What Audit Firms Should Consider as Their Clients Adopt AI Tools 

Organizations across the globe are increasingly turning to AI to improve their financial processes and operations. Recent research from IDC found that 96 percent of organisations currently use, or plan to use, AI in their financial processes. There are several reasons why. Forty-eight percent of companies find AI helps them spend less time on menial tasks; 33 percent are investing in Gen AI assistants to improve employee productivity; 29 percent are relying on AI to handle manual processes that must be reconciled with technology systems; and 26 percent are turning to AI because they need help handling their workloads. 

This increasing use of AI in business has significant implications for firms. It will change how they conduct their audits and the technologies they use in the audit process. A paper from CPA Canada and the AICPA called “The Data-Driven Audit: How Automation and AI are Changing the Audit and the Role of the Auditor” identified several potential opportunities client use of AI tools creates for firms. These include: 

• Assurance reporting on a client’s AI tool 

• Assurance reporting on the client’s AI tool controls and process  

• Assurance reporting on the client’s appropriate use of AI 

• Assurance reporting on AI-enabled robotic process automation applications 

As clients increase the use of AI in their financial operations, firms will need to hire and train staff who understand how AI systems function, change their audit approach to account for AI-driven financial systems and invest in their own AI systems to enhance the efficiency and accuracy of their work. 

The need for AI skills in auditing processes 

With more clients deploying AI in their financial processes, accounting firms will need to understand how those AI systems work. This will include figuring out how AI algorithms function, where the AI is pulling data from, how the AI makes its decisions and how accurate the final output is, according to the CPA Canada/AICPA paper. 

Critical thinking, analytical skills, professional scepticism and sound judgement – the traditional core skills of all excellent auditors – will continue to be important in auditing AI systems.  

But audit teams examining AI systems and controls should also have a range of AI-specific knowledge, including: 

• Machine learning, a subset of AI that enables systems to learn patterns and make decisions without being explicitly programmed by analysing and adapting to data 

• Understanding how AI algorithms and the source underlying the system function 

• The risks presented by AI, such as inaccurate output, potential bias and compliance with privacy laws 

Firms have a few options to weave these skills into their audit teams. They can hire auditors who already possess some knowledge of AI. They can hire or collaborate with technology specialists to assist in auditing AI processes or invest in training their auditors in AI, machine learning and data science.  

A variety of organisations, including the Institute of Internal Auditors and ISACA, an international professional association focused on IT governance, offer courses in auditing AI. And professional bodies, like the AICPA, offer resources on better understanding AI and its capabilities, AI governance and AI risk management.  

Adapting audit approaches for AI systems 

As firms begin auditing AI systems, they should update their methodologies to account for new processes. Risk assessments may evolve to incorporate AI-specific risks, such as a lack of transparency and bias.  

AI audits will also need to ensure systems comply with existing and emerging AI regulations, such as the EU’s Artificial Intelligence Act. Firms will also need to address jurisdictional differences in AI-related regulations for clients with operations across multiple countries. 

Enhancing audit efficiency with AI tools 

Firms that don’t invest in their own AI systems may find it difficult to attract business. BDO USA’s “2024 Audit Innovation Survey” polled 200 finance leaders about their use of advanced technologies in audit. They found that 64 percent said they look for a firm that uses AI before engaging with an auditor. By investing in AI skills and tools, firms can harness AI’s potential to meet evolving client demands and enhance their services while improving audit quality. 

IDC’s research discovered there are several benefits audit firms identified in using AI tools. Forty-one percent of survey respondents said AI increased accuracy because it can identify anomalies and patterns that may be missed by manual review. Over one-third of respondents said AI improved business efficiencies by processing large volumes of data quickly. And more than one quarter said AI reduces overall costs by automating routine tasks.  

Here are a few examples of how a Gen AI tool purpose-built for auditors, like Caseware AiDA, an AI-powered digital assistant, can free up time for audit teams: 

• It can examine lengthy PDF files or other documents and quickly create accurate summaries with links and citations, saving auditors from having to read through hundreds of pages 

• AI tools trained on audit-specific information can provide context-aware answers to questions related to a document, such as lease agreements or inventory records 

• AI trained on audit standards can ensure a firm’s work meets the highest professional benchmarks 

Ensuring privacy and compliance in the use of AI tools 

Any AI systems accounting firms use should comply with professional standards and protect client privacy. General-purpose Gen AI tools don’t meet these requirements. They save the queries entered into them and use these queries to train the AI’s language models. This means that information can potentially be accessed by anyone using the same Gen AI tool because the tool retains every query and can include that information in its subsequent responses. 

Firms should instead rely on AI tools purpose-built for auditors and accountants. These tools should retain no user prompts and feed no information back into a large language model. This allows firms to maintain the highest standards of data security and client privacy.  

As AI continues to revolutionise financial processes, accounting firms must embrace the opportunities and challenges it presents. Firms can remain competitive in a rapidly evolving landscape by equipping their teams with the necessary AI-specific skills, updating methodologies to account for AI-driven systems, and investing in cutting-edge AI tools. The integration of AI enhances efficiency and allows auditors to focus on high-value tasks, ultimately improving audit quality and client satisfaction. Firms that proactively adapt to the AI era will be well-positioned to deliver innovative and reliable assurance services, ensuring their relevance in an increasingly data-driven world. 

Learn more about how AI solutions like Caseware AiDA can streamline workflows, allowing your team to focus on the most critical areas of each engagement.