In this article, Hayley Morris, our Senior Consultant for IT Internal Audit, discusses how AI and technology is transforming Audit.
Investment into technology and its corresponding skillset, once more prevalent in Silicon Valley, has soared within the Audit sector. So much so that in 2016, EY hired more data scientists than even Google. The Big 4 firms are thoroughly taking the lead in this tech boost, as they seek to defend their market share and to react to regulators who are refusing to take any prisoners when it comes to failures.
The new EU rules, which were originally designed to increase choice, and which see companies forced to tender their audit every decade, have been crucial to these changes, as companies feel the pressure to contend with their competition.
However, whilst on the surface, technology advancements might seem key to winning the race, serious questions are being asked of both its efficiency and the possible consequences of ‘too much tech’.
Auditors argue that using AI and data mining will help them to avoid high-profile failures, and steep fines, like that of PwC’s last month, a record-breaking £5.1m for “extensive misconduct” in its audit of RSM Tenon. It is hoped that only ‘repetitive manual tasks’ will be taken over by tech, freeing up human employees to focus on tasks only their judgement can solve.
Despite these hopes, there are worries that the automation of audit processes could spell disaster for employees in the long-run, fears that Mark Weinberger, EY’s Global Chairman and Chief Executive claims are unfounded, although he does admit that “the rate of hiring might slow down”. Even if Audit roles are safe, it doesn’t mean Auditors should remain complacent.
With technology becoming integral to the role, old-school Auditors may need to upskill, adding tech skills and qualifications to their belts. PwC are already attempting to bridge that gap between audit and technology professionals, by offering a 4-year apprenticeship, where students will both learn the business and undertake a computer science degree.
PwC’s move hopes that by transferring the admin work, often given to entry level students, to AI tech, and instead replacing it with new intense training environments, they will be able to have the best of both worlds.
“AI can automate a lot of knowledge gathering and will help free up our people to focus on higher-value strategic work and provide more fulfilling responsibilities. These developments will in turn create opportunities to develop new roles and positions for the future, while the skills we need will also continue to evolve. In five years’, time, will we be recruiting for ‘data assurance associates’ or ‘blockchain auditors’, rather than just general audit graduates following the standard institute curriculum – who knows?” – Hywel Ball, EY’s UK Head of Audit
An extortionate amount of money is being spent on these moves, with EY saying they’re spending “millions annually” to boost their digital capabilities in audit, and Jon Andrews, head of technology and investments at PwC saying investment is likely to grow at “an exponential rate”. With the money being spent on AI that learns over time and systems that can detect anomalies in an entire company’s data, there are still those who are asking, is this really worth it?
Andrew Gambier, Head of Audit and Assurance at the Association of Chartered Certified Accountants, has stated that “in practice, AI may not do much more to help auditors do a better job”, and his questioning that the system could be gamed, is a worry held by many others.
Stephen Griggs, Head of Audit at Deloitte, suggests that, regardless of their successfulness, new tech could still help secure deals, with firms using this to evidence “that their approach to innovation and the developments they’ve secured are more impressive than the competition.” We can only hope that these innovations prove fruitful and aren’t simply an ego-driven misallocation of resources.