When Technology Meets Turbulence: The Impact of Digital Transformation and Policy Uncertainty on Audit Opinions

ABSTRACT This study investigates how Corporate Digital Transformation (CDT) influences audit opinions in Chinese A‐share‐listed non‐financial firms from 2011 to 2022, with a focus on the moderating role of Economic Policy Uncertainty (EPU). Results reveal an inverted U‐shaped relationship: moderate levels of CDT enhance audit outcomes through improved transparency, while excessive digitalization creates governance complexities that increase the likelihood of qualified audit opinions. EPU exacerbates these risks, directly and with fiscal policy uncertainty exerting the strongest moderating effect. Spillover analysis further indicates that Japanese EPU significantly amplifies the CDT–audit nexus, reflecting China's trade interdependence with major partners. Heterogeneity analysis shows that the negative effects of CDT are more pronounced in large firms, state‐owned enterprises, highly leveraged and low‐risk firms, and those with weak internal controls. Regional and sectoral disparities are also evident, particularly among labor‐ and capital‐intensive firms, those listed on the Shenzhen Stock Exchange, and firms in China's central regions. Among technological components, artificial intelligence (AI) exerts the greatest influence, underscoring both its potential and governance risks. Robustness checks across alternative EPU measures and econometric models confirm these findings. The study highlights the need for context‐specific digital transformation strategies and regulatory frameworks that balance innovation with audit reliability.