Isn't it ironic? The unintended consequences of audit firm efforts to increase auditor awareness of blockchain

Abstract

As innovative technologies, such as blockchain, transform business, audit firms make efforts to increase auditor awareness of the challenges associated with companies adopting them. However, given the positive hype surrounding blockchain, these efforts may backfire—prompting unintended consequences that threaten audit quality. Indeed, we expect these efforts make the pre-existing positive views of auditors about blockchain more salient, which subsequently prompts biased auditor judgment and actions (i.e., halo effects). Using an experiment, we predict and find that when auditors receive firm instructions to consider potential challenges associated with company blockchain adoptions, they subsequently evaluate a client's biased projections less skeptically when they know the client plans to adopt blockchain in an unrelated area. Conversely, auditors who do not receive these firm instructions do not exhibit this biased judgment. Building on the theory of ironic rebound effects and halo theory, these findings identify an unintended consequence of audit firm efforts to inform auditors about emerging technologies.