The Audit Implications of Cloud Computing

What is it about?

Over the last decade, many firms have shifted from in-house managed information systems to cloud computing arrangements, and the Public Company Accounting Oversight Board has described these arrangements as a "disruptive" technology to both financial reporting and audit processes. Ex ante, it is unclear whether cloud use allows for increased audit efficiency through reliance on service organization control reports or introduces additional complexity and risk to the audit. Motivated by this tension, we explore auditor behavior in the context of these relationships. Specifically, leveraging a 2015 Accounting Standards Update from the Financial Accounting Standards Board to identify material cloud users, we study how audit fees, lag, and restatements vary in the presence of these technologies.

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