The impact of artificial intelligence adoption on audit quality

Made Susmitha Kusuma Dewi; Made Gede Wirakusuma

doi:10.21744/ijbem.v9n3.2507

Authors

Made Susmitha Kusuma Dewi
susmithakusumad@gmail.com
Udayana University, Denpasar, Indonesia
Made Gede Wirakusuma Udayana University, Denpasar, Indonesia

Keywords:

artificial intelligence adoption, audit quality, Key Audit Matters, agency theory, public accounting firms

Abstract

This study examines the effect of artificial intelligence (AI) adoption by public accounting firms on audit quality, as proxied by the disclosure of Key Audit Matters (KAMs) in independent auditors’ reports. The study is motivated by the implementation of Indonesian Auditing Standard SA 701 in 2022, the issuance of Financial Services Authority Regulation No. 30 of 2023, and the growing adoption of AI within the auditing profession. Agency theory is employed as the primary theoretical framework. The study population comprises all companies listed on the Indonesia Stock Exchange during the 2022–2024 period. Using purposive sampling, the study obtained 1,326 firm-year observations. Audit quality is measured using the number of words and the number of accounts disclosed in KAM paragraphs, which are standardized into a composite Z-score. The primary independent variable is AI adoption, measured using a dummy variable, while public accounting firm rotation, firm size, and industry sector are included as control variables. The data are analyzed using multiple linear regression after the classical assumption tests are satisfied. The results indicate that AI adoption has a positive and significant effect on audit quality.

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