Digital transformation, sustainability disclosure, and audit quality: the role of corporate governance

Abstract

Purpose:  This study aims to examine the impact of digital transformation and sustainability disclosure on audit quality, and whether corporate governance moderates these relationships within an emerging country context. Methodology/approach: Utilizing panel logistic regression, this research analyzes listed companies. Digital transformation is measured via content analysis of specific keywords (e.g., AI, digital transformation), while sustainability disclosure and audit quality (big 4 vs non-big 4) use dummy variables. Corporate governance is proxied by audit committee size, independent commissioners, and the frequency of audit committee meetings. Findings:  The results of this study indicate that digital transformation and sustainability disclosure both positively and significantly affect audit quality among non-financial firms listed on the Indonesia Stock Exchange during the 2020-2024 period. However, corporate governance, proxied by audit committee size, the independent commissioner ratio, and audit committee meeting frequency, does not significantly strengthen either relationship. Practical and Theoritical contribution/Originality: Theoretically, this study extends agency theory by simultaneously integrating corporate digitalization and environmental sustainability factors. Practically, it assists regulators in emerging markets in formulating better reporting standards to improve market transparency. Research Limitation:  The digital transformation measurement relies strictly on keyword frequency in annual reports, which may not fully capture the actual operational depth of a company’s technological implementation.