Auditing in the Digital Era: Fuzzy Delphi and Mabak Methods in Iran

Abstract

The ongoing digitization of the economy presents challenges and opportunities for the auditing profession and requires auditors to adapt to them. This study examines changes in the auditing profession expected by Iranian experts until the next 15 years. It addresses the perception of auditing, the auditor–client relationship, regulations, structural and procedural changes for auditing firms, and the profile of the auditing profession. 27 projections in the form of five sections were extracted through the background study. To screen the auditing changes fuzzy Delphi method was used. Then the changes screened were ranked through the priority assessment questionnaire and the Mabak technique. Experts believe the annual auditing will evolve toward a continuous auditing approach and full (rather than random) auditing. However, audit risks will not disappear. Similar to other areas, a regulatory gap between the new digital business reality and auditing standards will exist. automation will relieve auditors from routine tasks in favor of more complex tasks and massive job losses will occur. Audit addressees will trust automated auditing procedures more than manual ones. They expect a forward-looking approach from auditing. Auditing reports will become less informative for audit addressees in cases like intangible assets and risk management reports. Experts believe that while the current models of audit fees will not be appropriate in the future, the tension between the client and the auditor will not increase. Experts believe that new technologies will not replace the auditor but rather will provide support.IntroductionThe rapid growth of digitalization in today's world has significantly challenged the existing business models and the recruitment of human resources in all industries (Loebbecke & Picot, 2015: 151). Technological advancements have been welcomed by the accounting profession because the profession needs accurate and reliable processes to generate appropriate and timely information for users to make sound decisions. Accordingly, audit firms and auditors are also potentially affected by the development of information technology, especially big data analysis, artificial intelligence, and blockchain technology (Gepp et al., 2018: 107). Big data is a tool for managing and analyzing large data sets that are created by the use of the Internet and other digital technologies. Big data can help model fraud and financial distress and predict future events (Nwachukwu et al., 2021: 21). Artificial intelligence can help automate the mechanical tasks performed by auditors. Auditors can use AI to perform prescriptive, predictive, and diagnostic tasks such as risk assessment and test transactions (Munoko et al., 2020: 212). By using the blockchain, many data, documents, and information needed in the audit can be stored without worrying about destruction. Therefore, auditors seek to understand how to use this technology as a safe and reliable way to digitally record transactions (Barr‐Pulliam et al., 2022: 340). These digital developments can affect the audit industry. Auditors and their interested groups need to know how this effect is. This study examines the expected changes in the auditing profession from the perspective of auditing experts in Iran for the next 15 years. For this purpose, an exploratory scenario was chosen instead of a depth scenario and the focus was on three technologies: artificial intelligence, big data, and blockchain. The expected changes in the auditing profession have been examined in the form of 27 questions in five sections: the perception of auditing, the auditor–client relationship, regulations, structural and procedural changes for auditing firms, and the profile of the auditing profession. Methods & MaterialUsing the fuzzy Delphi method, the current study has chosen an exploratory (broad) scenario instead of a deep scenario and focused on three technologies: artificial intelligence, big data, and blockchain. A broad Delphi approach eliminates the details by considering many specific aspects of the audit. Research is practical in terms of purpose. To conduct the research, first by studying the literature and the background of the research, 27 propositions for predicting the future of auditing if digital technologies are used in five sections: changing the understanding of audit audiences, changing the relationship between the auditor and the employer, changing legislation, structural changes and audit procedures, and changes in the characteristics of the profession were extracted. To analyze the findings more precisely, all propositions were designed as negative, which means that agreeing with each proposition will mean the poor state of the auditing profession and auditors in the next 15 years. Then, by designing a questionnaire, each statement was questioned. Fuzzy Delphi is a method for sifting indicators and factors, which uses numbers and fuzzy calculations to represent the views of experts. In this research, the five-point Likert spectrum, which is one of the common fuzzy spectrums, has been used. Using the purposeful sampling method, Delphi group members were selected. Finally, 26 questionnaires were used for data analysis. After removing the propositions that de-fuzzy value is less than the threshold (0.7), the Mabak method has been used to rank and extract the most probable propositions. FindingsExperts expect that reporting appropriate and comparable figures for intangible assets on the balance sheet will become increasingly difficult, resulting in less information for the audience of the audit report. With the adoption of digital technologies, audit report audiences will have more confidence in automated auditing methods than manual methods. Research experts have opposed the obsolescence of auditors' judgment in the digital age. Wishful thinking can be one of the reasons for opposing this proposition. Experts have agreed with the widening of the expectation gap regarding forward-looking risk statements in management reports. According to them, the audience of audit reports expects the dominance of a proactive and forward-looking approach from audit compared to the current passive and retrospective approach. Experts agree that automation is pushing current fee models for audit services. They believe that the transparency resulting from the use of digital technologies will not lead to an increase in tension between the auditor and the employer. Blockchain experts believe that there is no guarantee for transactions that are made in the real world and recorded on the blockchain. Transactions may be fraudulent, illegal, or unauthorized. Therefore, blockchain will not be a substitute for auditing. While agreeing to reduce the duration of contact between the auditor and the employer, the experts disagreed with reducing the importance of the relationship between the auditor and the employer. They believe there will be a significant regulatory gap between the new digital business reality and future auditing standards. Experts do not believe new auditing standards can be set by artificial intelligence instead of a human regulatory authority. They don't see AI progressing fast enough to make this prediction realistic. Experts expect that auditing standards in the future will continue to provide margins of discretion and freedom of action for auditors. The opposite of this view is that auditors' freedom of action will be lost due to full disclosure and transparency in all transactions. According to experts, there will be no need for separate standardization for small and large audit institutions in the future. Furthermore, professional skepticism will continue to be important as a professional qualification. Experts expect digitization to reduce the workload for simple audit tasks and give auditors more time to focus on more complex tasks. The opinion of experts is against changing the profile of senior auditors from classic auditing to consulting. Experts believe that annual audits are likely to be replaced by continuous or even real-time audits. This is acceptable given the advanced technology and capital market demand for faster and more reliable financial reports. Experts have opposed the elimination of small and medium audit firms in the digital age. Meanwhile, it is expected that only large auditors can make the necessary investment in digital technologies. They expect that artificial intelligence can provide auditors with a variety of tools in different areas and facilitate their decision-making. Full audit instead of audit based on sampling will be the rule of the audit profession, but audit risks will not be eliminated. This means emphasizing the human role in the audit process. Experts expect that in the digital era, along with specific auditing knowledge and skills, information technology knowledge is also of particular importance. They do not believe that exam requirements will reduce graduate interest in the field. Probably, the dynamism of the field and its synchronization with technological changes have been factors influencing the judgment of experts. According to experts, many jobs in the accounting profession will disappear in the digital age. The need for the physical presence of auditors in the workplace will be reduced and things will be done remotely, but this will not lead to disruption of their work-life balance. Conclusion & ResultsThe present research studies the future of auditing in Iran in the digital era in the next 15 years. For this purpose, by designing 27 predictive propositions in the form of a wide scenario, the future of auditing was studied in the form of five sections: changes in the understanding of audit audiences, changes in auditor-employer relationships, legislative changes, structural changes and audit procedures, and the characteristics of the audit profession. Forecasts are often formulated negatively; in this case, the rejection of any forecast statement indicates a positive outlook toward the future of auditing. After screening the propositions using the fuzzy Delphi method and removing 14 propositions, the remaining 13 propositions were ranked using the Mabak decision-making method. Mabak's ranking shows that, according to the opinion of experts, in the next 15 years, full audit and continuous auditing will be the rule of the auditing profession. In these years, there will be a legislative gap between the real conditions of digital business and auditing standards, and the standards will not be in sync with the speed of technology development. While automation will free auditors from routine and repetitive tasks to perform more complex and value-added tasks, it will challenge the current models of determining audit fees. According to experts, in the next 15 years, audit audiences will have more trust in automatic audit methods and procedures than manual and non-automatic procedures, and they expect auditors to adopt a forward-looking approach. Along with the loss of many jobs in the auditing profession in Iran, the physical presence of auditors in the workplace and the duration of contact between the auditor and the employer will decrease. Experts believe that in the next 15 years, artificial intelligence will help auditors make audit decisions with greater freedom of action (depending on the type of tool). In this situation, auditors will need expertise in information technology and data at the expense of simpler auditing skills. Experts believe that the information content of the auditors' report will be reduced for the audience in areas such as the assessment of intangible assets and risk management reports. The findings show that new technologies in Iran will not replace auditors, but will help them. Tiberius and Hirth (2019) also showed that according to auditors in Germany, digital technologies will not be a big threat to the auditing profession. The results contradict Frey and Osborne's (2017) prediction of the accounting profession becoming obsolete in the digital age, which similarly affects auditors. * Corresponding author

Keywords

• auditing
• stakeholders
• regulation
• digital technologies
• future