Artificial intelligence in auditing: Leveraging benefits and avoiding risk

Financial statement and compliance auditors are applying artificial intelligence (AI) much more frequently, and there is growing interest in leveraging its benefits. To help you understand how to use artificial intelligence in auditing while avoiding risk, we’re walking you through what you need to know.

Understanding artificial intelligence in auditing

While most people think of AI as generative text, like ChatGPT, it offers much more functionality. Financial statement and compliance auditors can use AI in auditing to automate tasks, such as data gathering or teach it to “learn” from the information gathered and apply that analysis to future tasks to make better informed judgements about what is considered to be an “anomaly.”

AI algorithms can learn from historical data and identify patterns that might indicate fraud, errors, or control weaknesses. There is a cost in building the infrastructure and training, but the benefits are proving to outweigh the benefits as auditors are overcoming learning curves in accessing usable client data and exploring the usefulness of AI capabilities. In fact, there are opportunity costs in not adopting this technology. Currently, audits are often viewed in a “transaction-based” orientation. AI allows for a larger “data-driven” orientation.

Examples of AI in auditing

Let’s look at a few ways AI can assist the audit process.

Planning and risk assessment

AI can help identify the aspects of the financial statements and disclosures that merit the most audit attention. This can minimize over-auditing transactions, events, or disclosures. Directly gathering and testing data directly from the audit entity’s IT system can be both effective and efficient. Analyzing a full data set can help identify risks in a more refined way. AI in auditing will better enable auditors to tailor the nature, timing, and extent of substantive testing to better correlated to risk of material misstatement because AI can consider multiple metrics when finding outliers and anomalies.

For example, auditors can prompt natural language processing tools to provide a list of risks to expect in an area. Then, the auditors can use AI to analyze large datasets to identify patterns, trends, and anomalies that may indicate potential risks to help prioritize their focus areas. Further, by incorporating machine learning, the system can learn which threats to elevate and which are false positives. AI also has the capability to produce a first draft of an audit plan based on all available data and it can improve efficiency, improve risk identification, and provide deeper insights into an audited entity's system of internal control.

Journal entry testing

AI can help identify significant or unusual transactions by using keywords or analyzing patterns in large pools of data. Performing journal entry testing early in the audit process can speed up the identification and testing of higher risk transactions and events. AI tools can monitor transactions and controls in real-time and produce exception reporting, enabling auditors to react and address potential issues as they arise.

Substantive testing

AI can process large amounts of data, reconciling databases, and “reading” bank statements, legal contracts, and other documents. Instead of using sampling, testing 100% of a population can increase the reliability of anomaly detection. Repetitive tasks cab be completed with increased accuracy and efficiency. 

For example, DataSnipper is an intelligent automation platform that uses Excel to link data from multiple distinct PDFs throughout the workpapers into a single workbook. Automated formulas can help identify anomalies. Also, by clicking on a “Cell” the reviewer can also view the underlying source document from a hyperlink. 

As another example, on 401(K) audits, data from a third-party administrator’s site can be uploaded and easily accessed into one place. Analyzing large quantities of data can lead to improved insights into how transactions get processed into the general ledger. AI-powered tools can handle data extraction, document review, and other time-consuming yet crucial tasks. By funneling routine tasks to AI, auditors improve their efficiency and better spend their time reviewing, instead of pulling, data

Learn more about bridging the gap to using artificial intelligence in auditing in this clip from our recent CPE podcast, "Impossible to Ignore—AI in Accounting." 

Benefits of AI in auditing

As you can tell from the examples above, using artificial intelligence in audits can save time, increase efficiency, and improve accuracy. Even more exciting, the data and insights captured today can be used to teach programs in the future, offering even more functionality. 

Because of these capabilities, firms and organizations are finding ways to scale AI technology to benefit specific challenges. As firms begin to standardize its own processes for capturing useful data from clients, opportunities to expand on capabilities for AI use on audits will be further identified. When brainstorming how to address challenging audit areas, incorporate consideration of AI technology as part of the potential solution.

Risks of using artificial intelligence in audits

AI also comes with risks when using it to assist in completing audits including: 

• Data privacy: Many AI algorithms, especially generative AI, use data input to inform other queries or train their models, putting your data at risk. 
• Cybersecurity: Deploying AI programs, both those developed in-house and off-the-shelf vendor options, could leave you vulnerable to cyberattacks 
• Regulatory compliance: AI regulations are in development, and regulatory bodies are working quickly to put guidelines in place. Staying aware of updates to regulations is essential to ensuring compliance.

However, those challenges can be overcome with increased skills, knowledge, and experience in the capabilities for using AI on a variety of audit tasks.

Take the next step with CPE courses from Becker

If you want to learn more about artificial intelligence or build your auditing skills, Becker offers a wide variety of CPE courses to help you gain important knowledge: 

• Navigating AI Ethics: Balancing Innovation and Responsibility 
• Artificial Intelligence for Accountants 
• Fraud Update 2025

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