Finance and Accounting

AI and Auditing: The Future of Financial Assurance

Auditing is the financial world’s version of a detective story, where auditors are the skilled investigators, uncovering financial irregularities and ensuring transparency.

Auditing is a meticulous process that involves analysing financial statements, evaluating internal controls, assessing risks, and providing assurance. These activities are essential for verifying the accuracy of financial reports and identifying any underlying discrepancies. Therefore, it is crucial to conduct audits periodically, typically once a year, and more, if needed.

Auditing plays a vital role in strengthening internal controls, fostering accountability, building stakeholder trust, ensuring regulatory compliance, ultimately enhancing business value.

However, audit firms today face mounting challenges: expanding scopes, a shrinking talent pool, increasing data volumes, and heightened compliance demands. To navigate these complexities, auditors need a powerful new ally, which they now have in the form of artificial intelligence (AI). By automating routine tasks and processing vast amounts of data, AI enables auditors to focus on high-value investigative work.

How AI is Transforming the Audit Process

AI is revolutionising the audit landscape, from the ground up. Here is a peek at its transformative capabilities:

Full data coverage: Unlike traditional sampling methods, AI can analyse entire datasets from ERP and accounting systems (point-of-sale, expense reporting, payment approval systems, etc.). This enables:

• Early risk identification: AI conducts thorough transaction reviews, particularly of journal entries, and leverages its pattern recognition and network analysis capabilities to detect suspicious transactions (e.g., a series of journal entries with rounded-off amounts made late at night by a single employee), hidden connections (e.g., a vendor and employee sharing the same address) and unusual behavioral patterns (e.g., sudden increase in expense reimbursements from a department) from the outset. This allows for early prioritisation of high-risk areas and more effective resource allocation.
• Anomaly detection: According to Alan Anderson, president of ACCOUNTability Plus LLC, “you’re trying to find a needle in a haystack when you perform sampling,”, whereas, “AI can give you 100% of the population, which makes anomaly detection extremely reliable when it’s based on proper parameters set by the auditors.”

Enhanced risk assessment: Building on early risk identification, AI provides deeper risk insights. It evaluates multiple factors—market conditions, regulatory changes, and industry trends—and leverages predictive analytics to go beyond simply identifying early risks, and anticipate potential issues, and assess their potential impact and likelihood. This helps pinpoint high-risk accounts or business units likely to face compliance challenges, allowing for more proactive risk management and targeted audit strategies.

Automated document review: AI-powered automation tools such as Natural Language Processing (NLP) are streamlining documentation processes by creating intelligent connections between various data sources, structured and unstructured. This integration allows auditors to trace information back to its source quickly and efficiently, while maintaining a clear audit trail. The result is not only faster processing but also enhanced accuracy.

Continuous monitoring and real-time alerts: AI enables continuous monitoring of transactions, allowing for immediate detection of policy violations or unusual patterns, addressing issues as they arise, facilitating continuous compliance monitoring, and triggering automated alerts for activities that require immediate attention.

The result of AI-powered audits? Not only are they significantly faster, more insightful, accurate, and efficient, but they also enhance stakeholder trust and confidence in financial disclosures.

Challenges and Considerations

While AI-powered audits offer significant advantages, several challenges and considerations must be addressed for successful implementation.

Data standardisation: The efficacy of AI in auditing depends heavily on the underlying data ecosystem. Modern organisations often operate multiple financial platforms, each with unique formats and standards. Inconsistent or incomplete data can compromise the accuracy of AI algorithms. Therefore, it is crucial to format data across these sources uniformly, all while upholding strict data privacy standards.

Maintaining objectivity: If AI algorithms are trained on biased data or developed without a focus on objectivity, they can unintentionally skew audit outcomes. Ensuring transparency and fairness is critical, making human oversight indispensable. Auditors play a vital role in maintaining ethical compliance by critically assessing AI-generated insights, questioning results, and applying independent judgment to mitigate potential biases.

Workforce evolution: Leveraging the full potential of AI in auditing requires a skilled workforce. Auditors need to undergo comprehensive training to acquire the necessary skills, including an understanding of data science and machine learning principles, depending on the specific AI systems they will be utilising.

Despite implementation complexities, the growth potential of AI in auditing is clear: industry forecasts project the AI audit sector to surge from $1 billion in 2023 to $11.7 billion by 2033.

The Future Lies in AI-Human Collaboration

The integration of AI into auditing marks a fundamental transformation in financial assurance. While AI enhances efficiency, accuracy, and transparency through automation, advanced analytics, and comprehensive data processing, it does not replace human expertise. Instead, it redefines the auditor’s role—shifting their focus from routine tasks to strategic analysis, critical judgment, and complex decision-making.

This synergy between AI’s computational power and human judgment strengthens risk management, delivers deeper insights, and ensures more robust financial oversight.

As AI continues to evolve, its collaboration with human auditors will drive greater value, combining data-driven precision with professional interpretation.

How can Infosys BPM help?

Financial and accounting services operate at the complex intersection of precision and rapid data processing at scale. Infosys BPM's specialised financial services solutions combine cutting-edge technology and analytics to drive performance optimisation and sustainable business growth.