Bringing a new level of intelligence – artificial intelligence – to your audit
Emerging technology can shine light on risks now lurking in your data.
Audit time is never an easy time. Questions always loom. Is accounts receivable keeping up with invoicing? Will inventory track with sales? Are all the numbers being accurately entered in the right places, at the right times … all the time?
The bigger your business, the bigger the worry. And at its heart is data. Thousands and thousands of lines of data, where risk in all its forms can reside and hide.
Identifying these risks with existing audit practices is a lengthy, time-consuming process, one that relies on samplings of data. Even the best audit firms can’t assure complete accuracy when using sampling – and risks missed, whether by fraud or human error, can prove very costly.
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How costly? A recent study of 2,690 fraud cases around the world by the Association of Certified Fraud Examiners found a median loss of $108,000 in revenue per fraud in the United States.1 Smaller businesses, those with 100 employees or less, lost almost twice as much per fraud as larger businesses because they typically have fewer anti-fraud controls, the ACFE study found.
“AI’s value for auditors, in specific, is its ability to analyze complete sets of data – quickly and more accurately than humans alone.”
And unfound risk isn’t just about revenue. Audits with errors can also draw the increased scrutiny of regulatory authorities, and in some cases even generate bad, business-damaging publicity.
With the introduction of artificial intelligence into the audit process, JCCS and other forward-thinking accounting firms are not only building a heightened level of confidence in the audit process, they are able to generate reports on a much faster timeline. Having an AI system crunch all the numbers frees audit professionals to focus on value-added activities like helping clients analyze ratios and trends, and better prepare for their futures.
AI isn’t scary. You use it every day.
Artificial intelligence isn’t new. It’s a term coined back in the 1950s and it refers to a computer’s ability to think and learn.
There are different forms of AI, such as machine learning, which you use every day. The spam filter on your computer uses AI to filter out junk emails based on your email use. Ride-hailing apps like Uber and Lyft use AI to minimize detours and reduce ETAs. Gaming apps, online music streaming services, and, of course, social media all use AI to glean insights from the streams of data we all produce in the course of our daily activities.
AI’s value for auditors, in specific, is its ability to analyze complete sets of data – quickly and more accurately than humans alone.
Supercharging the audit process.
In a traditional audit, auditors review transactions in small sets, or samples. These samples may be taken randomly or taken from areas already known to be of greater risk, such as transactions of high monetary value. Auditors with deep knowledge of a client and its industry may also choose to sample from specific, higher-risk areas of the business.
But no matter how broad and thorough these samples may be, they are just that: samples. What’s been missed, is what’s the worry.
Using its AI platform to look at all of a client’s data, not just samples, JCCS can help its clients get a more complete picture of their business data and can more accurately identify:
- Outlier transactions
- Strange numbers
- Transactions that take place at odd times
- Transactions made by unauthorized personnel
- Unintentional errors
The AI platform can also pinpoint areas that may not be risky now but promise to pose problems later if not addressed.
“The more data AI sees with each client audit cycle, the smarter it gets in its analytics and predictions.”
And AI does all this faster than even the largest team of auditors put to the task. How fast? An AI audit of a small business’ books can be done in but a few minutes.
Auditors still rule.
Successful implementation and execution of AI in audit still requires the ongoing input, oversight and knowledge of auditors. For one thing, making sure that the data fed to the AI platform is clean is key. For additional accuracy and power, JCCS can connect a client’s AI-augmented audit work to the accounting firm’s cloud service – a computer network service that “cleans” and stores all of a company’s data as well as adds tabulations and analysis.
The more data AI sees with each client audit cycle, the smarter it gets in its analytics and predictions. A transaction identified as risk in the first AI tabulation, for example, may actually be expected and correct for that client’s specific business; JCCS auditors can train the platform to account for that in the future. JCCS professionals monitor the conclusions made by the AI platform for thoroughness and accuracy of the data, for points AI flags that in reality are totally correct for that given client or industry, and for information that leads to valuable insights.
With AI reports, based on all data available, JCCS has greater insights to share with clients, adding even more value to the relationship beyond the actual audit report itself.
Auditors and AI working in tandem
Keeping risk where it belongs.
Risk is inherent in any business. But the audit professionals at JCCS believe that risk should come from introducing new product lines and opening new markets, not from the data buried in your financials.
Its AI-driven audits reduce risks in the right places, so clients can take the right risks needed to grow in the right ways.
To read client success stories:
- Association of Certified Fraud Examiners, Report to the Nations: 2018 Global Study on Occupational Fraud and Abuse, https://www.acfe.com/report-to-the-nations/2018/ and https://s3-us-west-2.amazonaws.com/acfepublic/2018-report-to-the-nations.pdf, p. 4 and 7, accessed September 25, 2019.