Does a Client’s Digital Transformation Affect Audit Quality and Audit Inputs? Evidence from China

Abstract

In the digital economy era, digital transformation has become a key strategy for enterprises to improve competitiveness. This study uses data from Shanghai and Shenzhen A-share listed companies in China from 2010 to 2023 to examine the impact of corporate digital transformation on audit quality and audit inputs. The results show that digital transformation significantly improves audit quality by enhancing internal control and information transparency. At the same time, it increases audit inputs because of greater operational and system complexity. The effects exhibit significant heterogeneity across audit firms. Non-Big Four auditors achieve greater audit-quality improvement but face substantially increased audit effort, while Big Four firms experience limited changes in both audit quality and audit inputs. The findings reveal a digital divide in audit capabilities, in which technological disparities between large and small audit firms lead to different adaptation patterns. This study provides empirical evidence for understanding how enterprise digital transformation reshapes audit risk assessment, audit-resource allocation, and audit-service quality in the digital economy.