We may only be halfway through the year, but 2024 has already sent huge waves through the technology space.
The last six months have seen key players in pretty much every global sector embrace artificial intelligence (AI).
In the world of public practice, AI has come on leaps and bounds. From small, independent practices to the Big 4 giants, most firms within public practice have all-eyes on AI.
Whilst AI provides auditors with new tools and incredible capabilities to streamline the audit process, it has created a buzz of heated discussion amongst accountants.
Will the rise of AI birth a new breed of technology-powered, robotic-handed auditors who will ascend to the top of the public practice ladder in half the amount of time it took their predecessors to?
And the most topical subject of all: can AI really replace human oversight?
In today’s blog, we’ll explore the most recent innovations in audit AI technology, how it’s being implemented by firms across public practice, and what this emergence means for the audit talent of today and tomorrow.
AI in Audit 2024
The speed of AI innovation is truly unprecedented. It seems like all you have to do is blink and suddenly a new AI software appears.
Now that we’re more than halfway through 2024, it only takes a quick Google search to see that AI has been widely embraced by most firms within public practice.
While we appreciate that AI does cause concerns around staffing, it’s essential for practices to stay at the cutting-edge of emerging trends. If not, firms could risk getting left behind.
A recent study by Big 4 firm, KPMG, found that “nearly 72% of companies surveyed are already piloting or using AI in financial reporting”. Head of Innovation within KPMG’s Global Audit department, Sebastian Stöckle, states that this figure is “set to reach 99% in three years.”
Additionally, KPMG are among the first to leverage AI in audit across the entire global firm. In fact, the accounting giants have recently fully implemented KPMG Clara AI; a “sophisticated platform and tool that analyzes transactions on a more granular level to enhance audit quality.” This intelligent new software, powered by MindBridge, a financial risk discovery and anomaly detection platform, “effectively scores each individual transaction by applying rules-based, advanced statistical and machine learning algorithms, allowing KPMG auditors to look at complete data sets and focus on the greatest areas of risk.”
However, despite the numerous benefits of AI audit technology, some firms are yet to implement it.
Danielle Supkis Cheek, Vice President of Strategy and Industry Relations at MindBridge Analytics Corp, states that AI can “completely transform journal entry testing” and “change the paradigm of the auditor’s approach to gathering and testing data from an IT system.”
Cheek adds that “AI can give [auditors] 100% of the population, which makes anomaly detection extremely reliable when it’s based on proper parameters set by the auditors.”
Emerging Technology
AI seems like such an umbrella term these days. So, what does AI technology in 2024 actually look like?
Cast your head west towards the United States!
As one of the world’s most technologically advanced countries, it comes as no surprise that the US is making groundbreaking AI discoveries. By trailblazing cunning new technology within audit, US accountancy firms are setting an example to UK public practice and encouraging firms to follow suit.
Take a recent practice aid from the AICPA as an example – a software that has been created to help auditors with tailoring their risk assessment. The Journal of Accountancy summaries how this technology can “improve audit effectiveness and efficiency, with an initial focus on the risk identification and assessment process.”
As well as this, AI pioneers Nanonets offers innovative technology that “serves as a robust audit automation software, featuring an AI-driven data extraction platform and a range of advanced features tailored to meet the specific needs of the audit processes”.
The Pros of AI in Audit
As with anything, there are positives and negatives to consider.
Before we get into the reasons why AI may hinder audit processes, let’s explore the incredible benefits this innovative technology can bring.
- Automating repetitive tasks: AI can automate repetitive tasks, such as data entry, reconciliation, and invoice processing. This reduces the time and effort required for these tasks and frees up accountants to focus on more complex tasks that require their expertise.
- Improving accuracy: AI can process large amounts of data quickly and accurately reducing the risk of errors in audits. AI-powered tools can identify anomalies and inconsistencies in financial data, helping to catch errors that may have been missed by humans.
- Enhancing data analysis: AI can analyse large amounts of data and identify trends and patterns that may not be immediately apparent to humans. This can help accountants make more informed decisions and provide better insights to their clients.
- Increasing efficiency: By automating repetitive tasks and improving accuracy, AI can help accountants work more efficiently. This can lead to increased productivity and cost savings for accountancy practices.
- Streamlining audits: AI can help auditors streamline their work by analysing financial data and identifying potential issues or areas of concern. This can help auditors focus their efforts on high-risk areas, improving the quality of audits and reducing the time and resources required.
- Improving client service: With the help of AI, accountants can provide a better service to their clients. AI-powered tools can provide real-time insights into a client’s financial data, enabling accountants to offer more personalised advice and guidance.
- Staying up-to-date: AI technology is constantly evolving, and accountants who use it can stay up-to-date with the latest tools and techniques. This can help them remain competitive in a rapidly changing industry and provide a better service to their clients.
The Risks of AI in Audit
Despite AI’s incredible power to quickly gather and disseminate information, some firms are reluctant to embrace it.
The Auditing Standards Board (ASB) conducted a study in late 2022 to understand the barriers of AI use in audit and why firms are yet to jump on the computer-powered bandwagon.
Here is a summary of their findings:
Source: Journal of Accountancy’s ‘What AI can do for auditors’ article.
From this, it can be understood that the main reason why firms are yet to embrace AI is a fear of the unknown. The limited access to training on how to use this technology has planted a seed of doubt. After all, how can you get the most out of something if you don’t know how to use it?
We hope that the coming years will see a huge push on education surrounding AI audit technology. Professional bodies, such as the ASB, should make finding information on AI easier to find, so firms can start reaping the benefits of the latest software.
It’s also worth noting that AI technology is not infallible. It relies on algorithms and data inputs, which can be biased or incomplete. Trained auditors and accountants are essential for interpreting and verifying the accuracy of AI-generated results, identifying potential errors, and making informed decisions based on the data.
Rather than having the potential to fully displace auditors and accountants, AI technology should be seen as a tool to help improve processes, boost efficiency, and provide a more modern service to clients.
Whilst AI provides impressive benefits, it’s perhaps only as smart as the brains behind it.
As a technology that’s constantly advancing every year, the future of AI is certainly bright. But it doesn’t replace the need for firms to attract skilled and experienced auditors to strengthen their workforce and deliver a well-rounded service to clients.
And that’s where we can help.
Here at Public Practice Recruitment Ltd, we have the expertise to match you with high calibre candidates who can deliver both the technical know-how and interpersonal skills needed to drive forward the success of your audit function. Turn to AI as a useful tool, turn to us to strengthen your team. Contact us today.
