Simplifying audit through artificial intelligence

​You might be thinking that artificial intelligence is a modern day marvel which is taking the world by storm but if you will go back to the roots of this marvelous technology then you will see its traces over 60 years  ago. During the Second World War, there was a noted British computer scientist named Alan Turing who used to crack Enigma code used by the German forces. The mastermind computer scientist and his team created Bombe machines which later become the first of its kind machine learning technology. But at that time, the progress regarding the first step towards machine learning was very slow due to limited computer technology. 

Later, remarkable steps in the field of AI and machine learning were taken like the development of the first intelligent humanoid robot in 1972, IBM’s deep blue defeating the world chess champion in 1977, IBM Watson defeating a jeopardy champion in 2011 and the AlphaGo program beating a human Go player in 2015. During all these years, the AI technology has taken over many operations but still, it hasn’t reached a point where it can replace the human brain.
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Similar to the use in many industries, artificial intelligence has affected the accounting industry as well. It is allowing users to process bulk data of clients to get a clear idea about behavior, trends, and anomalies. And AI is playing a major role in auditing as well.

​How artificial intelligence is transforming auditing?

The one way in which artificial intelligence has transformed the accounting process is by replacing multiple manual tasks and making them automated. Many manual tasks involved in accounting such as ingesting data, script writing while remembering all the rules, analysis of data, all these processes can be done by AI without any human intervention.

The future of AI in the audit process lies in the transformation of reasonable assurance as AI is now understanding the entirety of the ledger and identifying anomalies based on risk, rather than rules. In risk-based assurance, the transactions are identified on the basis of how they deviate from the data set for example unusual payment or other activities that were not noticed during the traditional practice of accounting.

 On one side, humans are totally dependent upon the judgment and random sampling which is both time-taking and comes with the risk of missing multiple items while on the other side AI uses its advanced technology to open risks which were never thought or considered before.

With more and more analysis of the data, AI is developing its learning process and that’s what could benefit the auditing process of accounting to a great extent. The ability of AI to learn with time can prove to be a great advantage for accountants. Along with that, the advanced AI technology analyzes the secondary data and cross-correlates with the support of hundreds of variables.
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In addition to the above-mentioned uses of AI in the auditing process, the AI minimizes the workload on both sides; client and accounting firm. The ability of AI to ingest and analyze complete ledger reduces the manual workload and wipes out the need to go back and forth, asking multiple questions. Along with that, the auditors are also free to explore and dig into the details which provide a much deeper, brief and clear picture of the financial status of the client which was earlier not possible because of the limited traditional method of accounting. 

​AI and accountants will go side by side?

Many people are living with the misconception that the day AI will become a fully advanced and evolved solution like the internet, it will replace the accountants completely but that’s not true at all. It doesn’t matter how much AI evolves or become advance, it will never be able to replace the judgmental decision making power and experience of the accountants. Along with that, AI can never understand the relationship between clients and firms and it will have no use when it comes to improving the relationship between the two or even maintaining it.

In the future, both the human brain and AI will work side by side and the integration of both will result in an effective, accurate and quick auditing and other accounting processes. On one side, the humans will keep on using their experience and power of judgment in accounting while on the other side, AI will keep on automating and accelerating the complex and large amount of data.

Every firm adopting the AI technology in their accounting operation must understand that it AI is a transformative technology and therefore the productivity of this technology will matter a lot on the adoption strategy and timeliness.
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Currently, many firms have successes in integrating the artificial intelligence technology in their accounting operation and getting benefit from it whether in the form of accounting software or any other technology.