Digital Transformation in Accounting and Auditing

Digital disruption has significantly impacted the accounting profession, resulting in the adoption of digital technologies that redefine traditional roles and processes. This chapter explores how accounting educators can prepare future accountants for digital transformation. It examines the impact of digital technologies on the accounting profession, identifies the critical digital skills accountants must acquire, and discusses how these skills can be integrated into accounting curricula. The chapter also addresses the challenges accounting schools face in effectively teaching these digital technologies. The chapter answers critical questions, including how accountants’ roles will change under digital transformation, what essential digital skills are required, how educators can effectively teach digital skills, and what challenges accounting schools face in the digital transformation era.

Changes in the corporate accounting world are massive and disruptive. Digital transformations in accounting are now significantly changing business operations, reducing the production costs of accounting information, making them available on a real-time basis, and processing an enormous amount of data. As data become more accessible, organizations should adopt emerging technologies that enhance their capability to survive in this data-driven environment. At the same time, organizations can no longer expect that the deployment of tangible resources such as information systems and digital transformation automatically results in enhanced organizational performance. Rather, they must consider the influence of leadership, projection of future transformation in the accounting field, and potential shifts in the workforce context. These factors are pertinent in shaping organizational behavior to guide organizational members, as they face challenges and ensure continuous progress and development in the complex and knowledge-intensive nature of digital transformation.

The current impact of technology and changing lifestyles on businesses cannot be ignored. Information technology has become a crucial aspect of business operations, enabling the efficient capture and analysis of large volumes of data, thereby enhancing competitiveness. Accounting and auditing professionals must now have technical expertise, and financial education programs must incorporate technology knowledge to meet this need. The authors illustrated the relevance of digital transformation in various sectors, including retail, healthcare, and finance. Digitalization in the public sector can enable accounting and auditing professionals to offer improved citizen-centric services. This chapter explores current and evolving digitalization, underlining the significance of information technology in financial services, especially accounting and auditing.

This study conducts a literature review of digital transformation (DT) in the accounting field and compares the research trends of DT in the accounting and information systems fields. We adopt a topic modeling-based approach of latent Dirichlet allocation to identify the topic to review the DT-related literature in the information systems and accounting fields. By analyzing 243 DT-related journal articles in both fields, we find that accounting studies have started to address DT since 2017, and the number of studies has increased, especially in the topics of security and blockchain/big data. However, while DT studies in the information systems field have focused on digital/social media, automation software, digital platform ecosystems, and firm value, we do not find similar patterns in the accounting field. Our findings provide accounting researchers with a better understanding of current DT research in the accounting domain and illuminate potential research directions in the future.

Prior accounting research has investigated accountants’ required digital technology (DT) competencies and how they continue to be impacted by ongoing DT advancements. To this end, the literature has identified a diverse collection of required accounting DT competencies, including information systems management, data, emerging technology, digital transformation, and digital business-related competencies. These diverse competencies compartmentalize into two broad categories: the required knowledge of DTs relevant to accounting work, and the skills and abilities required to effectively use these DTs for accounting work. Focusing on the second category, we examine the gap between the DT skills currently required by the accounting profession, and the DT skills currently possessed by accountants. We first conduct an extensive literature review to identify the DT skills required by the profession, and then use survey research to investigate the extent to which accountants across different career levels, accounting functions, and accounting practice settings actually possess the required accounting DT skills. In summary, we find that most accountants rate their DT skills level below average, with junior accountants surprisingly having the lowest DT skills rating. We identify and unpack the skill areas accountants are weakest and strongest in across different accounting functions, accounting career levels, and accounting practice settings. And we discuss potential moderators and mediators of skills gaps. Our findings have important implications for accounting practitioners, employers, educators of future accountants, and professional bodies.

The digital transformation of accounting depends, in large part, on accountants being able to continuously upgrade their digital technology competencies in line with ongoing and accelerating digital technology changes. Doing so is critical to accountants being able to deliver digitally transformed or transforming accounting roles, processes/workflows, and value outputs. However, an apparent inference from information systems and learning science researchers is that accountants’ attitudes to new technology and technology-related issues could be barriers to the efficient and effective attainment of required digital technology competencies. Combining survey research and quantitative content analysis, we investigate the nature and prevalence of accountants’ attitudes to new technology. We then discuss the implications of these attitudes and their prevalence for the required upgrading of accountants’ digital technology competence and for efforts to digitally transform accounting practice. Our research is related to research on the digital transformation of accounting, research on the expectation–performance gap in accounting education, and research on effective strategies for translating required technology competencies into accounting practice.

In recent years, organizations have embarked on digital transformation efforts across different aspects of the accounting function as they seek to benefit from technological advancements. Two strategies that accountants can leverage to drive digital transformation within their organizations are step-in and step-forward strategies. The step-in strategy recognizes that, although digital transformation incorporates the use of technology in many aspects of an organization’s processes, many tasks in the accounting setting cannot be performed by technology alone. Instead, human accountants need to “step-in” to work alongside technology to complete such tasks. The step-forward strategy recognizes that rapid advancements in technology have created many opportunities for accountants to leverage these developments to develop the next generation of tools that drive digital transformation. In this chapter, using examples, we illustrate how accountants can execute step-in and step-forward strategies in various accounting and audit settings to facilitate digital transformation in their organizations. In addition, to the extent that accountants need to adopt new skills and competencies to effectively execute step-in and step-forward strategies, this chapter will discuss how universities and other educational institutes can support the development of these skills and competencies in accountants.

Artificial intelligence (AI) is a trending topic in several contemporary interdisciplinary studies. Managerial accounting absorbs the expected benefits of AI expansion and transforms accountants’ responsibilities. This disruptive technology radically changes the role played by professionals, reducing routine tasks and enhancing their strategic role in the company. This study focuses on European startups that provide decentralized and automated accounting protocols. Several sources, such as a white paper, the company’s website, and interviews with top management, were used to explore this phenomenon. The results are guided by a rigorous qualitative methodology and show the impacts on financial, customer management, operational, and organizational areas. Our article aims to contribute to theory and practice. In particular, the accountant’s new role was observed under the lens of contingency theory, a valid theoretical construct for exploring social changes resulting from the introduction of technologies.

Distributed ledger technology or blockchain is an effervescent innovation technology that has drawn significant attention from numerous stakeholders, such as financial institutions, energy industries, national policymakers, startups, and academia. Evidence from industrial experience illustrates that blockchain technology has tremendous potential to deliver substantial advantages in the stated domains by pledging transparent and safe platforms, which combined with smart contracts, would allow new management services. This study provides an in-depth review of the basic principles underlying blockchain technology. After a thorough analysis of the literature and existing scenarios, this study scrutinizes the contemporary blockchain applications employed in the accounting and auditing sector and discusses the prospects and challenges of introducing blockchain technology in the auditing industry with a legal and regulatory lens. There are many questions that need to be resolved regarding the legal and regulatory frameworks for accounting, recognizing, and valuing crypto-assets. The qualitative analysis in this study attempts to understand how blockchain, intertwined with different regulatory dimensions, can play a role in digitizing conventional accounting and auditing systems.

Blockchains are an emerging technology expected to considerably transform the accounting and auditing professions. This study reviews the academic literature on blockchain in accounting and auditing. The methodology involves a semi-systematic literature review, as prescribed by (Snyder 2019), of 80 studies from the top 60 international accounting journals. This study also involves a comprehensive analysis of selected 80 studies to determine which year the most studies were published, the research methodologies they used, and the aspects of accounting that were involved. The number of studies published in international accounting journals has considerably increased. The most commonly used methodology is conceptual; empirical research is rare in the data pool. Most studies involve accounting information systems (AIS) and auditing. This study also identifies key and feasible concepts related to blockchain technology, namely triple-entry bookkeeping, smart contracts, continuous auditing, accountability and governance, and accounting and auditing applications. Additionally, this study provides potential research questions for future research on blockchain technology in accounting and auditing.

Artificial Intelligence (AI) in automated decision-making (ADM) systems is becoming more prevalent in business, enabling faster and more accurate decision-making. However, using ADM raises ethical concerns (i.e., privacy, bias, and accountability) and legal issues. Organizations using ADM systems should ensure that they have adequate controls and safeguards in place and are transparent and accountable for their actions. To address potential biases in ADM systems, it is essential to carefully review the data used to train algorithms and take steps to mitigate potential biases. In addition, traditional accountability structures may need to be reevaluated, considering the increasing use of AI in decision-making. Accountants can play a role in addressing these ethical challenges by ensuring that companies are transparent and accountable in their use of ADM systems and by helping to identify and mitigate any biases in the data and algorithms used.

Technology and data play a critical role in accelerating environmental, social, and governance (ESG) efforts. By leveraging ESG data and tools, organizations can identify, monitor, and mitigate ESG threats and business impacts. With the advent of data-driven technologies such as the Internet of Things, artificial intelligence (AI), and sensors, companies can easily collect and analyze large amounts of data about their supply chains and operations. In addition, blockchain technology can help companies improve transparency and authentication of ESG impacts. ESG goals could thus be identified, targets set, and improvements assessed. AI algorithms can identify correlations and trends between ESG performance metrics such as energy consumption, resource use, pollution, and stakeholder engagement. Companies can also supplement their AI capabilities with alternative data sources. Nevertheless, AI can pose a potential threat to companies and jeopardize ESG if not properly regulated. Implementing competent data governance protocols is critical to ESG efforts. Tracking and documenting ESG progress and avoiding potential complications in advancing AI requires accurate and reliable information. In this paper, we provide a conceptual analysis of the role of these technologies in advancing ESG initiatives. We outline strategies for companies to effectively leverage data as a valuable resource in support of these initiatives, increasing the benefits and mitigating the associated risks.

This study examines the impact of technological advancements on the accounting profession in Japan from the early 1990s to the present. Computer-assisted audit techniques (CAATs) and digital documentation have increased auditor efficiency and expertise. However, auditors may encounter challenges, such as limited data analytics tools and infrastructure knowledge, which can be difficult for especialy small and medium-sized enterprises (SMEs) with limited resources. The auditing profession is expected to continue to experience digital advancements, focusing on integrating CAATs and digitized workpapers to enhance efficiency and effectiveness. Possible strategies to overcome these challenges include the development of cost-effective CAATs-specific software solutions, and include comprehensive CAATs courses in undergraduate and graduate programs.