Abstract

This ongoing research aims to improve our understanding of the digital transformation (DT) process in small and medium-sized (SME) professional services firms. We define DT as “a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication, and connectivity technologies” (Vial, 2019, p. 3). Studies of large firms dominate most of the prior literature on DT and there is a dearth of knowledge about the challenges SMEs face. Addressing this gap is important because the SME sector is the largest contributor to the global economy, employment, and GDP but SMEs are known to be resource constrained. Our focus is on the domain of accounting audit where the regulator UK Financial Reporting Council (FRC) has encouraged SME audit firms to engage in DT to compete with the dominant “Big 4” (Deloitte, PricewaterhouseCoopers, KPMG, EY). Our ongoing action research involves Beever Struthers (B&S), an SME audit practice based in the UK. B&S has four offices in Manchester, Blackburn, Birmingham, and London, employs 240 staff, and has provided a complete range of accounting services to clients for over one hundred years. The audit service is the largest contributor to revenues serving 650 audit clients nationally of varying sizes and complexities. B&S is the largest provider of audit services in the UK housing sector meaning they act for several Public Interest Entities (“PIEs”). Audit of PIEs is regulated by the UK FRC and thus B&S audits are subject to a higher standard of regulatory review. The rationale for DT in the audit function is to significantly increase quality, productivity, and capacity to deliver additional insight, value to clients, and grow capacity to win more business without significantly adding headcount. In 2016, B&S selected “Inflo” (https://www.inflosoftware.com/) as the key provider of digital audit software and planned to replace all existing legacy software packages in the audit function. Our findings since September 2023 focus on the challenges B&S has encountered related to dependence on external vendors, fit with the audit process, and compliance with the regulations. Bricolage theory (Baker & Nelson, 2005) has enabled sensemaking of how and why actors have engaged with multiple vendor applications and to “make do” with limited “resources at hand” and “combine resources” to comply with FRC regulations. This process of bricolage has led to a “patchwork” of vendor applications, and concerns over Inflo compliance has led to limited adoption with only two of eight modules in use despite the availability of the entire suite of modules. Legacy audit digital applications are distributed over multiple locations and are fractionally adopted presenting a landscape of fragmentation. Future work will continue to engage in action research on the B&S DT process and we anticipate practical and theoretical contributions to knowledge on DT and bricolage in SME professional services firms.

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