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

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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 view AI use by their companies relatively positively, they appear to be uncertain about
how auditors’ use of AI will directly benefit their companies. In an experiment, 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.

Authors

• Nikki MacKenzie, Georgia Institute of Technology

• Cassandra Estep, Emory University

• Emily Elaine Griffith, University of Wisconsin-Madison