Digital innovation in Swedish audit firms

Abstract: Digital innovation has always been at the heart of technological progress and more than ever, it has become an essential business strategy. This technological progress is making companies change their internal processes and rethink their businesses. This is the case for audit firms that have to deal with innovation. Cloud-based services, large amounts of data and automation are advancing and changing the audit sector, which is changing the way information is analyzed and received. The purpose of this study is to look deeper into how audit firms innovate by looking at how the audit processes changed in the three stages, planning, review and reporting as a result of innovation in order to create an understanding of how technology changes the auditor's work. The study is conducted in a qualitative method based on semi-structured interviews with auditors. The theoretical framework consists of Technology-Organization-Environment (TOE) and Diffusion of innovations (DOI) theories. The empirical evidence contains data collected from twelve semi-structured interviews with auditors. The study contributes with knowledge about the auditors' view on the impact of digitalization on their work. The main finding is that the customers are the ones driving digitalization in audit firms because the use of digital tools depends mostly on which customer base the audit firms have. This finding highlights the fact that large audit firms are adopters of digital innovation and not the ones driving the changes. The results also show that the use of data analysis has allowed the auditors to have a better understanding of the audited company. Deeper analysis can be done on a larger amount of data and this enables to review all material and a complete set of data becomes the subject of selection. The empirical evidence also shows that larger audit firms have made great progress regarding the development of their inhouse digital systems. Moreover, small firms are not particularly interested in automation. Thus, competition does not stimulate the reception of innovation in this case. Auditors must be good at limiting which material to document but they don’t actually know how to do it, which means that more innovation is needed.