The Use of Artificial Intelligence (AI) in the Execution of Audits

Author: The ASA’s working team concerned with INTOSAI subcommittee on Internal Control Standards.

Introduction:

In the light of the world’s developments in information technology, the term Artificial Intelligence (AI) has been traded in discussions often in recent times. It is considered a modern field that attracts the attention of all societies, which is constantly evolving, and it is expected to play a crucial role in humanity’s future. Utilizing AI systems and modern information technology is key for the future of data processing in auditing to complete the audit work efficiently and effectively.

What is AI?

AI is defined as “a modern science that is harmoniously built and interconnected between mathematical rules, devices and programs that have been assembled in computers, which in turn perform many operations and tasks that a human can accomplish, but they differ from it in terms of speed and accuracy in finding solutions for complex problems, which are difficult to solve”.

More broadly, AI has a number of benefits: 

• Productive efficiency: AI can automate various tasks, leading to increased productive efficiency.
• Accuracy: AI can process large amounts of data, identify patterns that humans may not be able to detect, which can help make more accurate predictions and better decision making.
• Innovation: AI can contribute to the development of new products and services that were not previously possible.
• Cost-effectiveness: AI helps to reduce costs by automating tasks, reducing the levels of human intervention.

Advantages of AI for Auditors 

There are advantages from using AI systems in the field of external audit:

• External auditors can access information and evidence required in the audit process in an appropriate time. The timely provision of information increases the accuracy of information, and can help auditors reach reliability and transparency.
• Auditors can further develop accounting and the auditing profession, in order to raise competitiveness in the field of accounting and auditing to keep pace with the speed of other sectors, and reduce fraud, financial and administrative corruption.

The accounting and auditing profession is considered one of the most affected professions by the use of AI, as auditors need to keep pace with the accounting systems of the auditees. Therefore, the auditing profession cannot rely on traditional methodologies, and auditors must respond technological developments and enhance their technical, technological, and knowledge skills and capabilities continuously and appropriately. Using AI in the audit process can help improve the efficiency and effectiveness of the external audit process.

To determine the impact of AI on auditing, we must ask several important questions:

1)What are the benefits of AI in the audit field?

Auditors can find benefits of using AI technologies in the following contexts :

• Taking advantage of using expert systems in auditing: Expert systems are computer systems which can emulate the decision-making ability of a human expert. In auditing, expert systems can achieve many advantages:
  • They can improve the efficiency of the audit process, reduce costs, reduce the audit workload, and deliver the results of the audit process in a timely manner.
  • Expert systems can increase the performance of auditors. In learning how to utilize and work with expert systems, auditors become trained and qualified, increasing their effectiveness. Expert systems can also serve as a documentary reference for auditors. 
• Contract Audit: The use of AI in contract audit procedures is the most common, as a larger number of contracts can be analyzed continuously in real time. The auditor can automatically extract data from contracts using programming tools, identify relevant items for accounting processing such as the contract start date, contract amount, renewal options and termination, etc. Using AI, auditors can more effectively assess the risks in the contract.
• Electronic auditing and achieving cost advantage: The use of electronic auditing, or the digitization of audits, contributes to reducing the cost of audit services and increasing the profitability of audit firms. The use of audit software in the audit of financial statements, for example, can help expedite the completion of audit services. To achieve this, the auditor must be trained in using electronic audit software.
• The ability of AI to detect fraud: AI and machine learning can be used to detect fraud, as these technologies help to enhance the effectiveness of data analysis models. AI can study data and identify patterns that constitute fraudulent transactions.
• Enhancing audit quality: Electronic audits and its development through AI technology can save time and effort, and make the desired results of the audit strong and well supported. For example, AI can help detect fraud and anti-money laundering operations by meeting high audit quality standards. 

2) What are the obstacles or challenges that prevent the use of AI in audit work?

As the AI field innovates and develops over time with technological advancements, auditors will continue to face challenges in utilize AI in audit work. A few current examples of obstacles include: 

• Designing programs for AI for auditing purposes can be challenging due to complex data environments. Auditors collect and utilize a variety of data and evidence types, and integrating different forms of data into one AI model can be challenging. Additionally, audit programs need to balance how to integrate AI, while maintaining the roles of human auditors. 
• Ensuring that audit staff are qualified to employ AI related methodologies, and are able to keep abreast of technological developments in the auditing field. Auditors also need to understand and explain the rationale behind audit findings. Ensuring the transparency and explainability of AI-generated results is crucial but can be difficult to achieve.
• Securing high quality data and information cyber security for the auditees as well as the SAIs. AI models heavily rely on high-quality and consistent data for accurate decision-making. Ensuring data integrity is a challenge, as inaccuracies in input data can lead to flawed audit outcomes.

3) What are the consequences on not having auditors respond to the requirements of AI?

Stakeholders and audit clients now have increased expectations for auditors, due to the need for more support as new risks arise with industry and government growth. Regardless of the need to respond to the requirements of stakeholders and clients, the audit profession will not be able to continue without adapting to the surrounding changes, especially technical changes. For example, how can an auditor examine the huge amount of data available to clients without using modern technologies? Is it possible to plan the audit process without taking into account the risks arising from these changes? How can the auditor perform his job if he does not keep up these variables? Auditors need to consider utilizing AI in audits to keep pace with the evolving landscape. 

Conclusion:

In adapting to changes in society and technology, auditors need to use AI and expert systems in audit work, to be able to meet efficiency and effectiveness standards in audit work. SAIs should keep pace with technological development and digital transformation of their auditees. By using AI, SAIs will be able to process of big data to more efficiently identify risks of scam and fraud, and can enhance their role in protecting public money. In the face of continuous technological advancement in society, auditors should be well trained to utilize AI in audits to be able to deliver high quality accountability.