The Access Group provides software for accountants in Australia and New Zealand, and we’re often on the forefront of emerging technologies in accounting, and how they can be used in tandem with smart and scalable accounting practice management software.
By the end of this article, you should have a better understanding of the use of AI in auditing and see the benefits AI in the audit process has to offer your firm.
What is AI auditing?
AI and auditing work together to streamline the execution of work, ranging from the more complex to repetitive, everyday tasks that zap the valuable skills of busy auditors. Whether it’s automating administrative tasks, or identifying high-risk transactions, AI and auditing can free up time for everyone.
Ai in accounting and auditing goes deeper than maximising the potential of our resources by parsing the enormous amount of valuable data that accounting firms collect, leading to higher quality audits for your firm.
With AI tools being uptaken in droves for various industries, calls for regulation are increasing. However, no such AI auditing framework currently exists in Australia.
For a broader understanding of how artificial intelligence is applied in the accounting industry, please read: How can accountants harness artificial intelligence?
How is AI used in auditing?
The use of AI in auditing is varied, but includes the following:
Gaining greater insight from data
AI in auditing processes can analyse vast datasets quickly and accurately, identifying unusual patterns or anomalies that may indicate fraud, errors, or non-compliance.
Using artificial intelligence in auditing can perform advanced statistical analysis to assess risk and prioritise audit tasks.
For an understanding of the importance of data analytics to your firm, check out our blog: how to build a data-driven accounting practice.
Dissecting textual data
Natural Language Processing (NLP) enables AI to understand and extract valuable insights from unstructured textual data, such as financial reports, contracts, and emails. NLP can help auditors detect inconsistencies or potential issues in written documentation.
ChatGPT uses NLP to power its revolutionary generative AI-chatbot. For more insight into how accountants can incorporate ChatGPT into their operations, check out our article: How can ChatGPT be used by accounting firms?
To discover additional generative AI tools that are transforming accounting, read our article: Amazing generative AI tools for accounting firms.
Predicting the future
Predictive analytics can be used in AI and auditing to predict future financial trends, allowing auditors to identify potential issues before they become significant problems.
Predictive analytics are important in assisting the estimation of audit sample sizes and selecting the most critical areas for examination.
We spotlighted predictive analytics as an emerging technology to watch out for in our article: How emerging technologies in accounting can build a better practice.
Automating routine tasks
AI could automate more repetitive audit tasks, such as:
- Tests for details, by extracting and cross-reference supporting documentation to your audit sample.
- Matching a debtors list in Excel with sales invoices in PDF.
- Verifying the accuracy of financial statements.
AI and auditing can enable auditors to focus on higher value tasks.
The future of accounting is automated, are you ready? Read our article on leveraging the power of accounting automation and find out what your firm needs to do to thrive.
Detecting fraudulent activity
AI auditing systems can continuously monitor transactions and financial data to detect suspicious activities and potential fraud.
Machine learning models are trained with your clients’ historical data to identify patterns associated with fraudulent behavior, such as suspicious logins, fraudulent transactions or even identity theft.
Assessing risks
AI and auditing is revolutionising risk assessments for accounting firms, improving accuracy and results precision.
AI auditing systems can assess the risk associated with different audit clients, which can help auditors gain insight into their data much faster and enable a greater degree of decision making. This risk identification for accounting firms can also reduce errors of human judgement.
Increasing the efficiency of accounting workflows
AI can streamline audit workflows, making it easier to organise, review, and collaborate on audit documentation. This will help you to execute tasks in a systematic and organised way, reducing the time you spend on repetitive tasks.
There are many ways you can manage workflows within your accounting firm. Learn more about these in our article: what is a workflow for accounting firms?
Factors to consider when using AI for auditing
An auditing AI system is only as good as the data it’s built with
It's important to note that while AI can significantly enhance the auditing processes, the technology is still dependent on human judgment to build it using data that is relevant, accurate and unbiased.
Human auditors are still crucial to the AI audit process
AI and auditing should be used to support an auditor’s work, but it is still up to the auditor to interpret data to identify trends.
Human input is still an important part of the equation, as AI for internal audit data requires deep thinking and the ability to critique.
Accounting firm skill sets must be considered
If your accounting firm is considering the implementation of AI in the auditing process, you must first address whether you have the required skill sets within your firm to achieve and maximise the possibilities and upskill staff where necessary.
If your accounting firm needs pointers on where to look for continued learning and development, we have an article that may help you: the best free CPD resources for accountants.
Why auditors should pay attention to AI
Accounting firms: pay attention to the value that Ai in accounting and auditing can add to daily operations.
A study by EY in 2019 stated that 84% of CEO’s and business leaders in the United States considered AI an essential driver of success for their companies.
Since then, AI technology has left a huge impression on the world, but it is not without its risks, even for accounting firms who implement auditing AI systems before thinking about the challenges.
The benefits of using AI in auditing
- Increasing efficiency: AI for an internal audit can automate repetitive and time-consuming tasks, such as data entry, data analysis, and report generation, allowing auditors to focus on higher-value activities. Audits can be completed more quickly and with fewer resources, reducing the overall cost of the audit. Read our article about how to improve productivity in your accounting firm.
- Improving risk assessments: AI in accounting and auditing can help auditors gain a deeper understanding of their clients’ financial health and potential risks by analysing a wide range of financial data sources, leading to a more targeted and effective audit.
- Data-driven insights: AI and auditing can uncover trends and patterns from large volumes of data that may not have been easily discernible through traditional methods. Auditors can leverage these insights to make data-driven decision making and provide a more meaningful service to clients. Learn more about nurturing your clients in our article: mastering client relationships for accounting practices.
- Better resource allocation: with Ai in the audit process, auditors can allocate resources more efficiently by identifying high-risk areas and suggesting appropriate audit procedures. Auditors can also optimise their workflows and hone their focus on the areas that matter most.
- Enhancing your audit quality: AI can provide auditors with higher audit quality standards. With quality control checks, the likelihood of omissions or errors is reduced. Additionally, potential risks or issues can be identified, minimising the potential for human error.
The challenges for auditing AI systems
The following could be considered challenges to adopting auditing AI for your accounting firm
Resistance from your staff
Even the most forward-thinking firm will likely experience pushback on AI auditing and other emerging technologies.
The benefits of AI and auditing can be made abundantly clear to staff, but the implementation of such technologies for auditors, and gaining support from the team, can be challenging for firm owners.
Limitations with data
Although it is rarely a problem for larger firms and multinationals, smaller accounting businesses may find they collect insufficient amounts of data to build models around specific areas for AI auditing analysis.
Collecting and housing that data can be not just an expensive process, but one that requires the integration of a new accounting practice data management and analytics solution.
Accounting cybersecurity and data risks
You may experience fears within your firm, that are valid or otherwise, about potential exposure to cyber risks through AI and auditing.
Cyber criminals do indeed understand the value of data and they will exploit poor internal practices to steal confidential client information or financial data.
For a deep dive into the topic of cybersecurity in accounting, please read: cybersecurity for accounting firms: what are the biggest concerns?
What is next with AI and auditing?
AI and auditing can enhance the day-to-day work of auditors in accounting firms, providing your firm with tools that can save time and reduce human errors.
The mindset of ‘routine work’ must now shift to ‘strategic thinking’ for accounting firms, and this will be achieved by knowing how to analyse and interpret the data that AI parses.
Moreover, auditors will need to develop a new set of expertise, all revolving around data. The accounting and finance professional of the future will have robust data skills, an understanding of how to interpret disparate data streams, and the ability to analyse data for critical decision-making.
Make auditing easier with accounting practice management software
Workflow software, as part of accounting practice management software makes it easier for auditors to track their jobs, work with streamlined processes and hit their deadlines.
At the Access Group, we help accounting firms of all shapes and sizes to implement workflow management software best suited to their needs. So, book a demo or contact us today to see what will work best for your accounting firm.
Our fast and powerful APS software is used by 3 of the big 4 top accounting firms, help auditors work through more efficient workflows.
AI and Auditing FAQ’s
|
Will AI take over audit? |
Artificial intelligence is transforming the accounting industry, making waves by automating repetitive tasks and streamlining activity. However, human auditors have nothing to fear regarding the possibility of their roles being seen as obsolete in future. They remain vital to interpreting the ethical implications of AI and auditing. Auditors must apply a deep understanding of their clients’ business and industry, which is something that cannot be replicated by machine learning. |
|
How artificial intelligence (AI) will improve the audit process? |
The collaboration between AI and auditing professionals is an exciting development in technology for the accounting industry. An audit process that incorporates AI into the mix will be more comprehensive and efficient, with outputs that are more confident and assured. |
|
What are examples of AI in audit? |
Using AI-powered data extraction tools, in conjunction with accounting practice management software, is just one way of applying AI in auditing. Automating data entry and analysis can save time for busy auditors and reduce human errors. |