Digital Transformation, Information Resource Governance, and Audit Quality

Abstract

This study explored the nonlinear link between digital transformation and audit quality in manufacturing alongside supply chain concentration effects. It was conducted because traditional linear research ignores complex digitalization risks, like algorithmic black boxes, failing to fit manufacturing's unique financial integration contexts. The authors applied a framework combining mathematical deduction of misstatement risks, game theory, and panel regression on data from 12,450 Chinese A-share manufacturers from 2012 to 2022. The findings revealed an inverted U-shaped relationship where early transformation raises risks and lowers audit quality up to a critical point (Digital Transformation (DT)=1.58)—after which standardized governance reduces risks. Additionally, high supply chain concentration accelerates this benefit. This means managers must strategically pace information technology investments around this threshold, while auditors should adapt resource allocation to specific digital maturity stages to safely capture transparency dividends.