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Three essays on audit innovation: using social media information and disruptive technologies to enhance audit quality

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Three essays on audit innovation: using social media information and disruptive technologies to enhance audit quality
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Rozario
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Andrea M.
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1989-
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Andrea M. Rozario
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Vasarhelyi
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Miklos A
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Miklos A Vasarhelyi
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chair
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Kogan
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Alexander
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Alexander Kogan
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Helen Brown-Liburd
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Wood
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David A.
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David A. Wood
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Rutgers University
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Graduate School - Newark
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theses
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2019
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2019-05
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2019
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English
Abstract (type = abstract)
Advances in technology occur at exponential rates and are transforming business practices. Alles (2015) suggests that audit clients’ use of advanced technologies is likely to be the driver of adoption of such technologies by auditors. As a result, it is not surprising that the audit community, including academics, regulators, and audit professionals, are debating to what extent the use of technology will impact auditing (IAASB 2016; PCAOB 2017b). However, the impact of technology on auditing remains unclear. To provide insights into this debate, this dissertation explores the evolution of auditing as a result of nontraditional audit evidence, RPA (robotic process automation), and blockchain and smart contracts.
The first essay examines the usefulness of third-party generated information about firms’ brands and products from social media in enhancing substantive analytical procedures for the revenue account. The research questions in this study address whether Twitter measures of consumer interest and consumer satisfaction can improve the prediction performance and error detection performance of substantive analytical models. Extant research has documented that external nonfinancial information from Internet platforms can be useful for predicting firm performance and stock market prices, accordingly, it is important to examine whether such type of information can be used as an external source of audit evidence and enhance the effectiveness of audit procedures. The results of the study suggest that analytical models with Twitter proxies experience improved prediction and error detection performance than models that do not contain this information. Especially the analytical model that contains prior month sales, gross domestic product, and consumer interest as this model produces superior predictions and detects accounting errors for most of the industries that are examined. Collectively, these findings indicate that auditors can benefit from including social media information in analytical models as it can complement macroeconomic information and substitute contemporaneous firm-specific information such as accounts receivable.
The second essay proposes and implements a framework for RAPA (robotic audit process automation) to foresee the evolution of auditing as a production line. The redesigning of the audit process using RPA (robotic process automation) has the potential to enhance audit quality by automating structured audit procedures and offering auditors the opportunity to perform more meaningful work. The research question this study attempts to answer is: how can auditors redesign the audit process using RPA to accomplish a systematic audit approach? The proposed framework consists of six phases, including 1) developing vision and process objectives, 2) process identification, 3) process understanding, 4) audit data standardization, 5) audit apps prototyping, and 6) feedback and evaluation. The loan testing audit sub-process of a public accounting firm is selected as a candidate for automation to demonstrate the viability of the framework. The automation of this sub-process provides insights into the usefulness of the framework in guiding the application of RAPA to achieve near end-to-end audit process automation.
The third essay proposes an external audit blockchain that benefits from the reliability of the auditee’s blockchain records and smart audit procedures that autonomously execute audit procedures on behalf of the auditor. The research question this study aims to answer is: how will blockchain and smart contracts disrupt the audit profession? More specifically, if blockchain is widely adopted across industries, how can auditors leverage blockchain and smart contracts as audit data analytic tools to enhance audit quality? To address this question this study proposes an external audit blockchain supported by smart audit procedures. Blockchain and smart audit procedures have the potential to enhance audit quality and audit reporting and thus help narrow the expectation gap that exists between auditors, financial statement users and regulators by proactively performing audit tests and disseminating their results on the blockchain ledger. A holistic audit framework comprised of on-the-blockchain and off-the-blockchain audit procedures for the revenue account is proposed. The holistic audit framework takes into consideration the revenue risks that blockchain-based audits can potentially address. Additionally, novel functions for the PCAOB to improve their inspection process and issues related to the application of blockchain and smart contracts are discussed.
These three essays aim to inform the debate on the use and impact of technological tools on audit quality. The auditing profession is not immune to technological advances. Accordingly, motivated by the shift in paradigm that the audit profession is experiencing, this dissertation is aimed at providing insights into the evolution of auditing as a result of technology.
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Management
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Auditing
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Rutgers University Electronic Theses and Dissertations
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1 online resource (xix, 198 pages) : illustrations
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Includes bibliographical references
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Graduate School - Newark Electronic Theses and Dissertations
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doi:10.7282/t3-fmt3-px02
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ETD doctoral
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Rozario
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Andrea
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Andrea Rozario
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Rutgers University. Graduate School - Newark
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I hereby grant to the Rutgers University Libraries and to my school the non-exclusive right to archive, reproduce and distribute my thesis or dissertation, in whole or in part, and/or my abstract, in whole or in part, in and from an electronic format, subject to the release date subsequently stipulated in this submittal form and approved by my school. I represent and stipulate that the thesis or dissertation and its abstract are my original work, that they do not infringe or violate any rights of others, and that I make these grants as the sole owner of the rights to my thesis or dissertation and its abstract. I represent that I have obtained written permissions, when necessary, from the owner(s) of each third party copyrighted matter to be included in my thesis or dissertation and will supply copies of such upon request by my school. I acknowledge that RU ETD and my school will not distribute my thesis or dissertation or its abstract if, in their reasonable judgment, they believe all such rights have not been secured. I acknowledge that I retain ownership rights to the copyright of my work. I also retain the right to use all or part of this thesis or dissertation in future works, such as articles or books.
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