Artificial Intelligence (AI) is poised to fundamentally reshape the future of audit, driving unprecedented levels of automation, efficiency, and enhanced audit quality. But will this technological revolution ultimately lead to the replacement of human auditors? The answer, according to leading experts, is more nuanced than a simple yes or no.
As Global Head of Innovation and AI, Audit, KPMG International, I recently discussed this critical topic with Matthew Campbell, Chief Technology Officer, KPMG in the UK, as part of our ‘All eyes on’ series. Our conversation explored how AI is transforming the audit landscape and the crucial role humans will continue to play in this evolving ecosystem.
AI: Automating, Accelerating, and Enhancing the Audit
The impact of AI on audit mirrors its broader influence across all industries: automating repetitive tasks, accelerating existing processes, and enhancing overall business performance. For audit, this translates to higher quality, more comprehensive assessments.
AI is already empowering firms like KPMG to better identify high-risk transactions, allowing auditors to focus their attention on critical areas and obtain audit evidence from significantly larger and more complex datasets. By automating time-consuming tasks, AI frees up auditors to leverage their expertise in other vital aspects of the audit, ultimately enhancing value for everyone involved.
We are witnessing a growing trend of companies, regardless of industry, embracing AI alongside their workforce in processes surrounding financial and non-financial accounting and reporting. In the financial services sector, for example, AI is promoting greater inclusivity by analyzing broader and larger amounts of data, potentially leading to more customers being offered mortgages and providing lenders with a competitive edge.
The Critical Role of Data Quality, Governance, and Ethics
While the potential benefits of AI are immense, realizing them requires careful consideration of several critical factors.
Firstly, the accuracy, unbiased nature, and relevance of the data used to train AI algorithms are paramount. Biased or inaccurate data can lead to skewed results and potentially flawed conclusions. Secondly, companies often prioritize AI investments in areas like growth strategies and customer focus, while underinvesting in AI support, governance, risk, and compliance. This imbalance can create significant vulnerabilities.
Ethical considerations and resilience are also crucial. Guidelines are needed to ensure responsible AI implementation, and these aspects must be continually monitored and addressed due to the rapid pace of technological change.
Explainability: The Key to Trustworthy AI in Audit
A key risk associated with AI, particularly in the context of audit, is "explainability." It's essential to understand why AI algorithms highlight certain items and trends. We must be able to explain the rationale behind the AI's findings to ensure their validity and reliability.
This is why we strongly believe in the importance of having human auditors working alongside AI systems. Humans can provide deeper thinking, challenge the AI's outputs when necessary, and ensure that the technology is continuously learning and improving through human input. Rather than removing people from the loop entirely, this collaborative approach maximizes the potential of AI while maintaining the integrity of the audit process.
Adapting to the Evolving Skill Set
As with any new technology, companies need to carefully assess the skills required within their organization to effectively leverage AI and maximize its potential. Recognizing that AI implementation is an ongoing process and won't be perfect immediately is crucial.
As businesses increasingly adopt AI and seek assurance from their auditors, firms like KPMG have developed the expertise to help organizations adapt to the cultural changes AI brings, within an ethical framework that promotes responsible implementation.
One way we are achieving this is through "feature engineering," which significantly improves anomaly detection. This technique allows AI to identify behavioral outliers across various data elements, such as users who suddenly start posting entries when they normally don't. Instead of relying on pre-defined rules and looking for exceptions, AI helps us find the proverbial needle in the haystack.
Furthermore, we are leveraging AI to support the processing of large datasets related to natural language processing and voice and speech recognition.
AI: Empowering, Not Replacing, Auditors
KPMG has always believed that technology, including AI, has the potential to empower and enhance auditors in their day-to-day work, providing real value to the audit process. However, we must never blindly rely on AI as a "black box." Explainability is paramount.
For this reason, we believe AI will never entirely replace human auditors. Human knowledge and judgment will always be essential components of a robust and reliable audit. The future of audit lies in a collaborative partnership between humans and AI, where technology augments human capabilities and allows auditors to focus on higher-level tasks requiring critical thinking, professional skepticism, and ethical judgment.
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 feel free to contact 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.