Does Automation Improve Financial Reporting? The Moderating Role of Financial Literacy of Audit Committee Members

Javed, Arshad; Ihsan, Insha; Salman, Ahmad; Aksar, Muhammad; Kamal, Imran

doi:10.22059/ijms.2026.403604.678099

Does Automation Improve Financial Reporting? The Moderating Role of Financial Literacy of Audit Committee Members

Articles in Press

Document Type : Research Paper

Authors

Arshad Javed ¹

Insha Ihsan ²

Ahmad Salman ³

Muhammad Aksar ⁴

Imran Kamal ⁵

¹ Department of Management Sciences, University of Central Punjab, Rawalpindi

² Allama Iqbal Open University Islamabad

³ Department of Management Sciences, Preston University Islamabad Campus, Islamabad.

⁴ Department of Management Sciences National University of Modern Languages, Rawalpindi

⁵ Department of Management Sciences University of Central Punjab, Rawalpindi

10.22059/ijms.2026.403604.678099

Abstract

The integrity of financial reporting is the foundation of contemporary capital markets, yet Internal Control Weaknesses (ICW) remain a thorn in the flesh, even after major regulatory reforms. This paper examines whether the automation of financial reporting systems is an effective remedy for these control vulnerabilities, and how the Financial Literacy (FL) of audit committee members qualifies this connection. The study examines the interaction between technology adoption and governance expertise using an unbalanced panel dataset of 300 Pakistani non-financial firms for the period 2015 to 2024. The fixed-effects regression results provide strong evidence that automation significantly reduces the incidence of internal control weaknesses. Importantly, this positive impact is not evenly distributed; it is significantly higher in companies where audit committee members have high financial literacy. These results support the Resource-Based View, which indicates that although automation provides a means of control, human knowledge is needed to use it most efficiently. This study is relevant to the literature because it provides, for the first time in a developing economy, empirical evidence on the synergistic effect of technological infrastructure and human capital on the quality of financial reporting.

Keywords

Automation Financial Reporting

Internal Control Weaknesses

Financial Literacy

Resource-Based View

Technology Acceptance Model

Subjects