Unlocking Audit Potential: Harnessing Emerging Tools
From AI to Blockchain: A New Era for Auditors
The auditing profession is experiencing a profound transformation¹ driven by the adoption of emerging technologies. These innovations are not only enhancing the efficiency and accuracy of audits but are also reshaping the entire audit process. Traditional auditing methodologies are being enhanced by cutting-edge technologies, creating a more dynamic and responsive audit process. The adoption of data analytics, artificial intelligence (AI), and machine learning is particularly noteworthy. These technologies enable auditors to analyze vast amounts of data quickly, identifying patterns and trends that would be impossible to detect manually.
This article delves into the role of key emerging technologies and tools in auditing, illustrating how they are revolutionizing the field.
- Blockchain Technology
Blockchain technology offers a transparent and immutable ledger, providing a reliable source for verifying transactions. In auditing, blockchain can significantly enhance the trustworthiness and accuracy of financial records.
The key benefits of this technology are:
- Transparency: Every transaction is recorded in a public ledger, making it easily verifiable.
- Security: The decentralized nature of blockchain reduces the risk of fraud and tampering.
- Efficiency: Automates the process of verifying transactions, reducing the time and effort required for audits.
PwC² has been exploring blockchain’s potential in auditing, particularly in providing a single source of truth for financial data³. This technology allows auditors to verify transactions directly from the blockchain, ensuring the integrity and accuracy of the records.
2. Artificial Intelligence (AI) and Machine Learning (ML)
AI and ML are transforming the auditing process by automating routine tasks and providing advanced data analysis capabilities. These technologies can analyze vast amounts of data quickly, identifying patterns and anomalies that might go unnoticed through manual analysis.
Key benefits:
- Automation: Reduces the burden of repetitive tasks, allowing auditors to focus on more complex issues.
- Enhanced Analysis: AI and ML can identify trends, patterns, and outliers in data, providing deeper insights.
- Predictive Capabilities: These technologies can predict potential risks and issues before they become significant problems.
KPMG’s Clara⁴ is an AI-powered audit platform that offers real-time insights and predictive analytics. Clara⁵ helps auditors to identify and address potential issues proactively, improving the overall quality and efficiency of audits.
3. Robotic Process Automation (RPA)
RPA automates repetitive and mundane tasks, such as data extraction and processing, freeing up auditors to focus on more strategic activities. RPA tools can handle high-volume, rule-based tasks with speed and precision.
Key benefits:
- Efficiency: Significantly reduces the time and effort required for routine tasks.
- Accuracy: Minimizes the risk of human error in repetitive processes.
- Scalability: Easily scalable to handle large volumes of data and transactions.
Deloitte⁶ has implemented RPA in its audit processes to streamline operations and improve productivity⁷. By automating data collection and processing, Deloitte’s auditors can spend more time on analysis and judgment-based tasks.
4. Data Analytics
Data analytics tools⁸ allow auditors to analyze⁹ entire data sets rather than relying on sampling techniques. This comprehensive analysis provides a more accurate and thorough audit, identifying potential risks and anomalies that may be missed with traditional methods.
Key benefits:
- Comprehensive Analysis: Enables auditors to analyze all available data, improving accuracy.
- Risk Identification: Helps in identifying and assessing risks more effectively.
- Real-Time Insights: Provides immediate insights into financial data, facilitating timely decision-making.
EY’s Helix¹⁰ tool uses data analytics to enhance audit quality. Helix enables auditors to analyze vast amounts of data quickly, providing insights into financial trends and identifying areas of concern that require further investigation.
5. Natural Language Processing (NLP)
NLP is a branch of AI that focuses on the interaction between computers and human language. In auditing, NLP can be used to analyze and interpret large volumes of unstructured data, such as contracts, emails, and other text documents.
Key benefits:
- Text Analysis: Automates the analysis of unstructured data, saving time and effort.
- Insight Generation: Extracts valuable insights from text data, identifying trends and patterns.
- Compliance Monitoring: Helps in monitoring compliance by analyzing communications and identifying potential issues.
PwC’s¹¹ GL.ai¹² uses NLP to analyze¹³ and interpret financial documents, identifying anomalies and potential risks. This tool¹⁴ helps auditors to gain deeper insights into financial data and improve the overall quality¹⁵ of audits.
The integration of emerging technologies and tools in auditing is revolutionizing the profession, enhancing the quality, efficiency, and accuracy of audits. Blockchain, AI, ML, RPA, data analytics, and NLP are at the forefront of this transformation, offering new capabilities and insights that were previously unimaginable. As auditors continue to embrace these innovations, the future of auditing promises to be more dynamic, insightful, and effective, ultimately providing greater value to stakeholders and enhancing trust in the financial reporting process.
REFERENCES
¹ ISACA. Muhammad Asif Qureshi, CISA, ACMA, CIA, CISSP, PMP (February 2020). Auditing Emerging Technologies: Facing New-Age Challenges https://www.isaca.org/resources/isaca-journal/issues/2020/volume-2/auditing-emerging-technologies
² PwC Global. Supporting the auditing of cryptocurrency https://www.pwc.com/gx/en/services/audit-assurance/publications/halo-solution-for-cryptocurrency.html
³ PwC (May 2017). Building blocks: How financial services can create trust in blockchain. https://www.pwc.com.br/pt/estudos/setores-atividades/financeiro/2017/pwc-fsi-whitepaper-blockchain-trust.pdf
⁴ KPMG US. Bringing clarity to the audit with AI (Artificial Intelligence). https://kpmg.com/us/en/capabilities-services/audit-services/kpmg-clara.html
⁵ KPMG (2017). KPMG Clara — A smart audit platform. https://assets.kpmg.com/content/dam/kpmg/au/pdf/2017/au-kpmg-clara-a-smart-audit-platform.pdf
⁶ Deloitte Malta. Robotic Process Automation explained. https://www2.deloitte.com/mt/en/pages/rpa-and-ai/articles/robotic-process-automation-explained.html
⁷ Deloitte UK. Robotic Process Automation. https://www.deloitte.com/uk/en/services/consulting/services/robotic-process-automation.html
⁸ CPA Canada. Melissa Robertson, CPA (March 2023). Data analytics and visualizations tools: A primer for your digital audit transformation. https://www.cpacanada.ca/business-and-accounting-resources/audit-and-assurance/blog/2023/march/data-analytics-visualization-tools-primer
⁹ ACCA Global. Data analytics and the auditor. https://www.accaglobal.com/gb/en/student/exam-support-resources/professional-exams-study-resources/p7/technical-articles/data-analytics.html
¹⁰ EY Global. EY Helix. https://www.ey.com/en_gl/services/audit/technology/helix
¹¹ PwC US. Artificial intelligence services. https://www.pwc.com/us/en/services/consulting/cloud-digital/data-analytics/artificial-intelligence.html
¹² PwC (November 2018). GL.ai — PwC’s anomaly detection for the general ledger. https://www.pwc.com/m1/en/events/socpa-2020/documents/gl-ai-brochure.pdf
¹³ PwC US (May 2024). PwC is accelerating adoption of AI with ChatGPT Enterprise in US and UK and with clients. https://www.pwc.com/us/en/about-us/newsroom/press-releases/pwc-us-uk-accelerating-ai-chatgpt-enterprise-adoption.html
¹⁴ The Wall Street Journal (May 2024). PwC Set to Become OpenAI’s Largest ChatGPT Enterprise Customer. https://www.wsj.com/articles/pwc-set-to-become-openais-largest-chatgpt-enterprise-customer-2eea1070
¹⁵ PwC Japan (July 2023). PwC wins next generation AI award in audit services at the International Accounting Forum & Awards. https://www.pwc.com/jp/en/press-room/next-generation-ai-award230721.html
