Julian McPherson, the Partner in Charge of National External Audit and Assurance at KPMG, reported using the enhanced software on five audit cases in Australia. Several teams are executing traditional and new audit approaches to test the effectiveness of their machine-learning functions.
Mr. McPherson says;
“Analysing 100 per cent of transactions”
“Every transaction is given a score”
“attention on high-risk transactions”.
“The solution was able to identify high-risk transactions that wouldn’t have been able to be identified normally,”
At first, the new capability would not reduce the time or workforce required for an audit due to the labor-intensive process of initially establishing data feeds to allow the software to produce a comprehensive analysis. KPMG’s partner confirmed this.
Mr. McPherson continues to say:
“My team has grown, we are now recruiting more data scientists,”
Leverage AI To Streamline Auditing Processes
Split opinions exist among researchers regarding the long-term implications of artificial intelligence technology regarding white-collar jobs and its effect on auditors specifically.
Two recently conducted studies regarding ChatGPT and other AI chatbots showed that while such tools do have the potential to automate a range of office tasks and increase efficiency, it is currently too early to determine what the net effect will be on white-collar employment–whether jobs shift or are entirely lost globally.
Investment in Artificial Intelligence (AI) has been found to enhance the quality of audits, reduce associated costs, and, in some situations, supplant human auditors. This was the conclusion of a research paper published before the public release of ChatGPT in 2022.
Investigation of AI usage by the 36 largest global audit firms has discovered that more investment in this tech could lower audit fees, reduce possible audit restatements, and consequently decrease the number of accounting staff.
The authors say:
“Our empirical results document substantial gains in quality, as AI investments by audit firms are associated with significant declines in the incidence of restatements, including material restatements and restatements related to accruals and revenue recognition,”
“[Moreover], we find preliminary evidence that improved audit quality is accompanied by a move towards a leaner process: as audit firms invest in AI, they are able to lower the fees they charge while reducing their audit workforces and showing increased productivity, as measured by total fees per employee.”
The adoption of AI in auditing is still in its early stages; it is clear that the technology has the potential to transform the industry. As more firms like KPMG embrace this technology, we expect to see more accurate, efficient, and insightful audits, benefiting businesses and stakeholders.
Source: Australian Financial Review
