Journal Article10.2139/ssrn.4508268
AI capability and internal control effectiveness
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TL;DR: This study investigates the impact of artificial intelligence (AI) on internal control effectiveness, finding that firms with higher AI capabilities improve financial reporting quality and reduce material weaknesses, but benefits are moderated by managerial ability to extract value from AI.
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Abstract: This paper examines the role that artificial intelligence (AI) can have in supporting the accounting function of the firm by investigating the effect that firms' AI capabilities have on improving its internal control over financial reporting (ICFR). We posit that AI capability, as a critical resource within a firm, influences broader business operations, ultimately manifesting improvements in ICFR. We find that firms which invest more heavily in AI capability materially improve ICFR effectiveness by reducing the material weaknesses that firms report. We also identify an asymmetric effect on the internal controls that AI can improve, which is influenced by the sensitivity of certain material weaknesses to AI capability improvements. We further show that the tangible benefits derived from using AI are moderated by a firm's managerial ability to extract value from it. Overall, our findings demonstrate the value proposition of adopting AI to the firm through enhancing financial reporting quality and supporting regulatory filing obligations.
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Citations
Riding the Waves of Artificial Intelligence in Advancing Accounting and Its Implications for Sustainable Development Goals
Yixuan Peng,Sayed Fayaz Ahmad,A. Y. B. Ahmad,Mustafa S. Al Shaikh,Mohammad Khalaf Daoud,Fuad Mohammed Alhamdi +5 more
TL;DR: The role of AI in accounting is explored and provides accountants an opportunity to improve efficiency, accuracy, and decision support and empowers businesses to make sustainable decisions based on real-time data.
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The effectiveness of regulatory and technological mechanisms of banking internal control: An exploration based on the origins of banks
Ludovic Kenfang Wambe
TL;DR: The effectiveness of banking internal control is influenced by regulatory measures and information technology. However, the impact of IC regulations mainly benefits Western subsidiaries, while the role of IC information technology remains unclear.
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