Came across this article by Alex Jozsa of Barclay Simpson. Am interesting insight into our every day interactions with Artificial Intelligence and how Internal Audit can benefit.
Before I sat down to write this article, I’d interacted with AI in at least four ways today.
Overnight, Amazon had emailed me a mountain of product suggestions based on my previous purchases and browsing history. Then, I asked Siri (sorry Android users) to bring up my calendar appointments for the day while eating breakfast.
My bank no doubt also ran fraud detection processes to work out whether the person taking cash out of the ATM this afternoon really was me. And let’s not forget Google’s search function, which relies on RankBrain – an algorithm learning AI system – to provide more relevant results.
These examples may not quite meet our expectations of the self-aware robots that we’ve seen in science fiction. However, they all have one thing in common: they are designed to make our lives easier. As AI investment flourishes, we are beginning to see a growing number of business departments adopt these technologies to maximise team efficiency – and internal audit is no exception.
Let’s look at how auditors can use AI to better evaluate risk management, control and governance processes.
The current state of play in internal audit
Mathematician Alan Turing was one of the first academics to propose that computers would one day have communication skills so advanced they could convince a human that they, too, were a real person.
Almost 70 years later, the ‘Turing Test’ is still a benchmark for the latest augmented intelligence developments. However, internal audit is some way off using sophisticated AI technologies. A recent PwC report found that just 12 per cent of the best-performing internal audit functions are advanced in their use of intelligent automation technologies, such as robotic process automation (RPA).
Intelligent automation systems can have a significant impact on productivity, but they are relatively ‘dumb’, rules-based softwares that can only mimic human behaviour. In other words, they don’t have self-learning capabilities unless they are paired with other AI technologies. Nevertheless, PwC predicts RPA adoption will gain momentum among internal auditors, with departments naturally evolving into a more AI-driven approach in the future.
These innovations are likely to create a number of benefits for auditors, although professionals will need to become more familiar with emerging technologies to ensure they are used effectively.
What are the benefits of AI in the internal audit function?
AI poses both risks and opportunities for internal auditors. On the one hand, the function must provide assurance their business is using these technologies appropriately, but auditors can also leverage AI and AI-adjacent systems to their advantage.
1. Reduce the manual burden
Whether it’s RPA or more sophisticated solutions, one of the primary applications of AI is to alleviate the burden of laborious manual processes. As an example, auditors would traditionally have had to review batches of transactions manually to highlight discrepancies. The time and resources required to cover even a few hundred documents is considerable.
But AI can significantly streamline this job. For example, KPMG has partnered with IBM’s Watson platform – which is capable of reading 800 million pages per second – to enhance its tax and advisory services. Businesses can teach systems to identify signs of fraud and other problems, with auditors stepping in to examine the flagged issues.
2. Provide more comprehensive audits
The ability to evaluate massive datasets quickly doesn’t just free up professionals for more value-added tasks, it enables them to perform their job more thoroughly. The process of predicting risk becomes much more accurate as the amount of data analysed grows.
This creates a new problem. Larger datasets means more discrepancies, and auditors must examine each one to establish whether or not it’s truly an issue. Machine learning helps AI systems continue to evolve, but humans still need to ‘train’ computers to recognise their mistakes. While the manual burden for auditors may be reduced, many audit departments may find themselves busier in terms of their overall workloads.
3. Offer board-level strategic insights
AI can lead to significant risk and governance insights, and internal auditors can be at the forefront of delivering strategic suggestions to the board. In the process, auditors move from a purely assurance-based role to one where they are a key business advisor for the company’s growth.
A more prominent role for the audit function within businesses is likely to mean greater career development opportunities for professionals keen on securing executive positions.
4. Attract top talent
Organisations that offer auditors the chance to work with cutting-edge AI technologies have a better chance of attracting the industry’s leading professionals. Alleviating the burden of manual processes and providing staff with engaging strategic work will also improve retention, which could prove crucial with younger employees in particular.
A recent Deloitte report found that 61 per cent of 18-to-24-year-olds expect to leave their current job within two years. Only 12 per cent of the demographic, also known as Generation Z, expect to stay longer than five years.