The Role of Data Analytics in Enhancing External Audit Quality

Due to corporate failures, audit quality concerns and the rapidly changing IT environment in the financial reporting value chain, more auditors are using data analytics tools to enhance audit quality. However, researchers have not made significant progress in establishing the extent to which the Big Four audit firms in South Africa incorporate data analytics into the external audit process and whether this enhances the quality of the audit. The study investigated the role of data analytics in enhancing external audit quality in South Africa, the relationship between external audit, audit quality and data analytics and the impact of the latest technological advancements, commonly known as the Fourth Industrial Revolution, on the way firms perform audits. The study also explored whether audit firms in South Africa utilise data analytics, on which engagements and during which stages of the audit process, what the benefits and challenges of using data analytics are, and what the impact of using data analytics is on audit regulatory inspection results. This was achieved through a literature review and an empirical study conducted using a questionnaire. The study revealed strong evidence that there are notable audit quality concerns in South Africa, which have been attributed to a failure in audit quality, and that auditors are using data analytics to overcome these concerns. Based on the study’s findings, it was concluded that using data analytics in an audit enhances external audit quality.