ABSTRACT Accounting firms are increasingly investing in information technology (IT) to enhance audit quality. This study examines the impact of IT personnel investment on audit quality, drawing on the resource-based view and human capital theory to argue that specialized IT expertise improves audit effectiveness. The results show that investment in IT personnel is associated with higher audit quality, as measured by lower discretionary accruals and fewer financial restatements. The positive effect is more pronounced in high-growth accounting firm offices, where resource constraints are more common, and becomes stronger following the STEM OPT extension policy, which expands opportunities for IT capability development in accounting firm offices. Furthermore, higher compensation for IT professionals appears to incentivize improved audit quality. The findings are robust across various measures and methods addressing potential endogeneity concerns. This study contributes to audit quality literature and provides practical insights as audit firms continue integrating AI into their processes. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M41; M42; O33; J24.
Gui et al. (Wed,) studied this question.