As featured on BusinessMirror: The Future of Audit
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.
AI is revolutionizing how we do audits with its capacity to evaluate huge quantities of data and identify patterns, trends and anomalies that may need more research and analyses in a swift and accurate manner. By examining transaction data and discovering unusual or suspicious activities, AI is also being used to detect possible fraud cases. This makes it easier for auditors to conduct investigations and mitigate possible risks before they become major challenges.
AI can be a useful tool for auditors, assisting them in risk identification, data analysis and decision-making. However, it is crucial to acknowledge that while AI can assist in audits, it must be utilized alongside human expertise. Auditors must still apply their judgment and maintain professional skepticism when conducting an audit.
Emerald Anne C. Bagnes
Head of Audit and Assurance
KPMG in the Philippines
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 train 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 maximize the possibilities, recognizing that it won't be perfect straight away.
How is KPMG adapting to the 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 shift the dial in anomaly detection. It will be able to spot behavior 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 the processing of large datasets around natural language processing, voice and speech recognition.
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.
The excerpt was taken from the KPMG Thought Leadership publication: https://kpmg.com/xx/en/blogs/home/posts/2023/02/all-eyes-on-transforming-the-audit-with-ai.html
© 2023 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.