AI technology plays a vital and evolving role in how we understand and interact with the world around us, but the question in our world is what does AI mean for auditors?
Over 60 years ago, the first AI projects focused on tasks such as language translation. At the height of the Cold War, the US government funded a project to determine whether a machine could translate between English and Russian, but progress was limited due to the available computing power of the day.
More recent advances, such as IBM Watson defeating a Jeopardy! champion in 2011 and the AlphaGo program beating a human Go player in 2015, have brought us closer to thinking computers. AI and its associated technology, machine learning, have come to understand and take actions on the world at large. But they have not reached the point where human nuance and inspiration are replaceable.
AI is transforming the accounting industry by processing vast amounts of client data to report on behavior, trends and anomalies. For auditing, AI offers advanced methods for understanding ledgers, detecting material misstatements, and reporting on risk to clients.
How AI Helps Auditors
Artificial intelligence automates many tasks that were previously done manually, such as ingesting data, and it analyzes 100% of the dataset without requiring a human to create tests, write scripts, or remember all the rules. Key to the future of audit is that AI is changing the definition of reasonable assurance, by understanding the entirety of the ledger and identifying anomalies based on risk, rather than rules.
With risk-based assurance, transactions are flagged for investigation based on how they deviate from the data set, such as unusual payments or activities that would not normally be caught by traditional testing practices. While humans rely on judgement and random sampling, which can be time consuming and prone to missing items, AI rapidly parses information to reveal risks never thought of before.
AI-based systems are also continually learning and adapting to the data. As more information is entered and processed, AI analyzes secondary data and cross-correlates with the support of hundreds of variables.
AI also reduces the amount of work on both the firm side and client side. By having complete ledgers ingested and analyzed, with little manual effort, the need to go back-and-forth asking questions of the client is minimized. Auditors are free to explore and dive into details as they wish, providing a richer financial picture than ever before.
Will AI replace accountants? The answer is definitively “no.” It cannot replace the experience and judgement of auditors, nor can it understand and manage the relationships between firms and clients.
AI works alongside people, automating and accelerating large and complex data tasks and it assists with decision making when it comes to identifying misstatements and determining risk. It is transformative technology, and therefore any firm must carefully consider their adoption strategy and timelines.
But, AI is already improving the scope and quality of engagements and delivering a greater level of assurance for many firms across the world. It’s imperative for firms to investigate what AI brings to the table and decide their best path.
The question today is whether to stick with traditional tools and practices or embrace what AI has to offer right here and right now.
MindBridge Ai is restoring confidence in financial data with Ai Auditor, the world’s only AI-powered auditing solution that leverages machine learning and AI techniques to augment human capacity and redefine reasonable risk assurance.
John Colthart is General Manager, Audit and Assurance & VP Product Management at MindBridge Ai. After his departure as a corporate finance and accounting practitioner in 2000, he grew a startup to over 425 employees and exited to IBM with a role of VP Sales Operations in 2010.