Auditing companies use artificial intelligence (AI) tools to detect corporate fraud that auditors may miss. The Big Four accounting firms are investing significant amounts in AI and cloud services in preparation for big-money investments. TNIE asked Sriraman Parthasarathy, partner, at Deloitte India, about the use of AI in audit work. Excerpts from the interview:
Large companies have already adopted AI for specific audit activities and are now looking to scale up their use of the technology. This requires substantial investment and skill set building. As a result, smaller companies have yet to catch up. We need to be conscious of data privacy and security to leverage AI for audits. Therefore, publicly available generic AI platforms cannot be immediately leveraged for audits.
Potential areas where AI can be effective are financial statement review – disclosure compliance, tick and tie (the mechanical process of checking each figure and procedure for error); better data analysis; Audit Confirmation Tracker and Solutions; Examination of details on areas such as revenue, operating expenses, verification of changes in masters; and automation of various recalculations that are performed as part of the audit, for example, depreciation, inventory valuation. In addition, fraud detection through improved journal entry analysis and reviewing agreements and contracts and extracting key terms are some of the areas where AI is being used.
While there are many tools to leverage AI for audit by seamlessly integrating AI with robotics, process automation/predictive analytics, we can get the best from Generative AI. Several global initiatives have been taken by Deloitte to leverage the power of AI on audit in a wide range of sectors. The following areas are worth noting;
- Reviewing contracts and extracting key information
- extracting audit information from source documents
- Improved review of bank statements and solutions
AI can help auditors automate more of the repetitive tasks and improve the coverage and quality of audits, and it won’t take away jobs. This will help auditors make better use of their time to better review the outputs, especially while performing mundane tasks. However, to do so, there is an imperative need for talent transformation at the grassroots level
Do you think AI could allow smaller audit firms to compete with larger firms like yours?
The investments and skills required to leverage AI are significant and will certainly help in enhancing the quality of audits. Getting the best out of AI requires a good mix of audit skills and AI skills.