Digital Transformation Effects on Accounting and Auditing Functions

Abstract

This research investigates the multifaceted effects of digital transformation on accounting and auditing functions through a novel methodological framework that combines computational linguistics, process mining, and institutional theory. Unlike previous studies that focus primarily on technological adoption, this paper examines the
cognitive, procedural, and institutional shifts occurring within accounting and auditing
practices as they adapt to digital environments. We introduce the concept of ’digital
hermeneutics’ in accounting—the interpretive processes by which accounting professionals make sense of digital data streams—and develop a framework for analyzing
how digital transformation reconfigures traditional accounting epistemologies. Our
methodology employs a mixed-methods approach combining automated text analysis
of accounting standards revisions from 1995-2005, process mining of audit trails from
early enterprise resource planning systems, and ethnographic case studies of accounting
departments undergoing digital transitions. The results reveal three distinct patterns
of transformation: (1) a shift from periodic to continuous accounting processes enabled
by real-time data flows, (2) the emergence of ’algorithmic judgment’ in auditing where
human expertise increasingly interfaces with automated analysis systems, and (3) the
development of new forms of accounting materiality that account for digital assets and
intangible value flows. Our findings demonstrate that digital transformation is not
merely a technological overlay on existing practices but fundamentally reconfigures
the epistemological foundations of accounting and auditing. The research contributes
original insights into how digital technologies are reshaping the very nature of financial
representation, verification, and accountability, with implications for accounting education, standard-setting, and professional development in the emerging digital economy.