How Do Financial Executives Respond to the Use of Artificial Intelligence in Financial Reporting and Auditing?

Review of Accounting Studies, forthcoming. doi.org/10.1007/s11142-023-09771-y

47 Pages Posted: 6 Dec 2021 Last revised: 1 May 2023

See all articles by Cassandra Estep

Cassandra Estep

Emory University

Emily E. Griffith

University of Wisconsin - Madison

Nikki L. MacKenzie

Georgia Institute of Technology - Scheller College of Business

Date Written: January 5, 2023

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 versus does not use 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

Suggested Citation

Estep, Cassandra and Griffith, Emily Elaine and MacKenzie, Nikki, How Do Financial Executives Respond to the Use of Artificial Intelligence in Financial Reporting and Auditing? (January 5, 2023). Review of Accounting Studies, forthcoming. doi.org/10.1007/s11142-023-09771-y, Available at SSRN: https://ssrn.com/abstract=3974946 or http://dx.doi.org/10.2139/ssrn.3974946

Cassandra Estep (Contact Author)

Emory University ( email )

1300 Clifton Road
Atlanta, GA 30322
United States

Emily Elaine Griffith

University of Wisconsin - Madison ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Nikki MacKenzie

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

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