Voice of Business Blog

Guest post from Greater Rochester Chamber member Mike Martinsky, CPA, Bowers Accountants & Advisors

Artificial intelligence (AI) is all the buzz right now, with seemingly limitless capabilities.  Accounting firms are actively adopting new AI tools to help in their day-to-day operations, specifically with audit engagements. AI has the potential to significantly change how audits are performed by allowing auditors to process information more efficiently and identify areas that may require additional attention. While AI provides tremendous opportunities for audit teams, it also comes with risks and limitations that auditors must understand.

The Benefit of AI For an Audit

The introduction of AI into the audit process has changed how auditors are able to spend their time. One of the most obvious benefits is AI's ability to process large amounts of data and identify information that may be meaningful based on the prompts provided by the auditor.

A benefit of AI processing the data quicker, allows auditors to spend the additional time saved towards more valued added opportunities.

For example, an auditor may want to identify unusual or potentially high-risk journal entries within a client's general ledger. An auditor could spend a significant amount of time reviewing thousands of transactions and manually extracting entries that warrant further investigation. AI can assist in analyzing that data and within minutes create a smaller population of entries for the audit team to investigate further. What could previously take hours or potentially an entire day may be reduced to a matter of minutes.

The time savings are valuable, but the real opportunity comes from what happens next.

Instead of spending most of the day identifying transactions, the auditor can now spend that additional time discussing the transactions with management and gaining a better understanding of why they occurred. The auditor can ask questions, understand the underlying processes, and determine whether the transactions point to a larger issue within the client's accounting or internal-control environment.

This is where AI can help auditors move from simply identifying observations to providing value-added recommendations.

The Potential Downsides of AI for an Audit

Despite the potential benefits, AI also has significant limitations. The most obvious is that AI can generate incorrect responses.

AI tools are capable of processing auditing standards, and other technical information. An auditor may ask an AI tool a question regarding the appropriate accounting treatment for a particular transaction and receive an answer that appears confident. However, the answer may still be incorrect or may fail to consider an important fact or exception.

This creates a significant risk for auditors.

It is imperative that auditors fact-check and critically evaluate any information generated by an AI tool. AI should be viewed as a tool to assist the auditor, not as a substitute for professional judgment.

The Future of Auditing

AI is likely to continue changing the way audits are performed. The most significant impact may not be the elimination of audit procedures, but the redistribution of an auditor's time.

If AI can help auditors spend less time performing repetitive, manual, and data-intensive tasks, auditors can spend more time exercising professional judgment, communicating with management, understanding business processes, and identifying opportunities for improvement.

The future of auditing may therefore be less about AI replacing auditors and more about AI enabling auditors to become more valuable advisors to their clients.