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Speaking is a complex motor skill which requires near instantaneous integration of sensory and motor-related information. Current theory hypothesizes a complex interplay between motor and auditory processes during speech production, involving the online comparison of the speech output with an internally generated forward model. To examine the neural correlates of this intricate interplay between sensory and motor processes, the current study uses altered auditory feedback (AAF) in combination with magnetoencephalography (MEG). Participants vocalized the vowel/e/and heard auditory feedback that was temporarily pitch-shifted by only 25 cents, while neural activity was recorded with MEG. As a control condition, participants also heard the recordings of the same auditory feedback that they heard in the first half of the experiment, now without vocalizing. The participants were not aware of any perturbation of the auditory feedback. We found auditory cortical areas responded more strongly to the pitch shifts during vocalization. In addition, auditory feedback perturbation resulted in spectral power increases in the θ and lower β bands, predominantly in sensorimotor areas. These results are in line with current models of speech production, suggesting auditory cortical areas are involved in an active comparison between a forward model's prediction and the actual sensory input. Subsequently, these areas interact with motor areas to generate a motor response. Furthermore, the results suggest that θ and β power increases support auditory-motor interaction, motor error detection and/or sensory prediction processing.Participants listened to unexpected auditory feedback during speech production.Auditory cortex response reflects comparison between an internal forward model and auditory feedback.Increased theta power over motor areas reflect increased sensorimotor processing.Increased lower beta power over motor areas may reflect motor error processing or auditory prediction.