- Automation is now a fact of business life
- AI is a game-changer for auditors of financial statements
- The skills of an auditor will help navigate the new world
The late Stephen Hawkins said that the full development of AI could spell the end of the human race. And he is not only person predicting dark things about AI. Elon Musk has said that our biggest existential threat is AI. Bill Gates made similar comments, noting that our brains are extremely slow, with limited memory and communication abilities.
The alternative view expounds that AI machines will leverage human capabilities rather than entirely replace them. It’s a game-changer, not the end of the world. For deep analysis and interpretation, machines will still require insights from talented humans.
Whatever your point of view, the reality is that automation and AI is not in the future, it is now. And it is impacting the financial statement audit now. Technology is changing business – what it does, how it does it, how it controls what it does, how it reports what it does.
"I think we should be very careful about artificial intelligence. If I had to guess at what our biggest existential threat is, it's probably that. So we need to be very careful."
Much of the technology that businesses utilise for internal control processes, including reporting, is automated, based on programmed steps, logic or rules. For example, many online retail businesses do not hold stock, but instead source products from suppliers in real time. Physical stocktakes are irrelevant. The auditor needs to understand the supply process, contracts and controls, in order to design audit tests and to evaluate whether the financial statements reflect the entity’s financial position.
With automated recording and ordering systems, the types of controls the organisation has in place to record transactions will vary considerably. The auditor needs to understand the business process, what automated control processes are in place and how they are managed by the entity. Many of these processes may not involve humans at all, but are still easy enough extensions to traditional processes to understand.
But what if the business utilises AI technology? AI involves machines that can perform tasks like planning, understanding language, recognising objects and sounds, problem solving and learning. Machine learning – without being explicitly programmed – is a way of achieving AI. How can the auditor understand the controls over an algorithm that is constantly changing without human intervention?
These challenges can keep people awake at night. Yet it is an area where an auditor’s skills can shine. Deep understanding, scepticism, ethics, objectivity, analysis and a focus on objectives and stakeholder interests will come together to navigate professional auditors through the treacherous waters of AI.
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Find out more about AI and future developments
To find out more about AI and future developments, visit the World Congress of AccountantsVisit WCOA