The impact of digital transformation on auditing timeliness and modern slavery vulnerability

Abstract

This doctoral thesis explores the impact of digital transformation on two systems in a country, the financial and the social. The digital age has brought about profound changes in both financial markets and social systems, transforming how economies operate and how social vulnerabilities are addressed. Two seemingly distinct issues—cryptocurrency trading volume's effect on audit report lag (ARL) and digital access's role in reducing modern slavery vulnerability—are connected through the broader framework of digital transformation and technological advancement. This thesis is conducted drawing from the gaps in the literature, such as lack of other empirical studies and no decisive conclusions, and the need for such research. In the thesis essays, the results are drawn from performing multiple regressions on the empirical data gathered. As such, the thesis analyses these topics within a country-level context and explores how digital trading and access influence both financial reporting and human rights, shedding light on the interconnectedness of economic and social outcomes. Thus, it is organized into two empirical essays. The first essay of the thesis examines the impact of cryptocurrency trading on audit report lag in the context of audit risk. Using country-level economic information from 12 European countries between 2013 and 2019, it finds that increasing use of Bitcoins (a proxy for cryptocurrency trading volume) reduces the audit report lag of European firms. The findings also show a strong relationship between country governance, the transparency status of the country, and audit report lag. These findings therefore contribute to the existing literature on audit risk and cryptocurrencies as financial assets and call for further research on the use of cryptocurrencies in accounting and auditing. Furthermore, the findings of this study can help policy makers to better understand how to use cryptocurrencies for reducing the adverse consequences related to audit report lags in the future. The second essay undertakes an empirical examination of the impact of digital access and modern slavery vulnerability in the pursuit of combatting modern slavery. It considers the relationship between these two variables through the lens of information poverty theory and Geels’ (2010) multi-level framework. Based on data for 31 Organization for Economic Cooperation and Development countries over a ten-year period between 2010 to 2019, three key hypotheses are tested. Notably, the results of the model confirm that digital access reduces modern slavery vulnerability; country governance and transparency also play a significant role in that relationship. Implications from the research results are drawn for the benefit of theoretical development, policy makers and business managers. On a side note, and in contrast to the traditional PhD thesis, this thesis follows the "essay-based” dissertation structure. This format is less like a traditional monograph and more like a collection of research papers that may be published independently in academic journals. This format reflects the collaborative and multi-faceted nature of modern accounting research, which often involves multiple co-authors and addresses different aspects of a broader research question. The emphasis is on producing research that contributes to the academic community and can be disseminated quickly through publications.