How do financial executives respond to the use of artificial intelligence in financial reporting and auditing?

Cassandra Estep (), Emily E. Griffith () and Nikki L. MacKenzie ()
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Cassandra Estep: Emory University
Emily E. Griffith: University of Wisconsin-Madison
Nikki L. MacKenzie: Georgia Institute of Technology

Review of Accounting Studies, 2024, vol. 29, issue 3, No 21, 2798-2831

Abstract: Abstract Financial reporting quality can benefit from companies and auditors using artificial intelligence (AI) in complex and subjective financial reporting areas. However, benefits will only accrue if managers incorporate AI-based information into their financial reporting decisions, which the popular press and academic literature suggest is uncertain. We use a multi-method approach to examine how financial executives view and respond to AI. In a survey, respondents describe various uses of AI at their companies, spanning from simple to complex functions. While managers are not averse to the use of AI by their companies or their auditors, they appear to be uncertain about how auditors’ use of AI will directly benefit their companies. In an experiment that manipulates whether a company and/or its auditor use AI, managers whose companies use AI record larger audit adjustments for a complex accounting estimate when the auditor uses AI. Auditor AI use does not affect managers’ adjustment decisions in the absence of company AI. This study highlights the importance of considering the effects of AI use by both companies and their auditors when evaluating how AI influences auditing and financial reporting.

Keywords: Accounting estimates; Artificial intelligence; Audit adjustments; Auditor–client interaction; Financial executive judgment; Judgment and decision making (search for similar items in EconPapers)
JEL-codes: M41 M42 O33 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11142-023-09771-y

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