Do Executives with IT Backgrounds Influence the Selection of Corporate Auditors in the Context of Digital Innovation?—An Examination from a Sustainability Perspective

Abstract

Digital innovation is the core driving force to enhance the competitiveness of enterprises and promote sustainable development, and is a key enabler for achieving corporate ability goals. Executives with information technology (IT) backgrounds who have rich knowledge and skills in digital technology are the backbone of promoting the digital transformation of enterprises and optimizing the allocation of auditing resources. And they can lay the technological foundation for sustainable corporate development and play an important role in corporate audit decision-making. Based on the data of China’s A-share listed companies from 2015 to 2023, the impact of executives with IT backgrounds on auditor selection is empirically analyzed. The study shows that (1) the higher the proportion of executives with IT backgrounds in the executive team, the more the companies tend to choose high-quality auditors; (2) the degree of corporate digital innovation positively moderates the relationship between executives with an IT background and high-quality auditors; (3) the level of corporate internal control plays a mediating effect in the relationship between executives with an IT background and auditor selection; (4) for non-state-owned, large-scale, short executive tenures, and labor-intensive firms, executives with IT backgrounds exert a more significant influence on auditor selection. This study broadens previous research on corporate auditing behaviors from the perspective of executives with IT backgrounds, providing insights for companies to select suitable auditors, to make scientifically sound decisions regarding auditor selection in the context of digital innovation, further optimize internal management, enhance risk response capabilities, and thereby achieve sustainable corporate development.

1. Introduction

Under the background of digital economy, digital innovation has become an important way to drive the high-quality development of enterprises. The Chinese government’s 14th Five-Year Plan for Digital Economy Development, formulated to address new circumstances and challenges, explicitly states that “it is necessary to accelerate the construction of digital information infrastructure and improve the ability of digital innovation to lead development.” Digital innovation can influence the efficiency of enterprise resource integration and allocation, thus promoting the high-quality development of enterprises [1]. Executives with IT backgrounds who have studied or worked in digital technologies are able to leverage their specialized knowledge backgrounds, forward-thinking strategic vision [2], and deeper understanding of digital innovation [3]. Given that executives with IT backgrounds have long been immersed in environments of rapid technological iteration, they possess heightened sensitivity to strategic decision-making and transformation within enterprises. Consequently, the strategic choices they make are more readily accepted and supported across the board [4]. This psychological trait drives executives with IT backgrounds to view technological innovation as the core driver of corporate development. When making strategic decisions, they are more inclined to break through traditional business boundaries and explore emerging fields, thereby facilitating corporate digital innovation [5]. At the same time, in the face of uncertainties brought by technological change, executives with IT backgrounds have demonstrated a strong risk tolerance, enabling them to make bold attempts in strategic decision-making. From a behavioral perspective, executives with IT backgrounds leverage their deep technical expertise and data analytics capabilities to provide robust technical support for corporate strategic decision-making. Beyond this, they prioritize efficiency and flexibility in strategy execution, possessing a keen understanding of how to design corporate strategies, and adapt them promptly in response to evolving market conditions [6]. Therefore, executives with IT backgrounds infuse corporate strategic decision-making with innovative vitality and rational thinking through their unique psychological traits and behavioral patterns. This empowers enterprises to achieve sustainable development amid fierce market competition, enabling them to seize the window of opportunity presented by the new wave of technological revolution and industrial transformation.

As an important institutional arrangement in the corporate governance mechanism, third-party auditing plays an important role in standardizing corporate information disclosure and promoting the high-quality development of the capital market [7]. The higher the degree of corporate digital innovation helping to promote corporate audit informatization [8], the lower the likelihood of third-party audit issuing a non-standard audit opinion [9]. Due to the executives’ with IT backgrounds keen insight into technology and precise grasp of data, they tend to have higher requirements for audit quality and pay more attention to the auditor’s professional ability and experience level. At the same time, because of their own rich experience in information technology, they can enhance the awareness of enterprise information technology construction, improve the overall level of enterprise information technology implementation, optimize the internal information environment of the enterprise, elevate the quality and efficiency of auditing work, and further enhance the reputation of the enterprise [10]. Executives with IT backgrounds play a vital role in the decision-making of auditor selection. However, at this stage, some accounting firms still adopt the traditional auditing model, failing to promptly respond to the developing trend of enterprise digital innovation, which leads to their difficulties in meeting the needs of enterprises for digital auditing services. Currently, international research on factors influencing auditor selection primarily focuses on risk factors [11,12], regulatory media disclosure [13], outside directors [14], and cultural distance [15]. Studies of executives’ personal attributes and auditing have mostly focused on executives with overseas study experience [16] or financial backgrounds [17], and have not yet considered whether executives with the IT backgrounds influence companies’ auditor selection decisions. In summary, executives with IT backgrounds usually have a deep information technology background and are good at using enterprise data for analysis and decision-making. And they are more inclined to choose a specialized audit team with rich professional knowledge and auditing experience, which can help to improve the efficiency of enterprise resource allocation and enhance the competitiveness and sustainability and, at the same time, contribute to the innovation and advancement of audit techniques within accounting firms.

This paper empirically examines the influence of executives with IT backgrounds on auditor selection, the moderating effect of the digital innovation of enterprises, and the mediating effect of the level of internal control, using A-share listed enterprises as a sample from 2015 to 2023. The contributions of this paper include the following: first, breaking through the subjective perspective limitations in auditor selection research. This paper focuses on IT background executives as a specific decision-making group, examining how individual executive traits influence corporate audit requirements. It provides an IT background dimension to explore factors affecting auditor selection, enriching the literature on how executive personal characteristics impact corporate auditor selection behavior. Second, this study deepens the research on the influence mechanism of executive backgrounds on corporate audit decisions. By analyzing how the technical cognition of executives with IT backgrounds shapes their demands for auditor capabilities, it reveals the underlying micro-mechanism through which executives’ experiential backgrounds translate into auditor selection behaviors. This provides theoretical grounding for the practical application of the senior-level ladder theory in the context of digital innovation. Third, while existing research on executives with IT backgrounds mostly focuses on the impact on internal enterprises, this paper shifts the focus to third-party auditing, exploring the impact of executives with IT backgrounds on corporate auditor selection, and providing scientific basis and practical suggestions for hiring auditors that better meet the development needs of enterprises.

2. Theoretical Analysis and Research Hypotheses

2.1. Literature Review

Higher-order theory suggests that top managers’ education and work experience, cognitive abilities, personal characteristics, and values may influence corporate decisions [18]. Executives with a military background are able to influence corporate decision-making by improving the company’s information environment and reducing performance volatility affecting the liquidity of the company’s stock [19]. Risk-taking CEOs are able to achieve better innovation outcomes by improving the company’s innovation efficiency and pursuing more diverse and original innovation projects [20]. In recent years, with the development of the digital economy, executives with IT backgrounds in the executive team have become increasingly influential in corporate strategic decision-making, and have become an important force influencing corporate development. Compared with other executives, executives with IT backgrounds are more sensitive to digital technology, can deeply understand the logic of digital empowerment, and put forward enterprise development strategies such as digital innovation [21]. For this reason, many scholars have begun to pay attention to the impact of executives with IT backgrounds on enterprises.

Currently, a large number of studies have focused on the important role of executives with IT backgrounds in corporate executive teams, where executives’ IT expertise improves the possibility of applying information technology to business management and drives employees to use IT [22], creating a favorable information technology environment, which helps to enhance corporate reputation and business performance [23]. Existing research on the consequences of executives with IT backgrounds focuses on both internal corporate governance and information disclosure. In terms of internal governance, executives with IT backgrounds can increase the output of digital innovation patents and promote the digital transformation of enterprises by reducing management short-sightedness [24]. They can also improve the quality of internal control by influencing the degree of emphasis on information technology and the quality of implementation of the enterprise, which in turn can help the enterprise to make more timely and accurate profit forecasts. In terms of information disclosure, executives with IT backgrounds can take advantage of information technology to oversee the process of generating and reporting accounting information, detect and correct management’s information manipulation, and thus reduce corporate surplus management.

Comprehensively combing the existing literature, it can be seen that previous studies on executives with IT backgrounds mostly focus on exploring their impact on corporate performance and strategic transformation. By analyzing the relevant data of listed companies in China, however, the unique role of executives with IT backgrounds is revealed in the aspects of digital transformation, business model innovation, and so on. In recent years, with the deepening of the research on the perspective of executives with IT backgrounds, the focus of attention has been gradually extended to the level of corporate behavior, and the impact of executives with IT backgrounds on investment efficiency, technological innovation, and other corporate behaviors. But there is insufficient research on the potential problems that may exist with executives with IT backgrounds such as the agency cost, information asymmetry, and so on, especially in the field of auditor selection, which is the key decision-making behavior of the enterprise. And the impact of executives with IT backgrounds on corporate performance and strategic transformation has not been considered yet. It was unclear whether there is an intrinsic association between executives and auditor choices. Therefore, this paper introduces auditor choice behavior as a research object, and studies the path of executives’ with IT backgrounds influence on auditor choice from the perspective of executives’ background characteristics, in an attempt to provide incremental empirical evidence for the research in this area, expand the boundaries of the research on the consequences of executives with IT backgrounds, and enrich the relevant research on the background characteristics of executives driving the audit decision-making behavior of enterprises.

2.2. Theoretical Analysis and Research Hypothesis

Corporate executives are the core elements of corporate operations, with high cognitive abilities to perform leadership functions, solve key issues, and accomplish the goals of the corporate board of directors [25]. Traits such as executives’ age, educational background, and professional experience affect their thinking logic, values, and cognitive ability. Executives with relevant professional backgrounds can lead enterprises to make professional decisions [26], which in turn affects the strategic choices of the enterprises. Therefore, executives with information technology knowledge base and professional experience help the executive team to make high-quality and creative decisions in business operation and change. Executives with IT backgrounds are more likely to understand information technology and motivate their team members to actively use information technology [27], and the use of information technology is an effective factor to improve executive decision-making and is the basis of a high-quality information environment. Therefore, executives with IT backgrounds pay more attention to the implementation of enterprise information technology, skillfully use information systems, make accurate profit forecasts [28], effectively reduce accounting information asymmetry, improve the internal and external information environment of the enterprise, promote the operation of various departments of the enterprise to be more coordinated, and significantly improve the efficiency of decision-making and enhance the competitiveness of the enterprise [29]. And high-quality auditors usually have rich audit experience and professional audit technology team, which can match the complex information system of the enterprise. For example, in high-tech enterprises, executives with IT backgrounds may need auditors with data mining and digital technology auditing capabilities, and high-quality auditors are better able to meet such needs of enterprises. In summary, due to the personal expertise of executives with IT backgrounds and their demand for high quality in the information environment of the enterprise, they usually tend to choose high-quality auditors in order to promote sustainable development and enhance audit quality and efficiency.

Based on the above analysis, the following hypotheses are proposed in this paper:

H₁. 

The higher the percentage of executives with IT backgrounds in a company’s executive team, the more likely they are to choose high-quality auditors to promote sustainable corporate development.

Digital innovation, as a practical activity of integrating and utilizing digital resources to improve products, services, and business processes, is a key part of the innovation-driven strategy. In the process of enterprise digital innovation, the application of digital technology not only enriches the channels for enterprises to obtain information, but also changes the way executives deal with and use information [30]. Executives with IT backgrounds are familiar with the operation process of various information technologies and information systems, and have a clearer understanding and perception of the development and application of digital technology. In addition, sustainable development of enterprises is an ecological concept with economic significance, which pursues the maximization of comprehensive benefits such as economic, social, and environmental benefits, aiming to achieve harmonious coexistence between enterprises, society, and the ecological environment [31]. The higher the degree of digital innovation of enterprises, the more they can use digital technology to carry out all-round digital transformation of the five core links of enterprise organization and management, marketing, product development, manufacturing, and supply chain, and directly promote the improvement of economic, environmental, and social benefits, and thus lay the foundation for the sustainable development of enterprises. Therefore, in the context of digital innovation, in order to convey a positive signal to the capital market that the digital upgrading process of the enterprises is stable, and to enhance the disclosure quality of corporate sustainability reports, executives with IT backgrounds usually tend to choose auditors with rich experience in digital auditing to meet the strategic needs of the enterprises in digital innovation, alleviate stakeholders’ concerns about the risks and uncertainties of enterprise transformation and upgrading, and achieve the role of reducing agency conflicts and improving market competitiveness.

Based on the above analysis, the following hypotheses are proposed in this paper:

H₂. 

When other conditions are equal, the higher the degree of digital innovation in a company, the more significant the relationship between executives with IT backgrounds and high-quality auditors.

Internal control, as the core component of all management activities within an organization, has become a key factor in enhancing operational efficiency [32]. Improvements in internal control levels can enhance a company’s sustainable development capabilities to a certain extent, and stronger management capabilities can reinforce the impact of internal control on a company’s sustainable development capabilities. The effectiveness of internal control largely depends on the level of attention and professional competence of the decision-making layer [33]. Executives with IT backgrounds, due to their own information technology education or work experience, can better understand the entire process of implementing a company’s information systems, thereby identifying weaknesses in internal control and optimizing internal control quality. Improving the level of internal control is a guarantee for the quality of financial and sustainable reporting disclosure [34]. To promote high-quality corporate development, executives with IT backgrounds have greater motivation to hire high-quality auditors to provide audit services.

Based on the above analysis, the following hypotheses are proposed in this paper (Figure 1):

H₃. 

Executives with IT backgrounds drive firms to choose high-quality auditors by improving the level of internal control in their firms, i.e., the level of internal control mediates the relationship between executives with IT backgrounds and high-quality auditors.

3. Research Design

3.1. Sample Selection and Data Sources

The initial research sample selected in this paper is the data of A-share listed companies from 2015 to 2023. In order to ensure that the empirical results are reliable and valid, this paper excludes the samples that are in the financial industry, ST companies, and missing financial data, and shrinks the upper and lower 1% of the continuous variables to eliminate the impact of extreme values on the empirical results.

Since the beginning of 2015, China has clearly emphasized the implementation of the national big data strategy, attempting to promote the development and application process of big data in all aspects, promoting the opening and sharing of data resources, and laying a solid policy foundation for the development of the digital economy. Technologies such as big data, artificial intelligence, and blockchain have gradually evolved from auxiliary tools to the core competitiveness of enterprises, and the influence of executives with IT backgrounds on corporate strategy has become more prominent. Therefore, this paper chooses 2015 as the initial reference year. This study selected 28 listed companies from the technology and manufacturing sectors as research samples. Additionally, 15 experts with extensive experience in accounting and auditing, or with expertise in digital audit consulting for enterprises, were chosen as research subjects. A combination of survey questionnaires and online interviews was employed to gather perspectives on the measurement methods for key variables. To enhance the depth and scientific rigor of this study, other variables potentially influencing auditor selection were identified based on existing research and questionnaire feedback. These were incorporated as control variables within the research framework. Additionally, the digital innovation patent data were sourced from the China National Intellectual Property Administration, the internal control data from the Dibbo database, and the other data from the CSMAR database.

3.2. Model Design and Definition of Variables

3.2.1. Modeling

Logistic regression model (1) is constructed in this paper to test the Hypothesis H₁:

$$Auditor={\beta }_0+{\beta }_{1}IT+{\beta }_{2}Controls+\Sigma Province+\epsilon$$

(1)

The significance of the coefficient ${\beta }_1$ is observed to determine whether the proportion of executives with IT backgrounds ($IT$) in the executive team affects auditor selection ($Auditor$). If the coefficient ${\beta }_1$ is significantly positive, Hypothesis H₁ is true.

In order to test whether Hypothesis H₂ is valid, this paper continues to construct models (2) and (3) based on model (1):

$$Auditor={\alpha }_0+{\alpha }_{1}IT+{\alpha }_{2}InDig+{\alpha }_{3}Controls+\Sigma Province+\epsilon$$

(2)

$$Auditor={\gamma }_0+{\gamma }_{1}IT+{\gamma }_{2}InDig+{\gamma }_{3}IT\ast InDig+{\gamma }_{4}Controls+\Sigma Province+\epsilon$$

(3)

In the first step, model (2) is used to test the moderating effect of digital innovation ($InDig$) on executives with IT backgrounds ($IT$) and auditor choice ($Auditor$). In the second step, based on model (2), the interaction terms of $IT$ and $InDig$ are added to form model (3), and logistic regression is performed. If the coefficients ${\alpha }_1$,  ${\gamma }_1$, and ${\gamma }_3$ are significantly positive, it means that the higher the degree of digital innovation, the more executives with IT backgrounds tend to choose high-quality auditors, proving that the Hypothesis H₂ is valid.

To verify whether Hypothesis H₃ is valid, this paper additionally constructs model (4) based on model (1):

$$IC={\lambda }_0+{\lambda }_{1}IT+{\lambda }_{2}Controls+\Sigma Province+\epsilon$$

(4)

The significance of the coefficients is observed to determine the impact of executives with IT backgrounds ($IT$) on the level of internal control ($IC$). Existing research has confirmed that the higher the level of internal control, the more firms tend to hire high-quality auditors. If ${\lambda }_1$ is significantly positive, indicating that the proportion of executives with IT backgrounds positively affects the level of internal control of the firm, then Hypothesis H₃ is valid, and the level of internal control plays a mediating role in the relationship between executives with IT backgrounds and the choice of auditors.

3.2.2. Definition of Variables

Explained Variable

Auditor Selection ($Auditor$). In China, the “Top 10” accounting firms are often regarded as a proxy for high-quality auditors. Although the “Big 4” accounting firms dominate the corporate audit sector, large domestic accounting firms have earned a solid reputation for their audit services among domestic enterprises and local listed companies through their own capabilities. This broader classification approach integrates the universality of international auditing standards while preserving the uniqueness of local professional expertise. This characteristic proves particularly crucial within China’s highly segmented audit market. Against the backdrop of intertwined global market demands and domestic regulatory requirements, the “Top 10” accounting firms serve as a more comprehensive and representative proxy for high-quality auditing compared to the “Big 4” firms [35]. So, this paper chooses the “Top 10” accounting firms as a measure of high-quality auditing. The ranking information of the accounting firms hired by the sample enterprises each year comes from the “Top 100 Accounting Firms in Comprehensive Evaluation” disclosed by the CICPA, and if the firms are ranked in the top ten, it is regarded as the “Top 10” firms, and $Auditor$ takes the value of 1; otherwise, it takes the value of 0.

Explanatory Variables

Executives with IT Backgrounds ($IT$). Drawing on existing studies [36], this paper takes the proportion of executives with IT backgrounds in the executive team of A-share listed companies as an explanatory variable, and the senior managers in the executive team are those excluding the board of directors and the supervisory board. If executives have information technology-related education or serving experience, they are regarded as executives with IT backgrounds.

Moderating Variable

Enterprise Digital Innovation ($InDig$). Referring to the research of related literature [7,37], we collect and organize the invention and innovation patents of the sample companies from the China National Intellectual Property Administration, and take “informatization, intelligence, networking, information sharing, cloud, remote, machine learning, robotics, internet, cloud computing, internet of things, digitization, face recognition, blockchain, big data, virtual” as the selected key words. By screening the abstracts of invention patents and counting the number of patents related to digital innovation, the number of invention patents for digital innovation in the corresponding year of the selected sample companies is added to 1 to take the natural logarithm, which is used as a moderating variable in this paper.

Mediating Variable

Internal Control Level $\left(IC\right)$. This paper draws on existing research [38], using the “internal control index” in the Dibbo database as the measurement variable, and taking the natural logarithm of the internal control index plus one as the mediating variable in this paper.

Control Variables

This paper selects other factors that may affect the auditor’s choice as control variables to join the model, including company size ($Size$), company growth ($Growth$), gearing ($Lev$), return on assets ($Roa$), current ratio ($Curr$), fixed asset ratio ($Fixed$), intangible asset ratio ($Intangible$), shareholding ratio of top shareholders ($First$), shareholding ratio of top ten shareholders ($Top10$), nature of ownership ($State$), and the age of executives ($Age$). In addition, the model fixes the province ($Province$) effect. The variable definitions are presented in

Table 1. Definition of variables.

Category	Name	Symbol	Definition
Explained Variables	Auditor Selection	$Auditor$	If the firm chosen by the company is “Top 10”, then $Auditor$ = 1; otherwise, $Auditor$ = 0.
Explanatory Variables	Executives with IT Backgrounds	$IT$	Number of executives with IT backgrounds/total number of executive team members
Moderating Variable	Digital Innovation	$InDig$	$Ln$ (Number of patent applications for digital innovation inventions + 1)
Mediating Variables	Internal Control Level	$IC$	$Ln$ (Internal control index + 1)
Control Variable	Company Size	$Size$	$Ln$ (Total assets at the end of the year)
	Company Growth	$Growth$	Revenue growth rate
	Gearing Ratio	$Lev$	Total liabilities/total assets
	Return on Assets	$Roa$	Year-end net profit/average total assets
	Current Ratio	$Curr$	Current assets/current liabilities
	Fixed Assets Ratio	$Fixed$	Fixed assets/total assets
	Intangible Assets Ratio	$Intangible$	Intangible assets/total assets
	Shareholding Ratio of Top Shareholders	$First$	Number of shares held by the largest shareholder/$Ln$ (total number of shares)
	Shareholding Ratio of Top Ten Shareholders	$Top10$	Number of shares held by top ten shareholders/total number of shares
	Nature of Ownership	$State$	If the firm is state-controlled, $State$ = 1; otherwise, $State$ = 0.
	Age of Executives	$Age$	Average age of executives

.

4. Empirical Results and Analysis

4.1. Descriptive Statistics

Table 2. Descriptive statistics.

Variable	Sample	Mean	S.D.	Min	Max
$Auditor$	25,967	0.572	0.495	0.000	1.000
$IT$	25,967	0.121	0.216	0.000	1.000
$InDig$	25,967	0.110	0.416	0.000	2.565
$IC$	25,967	6.467	0.135	5.732	6.697
$Size$	25,967	22.408	1.306	20.094	26.440
$Curr$	25,967	2.379	2.123	0.340	13.131
$Lev$	25,967	0.419	0.196	0.063	0.880
$Roa$	25,967	0.035	0.061	−0.230	0.197
$Growth$	25,967	0.147	0.366	−0.542	2.100
$Fixed$	25,967	0.203	0.153	0.002	0.672
$Intangible$	25,967	0.046	0.052	0.000	0.348
$First$	25,967	33.145	14.559	8.320	72.840
$Top10$	25,967	57.748	15.048	23.460	90.480
$State$	25,967	0.340	0.474	0.000	1.000
$Age$	25,967	49.833	3.136	42.000	57.182

presents the descriptive statistics for the main variables. In particular, the mean (standard deviation) of the explanatory variable auditor selection ($Auditor$) is 0.572 (0.495), indicating that about 57.2% of the enterprises in the sample chose the “Top 10” firms.

The mean (standard deviation) of the explanatory variable executives with an IT background ($IT$) is about 0.121 (0.216), with the minimum value of 0 and the maximum value of 1, indicating that executives with an IT background in the sample companies accounted for an average of 12.1%; the mean (standard deviation) of the moderating variable digital innovation ($InDig$) is about 0.110 (0.416), with the minimum value of 0 and the maximum value of 2.565, indicating that the digital innovation component of the invention patents in the sample companies accounted for an average of 11%; the mean (standard deviation) of the mediator variable internal control level ($IC$) is about 6.465 (0.135), with a minimum value of 5.732 and a maximum value of 6.697. The results of the control variables are largely consistent with the existing literature and are distributed within a reasonable range.

4.2. Research Hypothesis Testing

Table 3. Percentage of executives with an IT background and auditor selection.

Variable	(1)	(2)	Variable	(1)	(2)
	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$		$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$
$IT$	0.043 ***	0.065 ***	$Intangible$		0.115 **
	(3.134)	(4.731)			(1.992)
$Size$		0.038 ***	$First$		0.001 ***
		(12.879)			(2.333)
$Curr$		0.004 **	$Top10$		0.003 ***
		(2.200)			(10.011)
$Lev$		−0.027	$State$		−0.005
		(−1.113)			(−0.709)
$Roa$		0.303 ***	$Age$		0.003 ***
		(5.381)			(2.980)
$Growth$		0.001	$Constant$	0.673 ***	−0.552 ***
		(0.090)		(62.248)	(−7.771)
$Fixed$		0.078 ***	$Province$	Fixed	Fixed
		(3.719)	$Observations$	25,967	25,967
			$R\text{-}squared$	0.067	0.095

Note: *** and ** represent 1% and 5% significance levels, respectively.

shows the results of the baseline regression test. In column (1), for the regression test results between executives with IT backgrounds and auditor, the coefficient is 0.043 and is significant at the 1% level; column (2) for the inclusion of other control variables that may affect the choice of auditor regression results found that the coefficient of the IT background executives and auditor choice is 0.065, and significant at the 1% level, proving that the higher the proportion of executives with IT backgrounds, the more inclined to hire the “Top 10” accounting firms, supporting the Hypothesis H₁ of this paper.

Digital innovation can help enterprises quickly grasp the changing market dynamics, timely respond to the new needs generated by the market [39], improve enterprise performance, promote the development of enterprise digital technology, improve internal governance capabilities, prompt executives with IT backgrounds to choose high-quality auditors, and send signals to the market that the enterprise digitalization process is robust and in good operating condition. This paper uses models (2) and (3) to conduct regression tests. The coefficient of the variable IT background executives ($IT$) in column (1) of

Table 4. Moderating effects of digital innovation in firms.

Variable	(1)	(2)	Variable	(1)	(2)
	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$		$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$
$IT$	0.059 ***	0.057 ***	$Fixed$	0.086 ***	0.087 ***
	(4.295)	(4.105)		(4.122)	(4.150)
$InDig$	0.036 ***	0.030 ***	$Intangible$	0.121 **	0.120 **
	(5.016)	(4.036)		(2.100)	(2.076)
$inter$		0.076 ***	$First$	0.001 **	0.001 **
		(2.657)		(2.479)	(2.474)
$Size$	0.037 ***	0.037 ***	$Top10$	0.003 ***	0.003 ***
	(12.262)	(12.227)		(10.270)	(10.329)
$Curr$	0.005 **	0.005 **	$State$	−0.005	−0.005
	(2.294)	(2.310)		(−0.649)	(−0.682)
$Lev$	−0.023	−0.022	$Age$	0.003 ***	0.003 ***
	(−0.954)	(−0.920)		(3.022)	(3.033)
$Roa$	0.301 ***	0.301 ***	$Constant$	−0.529 ***	−0.528 ***
	(5.339)	(5.356)		(−7.429)	(−7.423)
$Growth$	0.001	0.001	$Province$	Fixed	Fixed
	(0.139)	(0.138)	$Observations$	25,967	25,967
			$R\text{-}squared$	0.096	0.096

Note: *** and ** represent 1% and 5% significance levels, respectively.

is 0.059, and in column (2) is 0.057; both are significant at the 1% level. The coefficient of digital innovation ($InDig$) is 0.030, and the coefficient of the interaction term between $IT$ and $InDig$ is 0.076, which is significantly positive at the 1% level, indicating that corporate digital innovation significantly enhances the positive relationship between executives with IT backgrounds and auditor selection, which verifies Hypothesis H₂.

Table 5. Mediating effects of internal control quality.

Variable	(1)	(2)	Variable	(1)	(2)
	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{I}\mathit{C}$		$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{I}\mathit{C}$
$IT$	0.065 ***	0.010 ***	$Intangible$	0.115 **	−0.074 ***
	(4.731)	(2.676)		(1.992)	(−4.862)
$Size$	0.038 ***	0.013 ***	$First$	0.001 ***	0.000 ***
	(12.879)	(16.952)		(2.333)	(4.925)
$Curr$	0.004 **	−0.003 ***	$Top10$	0.003 ***	0.000 ***
	(2.200)	(−4.987)		(10.011)	(4.200)
$Lev$	−0.027	−0.026 ***	$State$	−0.005	0.009 ***
	(−1.113)	(−4.196)		(−0.709)	(4.693)
$Roa$	0.303 ***	0.586 ***	$Age$	0.003 ***	0.002 ***
	(5.381)	(39.659)		(2.980)	(5.642)
$Growth$	0.001	0.050 ***	$Constant$	−0.552 ***	6.070 ***
	(0.090)	(22.047)		(−7.771)	(323.977)
$Fixed$	0.078 ***	−0.033 ***	$Province$	Fixed	Fixed
	(3.719)	(−5.943)	$Observations$	25,967	25,967
			$R\text{-}squared$	0.095	0.165

Note: *** and ** represent 1% and 5% significance levels, respectively.

tests the mediating effect of internal control quality on executives with IT backgrounds and auditor choice. Column (1) shows that the proportion of firms’ executives with IT backgrounds significantly and positively affects auditor choice. Column (2) shows that the relationship between corporate executives with IT backgrounds and corporate internal control level ($IC$) is significantly positive at the 1% level, and the literature has confirmed that the level of internal control positively affects corporate auditor choice, suggesting that the level of internal control plays a mediating role in the relationship between executives with IT backgrounds and auditor choice, and thus supporting Hypothesis H₃.

4.3. Further Analysis

4.3.1. Robustness and Endogeneity Tests

To maintain the robustness of the previous regression results, this paper also adopts the following approach to the test:

Replacement of Key Explanatory Variables

This paper replaces the measurement of the explanatory variable of executives with IT backgrounds with a value to reflect whether the selected sample firms have executives with IT backgrounds in the current year ($I{T}_{dummy}$), using the value of 1 if there is executives with IT backgrounds and 0 otherwise. The regression results are shown in column (1) of

Table 6. Robustness and endogeneity tests.

Variable	(1)	(2)	(3)	(4)
	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{I}\mathit{P}\mathit{S}\mathit{A}$	$\mathit{I}\mathit{T}$	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$
$I{T}_{ave}$			0.921 ***
			(46.508)
$IT$		0.010 ***		0.532 ***
		(8.348)		(10.532)
$I{T}_{dummy}$	0.045 ***
	(7.137)
Control variable	Control	Control	Control	Control
$Constant$	−0.548 ***	−0.089 ***	0.055 *	−0.743 ***
	(−7.736)	(−14.754)	(1.732)	(−9.884)
$Province$	Fixed	Fixed	Fixed	Fixed
$Observations$	25,967	25,967	25,967	25,967
$R\text{-}squared$	0.096	0.074	0.103	0.056

Note: *** and * represent 1% and 10% significance levels, respectively.

. The coefficient of $I{T}_{dummy}$ of 0.045 is significant at the 1% level, which suggests that the firms with executives with IT backgrounds usually choose to hire the “Top 10” firms.

The Selection of Auditors Serves as an Important Proxy Variable Reflecting Audit Quality

Previous studies have also employed auditor industry expertise as an indicator of audit quality [40]. Compared to auditors without industry expertise, those possessing industry expertise are more likely to deliver high-quality audit services. This is typically manifested in their ability to curb clients’ earnings management and financial fraud, thereby enhancing the quality of clients’ earnings [41]. Therefore, the sum of the square roots of the total client assets in a specific industry across all accounting firms is used to measure the auditors’ industry expertise ($IPSA$), serving as a proxy variable for audit quality. The regression results are shown in column (2) of Table 6. The coefficient for variable $IT$ is 0.010, remaining positively significant at the 1% level. This robustness test further supports Hypothesis H1, indicating that companies with a higher proportion of executives possessing an IT background are more likely to select high-quality auditors.

Instrumental Variables Approach

To further mitigate the possible endogeneity problem, the paper then introduces the industry mean ($I{T}_{ave}$) of executives with IT backgrounds as an instrumental variable. Column (3) of Table 6 shows the results of the first-stage regression. The coefficient of $I{T}_{ave}$ is 0.921, which is significant at the 1% level, indicating that the higher the mean value, the higher the proportion of executives with IT backgrounds. Column (4) of Table 6 shows the results of the direct regression using the instrumental variable model. The coefficient of variable $IT$ is 0.532, which is significant at the 1% level and consistent with the regression results obtained from model (1) in the previous section.

4.3.2. Heterogeneity Analysis

Nature of Ownership Rights

While the previous section has concluded that the proportion of executives with IT backgrounds affects the firm’s choice of auditor, the nature of different ownership rights may also affect the firm’s ability to hire different auditors. First, the capital ownership or control of state-owned enterprises is owned by the state, and government agencies such as the State-owned Assets Supervision and Administration Commission (SASAC) may determine the behavior of enterprises, such as executive changes and firm selection, which may weaken the influence of executives with IT backgrounds on enterprise decision-making [42]. Second, compared with state-owned enterprises, non-state-owned enterprises have weaker market competitiveness. To seize the first opportunity in digital innovation and realize the enterprise’s high-quality development, their demand for having specialized technical talents is usually stronger. The extent and space for executives with IT backgrounds to play a role are greater, which will create more opportunities for them to make audit decisions [43]. Therefore, this paper suggests that non-state-owned enterprises have a higher probability of hiring a “Top 10” firm compared to state-owned enterprises. To verify whether the nature of ownership rights affects the main conclusions, this paper divides the sample enterprises into two groups: state-owned and non-state-owned. The related regression results are presented in

Table 7. Heterogeneity analysis—nature of ownership and firm size groupings.

Variable	(1) State-Owned Enterprises	(2) Non-State-Owned Enterprises	(3) Small-Scale Enterprises	(4) Large-Scale Enterprises
	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$
$IT$	0.030	0.057 ***	0.017	0.072 ***
	(1.081)	(3.604)	(0.670)	(4.298)
Control variable	Control	Control	Control	Control
$Constant$	−0.971 ***	−0.293 ***	−0.783 **	−0.645 ***
	(−7.948)	(−3.077)	(−2.220)	(−7.500)
$Province$	Fixed	Fixed	Fixed	Fixed
$Observations$	8825	17,142	6491	19,476
$R\text{-}squared$	0.137	0.092	0.081	0.106

Note: *** and ** represent 1% and 5% significance levels, respectively.

(1) and (2). In the group of state-owned enterprises, there is no significant relationship between executives with IT backgrounds and auditor selection. However, in the group of non-state-owned enterprises, the regression coefficient of executives with IT backgrounds is positive and significant at the 1% level, indicating that Hypothesis H₁ is more valid, i.e., the higher the percentage of techxecutives in a company’s executive team, the more likely they are to choose a high-quality auditor.

Enterprise Size

In current increasingly complex business environments, large-scale enterprises have been characterized by business diversification, and, accordingly, large-scale enterprises face higher financial risks. With the wave of digital transformation, executives with IT backgrounds have become an important role in allocating key resources and providing innovative thinking in the process of strategic transformation due to their deep experience in digital technology. On this basis, large-scale enterprises will increase their investment in executives with IT backgrounds who can accurately grasp technology trends and improve operational efficiency. In order to send positive signals to the market, enhance the credibility of financial reporting, and reduce the risk of financial fraud, executives with IT backgrounds will expect firms to have stronger technological capabilities and resources. As a result, large-scale firms are more inclined to hire high-quality auditors to enhance the effectiveness of corporate governance than small-scale firms are. In this paper, with reference to an existing study [44], firms with a corporate asset size less than the first quartile are classified as small-scale firms, assigned a value of 1, otherwise 0, and grouped into regressions. The regression results, as shown in columns (3) and (4) of Table 7, show that the effect of the proportion of executives with IT backgrounds on auditor selection is significant only in the sample group of large-scale firms, which is in line with the previous research results.

Term of Office of Executives

According to existing research, executives of different tenures differ in preference, experience, cognition, and perception, leading to the formation of different sensitivities to the choice of audit quality [45]. When executives have a short tenure, they often expect to grasp the pain points and difficulties in the development of the enterprise in a short period of time, improve the development strategy of the enterprise, and prove their own value. Thus, executives have strong incentives to choose high-quality auditors to maintain their positions and reputations [46]. With the prolongation of the executives’ tenure, they gain deeper insight into the market environment faced by the enterprise internally and externally. They are able to fully understand the accounting policies and skillfully cope with the various affairs of the enterprise. Then, the executives tend to become overconfident, adhere more to the established mode of thinking and behavioral habits, and adopt a conservative business strategy [47]. In summary, this paper argues that the length of tenure of executives with IT backgrounds also affects the choice of auditor. Based on the tenure of executives in the CSMAR database, an average tenure of executives with IT backgrounds in the sample firms in the year is calculated. The median of the average tenure is also calculated based on the annual province-level data. And then the sample is grouped according to the median: those above the median are the longer tenure group, and those below the median are the shorter tenure group.

Table 8. Heterogeneity analysis—executive tenure and industry classification grouping.

Variable	(1) Longer Terms	(2) Shorter Terms	(3) Capital-Intensive Enterprises	(4) Labor-Intensive Enterprises
	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$	$\mathit{A}\mathit{u}\mathit{d}\mathit{i}\mathit{t}\mathit{o}\mathit{r}$
$IT$	0.012	0.061 ***	0.012	0.053 ***
	(0.619)	(3.027)	(0.569)	(2.857)
Control variable	Control	Control	Control	Control
$Constant$	−0.417 ***	−0.703 ***	−0.710 ***	−0.549 ***
	(−3.923)	(−7.135)	(−7.113)	(−5.070)
$Province$	Fixed	Fixed	Fixed	Fixed
$Observations$	12,971	12,980	12,983	12,983
$R\text{-}squared$	0.101	0.108	0.119	0.092

Note: *** represent 1% significance levels.

columns (1) and (2) show the regression results using Model (1) for the two groups. In the group of executives with shorter tenure of IT background, its regression coefficient is 0.061, which is significant at the 1% level, while in the group of longer tenure, the coefficient is not significant. This suggests that firms are more likely to choose “Top 10” firms when the tenure of IT executives is shorter, which is in line with expectations.

Industry Classification

Labor-intensive enterprises tend to have lower technological thresholds because they highly depend on human resources for business processes, and they are characterized by low levels of informatization. Their operations are susceptible to economic cycles, market demand, and other factors. This situation makes it easier for executives with IT backgrounds to highlight their value and have a greater say in decision-making. In labor-intensive enterprises, to promote strategic transformation, executives with IT backgrounds usually expect to choose auditors with stronger data analysis capabilities, in order to convey financial soundness signals to investors and other stakeholders, mitigate the risk of information asymmetry, and enhance the demand for audit services. In contrast, capital-intensive firms are relatively mature in information technology construction, which somewhat weakens executives’ with IT backgrounds marginal influence, and their technical reliance on external auditors is also lower. Therefore, executives with IT backgrounds in labor-intensive firms are more inclined to hire high-quality auditors to enhance audit quality and efficiency, and to provide impetus for corporate transformation and upgrading. In this paper, the capital–labor ratio of the sample firms for the year is calculated based on the ratio of the firms’ fixed asset value to the number of employees in the CSMAR database [48,49]. And the median of the average capital–labor ratio is calculated based on the annual province-level data. Then, the sample is grouped according to the median: those above the median are capital-intensive enterprises, and those below the median are labor-intensive enterprises. Model (1) is used to regress the two groups, and Table 8 columns (3) and (4) list the regression results. In the group of labor-intensive firms, its regression coefficient of executives with IT backgrounds is 0.053, which is significant at the 1% level, while the regression coefficient is not significant in the group of capital-intensive firms, consistent with previous expectations.

5. Conclusions and Implications of the Study

Using the data of A-share listed companies from 2015 to 2023, this paper investigates the impact of executives with IT backgrounds on auditor selection from the perspective of executives’ personal attributes. The study confirms the following:

(1) The higher the proportion of executives with IT backgrounds in an enterprise’s executive team, the more they are inclined to hire high-quality auditors to conduct their audits. And this conclusion still holds after a series of endogeneity and robustness tests. (2) The higher the degree of digital innovation in enterprises, the more significant the positive correlation between executives with IT backgrounds and the choice of auditors. (3) The level of corporate internal control plays a mediating effect in the relationship be-tween executives with an IT background and auditor selection. (4) The influence of executives with IT backgrounds on corporate audit decision-making behavior is more pronounced in enterprises that are non-state-owned, large-scale, labor-intensive, and have short executive terms.

Furthermore, this paper gains the following insights:

1. From the perspective of corporate sustainability, the auditor selection mechanism can be optimized to meet the executives’ expectations of the technology needs of the audit. Enterprises may incorporate specialized AI audit capability metrics into their auditor selection process. This should encompass not only auditors’ proficiency in big data and blockchain technologies, but also evaluate core competencies such as the firm’s ability to conduct comprehensive data verification using generative AI and identify algorithmic biases through machine learning models. Such measures help mitigate financial misstatement risks stemming from outdated auditing techniques. It is necessary to clarify the participation of executives with IT backgrounds in corporate decision-making, enable them to provide professional technical experience in auditor selection based on the enterprise AI strategy, and establish a linkage between auditing needs and technology strategy, so as to ensure that the strategic objectives of executives with IT backgrounds match with that of the auditors hired by the enterprise.

2. For accounting firms, they need to enhance their technology adaptation capabilities by focusing on iterative AI audit technology development to meet the audit requirements of corporate executives with IT backgrounds. Accounting firms can integrate the capabilities of IT-specialized auditors with traditional financial auditors to form a composite audit team comprising “traditional auditors, IT-specialized auditors, and AI algorithm experts” tailored to the specific needs of executives with IT backgrounds. And at the same time, accounting firms should increase their research and development in, and application of, digital auditing tools, and formulate segmentation guidelines for digital auditing needs. Accounting firms can also accumulate typical audit cases and establish an audit case database to deepen auditors’ understanding of special business models required by executives with IT backgrounds, so as to avoid a waste of resources or redundant workload in auditor selection.

3. For regulators, the institutional framework can be refined to address the technical characteristics of AI auditing, thereby guiding the use of technology to empower auditing. Regulators can issue relevant auditing policy guidelines to clarify specific auditing requirements in information technology, establish a filing system for auditors’ technical qualifications, and encourage accounting firms to cooperate with technology companies to develop audit technology solutions to realize real-time interfacing between financial data and business systems to enhance audit efficiency. Industry associations can take the lead in organizing auditing technology exchange meetings, focusing on audit challenges posed by emerging technologies such as generative AI, and facilitating cross-disciplinary exchanges between executives with IT backgrounds and auditors, creating a better auditing environment and committing to achieving a “win-win” situation for enterprises, accounting firms, and regulatory authorities.

This study focuses exclusively on Chinese A-share listed companies primarily because the Chinese A-share market possesses a relatively well-developed regulatory framework, enabling access to abundant research data that provides substantial and high-quality support for this analysis. However, this approach carries certain limitations. Significant differences exist across countries and regions in terms of capital market development stages, legal frameworks, and economic environments. Consequently, the external conditions faced by Chinese A-share listed companies differ from those encountered by enterprises in other international regions. Therefore, the applicability of this paper’s conclusions may be limited when directly extended to enterprises in other regions or to non-listed companies. Future research could expand the sample scope to include more representative enterprises from additional countries and regions, thereby constructing a more applicable theoretical model. This would provide universal guidance and recommendations for diverse organizations while enabling deeper analysis of qualitative insights such as the strategic alignment of IT executives and auditors, enhanced decision-making through IT expertise, and the integration of IT executives into governance.