AI and in particular Gen AI will soon become common practice for auditors

The rise of artificial intelligence (AI) is transforming how auditors conduct their work, and as a result, businesses worldwide expect their audit companies to be in the vanguard of embracing and using the technology. That is according to research from KPMG.

In KPMG’s survey of over 1,800 leaders and audit experts worldwide, the researchers found that over three quarters of companies believe that the use of Al is moderately to very important for their external auditors to use, along with automation and data analytics – these three factors often go hand in hand with the adoption of Al.

This percentage is even higher for the board of directors, which understand the value of artificial intelligence and expect their auditors to use it. Leaders want their auditors to use Al for three key purposes:

Improve the efficiency and accuracy of audits
Over two-thirds want their auditors to prioritize the use of Al for data analysis and quality management. Slightly fewer would like auditors to focus on Al for risk and anomaly identification, as well as for risk mitigation and fraud detection.

Develop more proactive, continuous, and predictive processes
Over half of companies want their auditors to prioritize predictive analysis, and slightly less would like them to accelerate the speed of delivery and deliver real-time auditing throughout the year.

Gather data and value-added audit insights
Many companies expect their auditors to harness Al's ability to analyze vast sets of data and uncover insights that may not be identified through traditional analysis.

“The AI age is here – and it's reshaping financial reporting as we know it,” said Gopal Balasubramaniam, Partner at KPMG in Qatar. “As auditors, our mission is clear: lead responsibly, innovate boldly, and help our clients unlock the full value of this transformation.”

The lion’s share of companies (82%) surveyed by KPMG believe that their auditors are ahead or equal with them in the adoption of Al for financial analysis. Another 85% believe their auditors understand their company's use of Al for financial reporting moderately to very well, with over half saying well or very well.

Generative AI

When it comes to AI technologies, generative AI stands out as the most promising – at least in the immediate term. Most companies believe that their external auditors will be using generative Al (Gen Al) as a common practice within less than two years on average. Leaders expect it to happen even faster-in just 18 months.

Companies anticipate that auditors will use Gen Al in many of the same ways that they are using traditional Al-but do it better, because of Gen Al’s ability to uncover more complex data relationships and patterns than traditional Al through deep learning. They would most like to see their auditors prioritize the use of Gen Al for risk mitigation and internal controls, as well as data analysis and quality management, and risk and anomaly identification.

Gen Al enables auditors to analyze enormous volumes of data quickly and efficiently, freeing them up to focus on higher-value tasks such as interpreting results and recommending business actions. In addition, Gen Al can enhance the accuracy and effectiveness of internal control testing by identifying discrepancies or unusual activities that may require further investigation.

Governance

As adoption of AI accelerates, so do concerns around data security, ethical use, and regulatory compliance, said KPMG’s report. There also are serious concerns around cybersecurity and AI governance processes.

Notably, more companies have concerns about Gen Al than traditional Al. Copyright and IP (44%), cybersecurity (59%), data privacy (55%), and hallucinations (21% versus 7%) are much larger concerns for generative Al.

Commenting on the way forward, Keith Stafford, Partner at KPMG in Ireland, said: “Adopting Al presents challenges like data privacy or accuracy. However, its benefits, such as improved efficiency and decision- making, make it worthwhile. Al should be seen as a tool to enhance our capabilities and drive organizational success.”