<![CDATA[The convergence of digital transformation and rapid artificial intelligence (AI) development is reshaping accounting practices at every organizational scale, Micro, Small, and Medium Enterprises (MSMEs) included. This study examines how Artificial Intelligence Capability affects Financial Reporting Quality among MSMEs in Pontianak City, West Kalimantan—a setting that has received limited scholarly attention in this area—considering both its direct effect and its indirect effect through Digital Accounting Adoption as a mediating variable. An explanatory, causal quantitative design was applied through a cross-sectional survey. Data collection combined primary responses from 150 MSME owners or managers experienced in using digital financial-recording applications, chosen via purposive sampling, with secondary evidence drawn from academic literature and official records. Partial Least Squares Structural Equation Modeling (PLS-SEM) in SmartPLS was used for analysis. The measurement (outer) model confirmed adequate reliability and validity across constructs, evidenced by Cronbach’s Alpha and Composite Reliability values exceeding 0.70 and Average Variance Extracted above 0.50. Hypothesis testing confirmed a positive, statistically significant relationship between Artificial Intelligence Capability and Digital Accounting Adoption (path coefficient = 0.460; T-statistic = 6.936; p = 0.000), as well as between Digital Accounting Adoption and Financial Reporting Quality (path coefficient = 0.534; T-statistic = 9.737; p = 0.000). These findings position AI capability as an enabling factor for digital accounting adoption, which in turn functions as a strategic pathway toward stronger financial reporting quality among MSMEs—implying that efforts to build AI capability should go hand in hand with strengthening digital accounting adoption.]]>
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