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

Financial reporting quality can benefit from companies and auditors using artificial intelligence (AI) in complex and subjective financial reporting areas. However, this will only happen if managers incorporate AI-based information into their financial reporting decisions, which the popular press and academic literature suggest is not guaranteed. We examine financial executives’ responses to AI with a survey and experiment. In the survey, we find managers view AI use by their companies and auditors positively, though they doubt auditor AI will benefit them. In the experiment, managers whose companies use AI are more receptive to proposed audit adjustments for a complex 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 use. This study highlights the importance of considering the effects of AI use by both parties when evaluating how AI influences auditing and financial reporting