The Power of Intelligent Automation
In the audit profession, we have reached the next milestone in the transition from manually driven activities to processes that are increasingly automated. Most of the traditional tools and techniques continue to experience massive change, as digital tools and, more specifically, intelligent automation take on what has traditionally been handled through manual processes.
In this digital world, where information is ubiquitous and data volumes are exploding, auditors are engaging intelligent automation, cognitive technology and other tools to help make sense of it all and fulfill our important responsibilities to the investing public.
The practice is widespread. According to the KPMG 2018 U.S. CEO Outlook,49 percent of CEOs have begun limited implementation of artificial intelligence systems within their companies. Additionally, annual global spending on cognitive systems by 2019 is expected to be $31 billion, a 55-percent cumulative annual growth rate over a five-year period, according to the IDC Worldwide Spending on Cognitive Systems Spending Guide.
Cognitive technologies enable analysis of large volumes of data and allow auditors to more efficiently dig deeper into identified anomalies and enhance their professional judgment and decision making. Additionally, the ability to recognize and isolate relevant information regardless of source format, and evaluate the extracted data, has proven helpful to auditors in reaching conclusions. Technology can help enable applications in complex audit areas, such as revenue recognition and evaluation of a bank’s portfolio of loans.
Digitizing the audit can assist in delivering sustained high-quality audits, provide richer and more detailed audit evidence, enhance transparency and consistency of audit procedures, and provide management with a more detailed view into the company and its risks, controls and operating environment.
Tackling Revenue Recognition
The revenue recognition process of large organizations often involves hundreds, if not thousands, of contractual relationships. Errors in revenue recognition can have severe consequences for regulatory, tax and other compliance matters. Cognitive technologies can use revenue contracts, invoices, trial balances and other data to assist in assessing the completeness and accuracy of the client’s ledger.
These technologies can augment what an auditor considers and provide information quickly and consistently. What auditors learn from the additional details and analysis can enhance their ability to apply skepticism, allowing them to ask more precise questions in areas of greater risk, including areas of judgment.
Bank Loan Portfolios
Today, audit procedures frequently rely on a small representative sample of a bank’s loan portfolio with significant manual input to extract facts from the credit file, understand those facts, and interpret them against a client-specific loan-grading scale. In the future, technology tools could ingest all required documents to evaluate a commercial loan portfolio. During the training of an intelligent tool, key elements impacting the loan risk rating are identified, and a recommendation of risk grade can be generated. The explosion of data in business, along with the increased ability of technology to analyze the information, has fostered unprecedented advances in digital processing power and the capacity to support decision making across multiple activities and operations.
To succeed in the face of uncommon opportunities and challenges created by rapid technological advancements affecting financial statements, it is imperative that accounting professionals have an unquenchable thirst for continuous learning and strong critical thinking, as well as analytical, data science and IT skills, to complement their financial and business acumen.
Thomas Klockner, CPA, is a partner in KPMG's audit practice, where he primarily serves clients in the life sciences industry. He can be reached at email@example.com.
This article appeared in the January/February 2019 issue of New Jersey CPA magazine. Read the full issue.