Working Paper: The Purposes and Functions of Audit Firms’ Technology-Based Audit Tools

Paper Authors: Colleen Boland, Nicholas Galunic, and Matthew Sherwood

Abstract: Although auditing standards do not mandate the use of technology-based audit tools (TBATs), they have become increasingly prominent. However, only the individual audit firms and their regulators know the quantity, nature, and capabilities of the TBATs available to external audit teams. Employing a qualitative approach, this study addresses the knowledge gap by examining a propriety listing of the TBATs available to the audit engagement teams from eight of the largest U.S. audit firms. Contributing to our understanding of auditors’ prior and planned technology capital investments, we provide the first comprehensive understanding and description of the suite (i.e., toolbox) of available TBATs while also providing a multi-dimensional TBAT framework. Our framework should provide a foundation for regulators and researchers to examine the potential benefits and issues associated with TBATs, enabling more relevant and insightful research in this area. Second, we provide insights into the potential role of TBATs within audit firms’ internal Quality Control systems, shedding light on decision-making during audit engagement execution and TBAT’s role as an implicit quality control mechanism. Finally, we apply the framework to audit firms’ TBATs under development to shed light on the near-term objectives of future TBATs. Our study offers relevant information to regulators and researchers on the current and near-future state of technology tools available to auditors, aiding in deliberations on potential revisions to auditing standards and providing a classification framework for future research.  

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The economic research fellows and staff economists generate high-quality working papers that inform the oversight activities of the PCAOB and are disseminated to stimulate discussion and critical comment to the benefit of the public. Working papers are preliminary materials that have not been approved by the Board and reflect only the views of the author(s).

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