Research on Audit Risks in the Digital Transformation of Enterprises
Wei Wei
a
The College of Business Administration, Liaoning Finance and Trade College, Ganquan, Anshan, China
Keywords: Digital Transformation, Audit Risk, Audit Measures.
Abstract: With the development of the digital economy, digital transformation has become a significant trend for
enterprises. The application of technologies such as cloud computing, artificial intelligence, and blockchain
presents new audit risks for auditors in the context of enterprise digital transformation. By analyzing the audit
risks associated with this transformation, this paper states the major audit risks faced by enterprises from four
perspectives: new audit risks in digital transformation, material misstatement risks at the financial statement
level, material misstatement risks at the assertion level, and detection risk. Based on this analysis, the paper
proposes preventive measures for each type of audit risk. The research reveals that digital transformation
increases the demand for auditors' information technology audit capabilities and that IT-based auditing can
effectively address and mitigate various audit risks. However, audit independence and objectivity remain core
principles. This paper aims to provide preventive measures to reduce audit risks for enterprises, promote
comprehensive business upgrades, enable successful digital transformation, and reduce barriers to sustainable
development.
1 INTRODUCTION
With the development of technologies such as cloud
computing, artificial intelligence, blockchain, autom
ation, and the internet, digital transformation has gra
dually become particularly important for enterprises.
Björkdahl (Joakim Björkdahl, 2020) states that in th
e future, companies that fail to seize the right opport
unity to implement digital transformation will face ri
sks of declining profitability, being surpassed by com
petitors, or even being pushed out of the market. The
report from the 20th National Congress of the Com
munist Party of China emphasized supporting the de
velopment of specialized, high-tech enterprises and p
romoting deep integration of the digital economy wit
h the real economy. The State Council's executive m
eeting approved the Action Plan for the Digital Trans
formation of Manufacturing.Prior to this, in April 20
20, the U.S. Senate introduced a new version of the E
ndless Frontier Act, indicating that major world pow
ers have already incorporated digital transformation i
nto their national strategies, making it one of the pri
mary fields of future competition.
Digital transformation has become a major trend
for enterprises today.However, while this transforma
a
https://orcid.org/0000-0000-0000-0000
tion brings unprecedented opportunities, it also come
s with new challenges. In the field of corporate auditi
ng, digital transformation may objectively improve a
udit efficiency and quality to some extent, thus reduc
ing audit risk. However, this does not mean that audi
t risks will decrease significantly or disappear altoget
her. Therefore, during the process of digital transfor
mation, companies should take adequate measures to
prevent potential audit issues and incidents. Analyzi
ng the objectivity, potential and pervasiveness of aud
it risks is crucial for effectively controlling them and
minimizing their impact on the company's normal o
perations. This paper aims to accelerate the pace of d
igital transformation for enterprises, promote the digi
tal transformation process, enhance the quality and e
fficiency of corporate audits, conduct efficient audits,
and strengthen the prevention of major audit risks. B
y aligning with the trends of the new era, the paper s
eeks to help companies upgrade while reducing audit
risks, maintaining normal operations, and promoting
sustainable development.
Through the analysis of the new audit risks and o
ther types of audit risks brought about by digital tran
sformation, this paper discusses the audit mechanism
s and measures enterprises should adopt in the new e
368
Wei, W.
Research on Audit Risks in the Digital Transformation of Enterprises.
DOI: 10.5220/0013230900004568
In Proceedings of the 1st International Conference on E-commerce and Artificial Intelligence (ECAI 2024), pages 368-373
ISBN: 978-989-758-726-9
Copyright © 2025 by Paper published under CC license (CC BY-NC-ND 4.0)
ra from four perspectives: new audit risks, The risk o
f misreporting at two levels of corporate finance and
detection risk. Additionally, it highlights the audit te
chniques and professional skills that auditors in the n
ew era should master.
A review of the existing literature reveals that res
earch on audit risks related to digital transformation i
n enterprises is limited. Most studies focus on chang
es in overall enterprise value, governance levels, perf
ormance and collaboration between upstream and do
wnstream enterprises, with an emphasis on audit qua
lity and audit value. However, few studies address th
e impact of digital transformation on audit risks.
2 CONCEPTS RELATED TO
DIGITAL TRANSFORMATION
AND CORPORATE AUDIT RISK
2.1 Digital Transformation
Digital transformation is a broad concept. Digitizatio
n is defined by Merriam-Webster as the process of c
onverting something into a digital form (Yang Yanxi
n & Gao Minxue, 2024). When digitization is applie
d to various aspects of an enterprise’s daily operation
s, it is referred to as enterprise digitization. Enterpris
e digital transformation refers to the integration of di
gital technologies that lead to fundamental changes, i
mpacting multiple areas such as business models, or
ganizational structure, production manufacturing, pr
oducts and services, and business processes (Zhong
Xiaolong & Li Huihui, 2024). The aim of this transfo
rmation is to improve an enterprise's flexibility, agili
ty, innovation capability and competitiveness, while
creating new value and business opportunities, ensur
ing the sustainable development of the enterprise thr
ough new operating models in the digital era.
Digital transformation is not merely an upgrade a
t the technological level; it is a comprehensive organ
izational change and a continuous process that requir
es phased advancement across various levels. It dem
ands adjustments and optimizations in the enterprise'
s mindset, organizational structure and operational m
odels. Enterprises should shift their mindset in mana
gement and operations to meet the strategic needs im
posed by their development in the new era. Optimizi
ng organizational structures by building more flexibl
e, open, and collaborative frameworks, and fostering
a workforce with digital thinking and skills, is critic
al to responding to rapidly changing market environ
ments and enabling enterprises to successfully compl
ete their digital transformation.
After digital transformation, an enterprise’s opera
ting model must be driven by customer needs, with a
focus on direct connections with customers through
technological innovations such as big data, the Intern
et of Things (IoT), and cloud computing. These tech
nologies enable enterprises to meet user demands pre
cisely by providing point-to-point services based on
data platforms supported by cloud computing. This a
pproach optimizes products and services, enhances c
ustomer experience, improves operational efficiency,
reduces costs, creates new business models and gro
wth opportunities.
2.2 Audit Risk
Audit risk, in simple terms, refers to the possibility t
hat significant misstatements or omissions exist in th
e financial statements and that the auditor fails to det
ect these errors, resulting in an inappropriate audit op
inion. This definition encompasses two main aspects
of the auditing process: one is the problem with the
financial statements themselves, and second, neglige
nce or misjudgment of the auditor during the audit.
According to the Auditing Standards Board of th
e United States, Statement No. 47 states that audit ris
k is the risk that auditors unintentionally issue an ina
ppropriate opinion on financial statements containing
significant misstatements. The Chartered Profession
al Accountants of Canada describe audit risk as the ri
sk that audit procedures fail to detect significant erro
rs. International Auditing Standard No. 25, Materiali
ty and Audit Risk, defines audit risk as the risk that t
he auditor may provide an inappropriate opinion on f
inancial statements that are materially misstated." Th
e Chinese Institute of Certified Public Accountants d
efines audit risk in Article 17 of the China Certified
Public Accountants Auditing Standards No. 1101 - O
bjectives and General Principles of Financial Statem
ent Audits (2007) as the possibility that significant m
isstatements exist in the financial statements and that
the certified public accountant issues an inappropria
te audit opinion.
There are numerous reasons for the occurrence of
audit risk, and it cannot be completely eliminated. H
owever, most audit risks can be mitigated through sc
ientific assessment and reasonable management strat
egies, enhancing audit risk prevention and improving
audit quality and efficiency. Audit risk possesses ob
jectivity, potentiality, and pervasiveness, allowing fo
r effective control.
Research on Audit Risks in the Digital Transformation of Enterprises
369
3 AUDIT RISKS IN THE
PROCESS OF ENTERPRISE
DIGITAL TRANSFORMATION
There is certain audit risks associated with the digital
transformation of enterprises, which can primarily b
e categorized as follows.
3.1 New Audit Risks Brought About by
Digital Transformation
Digital transformation not only enhances an enterpris
e's core competitive advantages and improves its cap
acity for risk-taking but also utilizes digital technolo
gies to generate a vast amount of structured and unst
ructured information, thereby providing auditors wit
h reliable accounting information and improving aud
it quality (Zhai Huayun & Li Qianru, 2022). Enterpri
ses utilize information technology to build databases
and employ the rapid filtering, sorting, and computin
g functions of these databases for data processing, si
gnificantly enhancing data processing efficiency and
the accuracy of audit work (Zhou Gang, 2023). Whi
le digital technologies facilitate auditing and increase
efficiency, they also introduce new audit risks. Thes
e risks arise from the new characteristics of technolo
gy and the changes in enterprise operational models
associated with it.
First, as enterprises deepen their reliance on infor
mation technology and automated systems, any syste
m failures or security vulnerabilities may affect the a
ccuracy of financial statements, thereby increasing a
udit risk. Events such as hacker attacks, malware, an
d internal data breaches can lead to the alteration or l
eakage of financial information, significantly compli
cating auditors' efforts to assess and verify the authe
nticity of this information.
Second, as enterprises adopt big data and advanc
ed data analytics tools, data quality and data manage
ment become significant risk points in the audit proc
ess. Since databases serve as a crucial source of audit
information, inaccurate or unreliable data can presen
t major obstacles during the audit process and signifi
cantly impact the quality of audit results. Auditors m
ay need to invest substantial time and effort to verify
the accuracy and authenticity of data. Furthermore, t
he rapid technological advancements brought about
by digital transformation may lead to auditors lackin
g the necessary technical knowledge and skills. Digit
al transformation requires auditors to not only posses
s traditional financial and accounting knowledge but
also to have a certain understanding of information t
echnology (IT) systems, data analysis, and cybersecu
rity, along with related skills. Auditors must continua
lly learn and adapt to new technologies; otherwise, th
ey may be unable to effectively identify and assess th
e resulting audit risks.
3.2 Material Misstatement Risks at the
Financial Statement Level
From the perspective of the external environment, th
e current market share is nearly saturated, significant
ly increasing competitive pressure on enterprises. Ad
ditionally, the economic climate in recent years has b
een less than favorable, with rising operating costs a
nd diminishing profitability. At the same time, the de
mands of emerging markets resulting from digital tra
nsformation cannot be overlooked, as the pressure on
cash flow during this transformation process is subst
antial. Digital transformation increases management
and labor costs, which may lead to less noticeable im
provements in performance in the short term (Qi Yud
ong & Cai Chengwei, 2020). For enterprises, sustain
able development becomes an unavoidable challeng
e.
Investment and financing are among the primary
sources of capital for enterprises; thus, companies th
at report average or even negative operating results
may resort to practices such as producing fraudulent
financial statements or manipulating annual reports t
o present a more favorable image. This behavior can
significantly increase audit risk. Internally, if the digi
tal transformation does not meet the enterprise's expe
ctations, fails to open new markets, and does not gen
erate new economic growth points, the losses incurre
d during the transformation process will not be recov
erable. In a highly competitive market, if the enterpri
se cannot leverage its transformation to enhance prof
itability, it becomes more susceptible to material mis
statement risks. Additionally, if internal oversight fai
ls and irregularities in the financial statements are no
t detected, there may be potential significant misstate
ment risks.
3.3 Material Misstatement Risks at the
Assertion Level
Digital transformation in enterprises inevitably invol
ves various transactions. Some companies may pursu
e mergers and acquisitions to expedite the transforma
tion process. If an enterprise cannot accurately assess
the operational status and goodwill of the acquired c
ompany, it may face subsequent repercussions. Furth
ermore, if an enterprise inflates transaction informati
on, reports losses as profits, or exaggerates earnings
while claiming to be profitable, such earnings manag
ECAI 2024 - International Conference on E-commerce and Artificial Intelligence
370
ement practices will not accurately reflect the enterpr
ise's true financial condition, thereby triggering mate
rial misstatement risks at the assertion level.
3.4 Detection Risk
Detection risk is closely related to the auditors' own
capabilities. Insufficient quality among the auditing t
eam is a significant factor contributing to audit risk i
n corporate economic responsibility (Chen Wenpeng,
2024). Therefore, auditors need to continually learn
and adapt to new technologies, with a focus on data i
dentification and processing. Traditional auditing tec
hniques and processes may not align with the needs
of digitally transformed enterprises. If auditors lack s
trong digital auditing skills and do not have sufficien
t knowledge of emerging technologies, this can lead
to incomplete or inaccurate data acquisition, thereby
increasing detection risk. Auditors who cannot effect
ively utilize digital technologies may find it challeng
ing to perform audits for digitally transformed enterp
rises.
4 EFFECTIVE MEASURES TO
PREVENT AUDIT RISKS IN
THE PROCESS OF
ENTERPRISE DIGITAL
TRANSFORMATION
4.1 Preventing New Audit Risks
Preventing new audit risks is an important challenge
currently faced in auditing work. With the complexit
y of the market environment, technological develop
ment, and audit subjects, audit risks exhibit character
istics of diversity and concealment. To effectively pr
event new audit risks, several approaches can be ado
pted. First, enhancing the quality and capabilities of
auditors is essential. In the information age, auditors
need to master digital auditing technologies. Professi
onal training should be strengthened for both auditor
s who have yet to acquire these skills and those who
have already done so, with regular training sessions c
overing digital auditing, information technology, aud
iting practices, and legal regulations to improve audi
tors' professional competencies and business capabili
ties.
Second, it is crucial to improve the enterprise data in
formation system, strengthen security, and address v
ulnerabilities to ensure that enterprise systems can re
spond to and mitigate threats such as hacker attacks,
malware, and internal data breaches. Protecting critic
al data and information is essential to provide a stabl
e and efficient foundation for conducting big data au
dits (Yan Lixin, 2024). Finally, with the rapid develo
pment of new technologies such as the internet and b
ig data, new economic models continue to emerge. A
uditors must closely monitor the risk characteristics i
n these areas and develop corresponding audit strateg
ies and measures. In summary, enhancing the quality
and capabilities of auditors, adopting advanced audi
ting technologies and methods, and focusing on emer
ging risk areas can effectively reduce the probability
and impact of audit risks, ensuring the smooth progre
ss of auditing work and the objectivity and fairness o
f audit results.
4.2 Preventing Material Misstatement
Risks at the Financial Statement
Level
Preventing material misstatement risks at the financi
al statement level is a crucial measure to ensure the t
ruthfulness, accuracy, and completeness of corporate
financial information. Digital transformation may ne
gatively impact corporate operations and increase the
risk of significant misstatements, a risk that auditors
can perceive (Ni Guoai & Sun Dandan, 2023). In to
day's environment, some enterprises may take risks t
o enhance profits, stabilize stock prices, and secure a
dditional financing by resorting to practices such as f
alsifying financial statements or misrepresenting ann
ual reports, which undoubtedly harms investor intere
sts.
To avoid such situations, auditors must thoroughl
y understand the internal and external environments
of the enterprises being audited, identify potential ris
ks, and determine appropriate auditing methods suita
ble for the specific enterprise to ensure the accuracy
of the audit procedures. During the preparation of fin
ancial statements, it is essential to identify areas that
may carry misstatement risks, evaluate the identified
potential risks, and analyze their impact on the accur
acy and authenticity of the financial statements. By e
xecuting substantive procedures such as confirmatio
ns, inventories, and inspections, auditors can obtain s
ufficient audit evidence to verify the truthfulness and
accuracy of the financial statements. Auditors must
ensure their independence during the audit process,
maintaining the independence of the auditing depart
ment and avoiding interference from management or
other stakeholders. They should adhere to the ethica
l standards and relevant legal regulations, ensuring th
e objectivity and fairness of the audit results.
Research on Audit Risks in the Digital Transformation of Enterprises
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4.3 Preventing Material Misstatement
Risks at the Assertion Level
Material misstatement risks at the assertion level pert
ain to specific transactions, account balances, or disc
losures, directly impacting the accuracy and reliabilit
y of financial statements. To prevent material misstat
ement risks at the assertion level, enterprises must co
nduct thorough due diligence before acquiring anoth
er company. It is essential to take a firm stance on th
eir own interests, confirming that the target company
possesses robust profitability and normal operationa
l conditions that align with the enterprise's acquisitio
n objectives and that it can yield significant benefits
for the enterprise’s digital transformation progress. T
o mitigate risks associated with material misstatemen
ts at the assertion level, auditors need to conduct com
prehensive financial due diligence before any acquisi
tions, maintain a correct audit attitude, and avoid me
rely performing audits as a formality. Detailed testin
g of various transactions, account balances, and discl
osures should be conducted to identify misstatements
and detect fraudulent activities.
4.4 Preventing Detection Risk
To prevent detection risk, enterprises should first stre
ngthen the construction of the audit team and enhanc
e the quality of auditors. A qualified auditor should p
ossess solid professional capabilities, high ethical sta
ndards, and advanced risk awareness (Jia Tingting, 2
024). By enhancing their professional knowledge, au
ditors should acquire a variety of auditing methods a
nd multidisciplinary knowledge, including digital au
diting, information technology, and internal auditing,
to effectively address the increasingly complex audi
ting environment.
Fostering professional ethics is crucial; auditors s
hould receive thorough training in ethical standards t
o ensure they maintain objectivity, integrity, and pro
fessionalism throughout the auditing process. Establi
shing a robust auditing system involves formulating
and refining various regulations governing auditing p
ractices, clarifying auditing procedures, methods, an
d standards, thereby providing auditors with clear gu
idance and norms.
Optimizing the audit process is necessary to ensu
re an orderly auditing operation, minimizing detectio
n risks stemming from improper procedures. Establis
hing auditing standards, such as internal financial ma
nagement systems, codes of conduct for auditors, an
d auditing workflows and regulations, can facilitate t
he smooth execution of auditing tasks (Bai Xiaolin, 2
022). Implementing an audit review system to evalua
te critical audit documents, such as working papers a
nd audit reports, is essential to ensure the accuracy a
nd completeness of the auditing process.
Furthermore, a comprehensive audit supervision
mechanism should be established to monitor the audi
ting process in real-time, allowing for the timely iden
tification and correction of issues that arise during th
e audit. Utilizing modern auditing techniques and me
thodologies, such as big data and cloud computing, c
an significantly enhance the efficiency and accuracy
of auditing work, reducing detection risks caused by
human error. Strengthening communication with oth
er departments through timely information exchange
s can help verify the accuracy and reliability of audit
information. Ensuring the independence of auditors
is paramount; the audit department must maintain its
independence during the audit process, free from int
erference from management or other stakeholders, w
hile adhering to ethical standards and relevant legal r
egulations to ensure the objectivity and fairness of au
dit results
5. CONCLUSION
In summary, the digital transformation of enterprises
significantly impacts audit risks, encompassing eme
rging risk audits, material misstatements at the finan
cial statement level, material misstatements at the ass
ertion level, and detection risks. To mitigate these ris
ks, enterprises must implement corresponding preve
ntive measures, enhance the professionalism of audit
ors, cultivate adherence to ethical auditing standards
among audit personnel, ensure auditor independence,
and adeptly utilize digital technologies.
The effects of digital transformation on auditing
are multifaceted; they manifest not only at the techno
logical level but also involve updates to auditing phil
osophies and methodologies. For auditors, adapting t
o new auditing approaches in this evolving environm
ent requires continuous learning, particularly in infor
mation audit technologies. This commitment is essen
tial for providing robust support for the sustainable d
evelopment of enterprises and preventing the recurre
nce of audit risks.
Moreover, it is crucial to ensure that auditing pra
ctices meet the demands of the digital age while proa
ctively addressing emerging audit risks and formulat
ing flexible and effective risk management strategies.
Throughout this process, maintaining independence
and objectivity in audits remains a core principle.
This study acknowledges that research on emergi
ng audit risks and information audit technologies is s
till insufficiently developed. Future research could e
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xplore, from a dialectical perspective, the impacts of
enterprise digital transformation on audit risks and id
entify key areas of digital technologies relevant to thi
s context. Such exploration would provide further su
pport for the study of audit risks associated with digi
tal transformation. Digitalization is not only the path
forward for enterprises and auditing but is also perm
eating various aspects of modern society and individ
ual life. Consequently, the implications of digitalizat
ion and the societal issues that arise warrant careful c
onsideration.
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