ChatGPT, a language-learning model chatbot, has garnered considerable attention for its ability to respond to users’ questions. Using data from 14 countries and 186 institutions, we compare ChatGPT and student performance for 28,085 questions from accounting assessments and textbook test banks. As of January 2023, ChatGPT provides correct answers for 56.5 percent of questions and partially correct answers for an additional 9.4 percent of questions. When considering point values for questions, students significantly outperform ChatGPT with a 76.7 percent average on assessments compared to 47.5 percent for ChatGPT if no partial credit is awarded and 56.5 percent if partial credit is awarded. Still, ChatGPT performs better than the student average for 15.8 percent of assessments when we include partial credit. We provide evidence of how ChatGPT performs on different question types, accounting topics, class levels, open/closed assessments, and test bank questions. We also discuss implications for accounting education and research.
This paper explores the question: "How does a client's information technology (IT) capability influence audit pricing?" Company data for the years 2004 through 2012 are employed. Firms appearing on the InformationWeek 500 (IW500) annual list of U.S. organizations with superior IT functions serve as a proxy for companies with superior IT capability. Our findings suggest that companies with superior IT capabilities incur higher levels of audit fees. In addition, as client size increases, the audit fees of firms with advanced IT capabilities increase at a greater rate than firms without such capabilities. These findings contrast with prior research by Chen et al. (2014) that found in the immediate post-Sarbanes-Oxley Act (SOX) period for the years 2004 through 2007, client IT capability reduced audit fee increases. In addition, we replicate the Chen et al. (2014) results and find that IT capability did not influence audit fee increases during the sub sequent recession and recovery periods. Further, superior capability clients see smaller audit fee increases when exogenous shocks such as SOX regulations occur. These results suggest a revised interpretation of Chen et al. (2014) may be warranted. This study contributes to the literature by providing a more complete picture of how a client's IT capability affects audit fees. Prior research has studied the effect of IT capability on the external audit. This work focused exclusively on the immediate post-Sarbanes-Oxley Act of 2002 (SOX) period. Masli et al. (2010) suggest that specific IT investments in internal control-monitoring technology reduce the rate of audit fee increase. Also, during the immediate post-SOX period, for the years 2004 through 2007, companies with strong IT capabilities had slightly lower (9.1%) rates of audit fee increase than those without strong IT resources (Chen et al., 2014). We argue, however, that these findings may not extend beyond the immediate post-SOX era when public audit failures (for example, Enron Corporation, WorldCom, Tyco International, Adelphia Communications Corporation) generated severe market and regulatory responses, leading companies to deploy IT resources specifically targeted to addressing audit and internal control risks. Additionally, we are unaware of any research that explores how the client's IT capability impacts the actual level of audit fees incurred. This paper addresses the gap in prior research by exploring the broader question: How does a client's IT capability impact audit pricing? The COBIT 5 (Control Objectives for Information and Related Technology) framework recommends that firms align, plan and organize IT investments in support of their chosen business strategy (ISACA, 2017). Firms may gain sustainable advantage by uti lizing IT to develop business capabilities that are difficult for competitors to imitate or acquire (Mata et al., 1995). In particular, firms generate value by aligning their internal capabilities with their IT strategy, creating synergistic resources to respond to market, industry and s...
Purpose The paper aims to explore the impact of two types of monitoring mechanisms, namely, Securities and Exchange Commission (SEC) comment letters (CLs) and short sellers, on management’s demand for audit quality. Design/methodology/approach Using information on the short interest positions and a panel data of SEC CLs between 2005 and 2015, this study applies logit regression model to estimate the likelihood of hiring Big 4 and industry expert audit firm. This study also applies an ordinary least squares regression technique to estimate audit fees. Findings Consistent with disclosure and agency theories, results from empirical analyses provide that management demands higher quality audits measured by higher audit fees, and higher likelihood to hire Big 4 and industry expert audit firm. However, this study finds that the effect varies depending on the specific monitoring mechanisms. Additionally, when both monitoring mechanisms are in place, the SEC CLs drive the overall direction of the demand for audit quality when audit demand is captured by propensity to hire Big 4/industry expert audit firm. Research limitations/implications This study provides researchers with enhanced understanding of the factors having effect on the demand side for audit quality. Furthermore, it adds to the stream of literature on economic consequences of SEC CLs and short selling. Originality/value To the best of authors’ knowledge, this is the first comprehensive study to document the effect of two types of monitoring mechanisms, namely, SEC CLs and short selling, on the demand for audit quality.
Purpose Motivated by significant global developments affecting the sell-side industry, in particular a shift toward passive investments and growing regulation, this study examines whether financial analyst coverage declined over the past decade and if any loss of analyst coverage is associated with a change in forecast accuracy. Design/methodology/approach After investigating, and confirming, a general decline in analyst following, the authors calculate the loss of analyst coverage relative to the firm-specific maximum between 2009 and 2013. In multivariate analyses, the authors then examine whether this loss of coverage differs across geographic region, firm size and capital market development, and whether it is associated with consensus analyst accuracy. Findings Results indicate that between 2011 and 2021, firm-specific analyst coverage globally declined 17.8%, while the decline in the EU was an even greater, 28.5%. Within the EU, results are most pronounced for small-cap firms. As a consequence of the loss of coverage, the authors observe a global decline in forecast accuracy, with EU small-cap firms and firms domiciled in EU non-developed capital markets faring the worst. Originality/value This study is the first to document a concerning global decline in analyst coverage over the past decade. The study results provide broad-based empirical support for anecdotal reports that smaller firms in the EU and those in EU non-developed capital markets bear the brunt of consequences stemming from changes in the sell-side analyst industry.
Purpose This study aims to investigate the busy season contagion effects on other clients of the Big 4 auditor’s local office associated with the non-timely (NT) filing(s) by large accelerated filer (LAF) client(s) of the office. Specifically, the authors examine the influence such events have on the audit quality and timeliness of other clients of that office. Design/methodology/approach Using panel data of annual NT filings of LAF clients between 2006 and 2019, the authors apply the ordinary least squares regression technique to model audit reporting lag (ARL) and the logistic regression technique to model the probability of restatements. Findings Controlling for audit firm, industry and year-fixed effects, the authors find that a LAF NT filing reduces audit quality and audit timeliness of other clients of the office, as measured by restatement risk and ARL. The impact on ARL is most pronounced on the medium and small clients within the office. The deteriorated audit quality is observed for medium clients. Research limitations/implications The results of this study have practical implications for auditors and regulators. They reveal the contagion effect in the auditor’s local office with the NT LAF client. The main limitation of the study is the lack of staffing utilization data to allow for drawing conclusions on causality. Originality/value To the best of the authors’ knowledge, this is the first study to document the contagion effect of NT filings of LAF clients conducted at the auditor’s local office level.
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