By Al Naqvi
As scandal after scandal have destroyed audit credibility, the audit profession needs a total restructuring. One type of restructuring happened when PCAOB (regulator, Public Company Accounting Oversight Board) took control away from accounting firms’ self-regulation. The ongoing problems with audit are now forcing the exploration of new ideas. Some believe that the large accounting firms should be fragmented into smaller firms and must require the inclusion of smaller firms as partners. Others are suggesting having government take over the entire audit business (like IRS for taxes).
Audit suffers from both effectiveness and efficiency. In fact, the problem with audit is that effectiveness and efficiency goals tend to work against each other. If you seek efficiency, you may have to compromise on effectiveness and vice versa. Machine Learning can greatly improve audit outcomes. The application of machine learning happens in all stages of audits. Machine learning can also help discover new business models for audit firms.
Audit automation can be viewed as automation of audit planning, audit evaluation, internal controls risk assessment, reporting, fraud detection, valuation, and other such audit process tasks. AIAI offers a report on machine learning in audit.