Better Sooner than Later? Effects of Adopting Drone-Enabled Inventory Observation on Auditor Liabilities
Academic Article
Overview
Overview
Abstract
Audit firms have explored the use of drones for inventory observation, but practitioners expressed concern about additional litigation risk of adopting the new technology. We investigate whether using drones for inventory observation may increase auditors’ legal liabilities. Our results show that jurors assign higher negligence to auditors who use drones if the use of drones is not the norm in the auditing industry. On the other hand, if most of other similar-size audit firms have already adopted drone-enabled inventory observation, jurors assign higher negligence to auditors who do not use drones for inventory observation. Our findings offer practical insight into the potential legal liabilities associated with the use of drones. Our study also contributes to the literature by considering the interaction between conventionality (previously used practice) and normalcy (widely used practice), which has rarely been distinguished in the empirical test of normality bias.
