Search results

This study aims to examine whether clients’ degree of digitalization and audit firms’ expertise in information technology (IT) influence audit quality (AQ).

Data of Chinese A-share firms listed on the primary board of the Shanghai and Shenzhen stock exchanges from 2011 to 2019 are taken as the sample. All the data are obtained from the China Stock Market and Accounting Research. Clients’ digitalization is determined using the keywords “AI technology,” “blockchain,” “cloud computing,” “big data technology” and “digital technology.” Auditor firm’s digital expertise is determined by the proportion of higher IT expertise. As the proxy for AQ, this study uses audit fees, given that its quantum reflects the effort auditors expend that in turn affects the AQ.

A fixed-effect regression model shows that clients with high digitalization attain AQ. This study also finds a significant and positive coefficient of audit fees, indicating that AQ is high in the same situation if an audit firm’s IT is mature and developed. Furthermore, results confirm the moderating effect of clients’ digitalization and auditors’ expertise and on AQ. Auditors’ expertise in IT mitigates the audit risk and increase AQ.

Findings can enhance AQ and corporate governance literature by clarifying how external audits must evolve through digitalization and incorporating newly developed digital tools such as big data, analytics, artificial intelligence and robotic process automation. This study also provides important insights regarding how the development of new digital tools allow the audit profession to perform as a corporate governance mechanism.

After reading and discussing the case study, students should be able to identify the reasons why the company needed to digitise and how this links to the company’s strategy around technology and innovation, analyse the digitalisation implementation process followed in the case study by using an organisational change management model and make recommendations and propose a solution for the protagonist to consider for the successful roll-out of the digitalisation project.

DRA Projects is part of the DRA Global business based in South Africa. The company is known locally in the mining and engineering industry for its project development, delivery, execution and operations capabilities. Digital transformation is a key strategic focus in the industry, as clients seek digitised integrated systems. For this client offering, J.C. Heslinga, managing director of DRA Projects, was tasked with leading the digitalisation of the project delivery system. From July 2020 until July 2022, Heslinga led the implementation team through different organisational change stages. As the next phase included rolling out digitalisation to pilot projects and engaging employees and clients in the new process, Heslinga wondered if enough was done to ready the business for this change. The end users would be executing the changes, so their adoption will be imperative for successfully rolling out digitalisation. The case study concludes with Heslinga pondering the approach needed for the next phase. The case study focuses on the digitalisation implementation process through the lens of organisational change. The case study presents an opportunity to analyse and identify the theories and models used in organisational change within a real-life business context. The organisational change learnings can be adapted to help students with any transformation changes in similar business scenarios.

Postgraduate- and master’s-level students and business executives attending short courses will benefit from the learnings. The learnings can be applied to improve decision-making, organisational behaviour and strategic implementation using the fundamental principles of organisational change.

Teaching notes are available for educators only.

CSS 6: Human resource management

This study aims to examine the mediating effects of corporate governance mechanisms like the board of directors on the association between disruptive technology adoption by audit clients and the risk of material misstatements, including inherent risk and control risk. In particular, the authors study the mediating effects of board characteristics such as board size, independence and gender diversity.

Based on a sample of 100 audit clients listed on the FTSE 100 from 2015 to 2021, this study uses structural equation modelling to test the research objectives.

The findings indicate a significant and negative association between disruptive technology adoption by audit clients and inherent risk. However, there is no significant evidence observed for control risk. The utilisation of disruptive technology by the audit client has a significant impact on the board characteristics, resulting in an increase in board size, greater independence and gender diversity. The authors also find strong evidence that board independence mediates the association between disruptive technology usage and both inherent risk and control risk. In addition, board size and gender exhibit distinct and differential mediating effects on the association and across the two types of risks.

The study reveals that the significant role of using disruptive technology by audit clients in reducing the risk of material misstatements is closely associated with the board of directors, which makes audit clients place greater emphasis on the construction of effective corporate governance.

This study offers essential primary evidence that can assist policymakers and standard setters in formulating guidance and recommendations for board size, independence and gender quotas, ensuring the enhancement of effective governance and supporting the future of audit within the next generation of digital services.

With respect to relevant stakeholders, it is imperative for audit clients to recognise that corporate governance represents a fundamental means of addressing the ramifications of applying disruptive technology, particularly as they pertain to inherent and control risks within the audit client.

This study contributes to the existing literature by investigating the joint impact of corporate governance and the utilisation of disruptive technology by audit clients on inherent risk and control risk, which has not been investigated by previous research.

This study aimed to provide an exploratory analysis of digitalization processes in small professional service firms (SPSFs) by examining their main drivers and barriers and their impact on customer management practices, considering the intra-organizational, inter-organizational and service offering dimensions.

This study adopted a qualitative, exploratory and inductive research methodology based on in-depth interviews with 19 owners or consultants of small tax/accounting firms, focusing on the role of digitalization in their internal and external processes.

The findings reveal external and internal barriers to and drivers of digitalization, as well as its effects on customer management practices. They also reveal the emergence of tensions related to the intra-organizational, inter-organizational and service offering dimensions.

This work contributes to the research on the role of digital technologies in the professional service sector, with a focus on SPSFs, which has thus far received limited attention. This research highlights the complexity of combining increasingly standardized processes and services with the need to maintain flexibility and informality in internal and external interactions.

This study aims to analyze the mediating effect of the open innovation processes of knowledge acquisition and exploitation as external embeddedness strategy on the relationships between strategic orientation toward digitalization and the three dimensions of the innovation capability: client, marketing and technology.

The research model was tested using a structural equation modeling design based on survey data from a financial and insurance sector multinational enterprise with direct operations in seven emerging countries. This sector is classified as being highly digitalized.

The results show that strategic orientation toward digitalization has an effect on innovation capability, with a greater impact on the client and technology dimensions than on the marketing dimension. However, the relationships with clients and technology are partially mediated by acquisition, while the one with marketing is mediated by exploitation.

This finding widens the current purpose and theoretical sense of external embeddedness as a type of inter-organizational arrangement key for digitalization in the literature, which is focused on the adaptation of digital technology of the head office to the needs of the subsidiaries and the systems of their local allies. By contrast, the study results show that external embeddedness is key for the multinational to be able, from its global way of creating value through digital technologies, not only to improve operating efficiency, but also to meet costumer experience expectations in each host country and innovate in local commercialization strategies, on account of the knowledge transfer between the multinational and the local players on customer preferences and technology uses in local markets.

The differences between Big audit firms (BigN) and non BigN (nBigN) have been discussed at the international level from various points of view, focusing in particular on issues regarding the different quality of the services offered. This study aims to analyze the impact of digitalization on audit firms in the Italian context, seeking to understand how this phenomenon has influenced the quality differences already studied in the scientific literature.

The research adopts a qualitative approach, using semi-structured interviews. A total of 16 professionals working in the legal audit world were interviewed. The firms involved were PricewaterhouseCoopers, KPMG, Ernst and Young and Deloitte in the BigN category and BDO Italia Spa, MooreAxis Srl and Analisi Spa in the non Big class. The data collected via the interviews underwent thematic analysis. This analysis allowed the identification of three topics, on which the presentation of the results concentrated.

The findings of this research reveal that the digitalization of companies has widened the quality gap between Big and non BigN. BigN have been better able to exploit the benefits of the new digital technologies due to their greater investment capacity. At the same time, stakeholders’ expectations of the audit process in terms of quality have increased sharply, also in relation to nBigN.

This study’s main contribution is its analysis of the impact of digitalization on the audit quality of BigN and nBigN. This paper contributes to the existing literature by studying the consequences of digitalization on nBigN, a topic previously unexplored in the scientific literature (Manita et al., 2020), and the impact of new technologies in the context of audit firms in general.

Digital practices of facility management (FM) are undergoing transformation. Several Nordic countries have ambitious hospital-building projects, driven by large public clients with long-term experience of operating complex building campuses. There is thus an opportunity for creating state-of-the-art digital FM. This paper aims to investigate the role of digital FM in new hospital projects in Scandinavia.

Based on a literature review, a framework of understanding of digital FM in hospital operation is established. Two longitudinal cases are presented and analysed, one for a greenfield hospital and the other for an extension of an existing hospital.

The literature highlights the importance of integration between technical digitalization, competences, organization and management of digital FM. The projects are in different phases and represent quite advanced preparations for digital FM. State-of-the-art computer-aided FM systems are prepared before operation. External consultants are involved, posing a dilemma of in-house/outsourced human resources in the future digital FM operation.

Two case studies provide insights, but they have limited generalizability.

The study underscores the importance of preparation of management, organization and competences for digitalization.

Documented research on building information modelling (BIM) integrations in FM is still scarce. This article adds to the few empirical studies in the area. The findings illustrate that real estate administrators investing in FM software for new hospital buildings face challenges of aligning BIM models from design and construction to the FM system.

Being resilient is often equated with the capability to return to a state of normalcy after individuals and organisations face unprecedented challenges. This chapter questions the notion of ‘normalcy’ in complex and ongoing turbulence as experienced variously in diverse cultural and sectoral contexts. In theorising organisational resilience and associated transformation, it draws on insights provided by a microfinance institution (MFI) operating in the Philippines. The chapter details its efforts to transform business in light of experience gained in frequent and overlapping emergency conditions (including COVID-19) to create a new level of resilience in its clients and itself. For clients, the goal is often to self-manage loss associated with socio-economic development and for the organisation, to stabilise and cordon the investment needed to support clients survive and move on from the relatively constant adverse impacts of disasters. Published accounts of such experience and insights provided by board members and the President illustrate the nature of transformational resiliency strategies planned, including changes to the business model around provision of micro-insurance services and strategic adaptation of digital services aligned with the organisation's mission. A model of ‘practical resiliency in emergency conditions’ details the culture of resiliency adopted, demonstrating how stakeholders gain confidence and opportunity to practice resilient behaviours in emergency contexts. It highlights the significance of cultural consistency across purpose, values and capability to create an adequate level of trust and certainty across stakeholders to support transformational resiliency behaviours in shifting and dynamic ecosystems.

The purpose of this paper is to investigate the dynamics of digital entrepreneurship and the role of innovation ecosystem in its shaping by applying a multilevel perspective on the phenomenon.

An exploratory in-depth analysis of an IT company in Brazil is conducted using a quasi-mixed method design and three analytical techniques: pattern-matching, data exposure and social network analysis. The study is based on qualitative data, complemented by quantitative data. The case company is investigated within its time (historical development) and spatial (entire ecosystem) dimensions, providing an integrative approach to analysis.

The results revealed significant differences in a set of supporting innovation ecosystem’s actors and relationships throughout the development of the company from lower to higher levels of digitalization. The findings are discussed within a framework that links ecosystem’s actors at different layers with different levels of business digitalization.

This research brings implications to SMEs in high-tech industries that are aiming to transform their business toward greater digitalization, and stresses the importance of strategic partners in innovation ecosystem in this process.

The novelty of this research is related to how external actors contribute to a company to adapt and create value, and how companies may exploit opportunities by configuring internal resources and external assets from strategic relationships. The study considers digital entrepreneurship in dynamics, distinguishes between different levels of digitalization and prescribes them different enablers and sets of relationships.

The digital revolution has substantially changed the business environment. Most banks have acknowledged the importance of new technologies to improve performance and client satisfaction. The development of these innovations has led to the entrance of the so-called Fintechs. This paper aims to evaluate the impact of these transformations on the performance of financial institutions and on their business model.

The authors use data envelopment analysis and Malmquist total productivity indices to measure financial institutions’ efficiency and their influence on strategy.

The main finding is that clients are more than ever at the core of banking strategy. The irrelevance of distance in basic banking transactions has reduced expenses and contributed to increasing revenues for all financial institutions. Banks will have a card to play in the advice they can bring to their clients.

This research could be of interest for financial managers who wish to re-examine their current business practices and imagine their business model for the future.

The contribution will be to further define the correlation between the provision of electronic banking services and its performance by including diversified institutions (conventional banks, Fintechs, Gafas) in the sample from multiple geographic zones to identify differences as regards their efficiency and business practices.