Invisible string: auditor industry range and firm’s subsequent AI innovation

Although professional experience may shape auditors’ judgment, how the breadth of that experience relates to client firms’ AI innovation remains less understood. Using a panel of Chinese A-share listed firms from 2008 to 2023, we examine whether auditors’ technological industry range is associated with subsequent AI invention patenting. We find a positive association that is robust to alternative specifications and tests addressing potential endogeneity. Consistent with a governance-enhancement explanation, broader auditor technological industry range is associated with higher subsequent internal control quality and greater AI-related R&D commitment. The association with AI patenting is stronger among firms with IT-background CEOs or ISO 27001 certification, non-state-owned enterprises, and firms receiving smart-manufacturing subsidies. It is also stronger in settings with greater intellectual property protection and in engagements with higher audit fees. Additional analyses indicate that broader auditor technological industry range is associated with a stronger relation between AI patenting and both firm value and earnings informativeness.