IDEAS home Printed from https://ideas.repec.org/a/eee/finana/v91y2024ics1057521923005665.html
   My bibliography  Save this article

Hyperbole or reality? The effect of auditors' AI education on audit report timeliness

Author

Listed:
  • Liao, Fang-nan
  • Zhang, Chuancai
  • Zhang, Jin-jin
  • Yan, Xiang
  • Chen, Tian-xiang

Abstract

We manually collect data on auditors with artificial intelligence (AI) educational backgrounds comprising 8201 company-year observations of A-share listed companies in China between 2014 and 2020. We then develop an auditor individual-level setting to investigate the role of AI education in audit report timeliness. Results show auditors with AI educational backgrounds are negatively and significantly associated with audit report lag, indicating auditors with AI education can shorten annual audit report times by using programming, applied technology, and logical-thinking skills, thereby enhancing audit report timeliness. In addition, this timeliness effect is more pronounced in accounting firms with more branches and among state-owned enterprises, and higher-risk clients. Furthermore, AI education and Certified Public Accountant status can complementarily strengthen this effect, particularly in companies with higher client portfolio risk. Our results provide evidence that auditors with AI education play an important role in audit report timeliness reality and not hyperbole, which supports the efficiency view, and the understanding potential unintended consequences of auditors' AI education could be of interest to regulators that plan to develop new liberal arts framework.

Suggested Citation

  • Liao, Fang-nan & Zhang, Chuancai & Zhang, Jin-jin & Yan, Xiang & Chen, Tian-xiang, 2024. "Hyperbole or reality? The effect of auditors' AI education on audit report timeliness," International Review of Financial Analysis, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:finana:v:91:y:2024:i:c:s1057521923005665
    DOI: 10.1016/j.irfa.2023.103050
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1057521923005665
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irfa.2023.103050?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Voicu-Dan Dragomir & Madalina Dumitru & Liliana Feleaga, 2022. "The Predictors of Non-Financial Reporting Quality in Romanian State-Owned Enterprises," Accounting in Europe, Taylor & Francis Journals, vol. 19(1), pages 110-151, January.
    2. Chih†Ying Chen & Chan†Jane Lin & Yu†Chen Lin, 2008. "Audit Partner Tenure, Audit Firm Tenure, and Discretionary Accruals: Does Long Auditor Tenure Impair Earnings Quality?," Contemporary Accounting Research, John Wiley & Sons, vol. 25(2), pages 415-445, June.
    3. K. Hung Chan & Vivian Wei Luo & Phyllis L.L. Mo, 2016. "Determinants and implications of long audit reporting lags: evidence from China," Accounting and Business Research, Taylor & Francis Journals, vol. 46(2), pages 145-166, February.
    4. Ruitao Li & Fang Hu, 2020. "Public Listing and Corporate Social Responsibility from a Sustainability Risk Management Perspective," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 22(55), pages 808-808, August.
    5. DeAngelo, Linda Elizabeth, 1981. "Auditor size and audit quality," Journal of Accounting and Economics, Elsevier, vol. 3(3), pages 183-199, December.
    6. Steven Huddart & Pierre Jinghong Liang, 2003. "Accounting in Partnerships," American Economic Review, American Economic Association, vol. 93(2), pages 410-414, May.
    7. Liu, Xiang & Saidi, Reza & Bazaz, Mohammad, 2014. "Institutional incentives and earnings quality: The influence of government ownership in China," Journal of Contemporary Accounting and Economics, Elsevier, vol. 10(3), pages 248-261.
    8. Guan, Yuyan & Su, Lixin (Nancy) & Wu, Donghui & Yang, Zhifeng, 2016. "Do school ties between auditors and client executives influence audit outcomes?," Journal of Accounting and Economics, Elsevier, vol. 61(2), pages 506-525.
    9. Mariassunta Giannetti & Guanmin Liao & Xiaoyun Yu, 2015. "The Brain Gain of Corporate Boards: Evidence from China," Journal of Finance, American Finance Association, vol. 70(4), pages 1629-1682, August.
    10. Ashton, Rh & Willingham, Jj & Elliott, Rk, 1987. "An Empirical-Analysis Of Audit Delay," Journal of Accounting Research, Wiley Blackwell, vol. 25(2), pages 275-292.
    11. Mark L. Defond & Jieying Zhang, 2014. "The Timeliness of the Bond Market Reaction to Bad Earnings News," Contemporary Accounting Research, John Wiley & Sons, vol. 31(3), pages 911-936, September.
    12. Murat Ocak, 2018. "The impact of auditor education level on the relationship between auditor busyness and audit quality in Turkey," Cogent Business & Management, Taylor & Francis Journals, vol. 5(1), pages 1517588-151, January.
    13. Abdolmohammadi, Mohammad J. & Shanteau, James, 1992. "Personal attributes of expert auditors," Organizational Behavior and Human Decision Processes, Elsevier, vol. 53(2), pages 158-172, November.
    14. Lan Anh Nguyen & Michael Kend, 2021. "The perceived impact of the KAM reforms on audit reports, audit quality and auditor work practices: stakeholders’ perspectives," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 36(3), pages 437-462, May.
    15. Chen†Lung Chin & Hsin†Yi Chi, 2009. "Reducing Restatements with Increased Industry Expertise," Contemporary Accounting Research, John Wiley & Sons, vol. 26(3), pages 729-765, September.
    16. DeFond, Mark & Zhang, Jieying, 2014. "A review of archival auditing research," Journal of Accounting and Economics, Elsevier, vol. 58(2), pages 275-326.
    17. Jenni Kallunki & Juha‐Pekka Kallunki & Lasse Niemi & Henrik Nilsson & Daniel Aobdia, 2019. "IQ and Audit Quality: Do Smarter Auditors Deliver Better Audits?†," Contemporary Accounting Research, John Wiley & Sons, vol. 36(3), pages 1373-1416, September.
    18. Kris Hardies & Diane Breesch & Joël Branson, 2016. "Do (Fe)Male Auditors Impair Audit Quality? Evidence from Going-Concern Opinions," European Accounting Review, Taylor & Francis Journals, vol. 25(1), pages 7-34, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xiong, Hao & Hou, Fei & Li, Hanwen & Wang, Huabing, 2020. "Does rice farming shape audit quality: Evidence from signing auditors level analysis," Economic Modelling, Elsevier, vol. 91(C), pages 403-420.
    2. Hou, Fei & Liu, Jie & Pang, Tingyun & Xiong, Hao, 2020. "Signing auditors’ foreign experience and audit pricing," Economic Modelling, Elsevier, vol. 91(C), pages 300-312.
    3. Alhababsah, Salem & Alhaj-Ismail, Alaa, 2023. "Does shared tenure between audit committee chair and engagement partner affect audit outcomes? Evidence from the UK," The British Accounting Review, Elsevier, vol. 55(2).
    4. Cao, June & Ee, Mong Shan & Hasan, Iftekhar & Huang, He, 2024. "Asymmetric reactions of abnormal audit fees jump to credit rating changes," The British Accounting Review, Elsevier, vol. 56(2).
    5. Patrick Velte, 2023. "The impact of external auditors on firms’ financial restatements: a review of archival studies and implications for future research," Management Review Quarterly, Springer, vol. 73(3), pages 959-985, September.
    6. Kris Hardies & Sarowar Hossain & Larelle (Ellie) Chapple, 2021. "Archival research on audit partners: assessing the research field and recommendations for future research," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(3), pages 4209-4256, September.
    7. Hou, Fei & Shen, Huayu & Wang, Ping & Xiong, Hao, 2023. "Signing auditors' cultural background and debt financing costs," International Review of Financial Analysis, Elsevier, vol. 87(C).
    8. Dekeyser, Simon & He, Xianjie & Xiao, Tusheng & Zuo, Luo, 2024. "Auditor industry range and audit quality," Journal of Accounting and Economics, Elsevier, vol. 77(2).
    9. Nahla Abdulrahman Mohammed Raweh & Hasnah Kamardin & Mazrah Malik @ Malek & Abdulwahid Ahmed Hashed Abdullah, 2021. "The Association between Audit Partner Busyness, Audit Partner Tenure, and Audit Efficiency," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(1), pages 90-103, January.
    10. Tong, Lijing & Wu, Bin & Zhang, Min, 2022. "Do auditors’ early-life socioeconomic opportunities improve audit quality? Evidence from China," The British Accounting Review, Elsevier, vol. 54(2).
    11. Athavale, Manoj & Guo, Zhaorui & Meng, Yun & Zhang, Tianshu, 2022. "Diversity of signing auditors and audit quality: Evidence from capital market in China," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 554-571.
    12. Fei Hou & Fangnan Liao & Jie Liu & Hao Xiong, 2019. "Signing Auditors’ Foreign Experience and Debt Financing Costs: Evidence for Sustainability of Chinese Listed Companies," Sustainability, MDPI, vol. 11(23), pages 1-19, November.
    13. Xingqiang Du, 2019. "Does CEO-Auditor Dialect Sharing Impair Pre-IPO Audit Quality? Evidence from China," Journal of Business Ethics, Springer, vol. 156(3), pages 699-735, May.
    14. Pan, Yue & Shroff, Nemit & Zhang, Pengdong, 2023. "The dark side of audit market competition," Journal of Accounting and Economics, Elsevier, vol. 75(1).
    15. Mehdi Nekhili & Fahim Javed & Haithem Nagati, 2022. "Audit Partner Gender, Leadership and Ethics: The Case of Earnings Management," Journal of Business Ethics, Springer, vol. 177(2), pages 233-260, May.
    16. Knechel, W. Robert & Thomas, Edward & Driskill, Matthew, 2020. "Understanding financial auditing from a service perspective," Accounting, Organizations and Society, Elsevier, vol. 81(C).
    17. Kevin Koh & Li Li & Xuejiao Liu & Chunfei Wang, 2023. "The Effect of Audit Partner Diversity on Audit Quality: Evidence from China," Abacus, Accounting Foundation, University of Sydney, vol. 59(1), pages 340-380, March.
    18. Kuo, Nan-Ting & Li, Shu & Du, Ya-Guang & Lee, Cheng-Few, 2022. "Does individual auditor quality contribute to firm value? Evidence from the market valuation on corporate cash holdings," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 135-153.
    19. Xingqiang Du & Yiqi Zhang & Shaojuan Lai & Hexin Tao, 2024. "How Do Auditors Value Hypocrisy? Evidence from China," Journal of Business Ethics, Springer, vol. 191(3), pages 501-533, May.
    20. Jian Cao & Feng Chen & Julia L. Higgs, 2016. "Late for a very important date: financial reporting and audit implications of late 10-K filings," Review of Accounting Studies, Springer, vol. 21(2), pages 633-671, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:91:y:2024:i:c:s1057521923005665. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620166 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.