What Have We Learned with Artificial Intelligence (AI) Software?
Ryan Taylor, Partner
Over the past year, we embarked on a journey to include the use of AI technology in our audit process. We believe that the use of technology in our audits will provide a more efficient audit for our clients and help provide insight into the wealth of financial data at our fingertips. I’ll admit, we started off with a small bite, opting to gather and analyze the data for only about a dozen clients. We still have a long way to go in this process to truly maximize the potential of this technology, but we did learn a few things over this past audit season.
- Exporting client data out of the systems they use is not as simple as we had thought. Depending on the client, there could be so much transactional data that it may take multiple exports to get an entire fiscal year of transactions.
- Clients don’t always record inventory entries at the close of each month. We discovered that clients will export the monthly trial balance to an Excel file that they will then use to generate the financial statements to look how they prefer. Month-end inventory amounts are posted outside of the trial balance to these financial statements, but not posted to the actual trial balance. This causes working capital to be off when trying to do a monthly analysis in the AI software.
- Ability to analyze more data than before. With the use of AI, we now have the ability to analyze more of the transactional data than we were able to in the past. The AI software can provide us a risk score on all of the transactions, letting us know if there are transactions that fall out of expected ranges based on various control points, with some being the monetary amount of the transaction, the general ledger accounts that the entry is hitting, the posting date of the entry or the type of entry.
- Ability to see trends and ratios analysis. In prior audit engagements, we have been able to utilize some ratio analysis when comparing the financials of the current year to previous fiscal years. For some clients, we are provided monthly financial statements that can help us build expectations of how the year is looking and may look at the end. With the AI software, we are able to analyze different trends and ratios over the year based on whatever period of time we prefer. We can also compare the current years trends and ratios to previous years over the same period of time to see if they follow a similar pattern or not. The AI software can also help us generate expectations based on historical information that we can utilize to see how the current year stacks up.
These are just a few of the benefits that we have seen this past year. We have more to learn about what AI software can provide us and how we will utilize it in our audits, but it is exciting to see the benefits already starting to emerge.
The plan is to dive deeper into the data we gathered this past year, figure out how to best utilize it, and develop reports that we can use and also provide to our clients to show them what the data is telling us. As I mentioned, we only tried to incorporate this on a small number of engagements this past year, but we intend to keep adding a few more clients each year, so while you may not have seen or heard anything about our AI software in 2022, you may hear about it in 2023. If you are interested in AI and want us to include your company, please reach out to someone on your audit team and they can get the process started.