TheCorporateCounsel.net

One of the takeaways from the CAQ’s recent analysis of audit quality reports is that recently, some firms have included discussion on how they employ data analytics and artificial intelligence or machine learning to further enhance audit quality. This trend is reflective of a larger conversation about just how artificial intelligence will fit into our professional lives going forward. I have been saying for some time that the robots will be coming for my job at some point, and I can imagine that auditors have been wondering whether the same is true for them.

In this recent article from Forbes, Joseph Brazel, who is the Jenkins Professor of Accounting at NC State University, describes a recent study published in the Review of Accounting Studies which “demonstrates that the use of artificial intelligence is significantly improving the quality and efficiency of financial statement audits, as well as displacing audit professionals.”

The study looked at investment in artificial intelligence at audit firms from the period 2010 to 2019, well before the current AI splash made by ChatGPT. One of the study’s authors notes: “Our main result is that when audit firms invest in AI, their audit quality goes up. There are fewer restatements, including material restatements, and fewer SEC investigations related to audits performed by AI-investing firms.”

The downside is that greater levels of AI adoption were followed by reductions in the audit firms’ workforces. The study noted that this effect was most prominent with audit professionals at the more junior levels of the firms. With that piece of information in mind, I guess I will continue to worry about those robots coming for me!

– Dave Lynn