Is Artificial Intelligence Improving the Audit Process?
Review of Accounting Studies, 27, 938–985 (2022)
73 Pages Posted: 26 May 2021 Last revised: 27 Dec 2022
Date Written: June 7, 2022
How does artificial intelligence (AI) impact audit quality and efficiency? We explore this question by leveraging a unique dataset of more than 310,000 detailed individual resumes for the 36 largest audit firms to identify audit firms’ employment of AI workers. We provide a first look into the AI workforce within the auditing sector. AI workers tend to be male, relatively young, and hold mostly but not exclusively technical degrees. Importantly, AI is a centralized function within the firm, with workers concentrating in a handful of teams and geographic locations. Our results show that investing in AI helps improve audit quality, reduces fees, and ultimately displaces human auditors, although the effect on labor takes several years to materialize. Specifically, a one-standard-deviation change in recent AI investments is associated with a 5.0% reduction in the likelihood of an audit restatement, a 0.009 drop in log per client fees, and a reduction in the number of accounting employees that reaches 3.6% after three years and 7.1% after four years.
Keywords: technology, artificial intelligence, audit, product quality, efficiency, labor displacement
JEL Classification: O33, J23, L15, M42
Suggested Citation: Suggested Citation