Disruptive technology and audit risks: Evidence from FTSE 100 companies

We investigate the use of disruptive technology on the level of audit risk, within both companies and audit firms. A sample of FTSE 100 and their corresponding audit firms—specifically, the ‘Big 4’—are selected for the period 2015 to 2020. Our findings indicate that the utilisation of disruptive technology results in a significant reduction in audit risk for both companies and audit firms. Disruptive technology seems to promote benefits to companies and audit firms by significantly mitigating the risk of material misstatements (i.e. inherent and control risk) and detection risk; these results are consistent across various industry classifications. • Disruptive technologies are investigated in association with the level of audit risk. • Both companies and audit firms are examined to offer a comprehensive analysis. • Disruptive technologies significantly reduce inherent risk and the control risk. • Audit firms mitigate the detection risk by leveraging disruptive technology. • we perform additional tests to identify the heterogeneity of the industries.