How Does Artificial Intelligence Shape Audit Firms?

Abstract

This study examines the impact of using artificial intelligence (AI) on audit firms. We exploit the
staggered job postings requiring AI skills at audit office locations across the United States as a proxy for the use of AI at local audit offices. First, we find that relative to audit offices that do not yet post any AI jobs, audit offices that post such jobs experience a 19% increase in the number of auditor jobs. Second, after posting AI jobs, these audit offices are also less likely to demand hard and technical computer/software skills, and more likely to demand soft and nontechnical skills for the same auditor job in the same audit office. Last, we find that these audit offices do not lower audit fees but significantly reduces the percentage of clients with adverse restatements and audit lag. Overall, our evidence indicates that using AI does not replace auditor jobs but changes the skill requirements in auditor jobs and improves audit quality.

Keywords: Artificial intelligence, auditors, machine learning, audit quality

JEL Classification: O33, M42, J6, J23, J24