Man Versus Machine: Complex Estimates and Auditor Reliance on Artificial Intelligence

Journal of Accounting Research, Volume 60, Issue 1

Posted: 3 Apr 2022

See all articles by Benjamin P. Commerford

Benjamin P. Commerford

University of Kentucky, Gatton

Sean A. Dennis

University of Central Florida - Kenneth G. Dixon School of Accounting

Jennifer R. Joe

University of Delaware - Accounting & MIS

Jenny W. Ulla

Univerity of Nevada - Las Vegas, Lee School of Business

Date Written: March 1, 2022

Abstract

Audit firms are investing billions of dollars to develop artificial intelligence (AI) systems that will help auditors execute challenging tasks (e.g., evaluating complex estimates). Although firms assume AI will enhance audit quality, a growing body of research documents that individuals often exhibit “algorithm aversion”—the tendency to discount computer-based advice more heavily than human advice, although the advice is identical otherwise. Therefore, we conduct an experiment to examine how algorithm aversion manifests in auditor judgments. Consistent with theory, we find that auditors receiving contradictory evidence from their firm's AI system (instead of a human specialist) propose smaller adjustments to management's complex estimates, particularly when management develops their estimates using relatively objective (vs. subjective) inputs. Our findings suggest auditor susceptibility to algorithm aversion could prove costly for the profession and financial statements users.

Keywords: accounting estimates; auditing; artificial intelligence; algorithm aversion; subjectivity; competing information

JEL Classification: M40, M41, M42, O30, O33

Suggested Citation

Commerford, Benjamin P. and Dennis, Sean A. and Joe, Jennifer R. and Ulla, Jennifer, Man Versus Machine: Complex Estimates and Auditor Reliance on Artificial Intelligence (March 1, 2022). Journal of Accounting Research, Volume 60, Issue 1, Available at SSRN: https://ssrn.com/abstract=4072876

Benjamin P. Commerford (Contact Author)

University of Kentucky, Gatton ( email )

255 B&E Building
Lexington, KY
United States

Sean A. Dennis

University of Central Florida - Kenneth G. Dixon School of Accounting ( email )

University of Central Florida
P.O. Box 161400
Orlando, FL 32816-1400
United States

Jennifer R. Joe

University of Delaware - Accounting & MIS ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States

Jennifer Ulla

Univerity of Nevada - Las Vegas, Lee School of Business ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States

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