All eyes on: Transforming the audit with AI

In the next decade, Artificial Intelligence (AI) will fundamentally transform the audit through automating procedures and enhancing audit quality.

I had the opportunity to speak with my colleague Matthew Campbell, Chief Technology Officer, KPMG in the UK and heard that: “There’s so much more to AI than automating simple tasks like analyzing data. AI can support all areas of the audit. From helping auditors to make more insightful judgments to providing a more robust challenge to management too.”

So, in the future, will AI replace humans in the audit process? That’s just one of the fascinating questions Matthew and I discussed when we chatted as part of our ‘All eyes on’ series. Here’s a summary of our conversation.

How is AI changing the audit and the way auditors work?

It’s the same way AI is changing every business and organization: automating, accelerating and enhancing business processes, helping to transform at scale and drive value. We believe that means delivering even higher quality audits. For example, we expect AI will continue to help KPMG firms to better identify high risk transactions, allowing us to sustain our focus on risk assessment and obtain audit evidence over much larger, more complex sets of data. Also, by removing some of the more time-consuming tasks for auditors, AI will free them up to apply valuable skills in other areas, again enhancing the audit for everyone.

How can AI impact businesses and specific industries?

KPMG firms are seeing a broad range of companies, regardless of industry, using AI alongside their workforce also in processes surrounding financial and non-financial accounting and reporting.

For example, in financial services we are seeing AI promoting greater inclusivity by analyzing broader and larger amounts of data. This could lead to more customers being offered mortgages and that could give a lender a significant competitive advantage.

What are the potential risks of AI?

First of all, it is critical AI is being built with the most accurate, unbiased and relevant data available. Secondly, companies often focus their investment in AI on growth strategies, customer focus or frontline operations and often underprioritize the investment in AI support, governance, risk and compliance. There are ethics and resilience issues to consider here too. Guidelines are needed and due to constant change, aspects must be continually monitored and addressed.

A key risk around AI, which is very relevant to audit, is ‘explainability’. By this we mean we still need to understand and explain why the technology may be highlighting certain items and trends. That’s why we believe it’s important to have people working alongside AI to prompt deeper thinking and challenge where necessary, rather than removing people from the loop entirely. At the same time, this will help training the AI continuously through human input.

Lastly, as with any new technologies, companies need to think carefully about the skill sets they need within their organization to achieve and to maximize the possibilities, recognizing that it won't be perfect straight away.

How is KPMG adapting to AI trend?

As businesses introduce more AI and ask us, as their auditors, to provide assurance, this is what we will continue to do. KPMG firms have already developed the know-how to help businesses and organizations adapt to (and even embrace) the cultural changes that AI brings. All within an ethical framework that helps manage responsible implementation.

One way we are adapting this is by using ‘Feature engineering’ to really shift the dial in anomaly detection. It will be able to spot behaviour outliers across the different data elements including identifying users that normally don’t post entries and suddenly do. Suddenly we’re not setting rules and looking for exceptions. AI will help us to find that needle in the haystack. Additionally, we’re using AI to help support processing of large datasets around natural language processing, voice and speech recognition.

Stronger together

KPMG has always believed that technology, including AI, has the potential to empower and enhance auditors in their day-to-day work and provide real value to an audit. But, we must never simply rely on AI as a black box; ‘explainability’ is key. That’s why we believe AI will never replace people and KPMG will always have human knowledge in the audit loop.

Throughout the All eyes on campaign, you will hear from various leaders on topics such as continuous auditing, big data and technology assurance. AI will have a strong correlation with all four of these other topics. If you’d like to learn more about how KPMG can help your organization realize the benefits of these technologies, please email me or Matthew Campbell, Chief Technology Officer, KPMG in the UK directly. You can also hear more from Matt on his recent Building Confidence podcast episode.