Does big data mitigate audit risk? The moderating roles of discretionary accruals and firm complexity: evidence from an emerging market

In the wake of the fourth industrial revolution, big data analytics (BDA) has emerged as a transformative force in the auditing profession, offering unprecedented capabilities for risk assessment. We investigate the impact of big data adoption on audit-risk pricing proxied by audit fees and explores the moderating roles of discretionary accruals and firm complexity within the Egyptian context. Utilizing a robust panel dataset of 213 non-financial firms listed on the Egyptian Exchange from 2019 to 2024 with 1,278 firm-year observations, the study employs a multi-layered estimation strategy, including panel EGLS with panel corrected standard errors (PCSE) and dynamic System GMM to mitigate endogeneity concerns, cross-sectional dependence and heteroscedasticity. Empirical findings provide robust evidence that big data analytics adoption significantly mitigates audit risk, as evidenced by the substantial decrease in audit fees following digital integration. The results reveal that the risk-reduction benefits of big data are amplified in firms with higher discretionary accruals, demonstrating that technological efficiency serves as a crucial corrective mechanism in high-noise reporting contexts. Firm complexity positively moderates the big data-audit risk relationship, where the efficacy of big data in reducing audit risk is more pronounced in highly complex organizational environments. These results remain consistent across various robustness checks, including robust least squares and alternative disclosure proxies. The study offers novel insights for regulators and audit firms in emerging markets, emphasizing that while big data is a powerful tool for audit efficiency, its risk-mitigating effectiveness is synergistically magnified when navigating firms with elevated reporting discretion and structural complexity.