Accounting and Auditing Practices

GPT-3 and GPT-4, the two most powerful AI systems in the world, can generate information on nearly every subject in human ontology, create stunning visual art, solve mathematical problems of any difficulty, code in any programming language, and according to domain experts, learning to reason like human & evolve further, all by itself! We humans, the pinnacle of life's evolution on Earth, might have just met our match.

With such immense capabilities, it is no wonder why AI (and closely related branches such as data science, data analytics, business intelligence, and big data analytics) significantly impacts nearly every sector of the global economy. And the world of finance and financial services faces a major upheaval in the face of such ground-breaking technological advancements.

This article attempts to shine a light on the most prominent impacts of artificial intelligence on accounting and auditing practices around the globe.

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 How Can AI Assist in Auditing & Accounting?

Machines have become incredibly powerful in the past few years. Machine intelligence is immune to many errors that most humans are prone to, can operate at massive scales, automate different varieties of tedious & labor-intensive tasks, pore through vast volumes of data, and infer and unearth valuable information. Such a wide array of powerful capabilities poses a serious challenge to human intelligence & enterprise limits.

Technology is the great driver of change, and after computer technology, it is AI that's driving change in the field of finance. AI/Machine & Deep Learning and big data analytics can achieve large-scale automation of accounting and auditing processes, enabling businesses and organizations to cut costs, time, and effort immensely.

• Natural language processing-powered AI systems can read, interpret, and extract crucial information from any document. Natural language processing is a major branch of AI concerned with processing, understanding, and generating natural human language in all its forms.
• If trained correctly, NLP-powered systems can read, analyze and audit different financial statements, reports, leases, invoices, policies, derivatives, & sales contracts. With the right design and training, these systems can easily:

1. Identify key terms
2. Identify concerned parties
3. Analyze and uncover vital information
4. Point our errors
5. Recognize patterns & outliers
6. Can audit information by implementing set procedures, enforcing constraints, and applying intellectual standards

 And they can do all of the above without bias or prejudice, with absolute consistency, and with minimal human supervision.

• AI-powered auditing software suites are making their presence known in the wider market. Such tools can automate and speed up the analysis of varied information sources, accounting journals, financial reports, etc. With intelligent tools, auditors can easily identify potential problem areas, errors, discrepancies, & inconsistencies, unauthorized & doctored entries, and much more.

 Synthesis & analysis, development, structuring, and presentation of audit reports – all major sub-tasks in an auditing process are streamlined with advanced AI-auditing suites.

 For chartered accountants and finance professionals, the entire game has changed drastically. Their skills and intelligence are facing stiff competition from ever-evolving machine intelligence, which can surpass the laboring capabilities of any professional chartered, cost, or managerial accountant.

Notice How Closely The Data Analytics Sub-Tasks Align With The Stages of A Generic Auditing Process

AI-Assisted Accounting & Auditing Practices

The rise of specialized intelligence will forever change the landscape of auditing and accounting. The Association of International Certified Professional Accountants, the American Institute of CPAs, the Institute of Chartered Accountants of India, and the biggest CA organizations across the globe consider AI to be the ultimate game changer, with AI systems deemed the ultimate perfect complement to human talent in the domain.

• AI assists auditing teams in detecting, identifying, interpreting, and reporting any anomaly in financial information.

The ability of big data analytics systems to work with vast volumes & velocities of varied kinds of data is a boon for auditing firms. Collation, synthesis, cleaning, structuring, and analysis of large-scale enterprise-wide data becomes exceedingly simple with data warehousing and the Extract-Transform-Load pipeline.

Big Data Analytics Collates, Extracts, Transforms & Loads Data For Audit-Specific Querying & Operations

• Data and information are central in any accounting and auditing processes. AI and analytics-powered digital infrastructure is opening up new opportunities allowing CA professionals to merge different sources of information, craft special queries, and improve the quality & accuracy of operations.
• Risk assessment, fraud detection, pattern recognition, and financial advisory are the key objectives of an auditor, and each of these tasks can be carried out with amazing precision & at immense scales by AI.

Computer vision, optical character recognition, natural language processing, pattern recognition, neural network & deep learning are exceedingly potent technologies. They can consume and learn from vast amounts of information through powerful computational systems. Once learning is complete, systems can enhance and elevate the working and performance of auditing professionals to a whole new level.

• Trained on standard auditing procedures, AI software can aid auditors in making the right judgment by delivering timely and accurate insights. Software systems such as MindBridgeand AuditMap are immensely powerful auditing software systems that provide a better way to carry out deeper analysis & faster audits.
• AI and Analytics come with a collection of highly potent tools, techniques, and technologies for:
  • Empowering audit professionals to work with and manipulate huge amounts of varied data;
  • Working at any scale and scope and with any objectives;
  • Suggesting avenues, providing insights, and inferring knowledge for domain professionals;
• Tedious, labor-intensive tasks such as data entry, data collation, account reconciliation, and reporting will be slowly but surely taken over by AI-powered systems. NLP & OCR systems and data warehousing & data lake systems can process vast amounts of data at high velocities from both paper & paperless sources.
• In the face of all such major changes, auditors and accounting professionals have their work cut out. Representatives from threeof the world’s biggest accounting & auditing firms (KPMG, Deloitte, and Ernst & Young) urge professionals to raise the bar of excellence to compete with AI systems' immense ontological & processing capabilities.

For AI to become the perfect auditing partner, accounting and auditing professionals must use their skills, knowledge, and experience in tandem with the abilities of AI-powered auditing systems. Human intelligence must address all those areas where AI falters or come up short. Auditing professionals need to address the ethical and objectivity concerns of AI analysis, use their experience & human intellect to choose the most appropriate choice, and make the right judgment with precise assistance from AI assistants.

AI can make human auditors and accountants better decision-makers by arming them with the right kind of knowledge. While generated by copious and comprehensive analysis of large amounts of data, that knowledge must be tempered with human knowledge & judgment. We, humans, possess the emotional intelligence, the ability to relate information to real-life scenarios, and the creativity & innovation to deliver the best possible solutions.

Well, that’s about it for this write-up. Hope this was an informative and interesting read for anyone looking to understand the influence of AI in auditing and accounting practices.