Audit 5.0 in Risk and Materiality Assessment: An Ethnographic Approach

Abstract

The historical evolution of auditing reflects an increasing complexity in organizational demands, culminating in the emergence of Audit 5.0—an approach that integrates emerging technologies with professional judgment. This study aims to analyze how technological adoption influences risk assessment and materiality determination in financial auditing within a practical, real-world context. The research, qualitative in nature, combines narrative and thematic analysis of the literature, ethnography in a professional setting, and task analysis, developed over four years of experience in a firm of Chartered Accountants. The findings reveal that although digital tools enhance efficiency and accuracy, professional judgment remains essential to ensure the ethics, reliability, and contextualization of audited information. This study contributes to the advancement of understanding regarding the complementarity between technology and the human factor, proposing paths toward more robust and digitally adapted auditing practices.

1. Introduction

Understanding the evolution and development of auditing is crucial to grasp its contemporary importance and relevance (Owolabi & Olagunju, 2020). The historical analysis of auditing, as explored by Teck-Heang and Md Ali (2008) in the article “The Evolution of Auditing: An Analysis of the Historical Development”, reveals a path marked by significant transformations—from its origins to its current role in organizational financial regulation and transparency.

In the business context, auditing is a fundamental tool for ensuring the transparency, integrity, and reliability of financial and operational information (Arens et al., 2023; Louwers et al., 2018). It is a systematic, objective, and independent examination of an entity’s financial statements, aiming to express an opinion on their compliance with applicable accounting principles and their reliability for information users (Lopes, 2022).

The contemporary business environment is characterized by rapid technological evolution, driven by digitalization and the emergence of new technologies. Technological advancement not only transforms daily life but also deeply alters the functioning and dynamics of organizations (Vuković et al., 2024). In this context, auditing is also undergoing substantial changes, requiring new approaches to risk assessment and management (Roring et al., 2022; Wilamsari et al., 2023). Traditional practices are being reshaped by the introduction of digital tools and emerging technologies, enabling more integrated, accurate, and efficient audits.

Technological evolution in the auditing domain culminates in the concept of “Audit 5.0”. From early manual practices to current innovations, technology has played a crucial role in enhancing the efficiency, accuracy, and scope of auditing processes. Audit 5.0 integrates technology with human expertise, creating an environment that fosters adaptability and audit quality (Ali-Abdel et al., 2024). The emergence of Audit 5.0 reflects a renewed recognition of the importance of human relationships and ethics in auditing, thus complementing the role of digital technologies (Sitorus & Tambun, 2023).

Given that reliability and quality are central objectives of auditing, and that materiality determination and risk assessment are key elements, it becomes essential to analyze how technology can optimize these aspects, bringing significant benefits to professional practice. Audit 5.0 assumes the harmonious fusion between large-scale data processing capabilities and auditors’ professional judgment, enhancing the entire audit process and ensuring robust and ethical results (Mpofu, 2023; Rodrigues et al., 2023).

The concept of Audit 5.0 has emerged as a response to the limitations of Audit 4.0, paralleling the broader shift from Industry 4.0 to Industry 5.0. Audit 4.0 is characterized by the incorporation of digital tools such as data analytics, robotic process automation (RPA), and cloud computing to improve efficiency and reliability in audit processes (Ali-Abdel et al., 2024; Rodrigues et al., 2023). This phase emphasized automation and technological efficiency but often lacked emphasis on human interpretation and ethical oversight.

In contrast, Audit 5.0 reflects a more human-centered paradigm, inspired by the principles of Industry 5.0—resilience, sustainability, and humanization—which seeks to reintegrate the auditor’s ethical judgment, contextual awareness, and critical thinking alongside technological capabilities (Tavares et al., 2023; du Toit et al., 2023). It does not reject the automation of Audit 4.0 but rather builds upon it, emphasizing the collaborative role of technology and professional judgment (Mpofu, 2023). For instance, tools such as AI and machine learning are used not only for anomaly detection but also as aids in strategic decision-making, with final responsibility remaining with the human auditor (Samiolo et al., 2024; Mitan, 2024).

This evolution marks a significant shift in the auditor’s role—from primarily executing procedural tasks using technology to acting as a mediator between automated systems and ethical assurance. As such, Audit 5.0 repositions the auditor as an interpreter and ethical arbiter, reinforcing the importance of professional skepticism and contextual insight.

Although the current literature acknowledges the impact of emerging technologies on auditing (Mpofu, 2023; Rodrigues et al., 2023; Ali-Abdel et al., 2024), a significant gap remains in understanding how these technologies influence, in a practical and contextualized manner, risk assessment and materiality determination in real organizational settings. Studies such as those by Roring et al. (2022) and Wilamsari et al. (2023) address the digital transformation of auditing but focus mainly on technical aspects, often neglecting the analysis of the human and organizational dynamics that accompany this transformation. Therefore, this study contributes by articulating technological application with professional judgment, emphasizing an integrated perspective on auditing in the era of 5.0.

This scientific article results from work carried out in a Chartered Accountants firm over four years, within the scope of two internships and subsequent professional collaboration with the entity. The main objective was to analyze how the integration of emerging technologies in Audit 5.0 influences risk assessment and materiality determination, considering the complementarity between process automation and professional judgment. This research is structured around two specific objectives: (i) to understand the impact of emerging technologies on risk and materiality assessment, and (ii) to identify the influence of organizational practices and human interactions in audit execution. To achieve this, a qualitative approach is used, based on three main methods: narrative and thematic literature analysis, workplace ethnography, and task analysis.

Audit 5.0 redefines the auditor’s role by integrating emerging technologies with professional judgment, promoting more effective and transparent risk management. Tools such as the Auditing Software Distributor (ASD) enhance accuracy and agility but do not replace human critical analysis. Ethics and contextual knowledge remain essential in data interpretation. The future of auditing demands continuous training, sectoral adaptation, and further research into the impact of technologies and artificial intelligence (AI).

This article is structured as follows: the first section describes the research methodology; the second presents the theoretical framework on auditing and technology; the third analyzes the evolution of auditing up to Audit 5.0; the fourth discusses the observations and results from the internship; and the fifth section outlines the main conclusions and practical implications.

2. Audit Quality in Financial Auditing: Theoretical Framework

Historically, the concept of auditing has evolved in response to growing organizational complexity and demands. While early auditing primarily focused on the detection of fraud and errors, its role has expanded significantly in modern times. Contemporary auditing now emphasizes risk assessment, corporate governance, and the creation of organizational value (Nugrahanti, 2023; Owolabi & Olagunju, 2020). Among the various forms of auditing, financial auditing remains the most prominent, as it is primarily concerned with examining financial statements to ensure their accuracy, completeness, and compliance with applicable standards (Whittington & Pany, 2021).

The effectiveness of financial auditing requires a quality-oriented approach that goes beyond mere compliance with accounting standards. This approach must include an assessment of the consistency of applied principles, the detection of risks linked to opportunistic management practices, and verification that the financial reports faithfully represent the entity’s economic reality (Lin & Hwang, 2010). In this context, the most widely cited definition of audit quality is that of DeAngelo, which states that audit quality is the probability that an auditor will both detect and report material misstatements in a client’s accounting system. This definition highlights two central factors: the auditor’s technical ability to detect errors or fraud, and the auditor’s independence in reporting such issues, even when it conflicts with client interests (DeAngelo, 1981). This concept integrates key dimensions such as adherence to professional standards, ethics, and auditor independence (Alsughayer, 2021).

Growing concerns about audit quality stem, in part, from the increase in legal actions against auditing firms. Audit quality is crucial to public trust in financial statements, directly influencing economic decisions made by external stakeholders (Saliha & Flayyih, 2020). Investors, creditors, managers, and regulators rely on this information to assess an entity’s performance and financial condition (Lopes, 2022), making the reliability of audited information a key element. In this regard, Oroud et al. (2023) emphasize that high-quality audits instill market confidence, requiring firms to operate with technical rigor, impartiality, and transparency.

The International Standards on Auditing (ISAs), issued by the IAASB in the context of financial statement audits, set the parameters for ensuring high quality. According to the International Auditing and Assurance Standards Board (IAASB), its mission is: “to serve the public interest by setting high-quality auditing, assurance, and other related standards and by facilitating the convergence of international and national auditing and assurance standards, thereby enhancing the quality and consistency of practice throughout the world and strengthening public confidence in the global auditing and assurance profession” (see: https://www.fsb.org/2024/01/international-standards-on-auditing-isa/, accessed on 23 February 2024).

ISA 200 (ISA, 2018k) establishes the fundamental principles of auditing, while ISA 315 (ISA, 2018j) deals with identifying and assessing risks of material misstatement, and ISA 330 (ISA, 2018l) guides responses to these risks. Additionally, Sepeng et al. (2024) highlight the importance of ISO 19011:2018 (ISO, 2018), which provides guidelines for auditing management systems, including planning, execution, and auditor competence, based on principles such as integrity, objectivity, confidentiality, competence, and due care.

Audit planning is a critical phase for the quality and effectiveness of the work. It involves defining objectives, assessing risks, understanding the entity’s environment, and developing a detailed plan. According to Costa (2023), every phase of the process—from client acceptance to report issuance—decisively influences the integrity of reported financial information. This structure follows five main stages: (1) client acceptance or continuance (ISA, 2018b), (2) planning (ISA, 2018l, 2018j, 2018e, 2018g), (3) evidence gathering and substantive testing (ISA, 2018m, 2018e), (4) conclusion and evaluation (ISA, 2018i, 2018a, 2019), and (5) final report issuance (ISA, 2019).

Thorough planning enables auditors to focus on high-risk areas and enhance the accuracy of financial statements (Badruzaman, 2023; Costa, 2023). Arens et al. (2023) emphasize that this is a continuous process extending until the report is finalized. Relevant ISAs include ISA (2018e) (Audit Planning Objectives), ISA (2018j) (Understanding the Entity), ISA (2018e) (Responding to Risks), and ISA (2018g) (Communication with Governance). According to Eulerich et al. (2020), proper planning reduces audit risk to an acceptably low level. Furthermore, Sujana and Dharmawan (2023) argue that effective planning contributes to the reliability and integrity of audit results by ensuring a structured and proactive approach.

2.1. Key Risks to Audit Quality

Audit performance depends on understanding and implementing the fundamental concepts of auditing: materiality, audit risk, and audit evidence (Nikolovski et al., 2016). According to the literature, the main risks affecting audit quality include audit risk, control risk, inherent risk, detection risk, and fraud risk (see: Kocziszky et al., 2017; Nikolovski et al., 2016; Saliha & Flayyih, 2020; Vona, 2012).

Audit Risk

According to the Glossary of Terms from the Irish Auditing and Accounting Supervisory Authority (IAASA, 2021, p. 8), audit risk is defined as “The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. Audit risk is a function of material misstatement and detection risk.” In this sense, audit risk represents the possibility that auditors may issue an incorrect opinion on an entity’s financial statements due to deficiencies in executing audit procedures (Saliha & Flayyih, 2020). In other words, it refers to the probability that auditors fail to detect material errors or irregularities during the audit process, potentially compromising the reliability of their opinion.

Identifying and understanding the sources of audit risk is essential to ensure the effectiveness of the audit process (Nikolovski et al., 2016). Sources of risk include transaction complexity, insufficient evidence, undetected fraud or error, and internal control limitations—all of which may compromise audit quality and the accuracy of financial reporting (Allen et al., 2006; Arens et al., 2023; Sun & Guan, 2024).

To mitigate audit risk and ensure the detection of errors and irregularities, it is crucial to implement effective procedures (Allen et al., 2006; Arens et al., 2023; Sun & Guan, 2024).

Auditors should adopt a set of key practices to minimize risk and ensure the integrity of financial information: proper planning; in-depth understanding of the entity’s environment; assessment of information reliability; execution of substantive testing; effective communication with management; and thorough review and supervision of the entire audit process. In summary, audit risk is the probability that the auditor issues an inappropriate opinion on financial statements that contain undetected material misstatements (Nikolovski et al., 2016).

I. Control Risk

Control risk refers to the likelihood that a company’s internal control system fails to prevent or detect material misstatements in the financial statements in a timely manner. It is directly related to the effectiveness and reliability of the organization’s internal controls (Fakhfakh & Jarboui, 2023; Nikolovski et al., 2016).

Key factors influencing control risk include ineffective internal controls, lack of monitoring and supervision, process or system changes, fraud or collusion, and a changing regulatory environment. These elements are critical to assessing control effectiveness and can significantly impact the integrity of financial statements (Allen et al., 2006; Arens et al., 2023).

Audit procedures for assessing and improving internal controls—such as systematic control evaluation, control testing, proper documentation, communication with management, independent review, and continuous training—are essential for effective evaluation and enhancement of internal controls (Allen et al., 2006; Arens et al., 2023; Nikolovski et al., 2016).

II. Inherent Risk

Inherent risk refers to the susceptibility of an account balance or transaction class to material misstatement, either individually or when aggregated with misstatements in other balances or classes, assuming no related internal controls (Fakhfakh & Jarboui, 2023).

Factors influencing inherent risk—such as transaction complexity, business environment volatility, regulation, reliance on suppliers or customers, and macroeconomic conditions—can significantly impact operations and financial results (Arens et al., 2023; Nikolovski et al., 2016).

Auditors can address inherent risk through procedures such as assessing the business environment, understanding transactions and processes, evaluating accounting estimates, identifying areas of complexity, proper planning, involving technical experts, and maintaining ongoing communication with management.

III. Detection Risk

Detection risk is the risk that audit procedures fail to detect material errors in accounts and transactions (Fakhfakh & Jarboui, 2023; Nikolovski et al., 2016).

Factors contributing to detection risk include poor selection of procedures, incorrect application, misinterpretation of results, and random sampling. To mitigate this risk, auditors must adopt rigorous practices, such as careful selection and consistent application of audit procedures, detailed analysis and interpretation of results, gathering additional evidence when necessary, and ensuring effective planning and evaluation throughout the audit process.

IV. Fraud Risk

Fraud risk refers to the likelihood of intentional misstatements or manipulation in accounting records to gain an undue advantage or conceal relevant information. This includes document forgery, manipulation of records, and collusion (Vona, 2012).

Contributing factors include financial pressure or misaligned incentives, opportunities for fraud, rationalization or justification, lack of effective monitoring, and collusion among individuals (Allen et al., 2006; Vona, 2012).

To mitigate this risk, auditors should take a comprehensive approach involving the following: assessment of the control environment, use of data analytics and analytical procedures, control testing and substantive procedures, communication with management and whistleblowers, involvement of technical experts, and continuous training and awareness (Allen et al., 2006).

V. Non-Compliance Risk

Non-compliance risk refers to the possibility that an entity fails to fully comply with applicable legal, regulatory, or contractual requirements. This includes misinterpretation of legal and regulatory requirements, lack of awareness or updates, ineffective internal controls, pressure to meet deadlines or performance targets, and transaction complexity (Kocziszky et al., 2017).

Non-compliance may result in legal penalties, financial losses, or reputational damage.

To mitigate this risk, entities should perform comprehensive evaluations of internal control environments, regularly review and update policies and procedures, promote ongoing training, establish strong monitoring and supervision systems, foster a culture of transparency, and implement technology tools to manage and monitor compliance.

Once risks are identified, the audit team can develop appropriate strategies and mitigation plans, which may include adjusting audit procedures, allocating more resources to high-risk areas, and involving technical experts when necessary (Arens et al., 2023).

2.2. Risk Assessment in Auditing

Risk assessment constitutes a fundamental stage in the audit process, involving the identification, analysis, evaluation, and mitigation of risks that may compromise an organization’s objectives (Levytska et al., 2022; Nikolovski et al., 2016). This process, supported by evidence and the auditor’s professional judgment, is essential to ensure the effectiveness of the audit and the accuracy of financial statements (Allen et al., 2006; Fukukawa & Mock, 2011; Levytska et al., 2022).

I. Risk Identification

The first step in risk assessment is identifying potential risks an organization may face. This process aims to recognize events or conditions that could negatively impact the organization’s operational and financial objectives.

II. Risk Analysis

Once risks have been identified, the next step is to analyze their likelihood and potential impact. This analysis allows auditors to classify risks based on predefined criteria, enabling them to prioritize high-risk areas. Proper analysis ensures that audit efforts are allocated efficiently and effectively.

III. Risk Impact Evaluation

In the following phase, it is essential to understand how each identified risk could affect the organization’s objectives and operations. Impact evaluation involves analyzing the financial, operational, legal, and reputational consequences associated with each risk.

IV. Risk Mitigation

Based on the risk analysis and impact assessment, strategies and plans are developed to mitigate or reduce the identified risks.

V. Risk Monitoring and Review

Risk assessment is a continuous and dynamic process. As internal conditions and the external environment evolve, new risks may emerge, or the nature of existing risks may change. Therefore, it is crucial to regularly monitor risks and revise mitigation strategies, adjusting them as necessary.

VI. Integration of Risk Assessment into Organizational Strategy

Risk assessment must be aligned with the organization’s strategy and objectives. This alignment involves evaluating how identified risks may affect the organization’s ability to achieve its long-term goals.

Authors such as Knapp (2014), in the book Contemporary Auditing, emphasize the importance of rigorous risk assessment during the audit planning phase. This process allows auditors to focus efforts on high-risk areas, ensuring efficient resource allocation. Additionally, Knapp (2014) highlights the need for continuous reassessment of risks throughout the audit process, adapting procedures as new circumstances or findings arise.

In auditing, risk assessment is conducted to identify and evaluate risks associated with the audited entity or transaction. This process ensures that the financial statements are accurate and in compliance with accounting principles. Auditors use various methods and techniques to assess risks, such as analyzing historical data, conducting interviews with management, and evaluating internal controls. External events that may impact the audited entity are also considered. Factors such as the complexity of the entity, the effectiveness of its internal controls, management integrity, regulatory changes, and economic conditions influence risk assessment (Allen et al., 2006; Levytska et al., 2022). Thus, risk assessment not only ensures compliance with financial reporting standards but also contributes to the integrity and quality of the audit process.

Ultimately, risk assessment is essential for auditors to plan and execute the audit effectively. Through this process, resources are focused on the most critical areas, defining the nature, timing, and extent of audit procedures (Arens et al., 2023; Fukukawa & Mock, 2011). This approach ensures a comprehensive and efficient audit, capable of identifying and mitigating key risks (Arens et al., 2023; Fukukawa & Mock, 2011).

2.3. Determination of Materiality in Auditing

Materiality is defined in ISA (2018c) as the relative importance of matters on which the auditor gathers evidence in relation to the financial statements as a whole. Materiality refers to the relevance of information or transactions within a company’s financial statements and guides auditors in determining which errors or omissions may significantly affect users’ understanding of those statements (Arens et al., 2023; Huang et al., 2024). It concerns the relative importance of a misstatement or omission in financial reporting, taking into account its magnitude, nature, and circumstances (Louwers et al., 2018). Thus, an item is considered material if its omission could significantly impact the overall understanding of the information presented (Huang et al., 2024).

Research by Belinda et al. (2024) highlights that professional skepticism positively impacts audit quality, while time pressure does not show a significant effect. Materiality, on the other hand, exerts a positive influence on audit quality. To ensure that financial statements are presented fairly and comprehensively, auditors must adhere to the standards and guidelines established for materiality in financial auditing (Huang et al., 2024).

The practical application of materiality can be challenging due to differences in guidelines and methodologies (Houghton et al., 2011). To ensure transparency and trust in financial reporting, auditors should apply materiality to focus their efforts, ensuring the financial statements present a true and fair view of the company’s financial position (Rittenberg et al., 2013).

Determining materiality involves evaluating an error or omission in terms of its potential to influence users’ decisions, requiring careful professional judgment (Arens et al., 2023; Houghton et al., 2011). According to David and Abeysekera (2021), determining whether an item is material involves assessing it both individually and in aggregate, considering its nature and amount. The guidelines of the Australian Accounting Standards Board (AASB) 1031 (AASB, 2013) exemplify how materiality may be influenced.

Materiality plays a key role throughout all phases of the audit, directing auditors to areas where misstatements may significantly impact users’ decisions (Whittington & Pany, 2021), directly influencing audit decisions and procedures (Arens et al., 2023; Whittington & Pany, 2021). Thus, in:

I. Audit Planning

Defining materiality is crucial during audit planning. Auditors use materiality to establish audit objectives, select appropriate procedures, and determine the extent and depth of testing to be performed.

II. Risk Assessment

Materiality is essential for risk assessment. Auditors use it to identify significant risk areas, focusing efforts where material misstatements are more likely to occur and could affect the financial statements significantly.

III. Execution of Audit Procedures

During audit execution, auditors apply procedures to obtain sufficient and appropriate evidence regarding the financial statements. Materiality guides the selection and scope of these procedures, ensuring focus on high-risk areas.

IV. Evaluation of Audit Results

Materiality is used to assess audit findings. Auditors determine whether identified errors are material or immaterial, influencing the nature and extent of communications with management and those charged with governance.

V. Audit Reporting

Materiality also affects the audit report. Auditors are required to highlight any material concerns identified during the audit, ensuring users of the financial statements are informed of any relevant information that could influence their economic decisions.

In this way, it becomes clear how materiality influences the entire audit process—from planning through to the communication of results. Careful consideration of materiality is essential to ensure an efficient audit and that financial statements provide reliable and relevant information to users (Whittington & Pany, 2021).

2.4. Materiality vs. Risk Assessment

Materiality and risk assessment are intrinsically linked within the audit process. There is a close relationship between the concept of materiality in auditing and audit risk, as stated by Nikolovski et al. (2016). When assessing risks and determining materiality, auditors rely on their professional judgment to interpret available data, balancing the quantitative and qualitative aspects of the financial statements. This process ensures that audit resources are efficiently allocated to areas of higher risk (Arens et al., 2023; Rittenberg et al., 2013). Auditor judgment plays a central role in evaluating both concepts, as it involves applying subjective criteria and professional experience to make informed decisions throughout the audit (Arens et al., 2023).

When auditors identify risks related to specific transactions or areas of the financial statements, the materiality of those transactions directly influences the scope and depth of audit testing. Transactions considered materially significant require more attention to ensure that any potential errors or significant omissions are detected (Arens et al., 2023; Whittington & Pany, 2021). Therefore, the materiality is influenced by risk assessment in several ways:

I. Impact on Materiality Evaluation

Risk assessment directly affects materiality since areas with higher risk of material misstatement in the financial statements are deemed more relevant. For instance, transactions involving higher complexity or weak internal controls may prompt auditors to adjust materiality thresholds to reflect increased risk.

II. Prioritization of Audit Procedures

Identified risks guide the prioritization of audit procedures. Auditors focus on high-risk areas by applying more detailed procedures to detect potential material errors and ensure a proper evaluation of materiality.

III. Definition of Materiality Thresholds

Risks also influence the thresholds set for materiality. Risk assessment enables auditors to determine the extent to which errors may affect users’ decisions based on the financial statements. Accordingly, materiality levels are adjusted depending on the potential impact of material misstatements.

This relationship between risk assessment and materiality determination is summarized in Figure 1.

According to David and Abeysekera (2021), client-specific factors can influence how auditors assess and judge materiality, particularly in relation to risk. For example, an increase in the risk of omissions or misstatements may lead to setting a higher level of materiality. Factors such as the client’s industry sector and organizational structure may also affect the evaluation of materiality, reflecting inherent business risks. Conversely, an effective internal control environment may reduce control risk, enabling the auditor to lower materiality thresholds. These factors interact in complex ways, influencing both risk assessment and materiality determination throughout the audit. Thus, risk assessment plays a vital role in the application of materiality. By identifying and evaluating risks of material misstatement, the auditor adjusts materiality levels to focus audit procedures on the most critical areas, ensuring that the financial information presented is reliable and useful for users (David & Abeysekera, 2021).

3. The Era of Smart Auditing

The era 5.0 is transforming how auditors perform their roles, offering innovative tools and methods that promise to enhance the accuracy and effectiveness of audit processes, while emphasizing the importance of an ethical and well-founded approach (Mitan, 2024). However, digital transformation brings many opportunities but also presents several challenges for auditing. The rapid evolution of digital technologies creates a complex environment, requiring auditing to continuously adapt to ensure security and compliance (Azizi et al., 2024; Deloitte, n.d.). In the 5.0 era, one of the biggest challenges is integrating advanced technologies, such as AI, with the human element (Tavares et al., 2023). This is also one of the challenges for auditing in the 5.0 era. According to Han and Um (2024), sustainability and resilience are fundamental concepts in modern auditing, especially within Audit 5.0.

Audit 5.0 is “Smart Auditing,” which incorporates advanced technology with the human element (du Toit et al., 2023). Smart audits apply algorithms—such as machine learning, data analytics, and automation—to detect atypical patterns or risks with greater accuracy and speed, while maintaining a central role for human professional judgment. These technologies enhance the auditor’s ability to anticipate risks, reduce manual workload, and support more proactive audit strategies. Smart auditing thus represents the latest evolution in external audit practice, integrating AI and advanced automation within a human-centered framework (du Toit et al., 2023; Karagül & Selİmoğlu, 2025).

The integration of technology has not only become an inevitable necessity but also a source of opportunities for process optimization, value creation, and business growth (Imoniana et al., 2023). This digital transformation can generate new innovation opportunities, improve overall company performance, and reduce the likelihood of errors, increasing operational efficiency (Leng & Zhang, 2024). Integrating digital technologies in auditing not only optimizes processes but also strengthens trust throughout the work. Consequently, incorporating these technologies requires new skills and a more proactive approach from auditing professionals (Vuković et al., 2024). Beyond understanding accounting and controls, auditors are expected to have skills in IT, data analysis, interpretation of automated outputs, and comprehension of the AI models used (Karagül & Selİmoğlu, 2025).

AI is transforming auditing by replicating human capabilities such as reasoning and problem-solving. This technology enables faster and more accurate analyses, applicable to various audit stages such as risk assessment, materiality, and internal controls. To keep pace with this evolution, auditors need to adapt processes, update skills, and invest in training and technology (Mpofu, 2023). Moreover, smart auditing requires knowledge of software engineering, understanding client tools, and care in configuring algorithms, especially when using sensitive data (Vuković et al., 2024).

Introducing AI within Audit 5.0 is essential to explore synergies between advanced technology and humanistic practices. AI plays a crucial role by complementing ethical judgment and human interpretation, strengthening the efficiency, accuracy, and relevance of audits (Samiolo et al., 2024). It is human judgment that validates automatically generated insights, ensuring that results are relevant, ethical, and aligned with public and sustainability contexts (Karagül & Selİmoğlu, 2025). Qader and Cek (2024) note numerous studies documenting the benefits of AI use in finance and economics, especially in the audit process.

In Audit 5.0, AI goes beyond automating manual tasks and is used for more complex tasks such as risk analysis, fraud detection, and continuous auditing (Mpofu, 2023; Qader & Cek, 2024). The application of AI increases audit efficiency, allowing for more detailed and predictive analyses. These technologies assist in identifying complex patterns and forecasting potential risks (Ali-Abdel et al., 2024).

3.1. Audit 5.0 in Risk Assessment

The transition from Audit 4.0 to Audit 5.0 represents a significant evolution in auditing practice, characterized not only by the adoption of emerging technologies but also by the emphasis on human centrality, ethics, and social responsibility. Audit 5.0 proposes a harmonious integration of automation, artificial intelligence (AI), and professional judgment, in a model inspired by the principles of Industry 5.0: resilience, sustainability, and humanization (Tavares et al., 2023; du Toit et al., 2023). As we move toward human-centered manufacturing, it is essential to ensure that technologies are implemented in a reliable and user-friendly manner. Philosophical, social, and ethical issues and theories should guide the development and application of technologies (Pizoń et al., 2023).

In this new paradigm, risk assessment is enhanced by tools such as AI and robotic process automation (RPA), which enable real-time analysis of large volumes of data. These technologies identify historical and current patterns indicating high-risk areas, such as fraud and material errors, optimizing audit planning and execution (Mpofu, 2023; Rodrigues et al., 2023). AI also allows auditors to continuously adjust their strategies based on new evidence, promoting more dynamic and effective risk management (Azizi et al., 2024).

However, the adoption of these technologies is not without challenges. Data protection, privacy, information security, and algorithmic bias emerge as central ethical concerns. Aitkazinov (2023) highlights the importance of ensuring that AI systems are transparent, fair, and auditable. Additionally, it is essential for auditors to develop new skills to interpret and validate results generated by these technologies, avoiding over-reliance that could undermine professional skepticism (Aksoy & Gurol, 2021; Seethamraju & Hecimovic, 2020).

Leading firms like KPMG, through the KPMG Clara platform, already demonstrate the effectiveness of applying AI in risk assessment by enabling detailed transactional analysis and better supporting audit procedures (Bradley, 2023; KPMG, 2023; Mitan, 2024). AI-based continuous auditing tools monitor organizational systems in real-time, allowing immediate response to anomalies (Mpofu, 2023).

Therefore, Audit 5.0 emphasizes the need to balance the efficiency provided by technology with the auditor’s critical and ethical judgment. This balance is crucial to ensure relevance, reliability, and fairness in the risk assessment process (Ali-Abdel et al., 2024; Samiolo et al., 2024).

3.2. Audit 5.0 in Materiality Determination

The determination of materiality is a critical step in the audit process, as it directly influences the planning, execution, and final opinion of the auditor. In Audit 5.0, the use of AI and RPA offers a unique opportunity to enhance this process through exhaustive data analysis and automatic detection of patterns and anomalies (Mpofu, 2023).

Unlike traditional methods that often rely on limited sampling, technology now allows for the analysis of entire transaction populations, reducing the risk of undetected material misstatements (Rodrigues et al., 2023; Mitan, 2024). Audit 5.0 strengthens the sufficiency of evidence and improves accuracy in quantifying materiality thresholds, supporting auditor judgment with robust data (PCAOB, 2024).

AI-based predictive models are particularly useful in identifying areas with a higher likelihood of containing errors or fraud, enabling more efficient allocation of audit resources (Ali-Abdel et al., 2024). The application of these tools also facilitates the recognition of trends and outliers that might otherwise go unnoticed (Qader & Cek, 2024).

However, it remains essential that auditors maintain critical analysis of the results produced by AI. The effectiveness of these tools heavily depends on the quality of input data, and the interpretation of outputs must consider the organizational context and professional judgment (Mitan, 2024; CPA Canada & AICPA, 2020).

Firms such as PwC and Deloitte already integrate generative AI and specialized bots—like DARTbot—into their audit processes, enabling real-time responses and decision support based on large volumes of data (Kearns-Manolatos et al., 2024; PwC, n.d.; Mitan, 2024). In this context, Audit 5.0 aims not only at technical efficiency but also promotes social responsibility and ethics in materiality determination. The auditor must ensure that the criteria adopted respect the principles of fairness, transparency, and usefulness for the users of financial statements (Tavares et al., 2023; Samiolo et al., 2024). Thus, Audit 5.0 redefines the materiality determination process as a collaborative, critical, and technology-assisted task that integrates both algorithmic rationality and human judgment.

4. Research Methodology

This research adopts a qualitative approach with the objective of analyzing how the integration of emerging technologies in Audit 5.0 influences risk assessment and materiality determination, considering the complementarity between process automation and professional judgment. To achieve this goal, the study is structured around two specific axes: understanding the impact of emerging technologies on risk assessment and materiality, and identifying the influence of organizational practices and human interactions in audit execution.

A qualitative methodology was chosen because it prioritizes an in-depth understanding of audit experiences and practices, focusing on the non-numerical analysis of data, which is essential in a digital transformation context. This approach allowed capturing auditors’ perceptions, attitudes, and behaviors—key elements for interpreting the impacts of digitalization on audit processes (Creswell & Creswell, 2017; Djafar et al., 2021; Sinha & Arena, 2020). Within this framework, three complementary methods were employed: narrative and thematic literature analysis, workplace ethnography, and task analysis.

Narrative analysis enabled the collection of reports and interpretations from professionals involved, reflecting their experiences with technological tools and the redefinition of their role in auditing (Grzesiak, 2023; Repenning & DeMott, 2025). Concurrently, thematic analysis allowed the identification of recurring patterns, challenges, and trends in digital auditing practices (Halibas et al., 2020).

The thematic literature analysis focused on identifying core audit concepts—such as audit risk, materiality, and risk assessment procedures—that inform the theoretical foundation of this study. These are presented in Section 2.1, Section 2.2, Section 2.3 and Section 2.4 to support interdisciplinary understanding and contextualize the discussion on technology integration in Audit 5.0.

Ethnography, conducted directly at the internship site, provided contextualized observation of daily practices, interpersonal interactions, and organizational culture, offering a richer understanding of the dynamics shaping Audit 5.0 (Goodson & Vassar, 2011; Tagliaro et al., 2023). Workplace ethnography is a qualitative research method that involves the in-depth, immersive study of social practices and organizational routines in their natural settings. It focuses on understanding how individuals interact within specific professional contexts, capturing not only what people do, but how and why they do it, including implicit norms, power dynamics, and cultural practices (Goodson & Vassar, 2011; Müller, 2021). In auditing research, workplace ethnography allows for the observation of real-time behaviors, informal communication, and tacit learning processes, offering insights that traditional surveys or interviews may overlook (Tagliaro et al., 2023; Repenning & DeMott, 2025).

This method is particularly valuable in the context of Audit 5.0, where the integration of technology, ethics, and human judgment creates a complex interplay of technical tasks and interpersonal dynamics. By engaging directly with audit professionals in their working environment over an extended period, the researcher can document not only the formal processes (e.g., use of ASD software or adherence to ISA standards), but also the informal practices, such as decision-making rationale, collaboration styles, and responses to digital tools. Ethnography thus enriches our understanding of how digital transformation is enacted and negotiated in practice.

Finally, task analysis allowed the breakdown of auditors’ activities into concrete steps, identifying key competencies and potential operational inefficiencies. This analysis was crucial to map how digital tools are integrated into daily work and how they alter the technical and cognitive demands of the profession (Müller, 2021; Tagliaro et al., 2023).

In summary, the combination of qualitative analysis, ethnography, and task analysis provided the research with an integrated perspective on the transformations in auditing in the digital era. This methodological combination ensures a comprehensive and critical understanding of human experiences, organizational dynamics, and technical demands characterizing Audit 5.0.

5. Analysis in the Context of Audit 5.0

The entity analyzed is a Chartered Accountants’ Firm (SROC), established in 1990 and registered with the Securities Market Commission (CMVM) since 1994. With over 30 years of operation, it has been providing audit services across various industry sectors, within the legal competencies assigned to Chartered Accountants.

The organization has a team of more than 60 employees, composed of professionals with higher education in fields such as auditing, accounting, finance, economics, and management. These professionals possess skills aligned with the strategic needs of the entity and work within multidisciplinary teams. Structurally, the entity is divided into several departments: Audit, Consulting (comprising Tax and Corporate areas), Human Resources, and Audit Quality and Compliance.

5.1. Ethnography of Auditing Practice

Regarding the execution of audit work, the entity uses the ASD platform—Auditing Software Distributor. This software standardizes procedures, ensures the organization of technical documentation, and guarantees compliance with ISA, with particular emphasis on ISA (2018i), related to audit documentation. The use of ASD reinforces the systematization of working papers, organizing them into three main categories: general file (planning and conclusion), current file (execution), and permanent file (cross-cutting documentation), in accordance with best professional practices.

ASD manages the entire audit process, from risk-based planning to the issuance of the final report. This platform promotes task automation, information traceability, and increased operational efficiency. The first step in the process involves importing clients’ SAFT files or trial balances, which triggers the automatic creation of working areas, the analysis of financial statements, and the structuring of the respective audit papers. The second step consists of completing various questionnaires aimed at identifying and assessing risks. As the questions are answered, the system automatically generates an evaluation of the identified risks. After determining materiality and entering it into the ASD platform, it immediately calculates the risk level for each area based on questionnaire results, previously identified risks, and the defined materiality threshold. As a result, the tool highlights areas that require greater attention and work from the audit team.

However, it is essential that the auditor complements this automated analysis with in-depth knowledge of the audited entity. Analyzing significant variations and understanding the operational and financial context of the organization are critical to validating whether the areas flagged as priorities indeed correspond to those with the highest relevance or potential risk.

The integration of these digital tools, especially ASD, reflects the transition from traditional auditing to a more digital, automated, and collaborative model, aligned with the principles of Audit 5.0. This technological evolution frees auditors from repetitive and administrative tasks, allowing a greater focus on value-added activities such as critical analysis, professional skepticism, and the exercise of ethical and technical judgment—essential pillars of an audit oriented toward the future.

5.2. Risk Assessment and Materiality

This section explores how Audit 5.0 technologies support risk assessment and materiality determination across key audit areas. While the paper’s primary focus is on these two stages of the audit process, it is important to recognize that in practical settings—particularly within Audit 5.0 environments—the assessment of risk and materiality often occurs in conjunction with substantive procedures. For example, recalculations, external confirmations, and analytical reviews are frequently applied as a result of risk-based planning and materiality thresholds. Therefore, the examples provided here not only illustrate how technology informs the identification and evaluation of risk and materiality, but also how these assessments influence or intersect with the execution of audit testing in practice.

I. Tangible Fixed Assets and Intangible Assets Analysis

The area of tangible fixed assets (TFA) and intangible assets (IA) holds particular importance in risk assessment and materiality within Audit 5.0, both due to their financial weight on the balance sheet and the estimates associated with depreciation, amortization, and possible impairments. According to international auditing standards, notably ISA (2018f), the analysis of accounting estimates in these areas requires a critical approach based on understanding the methods used and consistency with applicable accounting standards.

In the observed practice context, the audit work includes analyzing asset variations, verifying documentation of acquisitions and disposals, and confirming ownership of registered assets, reflecting the need to ensure the integrity of financial information and proper asset recognition. Comparing official depreciation schedules (Model 32 Map) with accounting records helps identify discrepancies and evaluate whether depreciation policies comply with applicable standards, highlighting the importance of internal control in mitigating relevant risks (ISA, 2018e).

Materiality determination in this area is not limited to quantifying asset values but also incorporates qualitative analysis of impairment risks and the adequacy of depreciation policies, essential to ensure the reliability of financial statements. For example, significant differences in depreciation rates or inadequate insurance coverage may represent material risks requiring further investigation.

The adoption of technological tools aligned with Audit 5.0 principles, such as auditing software and variation analysis algorithms, enhances efficiency and anomaly detection capabilities. These tools automate depreciation calculations and comparative analyses, freeing auditors to focus on higher-value tasks like exercising critical judgment on the reasonableness of estimates.

However, Audit 5.0 emphasizes that despite increased technology use, ultimate responsibility rests with the human auditor. Professional judgment is indispensable to interpret outputs from digital tools, validate obtained information, and ensure relevant risks are appropriately addressed. The ability to discern when a variation is material or when an asset is under- or overvalued continues to depend on the auditor’s experience and ethical sensitivity. The analysis of tangible fixed assets and intangible assets holds particular importance in risk assessment and materiality within Audit 5.0, both due to their financial weight on the balance sheet and the estimates associated with depreciation, amortization, and possible impairments.

II. Cash and Cash Equivalents Analysis

The area of cash and cash equivalents, which includes bank deposits and cash on hand, is particularly sensitive in risk assessment and materiality due to its immediate liquidity and direct impact on financial statements. According to the Accounting Standardization System (SNC) and NCRF 12, proper measurement and disclosure of these assets is essential to ensure financial information reliability (SNC, 2015).

Within the audit work carried out, bank deposit verification involved external confirmations to validate balances and financial conditions with banking institutions. This procedure, outlined in international standards (ISA, 2018h, 2018e), is fundamental to mitigate the risk of material misstatements, ensuring the existence and accuracy of reported balances.

Critical analysis of financial institutions’ responses, complemented by consultation of credit responsibility maps and databases of the Bank of Portugal, allows validation not only of reported amounts but also identification of potential omissions or financing risks impacting the entity’s financial position. This cross-referencing is central in managing the risk of misstatements related to assets and financial liabilities.

Regarding cash, obtaining a cash count sheet signed by management and analyzing annual movements aims to detect irregular operations or fraud, areas where qualitative materiality assumes special importance. Small discrepancies can significantly impact the credibility of financial statements, requiring rigorous analysis and sound professional judgment.

Audit 5.0 introduces new tools to support these procedures. The use of auditing software like ASD and machine learning techniques facilitates the analysis of large transaction volumes, enabling automatic identification of anomalous patterns and atypical movements. These technologies enhance risk assessment effectiveness, making inconsistency detection faster and more accurate.

However, within Audit 5.0, technology does not replace the auditor: it enhances their analytical capacity. Professional judgment remains essential to interpret results generated by technological tools, assess the relevance and impact of identified deviations, and ensure the audit meets regulatory requirements as well as ethical and transparency standards. Thus, cash and cash equivalents analysis exemplifies the balanced integration of technology and critical judgment in contemporary auditing, reinforcing the auditor’s role in managing risks and determining materiality more efficiently and reliably.

III. Payables and Receivables Analysis

The analysis of third parties, including clients, suppliers, and other creditors or debtors, is crucial in risk and materiality assessment, given their potential impact on financial statements. According to international auditing standards, namely ISA (2018m, 2018h, 2018e), obtaining external confirmations is a reliable technique to validate the existence, accuracy, and completeness of reported balances.

In the analyzed context, confirmations were conducted based on materiality criteria, transaction volume, and software-assisted random selection (ASD Auditor). The standardized selection policy was adjusted according to the specific risk of each audited entity, demonstrating the need for professional judgment in identifying areas of higher relevance.

The use of technological tools such as ASD Auditor in managing confirmations and analyzing unusual or stagnant balances enhanced the ability to identify impairment risks and recording errors. Nevertheless, critical evaluation of client and supplier balances still requires human intervention, especially in recognizing potential losses and impairment provisions as recommended by NCRF 12. Thus, Audit 5.0, by combining automation with human judgment, enables a more efficient and accurate approach to managing risks associated with third parties without compromising the auditor’s professional responsibility.

The area of the “State and Other Public Entities”, though not always materially significant in amount, is considered high risk due to legal and fiscal implications. Therefore, the entirety of account 24 is subject to comprehensive analysis regardless of the absolute value involved. The area of the “State and Other Public Entities”, recorded under account 24 in the Portuguese Chart of Accounts, is subject to particular scrutiny due to its legal and fiscal implications. This account encompasses obligations such as corporate income tax (IRC), personal income tax (IRS), VAT, and social security contributions. Even when the amounts involved are not materially significant, the account is considered high risk because of potential regulatory non-compliance, and therefore undergoes comprehensive audit testing.

Verification of compliance with tax obligations covered corporate income tax (IRC), personal income tax (IRS), social security, and VAT through cross-checking accounting records, tax returns, and payment receipts. This procedure is fundamental to ensure the audited entity’s tax compliance and prevent contingencies that could affect financial statement reliability.

The use of digital platforms and Audit 4.0 tools with automatic extraction of tax data and automated reconciliations significantly increased procedural efficiency in this area. However, Audit 5.0 stresses that final responsibility for compliance assessment and tax risk management rests with the human auditor, who must critically interpret data obtained and act in line with ethical and regulatory principles.

The analysis of third parties and the “State and Other Public Entities” account highlights how risk and materiality assessment in Audit 5.0 combines automation and data analysis with professional judgment. Technological tools expedite and improve risk detection, but it is the auditor who interprets, decides, and communicates material implications for financial statements. This balance between technology and ethical responsibility reinforces the auditor’s role as guarantor of financial information quality in an environment of growing complexity and regulatory demands.

IV. Equity Analysis

Risk and materiality assessment in Audit 5.0 applied to Equity (P1A) involves a detailed analysis of changes in company capital, ensuring these transactions and balances comply with legal and regulatory standards. The use of integrated accounting software and document digitization plays a crucial role, enabling a faster and more efficient audit process with automatic access to information such as meeting minutes and account statements, minimizing human error and increasing report accuracy.

Automation and the implementation of emerging technologies such as blockchain within Audit 5.0 provide greater security and traceability in financial transactions. This approach strengthens transparency and confidence in financial statements by ensuring all entries and exits related to equity are properly documented and accessible. Use of these technologies also contributes to effective verification of share capital and beneficial ownership records, sensitive areas in the regulatory context.

However, auditor judgment remains essential, especially to validate the correctness of equity variations such as those derived from grants, donations, and adjustments to financial investments, always considering the materiality and relevance of transactions. Audit 5.0 significantly improves efficiency and reliability while facilitating risk identification and ensuring regulatory compliance in financial statements.

V. Expenses and Revenues Analysis

The analysis of Expenses and Revenues from the perspective of risk assessment and materiality in Audit 5.0 highlights the importance of a detailed analytical review to identify significant variations in accounts such as personnel expenses, other expenses, and income. This review aims to validate entries based on supporting documentation and ensure compliance with standards such as NCRF 1 and NCRF 10.

In Audit 5.0, automation of analytical review through data analysis tools enhances efficiency, allowing real-time detection of variations and anomalies. This not only reduces human error risk but also improves materiality assessment by enabling auditors to quickly identify and adjust higher-risk areas. The use of advanced technologies such as predictive software supports auditor judgment, allowing a more precise and effective approach focused on materiality of variations and operational and financial risk management.

Analysis of Personnel Expenses in Audit 5.0, through the lens of risk and materiality assessment, emphasizes the importance of verifying expense compliance with standards such as NCRF 28 and mitigating fiscal and accounting risks such as errors in salary and allowance calculations. The audit process includes verifying salary calculation accuracy and validating the adequacy of benefits such as pensions and provisions.

Automation of verification processes in Audit 5.0, such as validating salary calculations and tax contributions, increases efficiency, reduces errors, and facilitates anomaly detection. Use of AI algorithms to analyze large data volumes enhances fraud and inconsistency detection, strengthening materiality assessment and risk control. This enables a more precise, secure audit aligned with accounting standards, ensuring personnel expenses are correctly recognized and measured in financial statements.

Analysis of Sales and Services Rendered (RA) in Audit 5.0, considering risk assessment and materiality, highlights the relevance of NCRF 20 for revenue recognition and measurement. The sales area is particularly risky, involving the company’s main revenue source and financial flows, as well as being susceptible to fraud, both external (contract manipulation) and internal (errors in credit sales recording or cash handling) (see also ISA, 2018d).

Audit 5.0, focused on process automation, allows more efficient validation of sales through advanced software that automatically compares management system data with accounting, facilitating discrepancy identification. Analytical review and automation of procedures such as sales verification and compliance with E-Fatura increase accuracy and reduce human error risk. This ensures a more effective audit in assessing materiality and risks, especially in such a critical area as sales, where fraud and omissions can significantly impact financial statements.

6. Discussion

Audit 5.0 emerges as a response to an increasingly complex economic and technological context, marked by disruptive innovations and a strengthened appreciation of the human element. Unlike previous phases focused on mechanization (Audit 3.0) and process automation (Audit 4.0), Audit 5.0 integrates emerging technologies with auditors’ critical intelligence, emphasizing their ethical responsibility and analytical role (Soh & Martinov-Bennie, 2015; Kokina & Davenport, 2017). Risk assessment and materiality determination—core components of audit work—undergo profound transformations in this new paradigm, as evidenced by the qualitative study conducted through thematic literature analysis, organizational ethnography, and task analysis carried out over four years at the entity under study.

In the domain of risk and materiality assessment, the introduction of auditing software such as ASD has been central to the modern auditing approach. This system demonstrated how technology facilitates the standardization of audit procedures, ensures compliance with International Auditing Standards (IAASB, 2022), and promotes traceability of operations. The implementation of ASD in planning and executing audit work contributes to the systematic identification of risks, enabling automatic generation of work areas from client trial balances and creation of well-organized working papers aligned with ISA 230 requirements (ISA, 2018i).

Risk-based audit planning is enhanced by the system’s capability to aggregate financial information over multiple years and generate indicators of significant fluctuations. This analysis enables more efficient identification of critical areas, focusing audit efforts on the most relevant and materially significant items (Appelbaum et al., 2017).

Technology’s role extends beyond document management to support critical data analysis. Analytical tools and embedded algorithms in ASD facilitate the detection of anomalous variations in accounts such as cash and cash equivalents, third parties, inventories, and personnel expenses (Moffitt et al., 2018). The analysis of balance confirmations and automatic identification of stale balances makes the process faster and guided by quantitative and qualitative materiality criteria. Despite the ability of technological tools to filter and highlight anomalies, the final evaluation of their relevance and financial impact still requires the auditor’s professional judgment (Kokina & Davenport, 2017).

Workplace observations indicate that while technology enhances efficiency, it does not replace the auditor’s critical role in assessing risks and materiality (Earley, 2015). The analysis of complex transactions, the evaluation of the plausibility of accounting estimates, and the consideration of entity-specific contexts require inherently human skills. Uncritical reliance on technology may even pose new risks (Rozario & Vasarhelyi, 2018), demanding a continuous ethical and critical stance from auditors.

The entity’s organizational structure, characterized by a clear functional hierarchy, proves decisive in auditors’ training and performance (Power, 2003). Situated learning, supported by interaction among experience levels, has been crucial for the transfer of tacit knowledge, especially in the practical application of risk and materiality concepts. Direct supervision by senior auditors ensures that risk assessment decisions are not solely based on system outputs but also incorporate critical analysis of operational flows and business context (Suddaby et al., 2009).

Materiality determination goes beyond automatic calculations. Although pre-established percentage references exist (ISA, 2018c), professional judgment regarding qualitative materiality is essential in areas such as fixed assets, inventories, and third parties (Messier et al., 2017).

Practical cases, such as assessing obsolete inventories and critically analyzing atypical expenses and revenues, highlight that auditors must interpret financial information within a holistic understanding of the audited entity and its environment (Knechel, 2016).

The entity’s organizational culture, focused on quality and ethical compliance, is a key factor in mitigating material misstatement risks (Power, 2003). Practices like systematic review of working papers and adoption of formal policies on balance confirmations and cut-off tests demonstrate that a quality culture is fundamental to the effectiveness of Audit 5.0 (

Table 1. Audit 5.0 architecture: Integration of technology and human judgment.

Dimension	Technology	Human Judgment
Tools and Systems	ASD, anomaly detection algorithms, automation of confirmations	Interpretation of system-generated data, critical selection of relevant areas
Risk Assessment	Systematic data analysis, standardization of procedures according to ISA	Business knowledge, judgment on specific risks, strategic weighting
Materiality Determination	Application of automated quantitative criteria	Qualitative assessment, sector context, entity history
Team Organization and Structure	Digitization of working papers, traceability of actions	Mentorship, progressive delegation, transmission of tacit knowledge
Audited Areas	Automation of repetitive and low value-added tasks	Assessment of fixed assets, impairments, and complex accounting estimates
Quality and Supervision	Automatic review systems, compliance with regulations	Culture of systematic review, continuous supervision
Professional Development	Requirement of digital skills, use of digital training platforms	Continuous training, situational learning, and critical adaptation to new technologies

).

Regarding risk, it was observed that modern auditing is not limited to traditional financial risks. New risk dimensions, such as cybersecurity, data protection, and compliance with sustainability requirements (ESG), are beginning to be integrated into the risk assessment and materiality determination processes. Audit 5.0 requires an integrated approach to the assessment of cybersecurity and data protection risks (IAASB, 2022). Although these areas were not the direct focus of practical analysis at this stage, the literature highlights that information security failures can constitute significant material risks (Bierstaker et al., 2014). The growing pressure on companies to report ESG information is redefining the concept of materiality (IFAC, 2020). The integration of these factors into risk assessment represents a natural evolution of auditing practice, demanding from auditors both technical and ethical preparation to address non-financial materiality (Manetti & Becatti, 2009).

While this study focused primarily on risk assessment and materiality determination, the application of technology in the audit of internal controls over financial reporting is another critical dimension of Audit 5.0. Tools such as automated workflows, continuous control monitoring, and exception alert systems allow auditors to assess control design and operating effectiveness in near real-time. For instance, process mining and data analytics can help identify control breakdowns or deviations from expected procedures, enhancing the auditor’s ability to evaluate internal control reliability. However, as with other aspects of Audit 5.0, these technologies must be complemented by professional judgment to ensure a contextual understanding of control failures and compliance risks. The integration of control testing technologies represents an important avenue for future research.

It can be concluded that the analysis confirms that the auditor in the era 5.0 needs a hybrid skill set: technical expertise, digital competencies, critical thinking, and ethical responsibility (Soh & Martinov-Bennie, 2015). The ability to critically interpret the outputs of technological tools and maintain professional independence will be crucial for the profession’s credibility (Knechel, 2016). An important aspect that reinforces the relevance of professional judgment in Audit 5.0 is the persistent audit expectation gap—the difference between what auditors actually do and what the public expects from them. As Knežević et al. (2019) note, corporate scandals have raised essential social questions about the auditor’s responsibility, especially in detecting fraud and ensuring financial statement integrity. While auditing provides reasonable assurance, it does not offer absolute certainty that the financial statements are free from material misstatement. This underscores the critical need for transparency, ethical conduct, and continued public education about the role and limitations of audit, particularly in a digital context where the presence of technology may unintentionally inflate expectations of accuracy and comprehensiveness. The integration of AI into auditing, as envisioned in Audit 5.0, significantly enhances the efficiency and quality of audit engagements. As Jeremić and Luka (2024) observe, “Efficiency, that starry path to better audits, gains new meaning under the light of AI… By fully utilizing AI’s potential when analyzing data, auditors enhance their decision-making processes, resulting in more proactive and higher-quality audit engagements.” This highlights the transformative power of AI not only in automating routine tasks, but also in elevating auditors’ capacity to detect patterns, anticipate risks, and apply judgment with a more strategic and forward-looking mindset. However, the increased reliance on AI also underscores the need for auditors to remain critically engaged and ethically grounded in order to interpret automated outputs responsibly. The future of auditing will therefore depend on the ability to balance technological potential with professional integrity, promoting audits that not only meet regulatory requirements but also enhance stakeholders’ trust in financial information.

Risk assessment and materiality determination, although enhanced by emerging technologies, still rely heavily on the auditor’s critical thinking, sector knowledge, and ethical sensitivity. The organizational practices and human interactions observed during the internship underscore the importance of training, supervision, and a culture of quality to ensure a robust audit aligned with the demands of a transforming society. Audit 5.0, far from devaluing the auditor, redefines their role as an intelligent mediator between technology, regulation, and the creation of trust in the markets (

Table 2. Key dimensions of Audit 5.0 and their impacts.

Dimension	Description	Impact on Risk and Materiality Assessment	Practical Example
Technology	Integration of software and AI in auditing	Automation of tasks and anomaly detection	Use of ASD for automatic opening of analysis areas
Professional Judgment	Decisions based on critical and ethical analysis	Qualitative and contextual risk assessment	Asset impairments require interpretation beyond algorithms
Organizational Structure	Functional hierarchy and situational learning	Transfer of tacit knowledge and validation of decisions	Senior supervision in operational flow analysis
Human Interactions	Team communication and collaboration	Validation of critical decisions and consistency in standards application	Discussion of complex cases (e.g., financing contracts)
Organizational Culture	Emphasis on rigor, quality, and ethics	Strengthens risk management and internal control	Well-documented circularizations and cut-offs
Emerging Risks	Cybersecurity, data protection, and ESG	Broadening of the materiality concept	Increasing relevance of environmental and reputational factors
Auditor Profile	Technical, digital, and ethical competencies	Demand for a hybrid and critical role	Adapting to ethical technology use and sensitive judgment

).

7. Final Considerations

This study aimed to understand the impact of Audit 5.0 on the processes of risk assessment and materiality determination, based on empirical experience in a professional environment and a qualitative analysis of contemporary audit practice. The findings indicate that process automation, combined with real-time data analysis, enables more effective risk management and quicker responses to discrepancies. Tools such as ASD enhance the accuracy of financial information verification and increase transparency in auditor-client relationships.

It was also found that the adoption of emerging technologies does not diminish the role of the auditor but rather redefines it. Artificial intelligence, when ethically and responsibly implemented, has the potential to refine audit procedures and strengthen stakeholder trust. However, the effectiveness of this transformation depends on the auditor’s critical capacity and professional judgment, which remain essential for interpreting system-generated outputs and contextualizing them within organizational, regulatory, and ethical frameworks.

The ethnographic analysis revealed that Audit 5.0 practice continues to place a high value on the human factor. The transmission of tacit knowledge, ongoing supervision, and mentorship are key structural elements in maintaining quality, highlighting the importance of a human-centered approach even in highly technological environments. Additionally, it is crucial to preserve constant communication channels between team members and the client, as a simple comment or observation can sometimes serve as an early warning for potential issues—or even allow for their resolution before they materialize—something that technology, however advanced, may not yet be able to anticipate with the same nuance and human sensitivity.

Among the limitations of this study is its reliance on qualitative data obtained from a single organizational context, which may restrict the generalization of its findings. The interpretive nature of ethnography may introduce subjectivity, and the analysis did not encompass all implications of Audit 5.0 across different industry settings. Furthermore, the adoption of emerging technologies may face resistance from professionals less familiar with digital tools, potentially hindering their full and effective implementation.

It is suggested that future research adopt a longitudinal approach to analyze the impact of Audit 4.0 and 5.0 over time, focusing on the evolution of risk and materiality assessment across various sectors. It will also be relevant to explore how ethical aspects associated with AI influence professional judgment and public trust. Another promising research direction involves deepening the understanding of the impact of technologies such as generative AI, blockchain, and predictive analytics on audit procedures. Finally, the integration of non-financial risks, particularly those related to ESG criteria, into materiality assessments should be systematically investigated, given their growing importance in the context of modern auditing.