Artificial intelligence (AI) is developing into an amazing tool to help humans across multiple fields, including medicine and research, and much of that work is happening at Emory University’s Goizueta Business School.

Financial reporting and auditing are both areas where AI can have a significant impact as companies and audit firms are rapidly adopting the use of such technology. But are financial managers willing to rely on the results of AI-generated information? In the context of audit adjustments, it depends on whether their company uses AI as well.

Willing to Rely on AI?

Cassandra Estep, assistant professor of accounting at Goizueta Business School, and her co-authors have a forthcoming study looking at financial managers’ perceptions of the use of AI, both within their companies and by their auditors. Research had already been done on how financial auditors react to using AI for evaluating complex financial reporting. That got Estep and her co-authors thinking there’s more to the story.

“A big, important part of the financial reporting and auditing process is the managers within the companies being audited. We were interested in thinking about how they react to the use of AI by their auditors,” Estep says. “But then we also started thinking about what companies are investing in AI as well. That joint influence of the use of AI, both within the companies and by the auditors that are auditing the financials of those companies, is where it all started.”  

The Methodology

Estep and her co-authors conducted a survey and experiment with senior-level financial managers with titles like CEO, CFO, or Controller – the people responsible for making financial reporting decisions within companies. The survey included questions to understand how companies are using AI. It also included open-ended questions designed to identify key themes about financial managers’ perceptions of AI use by their companies and their auditors.

In the experiment, participants completed a hypothetical case in which they were asked about their willingness to record a downward adjustment to the fair value of a patent proposed by their auditors. The scenarios varied across randomly assigned conditions as to whether the auditor did or not did not use AI in coming up with the proposed valuation and adjustment, and whether their company did or did not use AI in generating their estimated value of the patent. When both the auditor and the company used AI, participants were willing to record a larger adjustment amount, i.e., decrease the value of the patent more. The authors find that these results are driven by increased perceptions of accuracy.

It’s not necessarily a comfort thing, but a signal from the company that this is an acceptable way to do things, and it actually caused them to perceive the auditors’ information as more accurate and of higher quality.

Cassandra Estep, assistant professor of accounting

“Essentially, they viewed the auditors’ recommendation for adjusting the numbers to be more accurate and of higher quality, and so they were more willing to accept the audit adjustment,” Estep says.

Making Financial Reporting More Efficient

Financial reporting is a critical process in any business. Companies and investors need timely and accurate information to make important decisions. With the added element of AI, financial reporting processes can include more external data.

We touched on the idea that these tools can hopefully process a lot more information and data. For example, we’ve seen auditors and managers talk about using outside information.

Cassandra Estep

“Auditors might be able to use customer reviews and feedback as one of the inputs to deciding how much warranty expense the company should be estimating. And is that amount reasonable? The idea is that if customers are complaining, there could be some problem with the products.”

Adding data to analytical processes, when done by humans alone, adds a significant amount of time to the calculations. Research from the European Spreadsheets Risks Interest Group says that more than 90% of all financial spreadsheets contain at least one error. Some forms of AI can process hundreds of thousands of calculations overnight, typically with fewer errors. In short, it can be more efficient.

Efficiency was brought up a lot in our survey, the idea that things could be done faster with AI.

Cassandra Estep

“We also asked the managers about their perspective on the audit side, and they did hope that audit fees would go down, because auditors would be able to do things more quickly and efficiently as well,” Estep says. “But the flip side of that is that using AI could also raise more questions and more issues that have to be investigated. There’s also the potential for more work.”

The Fear of Being Replaced

The fear of being replaced is a more or less universal worry for anyone whose industry is beginning to adopt the use of AI in some form. While the respondents in Estep’s survey looked forward to more efficient and effective handling of complex financial reporting by AI, they also emphasized the need to keep the human element involved in any decisions made using AI.

What we were slightly surprised about was the positive reactions that the managers had in our survey. While some thought the use of AI was inevitable, there’s this idea that it can make things better.

Cassandra Estep

“But there’s still a little bit of trepidation,” Estep says. “One of the key themes that came up was yes, we need to use these tools. We should take advantage of them to improve the quality and the efficiency with which we do things. But we also need to keep that human element. At the end of the day, humans need to be responsible. Humans need to be making the decisions.”

A Positive Outlook

The benefits of AI were clear to the survey participants. They recognized it as a positive trend, whether or not it was currently used in their financial reporting. If they weren’t regularly using AI, they expected to be using it soon.

I think one of the most interesting things to us about this paper is this idea that AI can be embraced. Companies and auditors are still somewhat in their infancy of figuring out how to use it, but big investments are being made.

Cassandra Estep

“And then, again, there’s the fact that our experiment also shows a situation where managers were willing to accept the auditors’ proposed adjustments. This arguably goes against their incentives as management to keep the numbers more positive or optimistic,” Estep continues. “The auditors are serving that role of helping managers provide more reliable financial information, and that can be viewed as a positive outcome.”

“There’s still some hesitation. We’re still figuring out these tools. We see examples all the time of where AI has messed up, or put together false information. But I think the positive sentiment across our survey participants, and then also the results of our experiment, reinforce the idea that AI can be a good thing and that it can be embraced. Even in a setting like financial reporting and auditing, where there can be fear of job replacement, the focus on the human-technology interaction can hopefully lead to improved situations.”

Goizueta faculty apply their expertise and knowledge to solving problems that society—and the world—face. Learn more about faculty research at Goizueta. 

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UBSLC

In February, this year’s Undergraduate Business School Leadership Conference (UBSLC) explored the concept of innovation during networking opportunities, team building activities and thought-provoking talks with Goizueta professors.

In addition to alumni sharing key aspects of their experience and faculty providing insight, students were treated to a fireside chat with keynote Victor Luis, CEO of Tapestry Inc., a New York–based house of modern luxury lifestyle brands including Coach, Kate Spade and Stuart Weitzman.

Luis discussed the company’s core values and the importance of getting agreement across the organization. “We asked them, across the three brands, what they believed in,” said Luis. The resulting values—optimism, innovation and inclusivity—bind Tapestry’s brands together while enabling them to seek individual brand expression.

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Healthcare Futuring Competition

Also in February, six teams were chosen to present their visions of healthcare delivery in 2040 at Goizueta’s Healthcare Futuring Competition finals, in partnership with Goizueta Healthcare Association. The competition asked students to complete a “futuring,” or scenario development, to envision the landscape of the U.S. healthcare system in 20 years. Students from throughout the Emory community and other Atlanta-area schools participated to compete for a prize pool of $10,000.

Creator and organizer Renee Dye, associate professor in the practice of organization & management at Goizueta, said the participants excelled at the challenge. “All of the judges were tremendously impressed with the creativity each of the student teams demonstrated in describing their visions for Healthcare 2040,” Dye said. “We were even more impressed with the students’ command of the complex issues facing U.S. healthcare that will play out over the next two decades.”

The winning team, Healthcare Odyssey, was composed of Shirley Gao 20MBA/MPH, Taylor Richardson 20MBA, Steven Cheng 19MBA, Avi Scher 20MBA and Marnie Harris 20MBA.

In their vision of the future, Healthcare Odyssey saw the consumer becoming the center of a healthcare system where information is just as valuable as dollars. They envisioned the creation of a trusted third-party data storage system they called the Biodata Bank.

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mEmory Accounting Research Conference

In March, it was the alumni’s turn to show their skillset along with other faculty during the mEmory Accounting Research Conference, which highlighted the research of Goizueta faculty and current and past PhD students.

“The conference provided an ideal forum to celebrate the 100th anniversary by bringing together current and former faculty and alumni,” said Karen Sedatole, one of the organizers. “The goal is to make a ‘mEmory’ by showcasing our rich history of developing top researchers.” Jan Barton, Usha Rackliffe and Karen Ton rounded out the faculty coordinators.

Among the presenters were:

• Suhas Sridharan, presenting “Non-GAAP Disclosures and Investor Uncertainty”
• Cassandra Estep, presenting “The Unintended Consequences of Material Weakness Reporting on Auditors’ Acceptance of Aggressive Client Reporting”
• Paul Madsen 10PhD, presenting “Is Accounting a Miserable Job?”
• Willie Choi 11PhD, presenting “When Do Tangible Rewards Motivate Greater Effort Than Cash Rewards? An Analysis of Three Commonly Cited Differences”

Emory Entrepreneurship Summit

The fifth annual Entrepreneurship Summit rang in the month of May. This year’s offerings included straight talk about the tough choices entrepreneurs have to make and the way alumni have overcome obstacles to reap rewards.

During the summit, participants had the chance to network, hear from successful entrepreneurial alumni, learn from micro-entrepreneurs and present their own ideas in the “Pitch the Summit” competition. Attendees also heard the kickoff Founders’ Addresses from William Hockey 12BBA, cofounder, president and CTO at Plaid and David Politis 04C, founder and CEO of BetterCloud.

Prior to the summit, student entrepreneurs had the opportunity to compete in early rounds of the Pitch the Summit competition. Those who advanced to the final rounds presented their ideas to a panel of distinguished entrepreneurial judges, who selected the most successful three pitches, which were then delivered in an open session.

The winning team was named Innohealth Diagnostics and was pitched by Angela Udongwo 20MPH. The team developed a test for the parasitic disease schistosomiasis, which they hope will increase early detection and lower the rate of the disease. The winners will receive guidance, financial support and a seat for a semester at Atlanta Tech Village.

Other alumni entrepreneur presenters included:

• David Gaspar 02BBA, DDG
• Todd Richheimer 02BBA, Lawfty
• Joshua Sigel 02BBA, Lasso Ventures
• Sarah Van Dell 04C, Plum Relish
• Jonathan Ende 05BBA, Seamless
• Andrew Berman 07BBA, Stealth (Voice)
• Nathan Meeks 07BBA, Gigzolo
• Eden Chen 09BBA, Fisherman Labs
• Alexandra Samit 09BBA, Alexandra Bath Designs
• Cyril Berdugo 11BBA, Landis
• David Gelbard 09BBA, Parachute Health
• Colin McIntosh 12BBA, Sheets & Giggles

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“We are thrilled about these additions to our team,” says Kristy Towry, vice dean for faculty & research, Goizueta Term Chair in Accounting, and professor of accounting. “They are all innovators in their fields, and I can’t wait to see what new knowledge they’ll bring to the table here at Goizueta.”

To read more about our amazing new faculty, see the online faculty guide: http://emory.biz/thoughtleaders.

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• Karl Schuhmacher, Assistant Professor of Accounting
• Cassandra Estep, Assistant Professor of Accounting
• Rohan Ganduri, Assistant Professor of Finance
• Tian Chan, Assistant Professor, Information Systems and Operations Management
• Vilma Todri, Assistant Professor, Information Systems and Operations Management
• Jesse Bockstedt, Associate Professor, Information Systems and Operations Management
• Morgan Ward, Assistant Professor of Marketing
• Inyoung Chae, Assistant Professor of Marketing
• Demetrius Lewis, Assistant Professor of Organization and Management

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