Thinking back over this past busy season, how many of your audits did you test 100 percent of the transactions before you issued your audit opinion? In addition, were there any of those that you were able to look at 100 percent of the transaction in a matter of minutes? Proponents of Artificial Intelligence (AI) claim this is exactly what AI can do when incorporated into a financial statement audit. Imagine the day when you can “click a button” and the software immediately looks at every transaction. We are not too far away from that day.#auditquality #FutureAudit #efficiency #publicaccounting #ArtificialIntelligence #criticalthinking #MachineLearning #quality #accountingsoftware #automation #audit #change #AI #assurance #Transformation #Technology #AuditandAssurance
So, the question remains what impact will AI have on the audit of the future? A huge pro of using AI in an audit is the ability to work through greater volumes of information in a shorter time-frame. The ability to go through greater volumes of information has several implications. First, as mentioned above, AI can look at 100 percent of the transactions that are entered into a client’s general ledger. But it doesn’t stop there. Imagine AI software that can read through debt agreements and provide an output that summarizes the terms of the agreement. Now imagine that as the auditor, you can set what the terms of the debt agreement are that it will summarize. Let’s go one step further. There are several new accounting pronouncements that will have a huge impact on our profession over the next few years. One of those is an update to the lease accounting standards. With the new standards in place it is guaranteed that lease agreements will be scrutinized more and in a different way. Now imagine your AI having the ability to read all of the lease agreements that a client provides you with and then provide an output on how that lease should be accounted for. Now imagine it doing that for a large volume of lease agreements in a matter of minutes. As you can see the AI software provides ways to increase efficiency within audits outside of just testing of transactions.
AI has the ability to help within the financial statement process outside of just the auditing aspect. An example would be the use of AI software for examining travel and entertainment expense reports. Currently this tends to be a very manual process of an individual matching up receipts to expense reports and attempting to keep an eye out for any potential fraud. Now imagine being able to “submit” those receipts to AI software that will not only match the receipts to the expense reports almost instantaneously, but will also be diligently looking for fraud within those reports. Now the staff will only need to spend time looking at the expense reports the AI software has flagged for potential fraud instead of looking at all of them or sampling a portion of them.
As with any software, the quality of the data going in will have an impact on the quality of the reports that come out. In addition, AI software is currently very rigid in the format that the data has to be in in order for it to analyze. AI has a lot of potential, but at this point it does not have the “judgmental” factor that human auditors have. However, AI does not get bored with remedial tasks, so it can be set to perform the repetitive and time-consuming tasks, especially in the data acquisition phase of an audit, allowing human auditors to spend more time on the judgmental aspects of the audit.
As you can see from above, AI provides many unique and interesting opportunities within the world of financial statement audits. There are pros and cons, but it is safe to say this is a road the profession will have to walk down as we move into the future. So, the question remains, are you ready for artificial intelligence?