Is Artificial Intelligence your new auditor?

The audit profession is increasingly embracing Artificial Intelligence. We have seen use of machine learning and generative AI in audit cases. All Big Four firms are adopting the use of AI and from the outlook, subsequent future investment plans point to further development of this technology in the profession. Firms are developing their own AI-powered audit platforms such as the Deloitte Omnia, Price Waterhouse Coopers. Aura Platform, KPMG Clara and EY Helix. Some other AI incorporated software used in audit include Workiva and Mindbridge that enable analyzing and auditing of full data sets. One notable case has been the use of machine learning which are models that can be trained to analyse data and predict patterns. PwC is an example of such a f irm using machine learning algorithms to f lag unusual transactions, making audit processes more data-driven and risk focused. IFAC has continually issued guidelines and updated standards as a result of evolving technology use. National bodies such as Financial Reporting Council (FRC) in the UK, which has significant influence, has also issued guidelines on use of AI for audit firm are evaluated, deployed and monitored to ensure audit quality. Issuing of such AI specific guidance by FRC may have a trickle-down effect on audit f irms as international firms involved in audit may not only adopt this in UK but subsequently standardize the process in their global operations. While not a regulatory practise, this may be considered standard best practise over time. This further highlights the use of AI is going to have an impact on audit risk; inherent, control and detection. While it can directly and significantly reduce detection risk by methods such as allowing full population testing rather than sampling, the effect on inherent and control risk remains indirect as these require significant professional judgement. Although some of these risks cannot be fully eliminated, AI can contribute to a notable reduction in the overall audit risk read more...