Could AI be universally adopted within audit in the next three years?
May 14, 2024
No longer confined to traditional assurance functions, auditors are now expected to be at the forefront of innovation, guiding their clients through the complexities of AI adoption and providing the necessary expertise and attestation.
The audit profession is on the cusp of a transformative shift, driven by the rapid advancements in artificial intelligence (AI) technology.
According to a recent global survey conducted by leading consultancy firm KPMG, the adoption of AI in financial reporting and auditing is set to skyrocket, with nearly all businesses expected to be either piloting or using AI within the next three years.
The research, which polled 1,800 companies across 10 major markets, paints a compelling picture of the seismic changes underway.
The findings reveal that almost three-quarters (72%) of organisations are already embracing AI in their financial reporting processes, and this figure is poised to reach an astounding 99% by 2027.
Notably, the survey also highlights the growing importance of generative AI (GenAI) in the financial reporting domain, with over 97% of respondents anticipating the deployment of these cutting-edge technologies within the same timeframe.
Auditors Poised to Lead the AI Transformation
Alongside the rapid adoption of AI in financial reporting, the KPMG study highlights the pivotal role that auditors are expected to play in driving this technological revolution.
The survey findings indicate that companies are looking to their external auditors to spearhead the AI transformation, providing both the expertise and assurance required to navigate this uncharted territory.
Over three-quarters (82%) of respondents believe that their auditors are either ahead or on par with them in the adoption of AI for financial analysis. Moreover, a significant majority (77%) consider AI, automation, and data analytics to be moderately to very important for their external auditors to utilise.
Companies are seeking their auditors to deploy AI for three primary purposes: improving the efficiency and accuracy of audits, developing more proactive and predictive audit procedures, and gathering valuable data-driven insights.
Furthermore, a substantial number of organizations (52%) want their auditors to prioritize predictive analysis, while 47% desire faster speed of delivery and 45% seek real-time auditing throughout the year.
The Rapid Adoption of AI in Financial Reporting
Among the key findings, the research reveals striking regional variations in AI adoption rates. North American companies are leading the charge, with 39% of organizations in the region selectively or widely deploying AI in their financial reporting processes.
Europe (32%) and the Asia-Pacific (APAC) region (29%) are also witnessing significant strides in AI integration.
When it comes to industry sectors, the telecoms and technology businesses have emerged as the frontrunners, with 41% of these companies selectively or widely adopting AI within their financial reporting operations.
The energy, natural resources, and chemicals sector (35%) also boasts a relatively high level of AI adoption, while the consumer products and retail industry (26%) trails behind other sectors.
The research further identifies a clear correlation between company size and AI maturity.
Larger enterprises, with revenues exceeding $10 billion, are leading the charge, with 40% of these businesses classified as “Leaders” in AI adoption. In contrast, less than half as many (18%) of the smaller companies, with revenues below $5 billion, are considered Leaders.
Navigating the Risks and Challenges of AI Adoption
As companies enthusiastically embrace the transformative potential of AI in financial reporting, they are also acutely aware of the associated risks and challenges.
Data security, privacy, and ethical concerns emerge as the top priorities, with 56% of respondents citing these as the biggest barriers to successful AI implementation.
Additionally, the survey reveals concerns around limited skills and talent (46%), data quality issues (44%), and insufficient funding and investment levels (43%) as key hurdles to scaling AI and GenAI capabilities within the financial reporting function.
To overcome these obstacles, organizations are looking to their auditors to play a more significant role in evaluating the use of AI, potentially providing assurance and attestation over their AI controls.
Nearly two-thirds (64%) of respondents expect their auditors to conduct a more detailed review of the control environment related to AI in financial reporting, while over half (53%) foresee auditors performing AI governance maturity assessments.
[Accountancy Age]
