How many times do you get into trouble that you easily could’ve avoided? You screw up and then your friend tells you that they knew about it all along and then you scream at them “why didn’t you tell me?”
If you could have that friend with you at all times to point out all your faults and inconsistencies to make sure you stay out of trouble, would you do it?
Of course you would, and in today’s world, this friend of yours has a name: Artificial Intelligence.
By using AI in auditing, you can make sure you stay trouble free and have everything check out just the way you want.
AI has already changed the game in the world of accounting. It is not a trend at this point, but a building block that you set your company foundations on. Artificial intelligence has transformed the game and brought in overwhelming efficiency and accuracy that we did not know was possible in such a short period of time.
Using AI in industry use cases is not just a theory anymore or something that we hope to accomplish. It is now a proven methodology with actual real-life applications and documented case studies.
The use of AI in accounting, most importantly auditing, is still growing rapidly. Nearly 72% of companies today are using AI for financial reporting. This number is expected to explode to 99% in the next three years.
The use of AI is not a work of magic or fairy tale as many people tend to believe. AI is the direct result of complex algorithms and heavy data sets that enable the machine to handle your most tedious tasks and transform businesses.
The days of long, repetitive, low value tasks are over.
AI does all of that for you now through multiple different use cases and leaves you more time for actual analysis and high value tasks that drive growth.
Generative AI is a function that basically allows it to create new content from data that you provide. This content can come in the form of financial reports, analysis, predictions, etc.
This has been a breakthrough for financial firms as they have fully incorporated AI to handle their auditing summaries, generate financial reports, or even create simulations that can predict future financial outcomes.
There are many AI use cases in auditing and financial reporting, and they are still improving and evolving the more AI technology is advanced. Today, generative AI is able to process and analyze unstructured data.
This allows it to analyze things like emails, contracts, or paperwork.
This is a game changer in auditing, as AI can detect potential risks or faults in a mess of paperwork that a normal employee would miss.
This allows for increased accuracy and efficiency that just can’t be matched by traditional auditors.
According to KPMG, integrating AI into auditing processes is not just a suggestion, but a game-changer that can significantly reduce the time and cost associated with manual auditing tasks.
Advanced machine learning algorithms can eliminate human errors and biases, and allow you to analyse vast datasets, identifying patterns and anomalies.
Not only does this allow AI to be helpful in detecting fraud, but it allows it to offer so many use cases in the world of auditing.
AI’s processing capabilities are unmatched. It is able to analyze books of data in just minutes. It is your lifeboat in the vast sea of unstructured, messy paperwork that you would drown in. Well, no longer are the days of drowning in paperwork, AI will do it for you.
AI can analyze huge amounts of financial data quicker and more accurately than a human can. This includes unstructured data like financial statements and emails.
By utilizing AI in data analytics, AI and auditors can detect hidden patterns that are missed by traditional means.
This allows for auditors to make better decisions and offer deeper looks into financial reports and provide an overall better audit.
An example of that is spotting patterns in revenue sources or disparities in expense reports. This allows auditors to formulate better strategic business suggestions for their financial institutions.
Fraud detection is probably the biggest nuisance in auditing and is the most time consuming task there is. This is where AI becomes the solution with its machine learning.
AI can detect and respond to problems in real time. This has changed the way that some fraud analysts operate, as they now no longer have the same work load.
Instead of analyzing every little irregularity, they are now free to concentrate on high-level problems and cases and leave AI to handle the little problems.
AI can help detect and prevent fraud by continuously monitoring transactions. It studies patterns and irregularities to spot potential suspicious behaviour.
By analyzing large sets of data, AI can detect anomalies such as unusual spikes or strange payments.
This allows auditors to investigate those problems before they cause more damage and become greater issues.
One of the greatest strengths you can have is when you can accurately predict the future. Today, we have the closest best thing to that.
AI is fed historical data and is then allowed to shape an extremely accurate prediction of the future, which can allow auditors to assess financial performances and potential risks.
Predictive analysis helps auditors forecast revenue streams, expenses, and risks in compliance, but risk management is a whole other story.
By getting accurate predictions of the future, auditors are now able to provide more strategic advice to help businesses and prepare to tackle financial and regulatory challenges.
This can also allow AI to predict future dips or increases in revenue based on past financial trends. This gives companies and auditors time to make strategic adjustments accordingly to mitigate risks or capitalize on potential opportunities.
Imagine if someone had told you back in 2017 that Nvidia will explode like that. Just a small investment of $1000 could’ve made you over a quarter of a million dollars.
With AI predictions, you don’t have to miss out on such opportunities.
Something that is always a nuisance for any manager or business owner, is resource allocation. AI algorithms can analyze historical data and help auditors optimize resource allocation. This allows for appropriate distribution of resources, where high-risk issues receive more attention than a lower-risk one.
AI helps the distribution of resources be more effective and efficient, with little doubts and guesses to the course of action taken.
If you’re wondering what that might look like in a real-life scenario, AI will analyze previous audit reports and determine which areas have generally been more problematic and require more attention. Higher-risk areas will receive more time and resources based on data and not just feelings or guesses.
What sets AI apart from humans is the fact that AI never rests. With AI in command of your auditing, you now have constant regular monitioning of financial transactions. Everything is happening in real time.
Traditionally, auditing reports happen in intervals and set dates within the year. Between those periods, a lot can happen that can cause disasters if left unattended.
AI can now allow auditors to address detected anomalies as they occur rather than just wait for them to be bigger issues than they needed to be.
An example of that is continuously scanning financial systems for unusual transactions. If potential fraudulent transactions come up they are looked into right away and easier to handle.
Usually, when financial companies lend money or invest into projects, a lot of study is put into the decision-making process.
There is a lot of risk involved, and that's why there is an entire department dedicated just for managing risk.
AI can evaluate past reports, transactions, audits, and industry trends to highlight areas with high chances of fraud or violations.
This allows auditors to adjust accordingly and avoid risks. Avoidance is easier than curing.
Artificial intelligence in financial services makes a huge difference in investment management and risk analysis. AI factors in multiple aspects to determine whether an entity is reliable or not.
Transaction history, credit score and history, income growth, and market conditions are taken into consideration as well as other things to create predictive analytics, ultimately predicting behavior and micro activities to determine if investments should occur.
The cherry on top of the cake is the reporting phase.
After AI and auditors look into all the data, they now have to report it. AI tools are used to present the findings and make recommendations based on current financial data.
AI can generate visual dashboards and detailed reports, highlighting financial insights and trends. This allows for executives or board members to easily access and understand the data findings and realize the areas of concern.
As with anything, there are always challenges. The challenges of using AI in auditing are similar to that in any other industry.
There is always a huge concern for data privacy and security. Dealing with sensitive information and financial reports of big clients can be a problem if anything is leaked. Cybersecurity has become extremely important in today’s day and age of cyber crime and theft.
AI might also be inaccurate if the data provided to it is unclear or incomplete. So if someone messes up along the way, the direction of a report can dramatically change.
Adoption of new technologies is always an issue if there is a lack of skill with traditional employees. Traditional auditors may not be able to work efficiently with AI or be unable to use it, which is why business owners must always be looking to invest into their teams to adopt AI.
AI in auditing is not a trend or a promising idea. It's a necessity. If you’re not using it you’re behind. The use of AI is similar to that of the invention of the printing press. It is the new way of the digital age.
By utilizing and adopting AI, auditors become more efficient, more accurate, and more insightful.
They are no longer just people who punch in numbers, their role completely transforms to strategic advisors. Someone who actually brings value to a company.
AI has taken away the boring, mundane, and repetitive nature of work. The donkey work has been eliminated.
This presents the opportunity for more value work and for people to bring value and unique insight. Hiring is now based on quality, and not just a need for someone to push numbers.
If you are looking to adopt AI but are unsure of the way to incorporate it into your business, there is no need to worry. LyRise offers professional experts that can guide you through the process. Book a free consultation with us and begin your AI journey.