Transforming the audit experience with AI

AI and GenAI are transforming the landscape of financial reporting, driving innovation and improvements in quality and efficiency. In the next three years, 100% of US financial reporting leaders report they will be either piloting or using AI in financial reporting, according to a recent KPMG survey on AI in financial reporting.

As companies engage more with AI and GenAI capabilities in this ‘AI era,’ they will face new opportunities, risks and challenges. Financial reporting leaders are focused on navigating these risks by becoming AI-ready and expect their external auditor to not only use AI and GenAI in the audit, but also use professional judgement to evaluate control environments.

In fact, 83% of financial reporting leaders believe it is important for auditors to utilize AI in performing their analysis, prioritizing risk and anomaly identification, data analysis and quality management, and risk mitigation and real-time auditing.

Enhancing audit quality with AI

At KPMG, we are accelerating our use of AI in the audit, anchored by our Trusted AI framework, to continue enhancing quality and uncovering deeper insights for audit committees and management.

Last year, we deployed KPMG Audit Chat, our proprietary GenAI tool built on Azure OpenAI service, which includes a library of use cases. Audit Chat now helps auditors consult our methodology and the standards, review documentation and more.

Today, we’ve embedded our GenAI assistant directly into KPMG Clara, our global smart audit platform, for 90,000 auditors around the globe. Like an additional team member, this capability can interact directly with audit engagement documentation and our audit methodology to help auditors refine risk assessments, develop substantive testing procedures and enhance audit documentation.

Additionally, we are using directed AI and machine learning to conduct transaction scoring through our global alliance with MindBridge. With KPMG Clara Transaction Scoring, our teams are able to perform analyses over 100% of transactional populations, delivering audit evidence and identifying outliers over both general ledger and subledger populations. Transaction Scoring also enables our teams to refine risk assessments and unlock deeper, data-driven insights for audit committees and management teams.

AI is freeing up resources for our auditors to spend more time on the areas of highest risk, sector-specific risks and challenges – to the benefit of both stakeholders and the capital markets.

Protecting the capital markets with trust

Our focus areas align with the demands of audit committees and management teams. Our research finds that companies across the US are eager to realize the benefits of an AI-enabled financial reporting process.

Among financial reporting leaders, the top expected benefits of AI in the next three years include real-time insights into risks, fraud and control weaknesses (73%), increased data accuracy and reliability (67%) and lower costs (62%). In addition, 60% expect greater ability to predict trends and impacts.

Importantly, our Trusted AI approach ensures we are deploying AI in the audit with a human-in-the-loop mindset to maintain quality and accuracy. Our teams are trained on how to effectively use AI as an enabler, ensuring our professionals are critically engaging outputs and exercising professional skepticism.

Empowering our professionals with AI

AI will augment, not replace, the role of the auditor, and the audit will always be people-driven. Our methodology, audit standards, industry dynamics and a business’s particular risks are integrated through human judgment and decision.

We believe AI will pull more people into the profession. By reducing manual work, people are free to focus on more strategic, higher-level thinking. Moreover, as the role of the auditor expands to protect the capital markets, the mission and purpose that drives our profession today will only increase.

Looking ahead

The use of AI and GenAI is becoming ubiquitous, with 58% of financial reporting leaders seeing GenAI as the number one technology priority in the next year.

At KPMG, where we are today is just the tip of the iceberg. As our technology teams and auditors gain more experience with GenAI, we expect to accelerate innovation across our audits.

More broadly, the benefits of AI will only grow as firms continue investing in and deploying new capabilities, and in the future, these trends will fundamentally shape the competitive positioning of finance functions in business strategy. At the same time, auditors will have the opportunity to become consistent collaborators with organizations as they embrace AI as a business enabler and navigate the increasingly dynamic, digitally connected market.