–0.252
TC_2 0.778 0.811
0.854
TC AP_8
0.767
TC_3
EOU
TC_4 AP_9
0.766 0.756 0.694 0.705 0.832 0.862 0.879 0.851
Figure 2.
Results of the study
EOU_10 EOU_11 EOU_12 EOU_16 EOU_6 EOU_7 EOU_8 EOU_9

evident that the factors of ease of use have a positive effect on audit practice. Therefore, H4 is
also supported.
The p-value and t-value of perceived benefit have values of p > 0.05 and t 5 0.988,
respectively. This result indicates that perceived benefit has no impact on auditing practice,
and that evidently, there is no lack of knowledge regarding the perceived benefit of the used
of emerging technology tools for auditing practice among auditing professionals. H2 is
accordingly not supported.
Overall, three findings support the claim that the majority of factors chosen for analysis
had an impact on auditing practice.

6. Discussion
6.1 The impact of technology adoption among auditing practice
Previous studies have found that technology adoption is considered to be the most essential
factor that impacts auditing practice (Mazza and Azzali, 2018; Baksaas and Stenheim, 2019;
Wessels, 2005). Technology adoption facilitates the ability of auditors to enhance their
auditing practice and also enables auditing practice to minimize probable misstatements
when carrying out the auditing of items in financial statements. Additionally, scheduled
auditing tasks can be carried out on time (Phang and Foong, 2010; Albring et al., 2014).
Researchers originally intended to find the importance and effect of technology adoption on
auditing practice (Mahzan and Lymer, 2014; Razi and Madani, 2013).
In Table 7, the path coefficient analysis reveals a significant link between the technology
adoption and auditing practice (β 5 0.341, p < 0.001). This is in accordance with the hypothesis
proposed in this study, which indicates that technology adoption among auditors increases the
level of efficiency in auditing practices. The positive relationships encountered between
technology adoption and auditing practice is in accordance with the study of Mazza and Azzali
(2018), who also noticed that the quality of IT controls has an impact on audits. Muda and
Landau (2019) found that the technology use variable has a favorable and significant impact on
the quality of auditing and accounting practices. Firstly, these positive findings can be explained
by many reasons. Initially, the adoption of technology enabled in auditing practices improves the
speed and accuracy of audit tasks. Secondly, scholars believe that traditional auditing might not
EJMS be competent enough to be practiced in the current advanced technological environment, and
27,1 therefore, practicing audit firms must transform manual auditing to technology-based auditing
to improve auditing. Those firms that use technology in auditing ensure efficient, effective,
speedy and timely auditing. As a result, it can be argued that the reasonable justification for
obtaining this result for the first hypothesis is that auditors should be more aware of the benefits
of using technology-enabled auditing software to improve their auditing efficiency.
110
6.2 The impact of the perceived benefit on auditing practice
The next factor examined in this research was perceived benefit. Numerous research studies
have highlighted the fact that the perceived benefits of emerging technology are considered
to be the most crucial factors that influence auditing practice (Razi and Madani, 2013; Abiola,
2014; Mihret and Yismaw, 2007). A well-formulated and executed audit plan is one that
contains a thorough inclusion of cost and benefit emerging technology tools and cost-
effective ICT training. CAATs can probably act as an associating mechanism for traditional
audits with emerging technology enabled auditing, and the implementation of CAAT tools by
practicing auditors has resulted in achieving many benefits. Nevertheless, the limited
evidence regarding the assessment of cost-benefit analysis on investments in CAATs/GAS
had led auditors to continue operating with the manual audit (Mohamed et al., 2019; Pedrosa
et al., 2020). However, Table 5 shows the results of this study for the path coefficient analysis,
where there was found to be a negative relationship between perceived benefit and auditing
practice (β 5 -0.042, p > 0.05). This is not in accordance with the hypothesis suggested in this,
which indicates that perceived benefit is positively associated with auditing practice.

6.3 The impact of the technological challenges on auditing practice


With regards the factor of technological challenges, the results reveal that there is a positive
relationship between technological challenges and auditing practice. This finding suggests that a
high level of technological challenges has a high and positive impact on auditing practice, which
is in accordance with that, which was suggested in the purpose of this study (i.e. that
technological challenges have a positive relationship with auditing practice) and which confirms
a positive and significant direction (β 5 0.297, p < 0.001). This can be perceived by the fact that a
high degree of technological challenges exists among practicing auditors in the auditing practice.
If there is a high level of technological challenge, then newly qualified auditors are prepared to
accept these challenges in a positive way to implement advanced technology tools for audit
practice. This could be the result of many reasons, such as that young, qualified auditors believe
that customized audit software that is affordable for small-scale audit firms, together with
technology-based audit training increases firm profitability, and that technology-enabled
auditing can be understood by all those who have a basic level of computer knowledge. Widuri
et al. (2019) believed that the adoption of audit software by practicing auditors is required to
overcome the challenges of having to audit financial statements. Furthermore, Omoteso (2016)
stated that auditors need to utilize both emerging technology tools and software to improve their
quality of audit work and to able to refine their technical skills if they are to manage these new
challenges. The literature defends that the audit of items in the financial systems of any
organization cannot be carried out successfully without having proficiency in the transaction
process via the use of computerized accounting. These results are in accordance with the
objectives set out for this study.

6.4 The impact of ease of use on auditing practices


Perceived ease of use signifies “the extent to which a person believes that using an IT will
enhance his or her job performance” (Betti and Sarens, 2021; Venkatesh and Bala, 2008).
The findings for the fourth factor, i.e. ease of use, reveal that ease of use and auditing practice Emerging
have a favorable and significant relationship. These results findings imply that the elements technology and
or factors of ease of use have a positive effect on auditing practice. These findings are in
accordance with the objective of this study (i.e. that ease of use has a positive relationship
auditing
with auditing practice), which confirms a significant direction (β 5 –0.252, p < 0.001). practice
Auditors can use computer-assisted technologies to conduct automated audit testing across
the company on a frequent, real-time basis. Damerji and Salimi (2021) found that technology
readiness and perceived ease of use have a positive impact on technology adoption. In turn, 111
Stevens (2016) found that emerging technology delivers an easy identification of the
duplication of transaction data and can thus rule out the question of the reliability of the
transactional data set. In addition, he states that it minimizes time spent on transforming data
due to the automation process comprising pairing, extraction and formatting, and that a
substantive audit includes access to all (100%) the data populations, which “can lead to
superior results.” This could be attributed to the fact that there is a positive impact on the
elements of ease of use among owners/partners of a sole proprietorship or partnership firms.
Mansour (2016) specified that only two factors emanate from the TAM, which confirms that
statutory auditor’s intention to adopt CAATs, which facilitate conditions and auditors’ PE.
This result is in accordance with the objectives of this study. Emerging technology tools-
enabled audit software can be used to ease the auditing of items in financial statements on
time (Thottoli, 2021a). Researchers believe that sole proprietorship audit firms follow
traditional audit practices, which can slow down the audit task, which in turn results in the
non-acceptance of new client assignments. It is, therefore, important for auditors to adopt
attitudes that accept the use of technology as this motivates them to adopt emerging
technology tools-enabled audit software and thereby accept assignments from more clients. It
is, therefore, suggested that sole proprietorship and partnership audit firms need to
implement emerging technology tools-enabled audit software for auditing clients’ financial
statements. Ultimately, this exposes the fact that the inherent ease of use increases the
adoption of emerging technology-enabled software by sole proprietorship and partnership
firms, which, in turn, leads to improving the efficiency and effectiveness of auditing practice.

7. Conclusion
ICT provides a substantial change for the way of preparing and auditing financial
statements. Even though the risk of material misstatements from the use of emerging
technology tools-enabled transactions is high, such tools also provide new avenues for the
auditing practice. The advancement of technology has shown that the traditional way of
auditing is becoming more obsolete. Emerging technology tools-enabled audit software acts
as a complement of added value to enable auditors to carry out audits in a more timely,
efficient and effective way. Emerging technology tools-enabled auditing helps practicing
auditors to accumulate sufficient and appropriate audit evidence through vouching, tracing,
verification, recalculation, re-performance and electronic confirmation by third parties, and
can be used to analyze procedures through the use of audit software. Accordingly, auditors
must change their way of thinking to adopt emerging technology tools-enabled auditing
software for auditing their clients’ financial statements. The findings of this study confirm
that technology adoption, technological challenges and ease of use all have a positive impact
on emerging technology tools-enabled auditing practice, whereas perceived benefits have a
negative relationship with emerging technology tools-enabled auditing practice.

8. Implications
The findings of this study can be used to determine a number of implications. This study
highlights the value-added benefit of emerging technology tools-enabled audit software for
EJMS owners or partners of sole proprietorship and partnership firms, especially in India. The
27,1 adoption of audit software can increase the efficiency of carrying out audits by small audit firms.
The research discussion and findings posit that a potential justification to influence the adoption
of customized or GAS for internal or external auditors to make use of emerging technology-
enabled audit tools. The propensity of junior auditors to adopt emerging technology, as well as
their perceptions of its benefits and ease of use, provide insight into how practicing auditors can
overcome technological challenges by redefining their audit firm’s objectives. The findings
112 enhance technology tools auditing practice and, in turn, add value to the literature on accounting.
The study proposes public awareness of emerging technology tools-enabled audit practice, not
only in form, but also in substance. Additionally, this research can assist policymakers, software
providers, The Institute of Chartered Accountants of India (ICAI) – an association of audit firms,
and also the government to establish thoughtful and deliberate policies that harness technology-
enabled auditing practice.

9. Limitations
This research has been carried out within a limited geographical area – Kerala, India, where
only auditors of a sole proprietorship or partnership firms were targeted. Hence, the results
might only be relevant for the economic and governing environment of Kerala, India. It is thus
necessary to carry out further research with other economic and geographical environments
to provide broader findings. Future studies could also extend to large-scale audit firms in
other parts of the world. Furthermore, the research could be extended to use qualitative
methods. In should be added that other technological areas, such as ICT competency, ICT
confidence and training in technology tools, could well impact accounting or auditing
professionals’ decision to adopt technology-enabled tools in the future.

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117
Appendix

QUESTIONNAIRE

A. Demographic information

Audit firm:

1. Type of audit firm : 1. Sole Proprietorship 2. Partnership(LLP)

Auditors & Audit team:

2. Gender : Male Female


3. Age : 0-20 21- 40 above 40
4. Year of experience in auditing : 0-10 11-20 More than 20
5. Professional qualification : CA CS CMA
CPA ACCA
6. IT Qualification : Tally MS Word, Excel
: Others (specify) …….

Audit client

7. Type of Clients : Individual Partnership Pvt Ltd Co.


Public Ltd Co. Others (specify) ………...
B. TECHNOLOGY ADOPTION
The following statements indicate the adoption of Technology Adoption (TA) by auditing
professionals. Give your responses by putting tick (√) mark in the appropriate column against
statements on a five-point scale ranging from SD - Strongly Disagree, DA- Disagree, N- Neutral,
A- Agree, SA - Strongly Agree.
Sl SD DA N A SA
No. Statements 1 2 3 4 5
B.1 We employ technically competent audit assistants.
B.2 We insist on communicating with clients and other
staff using technology.
B.3 We use technology to improve audit efficiency
through reduced paperwork.
B.4 We use Computer-assisted audit techniques (CAATs)
to test client’s computer-based accounting system.
B.5 We have sufficient technological equipment to carry
out our work.
B.6 We use sophisticated accounting and auditing
software
B.7 We effectively use technology to manage our office
EJMS C. AUDITING PRACTICES
The following statements indicate broad auditing practices by auditing professionals. Give your
27,1 responses by putting tick (√) mark in the appropriate column against statements on a five-point scale
ranging from SD - Strongly Disagree, DA- Disagree, N- Neutral, A- Agree, SA - Strongly Agree.
Sl SD DA N A SA
No. Statements
1 2 3 4 5
C.1 We use our own customized audit software.
118 C.2 We test clients’ data using audit software.
C.3 We examine clients’ e-books of accounts only.
C.4 We review/collect supporting document for all
material transactions.
C.5 We do vouching and tracing only by using computer.
C.6 We review bank reconciliation only by using
computer.
C.7 We keep audit working papers only in soft copy.
C.8 We do substantive audit procedure using audit
software.
C.9 We test clients’ accounting procedures with input,
process and output using audit software.
C.10 We ensure clients accounting system comply with
applicable Accounting Standards.
D. PERCEIVED BENEFITS
The following statements indicate perceived benefits of technology-enabled auditing received by
auditing professionals. Give your responses by putting tick (√) mark in the appropriate column
against statements on a five-point scale ranging from SD - Strongly Disagree, DA- Disagree, N-
Neutral, A- Agree, SA - Strongly Agree.
Sl Statements SD DA N A SA
No.
1 2 3 4 5
D.1 Technology-enabled auditing ultimately reduces audit
cost.
D.2 Technology-enabled auditing increases firm
profitability.
D.3 Technology-enabled auditing helps to complete audit
task on time.
D.4 Technology-enabled auditing increases accuracy of
audit task.
D.5 Technology-enabled auditing increases audit staff’s
performance.
E. TECHNOLOGICAL CHALLENGES
The following statements indicate technological challenges in auditing facing by auditing
professionals. Give your responses by putting tick (√) mark in the appropriate column against
statements on a five-point scale ranging from SD - Strongly Disagree, DA- Disagree, N- Neutral,
A- Agree, SA - Strongly Agree.
Sl Statements SD DA N A SA
No.
1 2 3 4 5

E.1 Customized audit software cannot afford to small scale


audit firms.
E.2 Technology-enabled audit training increases cost of the
firm.
E.3 Technology-enabled auditing increases the risk of
getting sufficient and adequate audit evidence.
E.4 Technology-enabled auditing can understand only those
who have basic computer knowledge.
F. EASE OF USE Emerging
The following statements indicate the level of acceptance and use of ‘Ease of Use (EOU)’ by auditing
professionals. Give your responses by putting tick (√) mark in the appropriate column against statements technology and
on a five-point scale ranging from Strongly Agree, Agree, Neutral, Disagree and Strongly Disagree. auditing
Sl SD DA N A SA practice
No. Statements
1 2 3 4 5
F.1 I would find technology useful in my job
119
F.2 Using technology tools enables me to accomplish tasks
more quickly
F.3 Using technology tools increases my productivity
F.4 Using technology tools would reduce the time I spend
on unproductive activities
F.5 Using technology tools would increase the quality of
the audit
F.6 It would be easy for me to become skillful at using
technology tools
F.7 I would find technology tools easy to use

F.8 Learning to operate technology tools is easy for me


F.9 Using technology tools may require a lot of my mental
effort
F.10 People who are important to me think that I should use
technology tools
F.11 In general, the audit firm has encouraged to use
technology tools
F.12 Person who use technology tools have more prestige than
those who do not use it.
F.13 My firm have the resources necessary to use technology
tools
F.14 I have the knowledge necessary to use technology tools
F.15 An IT expert is available for staff whenever have
technological difficulties
F.16 I think that using technology fits well with the firm’s
audit approach
G. SUGGESTIONS
Suggestions if any, for extending the adoption of technology by auditors for financial statement
audits in Kerala……………………………………………………………………………………
(Thank You)

Corresponding author
Mohammed Muneerali Thottoli can be contacted at: [email protected]

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