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Audit technology and Financial Reporting Quality: The impact of information technology used in the audit process on the legitimacy of audited financial statements
2012 (English)Independent thesis Advanced level (professional degree), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

According to agency theory the managers of a company often have motives that conflict with the goals of the organization and the expectations of the company’s constituents. The information gap between the management and the constituents creates uncertainty and increases the need for qualitative financial information. The auditor’s role is to provide legitimacy to the financial statements and reduce the uncertainty caused by the information gap. If the financial statements of firms were unaudited it would be much more costly to raise capital because of the uncertainty information asymmetry causes. Unaudited firms would have to pay higher interest rates for debt and offer their shares at a lower price for equity as a result of the higher risks the constituents of the firm face in an uncertain situation.Audit technology has significantly changed the way audits are performed. Audit technologies differ across audit firms and this has shown to influence the audit structure of the firms, and to cause variation in the way the audits are performed. The purpose of this study is to enhance understanding of the use of audit technology across audit firms by comparing small and large audit firms and identifying differences and similarities amongst these and by exploring auditors’ perception of the effect of the use of audit technology on the legitimacy of financial statements. We attain the purpose of the study by developing a model for analysis. This model for analysis is based on our question of issue, which is the problematic variation in the use of audit technology, and on our theoretical framework which concerns legitimacy issues described by legitimacy theory and agency issues described by agency theory.This study was based on a deductive approach and the actor’s view was chosen as methodological view since the individual auditor’s interpretation of the explored phenomenon was central to answer our question of issue. A case study strategy enabled us to conduct an empirical investigation within the real-life context of the auditor’s environment. We conducted 11 semi-structured interviews in 4 different audit firms of different size in order to attain the purpose of the study.The study has shown significant differences in audit performance between large and small firms. For example only the larger firms use internal control evaluations of the documentation, and the smaller firms more often look at qualitative factors when performing an audit. Furthermore, it has shown that the variation in audit performance in both small and large audit firms increases information asymmetries between the company’s management and its constituents.

Place, publisher, year, edition, pages
2012. , p. 55
Keywords [en]
Social Behaviour Law
Keywords [sv]
Samhälls-, beteendevetenskap, juridik, Audit, Revision, Företagsekonomi
Identifiers
URN: urn:nbn:se:ltu:diva-50270Local ID: 78866d15-3008-4ff1-a9bd-ca58cfbbd36cOAI: oai:DiVA.org:ltu-50270DiVA, id: diva2:1023627
Subject / course
Student thesis, at least 30 credits
Educational program
Business and Economics, master's level
Examiners
Note
Validerat; 20121117 (global_studentproject_submitter)Available from: 2016-10-04 Created: 2016-10-04Bibliographically approved

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Norberg, RobertFalcaru Oprea, Miruna

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf