The Effect of Computer-Assisted Technology on Auditor Litigation

Abstract

With audit IT technology and data analytics changing at a quick pace, it's imperative that the industry adapts. The motivation for this paper stems from the accounting world and the Big 4 audit firms changing their demands on the profession. I conducted a three-cell-between-subjects experiment using 76 participants through Amazon Mechanical Turk regarding a hypothetical class action lawsuit against auditors for an undetected misstatement. The three conditions included a No IT available, IT available but not used, and IT available and used. My two hypotheses center from the Lowe et al. (2001) paper and how if IT during an audit fails, juries will have lower judgement and competence of the auditor. This paper studied the effect of computer-assisted audits on damage awards in auditor litigation based on evaluative judgments of auditor effort. Following the case, participants answered a series of questions to capture bias and feelings about the auditors. The results supported prior research of the link between evaluative judgments and damage assessments, but did not find the primary, novel hypotheses to be significant. The limitations of this study were the use of MTurk instead of a real jury and the potential bias that people have on the accounting profession.