Me, myself & AI: The auditor is no longer alone

Audits have long been a labor-intensive process, requiring auditors to meticulously review financial records, ledgers, contracts and invoices. However, the advent of artificial intelligence (AI) is revolutionizing this approach, enabling auditors to analyze vast amounts of data, detect anomalies, and identify potential risks more efficiently.

In India, where regulatory compliance is extensive, the need for AI-driven audits is particularly crucial. With over 1,530 Acts and rules, and more than 69,000 statutory obligations, businesses must navigate a complex web of requirements. According to a TeamLease RegTech report, this complexity underscores the importance of AI in streamlining the audit process.

AI is increasingly being integrated into audit and accounting practices, with a significant majority of professionals acknowledging its value. According to a survey of over 1,000 audit and accounting professionals, 66% of respondents reported that AI is already embedded in their firm's strategy, while 53% agreed that AI tools can enhance audit quality.

The primary benefit of incorporating AI into audits lies in its ability to enhance efficiency and provide deeper insights. Sachin Mohe, a Partner at Deloitte India specializing in audit technology, highlighted that AI enables auditors to take earlier action, strengthen controls, improve documentation, and expedite closure. Specific applications of AI in audits include transaction analysis, where AI-based tools can flag duplicate entries, unusual trends, missing approvals, and transactions that deviate from predefined criteria.

Another application is document analysis, which can help summarize gaps in audit evidence, identify duplicate transactions, and highlight exceptions related to fraud risk scenarios. Companies like Deloitte, Ernst & Young (EY), and KPMG have already begun implementing AI tools within their cloud-based audit platforms. These tools support various audit activities, such as risk sensing, evidence retrieval, document analysis, technical accounting research, financial statement validation, and data analysis.

To ensure the responsible use of AI in audits, experts recommend implementing safeguards to protect sensitive financial and employee data. These safeguards include using approved enterprise AI tools, minimizing and masking sensitive information, enforcing strict access controls, maintaining audit trails, vetting vendors, and ensuring human oversight.

Organizations must also maintain visibility into AI systems used by third-party vendors, build registries of all AI tools, and establish clear internal rules regarding AI usage.