Supply chain diffusion mechanisms for AI applications: A perspective on audit pricing

Abstract

Artificial intelligence (AI) application has had a profound impact on business development. However, it is not clear whether supplier AI application has an impact on customers and its mechanisms. In this paper, we empirically examine the impact of supplier AI applications on customer audit fees using robotics data from the International Federation of Robotics (IFR) as a proxy variable for the level of AI. We find that supplier AI applications significantly reduce firms' audit fees. Further mechanism tests indicate that supply chain risk and supply chain transparency are two potential mechanisms. In addition, the stronger the supplier's diffusion capability, and the stronger the client's absorptive capacity, the more pronounced the above spillover effects. This paper emphasizes the important impact of supply chain relationships on third-party auditors' pricing decisions.