Better sooner than later? Effects of adopting drone-enabled inventory observation on auditor liabilities

Sarah Kim, Tom Downen and Helen Kang

Managerial Auditing Journal, 2026, vol. 41, issue 3, 557-578

Abstract: PurposeThe COVID-19 pandemic has driven the adoption of advanced technologies in auditing, including the use of drones for inventory observation. However, practitioners have expressed concerns about the additional litigation risks associated with these technologies. This study aims to investigate whether using drones for inventory observation may increase auditors’ legal liabilities. In addition, it explores how perceptions of conventionality and normalcy interact in auditor liability and their broader implications.Design/methodology/approachThis research employs a 2×2 experimental design to examine the effects of inventory observation method (drones vs human staff) and consistency with audit industry norms (consistent vs inconsistent) on jurors’ negligence assessments. Participants assume the role of mock jurors in a hypothetical legal case involving allegations of insufficient inventory observation. The study manipulates the observation method and its alignment with industry practices with a view toward disentangling the constructs of conventionality and normalcy.FindingsThe findings show that jurors assign higher negligence to auditors using drones when their use is inconsistent with audit industry norms, compared to auditors relying on human staff. Conversely, when drone use aligns with audit industry norms, jurors attribute lower negligence compared to those not using drones. In addition, the results indicate that the perceived foreseeability of audit failure mediates this interaction effect.Originality/valueThis research contributes to the extant literature by addressing the distinction between the constructs of conventionality and normalcy. It also offers practical implications for auditors, emphasizing the importance of demonstrating due care when adopting new technologies to align with audit industry norms.

Keywords: Auditor liability; Inventory observation; Drones; Litigation risks; Conventionality; Normalcy (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-01-2025-4642

DOI: 10.1108/MAJ-01-2025-4642

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