Digital assets, auditor IT experience, and material misstatements: Evidence from a developing country

Abstract

Keeping up with the global debate around cryptocurrencies, our study examines the relationship between cryptocurrency recognition and assessing the risks of material misstatement (RMM) and the possible moderating effect of auditor IT expertise on this relationship. We conducted a 2x2 factorial experimental design involving 130 auditors employed by licensed accounting and auditing firms. The results suggest that the presence of cryptocurrency in financial statements significantly increases the assessed RMM, especially among auditors with higher IT expertise. Sensitivity analysis supports these results. These findings have important implications for audit practices, highlighting the need for advanced IT training and specialized expertise for auditors involved in cryptocurrency audits. In line with agency theory, this study demonstrates the role of IT expertise in mitigating information asymmetry related to complex and emerging technologies. Moreover, our findings have practical implications since regulators, standard setters, audit firms, and educators can benefit from the findings, which emphasize the critical role of auditor competence in cryptocurrency matters and the value of regulatory oversight in promoting sound audit practices in this emerging area. In addition, our study fills a knowledge gap by providing recent evidence from a developing country.