Artificial intelligence is a game changer for auditors
CPAs are using the latest technology to improve audits and risk assessments and analyze larger volumes of data.
Using artificial intelligence (AI) in the audit process has paid significant dividends for Samantha Bowling, CPA, CGMA, and her audit clients.
Bowling is a partner at Garbelman Winslow CPAs in Upper Marlboro, Md., and many of her clients are not-for-profits. They have important missions in serving the public, and they don’t want to be the latest charity making headlines with a case of fraud siphoning precious donated funds.
AI has helped Bowling and her firm perform better audits for these clients because it helps identify the areas where risk of material misstatement is largest and enables analysis of more complete sets of data and transactions.
“It’s a total game changer in the audit world,” Bowling said of the technology.
Technology is helping CPAs provide improved quality in almost every area of the audit. Bowling is at the forefront of a trend that has seen CPAs increasingly turn toward the use of AI in various aspects of the audit. Even smaller firms such as Garbelman Winslow, which employs fewer than 20 people, are discovering tremendous advantages as they incorporate AI into their work.
One of the most important areas where AI is paying significant dividends is in risk assessment. Auditors use risk assessment to determine which parts of a given client’s financial statements are in greatest danger of causing a material misstatement.
The auditors focus more attention and perform more audit procedures on those areas of greatest risk. CPAs rely on their experience and professional judgment to identify the riskiest areas of the audit.
The AI software enables auditors to make judgments about which areas need the most scrutiny, based on a sophisticated, thorough analysis of the client’s data and financial statements. This helps practitioners make the best use of their time in the audit.
Bowling is even using AI for initial risk assessments as she considers taking on new clients. The software tells her how risky the audit is likely to be, so she can charge an appropriate price for more complex audits or can decline to accept the engagement if there’s too much risk involved.
“I believe audits are definitely better [with AI] because they’re targeted based on actual risk in the financial statement transactions, not just our interpretation of what risk is,” Bowling said.
In addition to risk assessment, auditors are using AI to:
Analyze complete groups of data and transactions rather than relying on sampling. This leads to a more complete audit and helps auditors identify anomalies that can be flagged for additional scrutiny. It also ensures that smaller transactions get a level of scrutiny where they previously would have been overlooked because of materiality constraints.
Automate tasks that once were performed manually, permitting the auditor to focus more on tasks that require their judgment.
Converge financial statement auditing with forensic auditing in circumstances where fraud is discovered.
Meanwhile, AI is enabling company finance departments to create more efficient processes and better controls for their accounts payable, accounts receivable, enterprise risk management, and financial planning and analysis functions. Company internal audit departments are using AI for their own risk assessments and procedures. And CPAs who perform tax preparation services are using optical character recognition software to scan documents and import relevant information into their tax preparation software.
The next step for auditors, which Bowling already has implemented for some of her clients, is continuous auditing. When a client has its data available in a cloud application, Bowling can connect that data with the AI auditing platform to provide real-time analysis.
“Because of this technology, we’re going to be able to do continuous auditing or continuous risk analysis as the year is going on,” Bowling said, “and there won’t be huge surprises after the year is over.”
These technological developments help Bowling sleep better at night because she knows the software is helping her work to the best of her ability. She knows that she’s considering the right risks in her audit work, and she’s delivering high quality audits to her clients as a result.
“I’m really excited to be a CPA at this time,” she said. “I’ve been doing this for 30 years, and I’ve never been this excited about the software. …There is so much opportunity. Everybody was afraid that technology was going to replace us, but it’s not. It’s just going to elevate us to where we always wanted to be.”
