The External Audit Function in a Digitalised Business Environment and its Implications on Business Process Reengineering: A Case Study of a Leading Audit Firm in Sri Lanka

This paper aims to explore how the scope of the external audit function has changed with digitalisation, analyse the changes in working practices within audit firms, assess the extent and implications of the skills gap created by digitalisation among external auditors, and investigate the influence of digitalisation-driven technological advancements on the success of Business Process Reengineering (BPR) initiatives in audit firms. Using a qualitative case study approach, data was collected through structured interviews with manager-level auditors, associate-level auditors from one of the Big Four audit firms and representatives from its client companies. The collected data was analysed thematically. The research reveals that while the core scope of external auditing remains unchanged, digitalisation significantly alters working practices. Notably, Key Performance Indicators (KPIs) have improved as a result of these changes; however, a widening skills gap among auditors has emerged as a new challenge affecting KPIs. These findings hold practical value for audit firm partners and managers, enabling them to establish novel operational standards and goals while proactively addressing the identified skills gap through targeted upskilling initiatives. Ultimately, this study contributes to a deeper understanding of the under-researched interplay between digitalisation, BPR, and the external audit function, shedding light on the critical role of technological advancements in ensuring BPR success within audit firms.