Artificial intelligence (AI) is increasing efficiency, delivering crucial insight, and reducing costs by automating activities across business operations. AI’s capability to also free up human endeavour from routine tasks, to focus instead on creative thinking and better customer experiences has captured C-suite attention as well as investors’.
In fact, 71 percent of investors are leveraging generative AI tools to evaluate a company’s financial performance and 72 percent use it to summarise data, including reports, filings and transcripts. All business units are thinking about how to optimise their areas through AI, which means it should be top of mind for every internal auditor right now too.
AI is on a roll. One-third of chief financial officers (CFOs) responding to PwC’s annual survey reported increased revenue and profitability over the past year thanks to generative AI (GenAI). Half expected their AI investments to increase profits in the year ahead. Meanwhile, eight out of 10 global decision makers believe AI will meaningfully improve reporting as well as audit and risk processes over the next two years.
As adoption grows, internal audit has an opportunity to benefit from the powerful insight AI can deliver. By simplifying complex data processing, auditors will gain better visibility and understanding of their organisation’s control environment, keep up with evolving risks, and better communicate recommendations to stakeholders, but also have to promote safe adoption.
What AI can do for internal auditing
Internal audit has leveraged the vast quantities of data generated by all parts of business, to develop plans, using analytics to focus on areas for a deeper dive or to highlight where controls are working well. However, internal audit has relied on manual processes and experienced auditors interrogating data, evaluating controls performance and most importantly delivering meaningful insight.
These manual approaches to internal auditing are increasingly insufficient. They are labour-intensive, which is expensive, and slow. Internal audit needs to leverage the wealth of data to provide the kind of real-time, comprehensive information that will deliver insight into the state of the business and the risks to strategic objectives.
To address these challenges, auditors are increasingly turning to AI, to liberate the future of internal audit processes. Used strategically, organisations can derive a competitive advantage from a truly AI-augmented audit function.
That’s partly because AI can make the audit process more efficient, so they can achieve more. It can transform mundane and repetitive tasks so that audit professionals can focus instead on sophisticated analysis and proactive risk identification. Take compliance, as an example. It takes hours to review a large financial report for compliance with relevant standards; AI can reduce this to little more than seconds.
AI can also make deeper, broader and more frequent analyses possible for internal audits that are fully comprehensive. Some compliance calls for verification of samples but with AI, potentially every operation could be tested, possibly in real time. That’s progress, provided auditing remains an independent assurance function with an external perspective. Auditing isn’t intended to provide continuous monitoring and shouldn’t be reshaped to do so.
Beyond efficiency and more complete, high-quality testing, AI can also add value to the strategic role of auditing. It can uncover insights to inform company strategy and help it stay ahead of emerging risks and opportunities. That way, AI can enrich the output of the internal audit team, making it an indispensable strategic partner.
Internal audit should champion the safe adoption of AI governance and guard rails
It is natural to be skeptical of AI, but many people are interacting with AI in their personal lives, using the many open-source tools available today. These tools work really well and are learning to do more based on the requests users make and the data they submit. It is only natural that they will want to do the same in their working life.
Keeping control of your data, including prompts, is important for businesses and audit functions, and therefore understanding what your chosen AI solution does with your data is vital to the safe and effective adoption.
It is also important to define the purpose for the use of AI in the organisation as a whole and then within the AI function, having consideration of the relevant laws and regulations. Internal audit, as champions of risk and governance, should be one of the multiple voices defining how AI is governed in each business. There are big advantages in the use of AI for internal audit, and this starts with understanding, so audit professionals should participate in pilots if they’re going on in their organisation.
AI will enhance auditors’ roles, not replace them. It is a tool to automate routine tasks, complement the skills of experts and free up their time to focus on delivering strategic insight and improving the control environment.
To govern AI’s use at a departmental level, leaders must establish clearly how it will help them achieve a core purpose. For auditing, that is delivering independent assurance. It won’t always be right to use AI, just because it’s there and everyone feels compelled to get on board. Leaders must be mindful of ethical and practical boundaries and have proper precautions in place.
Take the earlier example of using AI to check reports for compliance. The job doesn’t end when AI delivers its output. AI can accelerate tasks, but it shouldn’t replace an auditor’s judgement entirely. The tool’s output is only as good as the quality of its inputs, so AI’s will need careful review.
AI as a competitive advantage
Each new technology brings an opportunity to align activities, processes and systems to support an integrated approach. AI is an advanced way of managing and managing data, if organisations integrated activities, processes and systems to support it. A platform that connects to data sources, builds data sets and delivers insights to reports is the perfect foundation for AI to fit seamlessly into workflows and augment auditing teams’ expertise.
Teams can plan, test, report and monitor audit work in a single AI-assisted platform. It can equip them to send evidence requests out automatically and attach to tests or workpapers. With data always connected to sources, updates can happen automatically, and experts could spend less time on manual tasks and more time advising the business.
To reap the full benefits and help organisations adopt AI safely, auditors should proactively identify early use cases for AI in internal audit. Examples include testing for certain attributes within audit samples, identifying risks and controls from process narratives and walkthroughs or identifying proposed audit procedures that inform the first draft of audit issues, recommendations and reports.
First, there was digitalisation, now there is AI. It is next-level automation for tasks and workflows, but it can also do more. It can add to the strategic role of auditing; help organisations adapt quickly to regulatory changes and identify and describe enterprise risks. In this way, AI-assisted internal auditing can confer a competitive advantage, provided it is used responsibly, with clear purpose and to support and enable, not replace, the expertise of each auditing team.
