Effect Of Digital Transformation On The Effectiveness Of Financial Audits Of Small And Medium-sized Accounting Firms In Nairobi County

Abstract

This study aimed to investigate the effect of digital transformation on the effectiveness of financial audits in small and medium-sized accounting firms in Nairobi County. Specifically, it sought to evaluate the effect of computerized auditing, accounting automation, accounting internet technologies, and decision support technology (DST) on the effectiveness of financial audits of Small and Medium Audit Firms in Nairobi County. The theoretical framework was underpinned by the technology acceptance model, diffusion of innovation theory, unified theory of acceptance and use of technology, and decision support system theory. A descriptive research design was employed, targeting 448 partners working in all registered 340 Small and Medium Audit Firms in Nairobi County, using stratified sampling to select a sample size of 211 partners. Data on study variables-computerized auditing, accounting automation, accounting internet technologies, decision support technology, and effectiveness of financial audits were collected through structured questionnaires and analyzed quantitatively using SPSS, applying descriptive and inferential statistics. The study’s findings were presented using APA-formatted tables. The study reveals that computerized auditing techniques enhance risk identification but show mixed effectiveness due to implementation challenges. Accounting automation significantly improves audit accuracy and efficiency, while internet technologies positively influence audit processes through enhanced flexibility. However, DST presents complexities, with a negative regression coefficient indicating challenges in full integration. The study concludes that while digital transformation enhances audit effectiveness, careful implementation is essential. Accounting automation and internet technologies offer notable benefits, but DST requires further improvement. It recommends firms prioritize proper training for computerized auditing and DST integration, alongside regular system evaluations. Future studies should explore the longitudinal impacts of digital transformation, extend research geographically, and examine emerging technologies like blockchain. Additionally, qualitative approaches can provide deeper insights into these complexities.