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Can AI Replace Auditor ?

AI is no longer a theoretical possibility, it’s here. Artificial intelligence is moving beyond the popular image of self-driving cars and smart homes to become a large part of everyday life. It will continue to evolve, presenting us with great opportunities, but also a whole new set of risks to consider.

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 also transforming the accounting industry. What can be expected in the future from artificial intelligence for auditing is a composite of functionalities drawn from many disciplines and applications that can perform complementarities of audit functions of many types increasing the competencies and effectiveness of the assurance function. AI offers advanced methods for understanding ledgers, detecting material misstatements, and reporting on risk to clients for auditing.

AI is changing the definition of reasonable assurance by understanding the entirely of the ledger and identifying anomalies based on risk, rather than rules. AI analyzes the transactions in the general ledger and then puts those transactions into buckets: high risk, medium risk, or low risk. Previously, we would manually sample at random to figure out which transactions to review, which was less effective. AI is more comprehensive, it alerts us when things don’t look right and tells us where to start and where our risk is going to be.

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 the client-side. By having complete ledgers ingested and analyze, 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 auditors? The answer is definitely “no.” It cannot replace the experience and judgment of auditors, nor can it understand and manage the relationships between firms and clients. The best combination is to have humans and AI working together. We can’t see AI as the death of the auditors, but it sure pushing many auditors outside their comfort zone. Those who thrive will be the ones who actively embrace the potential of AI, rather than shying away from the uncertainties of this new technology.

But the question for auditors is: Are you ready for AI?

Reference

https://www.journalofaccountancy.com/issues/2019/jun/artificial-intelligence-in-audit.html

https://www.accountingweb.com/technology/trends/demystifying-artificial-intelligence-for-audit

https://home.kpmg/uk/en/home/insights/2018/06/auditing-with-artificial-intelligence.print.html

https://towardsdatascience.com/better-internal-audits-with-artificial-intelligence-53b6a2ec7878