How Does Artificial Intelligence Shape Audit Firms?

AI in auditing: Your co-pilot, not autopilot

Law, K. K. F., and Shen, M. (Forthcoming). How does artificial intelligence shape the audit industry? Management Science.

Key takeaways:

The adoption of artificial intelligence in audit firms leads to an increase in auditor jobs, especially for junior and mid-level positions, rather than displacing human auditors as commonly believed.
As AI takes on routine tasks, the demand for auditors with strong soft skills, such as cognitive abilities, efficiency, and customer service, grows significantly in the auditing profession.
Audit offices implementing AI experience a notable improvement in audit quality, with more accurate assessments of going concern and internal control opinions for their client firms.
Despite the efficiency gains from AI, audit fees remain unchanged due to the high initial investment costs, ongoing compliance requirements, and increased compensation demands in the industry.

"I’ll tell you, we still hire roughly the same number of people or more as we grow. It [AI] just allows us to do more work right. And the quality of what we do improves dramatically, and it provides more assurance around the work that we do."
“We haven’t removed a person from a job because of AI. It hasn’t changed the pendulum that much. So, actually, there is a slight increase in the headcount of auditors.”
“AI can increase the volume of clients you serve. So that’s the need for the saving, if anything. It allows us to grow faster. In my case, we need more people [rather] than less….
I’m probably on the other side of the camp where I think AI is going to increase the people we need.”

Audit partners’ quotes on AI’s effect on auditor headcount

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"I’ll tell you, we still hire roughly the same number of people or more as we grow. It [AI] just allows us to do more work right. And the quality of what we do improves dramatically, and it provides more assurance around the work that we do."