Can Artificial Intelligence Reduce the Effect of Independence Conflicts on Audit Firm Liability?

We conduct two experiments to examine whether artificial intelligence can reduce the effects of independence conflicts on audit firm liability. Our experiments manipulate (1) whether procedures are performed by an auditor or an artificial intelligence and (2) whether the audit firm was careful in maintaining the appearance of independence from the audit client. Results of the first experiment indicate that artificial intelligence significantly reduces the effect of the appearance of independence conflicts on jurors’ judgments of audit firm liability. This effect is intentional and is driven by greater overall trust in the audit process. Our second experiment replicates the findings within a setting which relies entirely on participants’ preconceived notions of the strengths and weaknesses of individuals and AI and weakens the credibility of all statements by making them through questions by the plaintiff and defense attorneys. It also examines the relationship between trust in automation and related frameworks. Our study contributes to literature on auditor negligence and how technological change might affect audit firm liability