Can AI help auditors delve deeper in to the finances of organisations and gain greater assurance?
The expectation gap is the difference between what auditors do; and what the public thinks auditors do. The public often believes auditors will test the vast majority of transactions in the accounts which due to time and resource constraints, just isn’t possible. Until now…?
AI can be a potential solution to closing the expectations gap. There have already been significant advances made in the past few years as new AI softwares and technologies enter the audit market. For example:
- The AI accounting software Datasnipper has the ability to extract and summarise information on hundreds of invoices in a matter of seconds. A task that would previously take an audit junior at least half a day to type out.
- Products such as Inflo offer the ability to perform data analytics on an entire general ledger and apply sophisticated risk scoring to pull out specific postings to test for fraud and error.
Advances in AI may offer the ability to test 100% of the general ledger via AI driven data analytics, something a whole swathe of auditors could not previously do. Also, with invoices and documents extraction becoming more sophisticated, it may soon be possible to cast a wider net and vouch thousands of transactions to supporting documents in minutes. This can allow for a much more thorough audit with a greater level of assurance obtained.
With greater power comes greater accountability
If AI is to play a bigger role in audit testing, care needs to be taken so that the work is still directed and reviewed by an auditor. This will ensure auditors still have accountability for the work that the AI is producing and can’t get away with just saying ‘the AI did it’.
In order to use AI tools in an appropriate way, auditors will need to become comfortable with how the AI underlying models such as GenAI work so that they are able to direct the AI audit testing to achieve the desired objectives. This represents a big opportunity for the firms who embrace AI as they will be able to offer greater assurance to clients wanting a more in depth audit, which can lead in turn to extra fees.
Can AI predict potential bigger picture issues such as going concern threats?
Audit firms are often pulled apart in the press for ‘signing off’ on the financial statements of a company that 12 months later has gone bust. The articles often omit the fact that there was a whopping big going concern disclosure included in the audit report. This is another symptom of the expectations gap where the public expects auditors to be able to predict the future and foresee every eventuality.
Could AI be better suited to assessing the going concern threats? AI could make more informed decisions by analysing the companies financial data, macro economic trends and the vast wealth of similar business case studies that it has available to it.
Whereas advances in technology in the past have always been of a binary nature and solve objective problems, the exciting thing with AI is that it can help solve subjective problems too. Therefore AI could prove useful in analysing the data and offering an opinion on the going concern of a business as well as other subjective issues in audit. With AI’s ability to draw on large amounts of information and the lack of any subconscious human bias, it should eventually be able to do this much better than human auditors.
To boldly go where no auditor has gone before
AI could offer real solutions to the expectations gap by tools such as document extraction and data analytics to dig deeper into companies finances than has ever been possible before. However, this will only be possible if auditors are prepared to get to grips with the AI and see advances in AI as an opportunity to provide better audit services to clients. AI may eventually be able to be implemented in assessing going concern threats and other subjective audit areas, greatly improving auditors ability to give better audit opinions.
Those firms who ignore AI and it’s applicability in audit may find themselves left in the dark. Whereas for those that take the leap into the unknown, they may boldly go where no auditor has gone before!
