How AI will revolutionize audit

How AI propels audit forward

One of the biggest challenges auditing firms face is the need to manually manipulate data to render it useful. However, once you eliminate the impediments of standardizing data, the possibilities for using this data are limitless.

Data extraction, cleansing, and validation are the top tasks audit professionals are considering for AI or generative AI (GenAI). In fact, 57% of firms say they are already using or planning to use AI technologies for extraction, while 29% plan to use or are already using AI for data cleansing and validation.

AI and machine learning drive the advanced data-ingestion capabilities that gather client transaction data. Auditors can then validate and standardize complete data sets with minimal manual intervention.

Technology-driven data analytics can then quickly find potential misstatements and insights in large volumes of data, even utilizing aggregated and anonymized data for better audit decision-making and benchmarking. AI tools and modern machine learning also improve audit quality by analyzing all transactions and identifying anomalies that auditors might otherwise overlook. The tools, if designed properly, also provide the required documentation.

With data at their fingertips, auditors can significantly improve their planning and risk-assessment processes, focusing on high-risk areas and minimizing work in low-risk areas. They can also modernize their testing approaches to test audit populations more efficiently and automate significant aspects of the audit.

Indeed, according to the Thomson Reuters survey, the benefits of technology adoption cited by at least half of respondents include improving efficiency, freeing up an auditor’s time to address more complex issues, streamlining processes, and improving quality.

“Implementing dynamic audit technologies centers on leveraging data analytics and automation to create a more efficient, risk-focused, and insightful audit process,” said one respondent. “An example is AI that can eliminate repetitive tasks such as data extraction or testing. This can save time for auditors to focus more on reviewing and communicating with clients.”

It’s important to note that AI and other progressive technologies are just tools in an auditor’s toolbox. AI augments their professional expertise, but auditors retain control. For example, they can use AI insights to design procedures based on risk and then apply their professional judgment and experience to adjust those outputs as needed.

“An important point that has been made by a number of leaders in the profession is that AI is not going to replace auditors, but auditors using AI are going to replace auditors not using AI,” notes Scott Spradling, Executive Director of Audit Innovation at Thomson Reuters.

“The technology doesn’t make decisions; auditors make decisions better and faster using the technology tools,” agrees Wyle.

What can AI do for auditing?

Progressive technologies provide almost endless possibilities for auditors. Here are some of the use cases for AI and machine learning:

• Benchmarking client business metrics against others in their peer group
• Analyzing audit populations to identify higher-risk population segments
• Identifying anomalies and flagging suspicious transactions
• Visualizing client general ledger data in depth
• Automating testing and verification processes
• Importing and organizing trial balance data quickly
• Synthesizing data from audit workpapers and client documents
• Performing first-draft assessments of GAAP compliance and completing audit documentation

Clients are on board with AI

If you’re worried about how clients will react to your firm using AI and other progressive technologies, fear not. More than 80% of companies want their auditors to use AI for a broad range of activities ranging from data analysis, quality management, and anomaly identification to risk mitigation, fraud detection, and predictive analysis.

This statistic represents a significantly increased vote of confidence in AI; only one year ago, 61% of companies said they wanted auditing firms to use AI.

Avizo and RSBK Partners: Two firms moving toward the future

Avizo and RBSK Partners PC are just two firms preparing themselves for the future by taking incremental steps today. Notably, progressive firms such as these are adding new technologies in a consistent and persistent way — without needing high-risk investments or major disruption.

Avizo makes time for what matters to clients

Avizo, in business since 1990, provides audit, tax, and advisory services to various industries, with a particular focus on non-profit and governmental clients. Avizo also maintains a robust practice for auditing 401(k) employee benefit plans.

The firm, a long-time proponent of Lean Six Sigma, has been on a continuous journey to improve internal processes, explains Rachel Young, CPA, CGMA, MAcc, CEO, and Strategic Consultant. However, many clients are not as technology savvy or have out-of-date software, making it tricky for Avizo to export and import client data and employ data analytics tools.

Leveraging AI and other progressive technologies solves these data challenges and allows the firm to focus more on its clients. “If you don’t have to spend all your time scrolling through a general ledger to find things that data analytics can find for you, you have time to have deeper conversations with your clients,” explains Young.

“With these new technology tools, we can help our clients look to the future,” she continues. “We no longer have to wait until the books are closed to have conversations with clients. Continuous auditing is much more possible today than it was even three years ago.”

Technology change doesn’t happen overnight — and neither does employee acceptance of those changes. Young advises other firms to take their time educating employees and building confidence, which doesn’t necessarily come from the executive suite.

Explains Young, “While having a champion at the partner level is important, it’s even better to have champions throughout the firm. When employees start spreading the word about what this technology can do, then you have real momentum.”

RBSK Partners PC: Changing auditing firm dynamics

RBSK Partners PC has a long history dating back to 1965. The firm’s 25 or so employees offer a full range of services to private companies, including audit, accounting, tax, and advisory, says John G. Seale, CPA, CITP, and Managing Partner.

RBSK uses progressive technologies to deliver deeper analysis to clients and broaden their service offerings. For instance, instead of reviewing transactions for a particular month and looking for unusual items, RBSK can analyze transactions based on crucial attributes — such as time of day posted — to identify transactions that are more at risk of fraud or error.

Being more proactive with clients impacts the bottom line. Seales notes that now that RBSK has the ability to provide more services, including client training, they have attracted larger clients and can command higher fees. “We are meeting with clients monthly or quarterly now and providing them with customized services well beyond compliance. The clients look forward to these meetings and bouncing ideas off us,” he explains.

Technologies like AI also level the playing field for smaller firms like RBSK by allowing these firms to be efficient, offer more client services, and increase auditor pay to combat the industry-wide talent shortage.

“We can do what bigger firms are doing with data extraction and analytics even as a small firm,” notes Seale.

Modernization is not a single, big-bang event

Audit has always been, and will always be, heavily reliant on technology. Can you imagine a firm not using spreadsheets? At some point, we’ll think about AI and progressive technologies in the same way we view spreadsheets — as essential tools to help auditors work smarter and more efficiently.

Firms often sit on the technology sidelines because they believe they must undergo a highly disruptive and expensive change management process to adopt these new technologies. Nothing could be further from the truth. While audit will continue to evolve to take advantage of new and emerging technologies, you don’t become a firm of the future overnight.

AI and progressive technologies will revolutionize audit. But from one year to the next, it’s a rapid and persistent evolution rather than a single big bang. There’s no need to discard your current processes. Instead, these new technologies can be woven directly into your current methodology in a practical way that provides continual, fast-paced improvement.

“You aren’t seeing global audit firms discard their fundamental audit methodologies,” notes Spradling. “They are instead aggressively supplementing them by incorporating new, progressive technologies directly into their existing methodologies and workflows. And they are rapidly evolving their methodologies and workflows as they go. There are very good reasons for this approach.”

“Modernization does not have to be disruptive,” says Wyle. “You need a trusted partner with staying power that can leverage these new technologies to help you evolve and transform into the firm of the future without requiring high-risk investments.”

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