Artificial Intelligence and Auditing

Transforming the Audit in the Digital Age

BY KPMG, LLP

“Intelligent robots. Self-driving cars. Neuro-technological brain enhancements. Genetic editing.” We are at the beginning of the “Fourth Industrial Revolution,” says Klaus Schwab, Founder and Executive Chairman of the World Economic Forum. “The evidence of dramatic change is all around us and it’s happening at exponential speed.”

More data is created in a day than was created in a lifetime just a generation ago—and requires tools that can analyze this data at a high level to perform quality audit services. That’s where digital solutions, including cognitive technology and intelligent automation, are critical to success.

The audit profession must continue to invest in digital tools to serve the capital markets, enable its professionals and promote the public trust. These tools include workflow automation, which enables the seamless use of data, robotic process automation, which allows the use of intellectual property to assess great volumes of data for risks and anomalies, and intelligent automation, which uses cognitive technology to read unstructured data, identify relevant attributes and perform predictive analytics.

What is cognitive technology?

Cognitive systems assist human knowledge workers in two fundamental ways:

• Evidence gathering. Cognitive systems are adept at finding information within the unstructured, semi-structured and mixed formats of documents that underlie many audit processes. They assist knowledge workers in obtaining evidence and generating hypotheses that support decision-making.
• Judgment-based decisions. Once evidence is gathered, cognitive technologies convert knowledge into machine-interpretable logics and data into insights that auditors can apply to their interpretations, recommendations, diagnoses and conclusions. The systems consist of state-of-the-art artificial intelligence techniques that not only aid knowledge workers in their current workflow, but have the capacity to monitor user behavior to eventually learn to perform more complex tasks.

Cognitive systems mimic human brain functions in three ways:

• Perception. They interpret sensory input beyond traditional data.
• Reasoning. They can hypothesize and weigh supporting evidence.
• Learning. They improve confidence levels with experience.

With these abilities, cognitive technologies can process data in the forms of natural language processing, artificial intelligence, deep learning, machine learning, text analytics, predictive analytics, image recognition and voice recognition.

Digitizing the audit

Audit firms are increasingly using digital tools for a number of reasons:

• Audit quality. These tools deliver sustained high-quality audits in a world of ubiquitous information and exploding data.
• Empowerment. They position audit professionals for success in a digital and mobile world.
• Insights. They provide richer, more detailed audit evidence, enhanced transparency, consistency and depth of audit procedures, and deeper views into a company, its risks, its controls and its operating environment.
• Confidence. They identify anomalies and focus audit professionals on risk to provide high-confidence outcomes.

In the near future, unprecedented advances in computing technology will enhance auditing by making it possible to generate deeper analytical insights on a range of financial and operational areas such as:

• Predictive analytics.
• Enabling a deeper and more robust understanding of business risks by using client’s data combined with an analysis of industry or market data.
• Providing auditors with refined analytical capabilities and knowledge.
• Cognitive technologies.
• Enabling the analysis of larger volumes of data, in particular unstructured data.
• Allowing auditors to dig deeper into identified exceptions.
• Augmenting professional judgment and decision-making.
• Digital automation.
• Allowing for evaluation of larger data sets.
• Enabling a more granular analysis of underlying data and use of algorithms and rules.
• Supporting the auditor’s ability to identify unique transactions and pinpoint data or performance anomalies.
• Enhancing visualizations of results to facilitate interpretation.

Learn more about how cognitive technologies are transforming the audit profession.

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