Data, artificial intelligence and machine learning – what’s next for the external audit?
CaseWare Australia & New Zealand proudly joined the Chartered Accountants Australia & New Zealand Audit Conference 2018 in mid April to discuss the importance of technological revolutions in auditing. The panelists were:
- Rob Pillans FCA – Chair (Planet Consulting)
- Bruce Wang (Accru Melbourne)
- Craig Waldon (CaseWare Australia & New Zealand)
- Radlee Moller (CIB Accountants & Business Advisors)
- Solon Angel (Mindbridge Ai)
Each of the panelists were asked for their definition of Big Data and Data Analytics, Machine Learning and AI. This is a summary of the responses and discussion held at the Melbourne conference.
Technology likely to change the audit landscape
Big Data includes data from structured data sets like financial or customer databases, as well as the unstructured data from social media sources, which includes diagrams and photos. The issues with Big Data include the ability to make sense of unstructured data, as well as the sheer volume and speed at which data is being generated.
Data Analytics is the ability to take big data and make sense of it. Ideally, in formats easily understood and interpreted. Data reliability or quality is also an issue that has not been intelligently sorted yet, even for structured data and is an ongoing challenge.
Artificial Intelligence is the development of complex computer systems that can take on tasks that usually require the equivalent of human intelligence and decision making skills. Effectively, an extension of human capacity – for example, taking on more and more of the tedious and repetitive tasks that an auditor might undertake during an audit.
Machine Learning is an application of artificial intelligence (or multiple layers of AI) which provide a machine the ability to learn and improve from experiences without human intervention – machines that can access data and use it to learn for themselves – an “adaptive ecosystem”.
A era of opportunity if technology is leveraged
All panelists agreed that we are currently in an era of opportunity for auditors and accountants – if technology can be leveraged successfully, the value provided to assist clients to understand patterns and expedite business opportunities has never been greater. The ability of an auditor to now analyse 100% of the ledger (no longer reliant on sampling) and provide an insight to the business has the potential to be exceedingly valuable to their client.
Current problems for auditors
Within the audit space right now, the following challenges were identified:
- Repetitive tasks take precious audit time – the balance of providing value vs compliance in audits is still heavily weighted towards compliance requirements.
- Detection of fraud has time limits – during an audit with just sampling capabilities, sheer volume of data makes effective fraud detection more remote.
- Technology to date has meant that specialists or auditors skilled in data analysis techniques would typically be needed for most audits with large datasets to have even sampling undertaken effectively.
- Data access, data veracity and data quality is still a concern for most auditors. This includes the geographical location of data – offshore data storage has major implications for a number of companies and industries.
- The accounting and audit standards are still catching up with technological advances – are we staying “true” to the standards, or potentially ignoring the standards? The hope is that new technology allows us to exceed the standards, and that there won’t be a ‘clash’ with the standards.
- Technology should be viewed as an “assistant” or tool, with the ability to:
– Apply consistency
– Be wholistic (100% testing – breadth & depth data analysis)
– Provide efficiencies
– Eliminate run-of-the-mill samples
- Integration of data analytics within individual firms methodologies, and making sure it is effectively used.
The future of auditing
The convergence of data and technology is providing a breakthrough opportunity for auditors and ongoing analysis of business data, with the impact likely to change the way auditors need to work.
Looking at examples in other industries, the panelists were probed on their current ‘wishlists’ and the way forward with the new technologies available now, and coming in the next few years:
- New technologies and their exciting applications are lifting the profile of auditors, and providing better value to clients.
- Steps forward potentially include:
– Continuous auditing, 24/7, with high risk transactions highlighted immediately.
– Audit committees embracing new technology and asking for it to be used on audits.
– CFOs need to be on board.
– Increased data integrity measures, allowing the data to go direct to the auditors with no human intervention or interpretation required.
– Technology becomes more affordable and easier to apply to data and interpret for client value – more intuitive, with better interfaces.
– Continuously leveraging efficiencies, including the use of BOTs for good.
– Better business intelligence tools, including visualisation (with drill down capabilities).
What can your Audit firm do to embrace the new technologies?
The new technologies available now and coming soon, are not a silver bullet for audit efficiency and effectiveness. It is important for firms to consider how these technologies can add value to the audit without increasing costs. Things that all firms should consider in this area include:
- Get an understanding of the technologies coming onto the market.
- Work out how it can fit into your methodology.
- Understand DATA and the audit impact – it’s not a ‘silver bullet’ – there are pros and cons to using analytics.
- Contribute to discussions about the standards and moving these forward to what makes good sense for business, the financial markets and auditors.
- Cultivate data analysis skills in your people, encourage professional bodies & learning institutions to include it within audit & accounting courses.
- Within your audit business, take advantage of / look to:
– Change mindsets / champion efficiencies / take out annoyances
– Collect information & experiences from your peers
– Skill your people
– Reassess your usual operations
– Challenge your methodology
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