Small Firm Blazes Trail in Artificial Intelligence Use for Audits

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By Courtney Rozen

When Samantha Bowling first started serving on the Association of International Certified Professional Accountants’ council, she noticed a frequent conversation topic: artificial intelligence.

In a 2018 Burrus Research-Maryland Association of CPAs survey of more than 1,000 CPAs, respondents ranked AI, machine learning, and cognitive computing as the top technology trends that will influence the accounting and finance world over the next three years.

AI is a collective term for computers that can simulate human behaviors, like decision making and learning.

As a council member, Bowling saw that Big Four accounting firms were funneling cash into the technology, threatening to crush her 15-person CPA firm’s audit practice.

“I decided I was going to take out my Google machine last fall and say, ‘there’s got to be a solution for AI for small firms,’” Bowling told Bloomberg Tax in an interview. She picked MindBridge Ai Auditor, an audit analytics platform that applies AI.

Bowling is now one of a few small-size CPA firm leaders testing AI in auditing. As of July 1, she’s also chairwoman of the Maryland Association of CPAs, where she hopes to motivate the organization’s 11,000 members to embrace technological innovation.

“We’re really excited to have her energy and passion around innovation and openly adopting these emerging technologies,” said Tom Hood, executive director and CEO of the MACPA. “It’s a time when we need that kind of leadership in our profession.”

Implementing AI

The Big Four global accounting firms—PricewaterhouseCoopers LLP, Deloitte LLP, KPMG LLP, and Ernst & Young LLP—are pumping cash into AI.

KPMG and Deloitte, for example, announced partnerships with AI companies in March 2016, with KPMG picking International Business Machines Corp.’s Watson and Deloitte selecting Kira Inc., according to press releases from IBM and Deloitte.

At PwC, 250 people are working on incorporating emerging technology, like AI, into the firm’s audit practice, said Michael Baccala, PwC’s U.S. assurance innovation leader.For example, they use natural language processing, a type of AI that can be used to review documents, like an invoice, tax form, or lease. This allows auditors to quickly pull information from paperwork for an audit, Baccala told Bloomberg Tax.

“We were concerned that smaller firms would be squeezed out of the market because they don’t have the resources that those megafirms have to explore an emerging technology like artificial intelligence,” Hood said.

Enter MindBridge Ai Auditor, the platform launched in February 2017 that Bowling chose.

Instead of having a CPA sift through a random sample of a company’s financial records, MindBridge Ai Auditor examines each transaction and sorts it into risk categories labeled high, medium, and low. The machine spots which transactions are irregular, like a $15,000 rent payment for a company that typically spends $10,000, and labels them high risk.

Bowling then scrutinizes high risk transactions. She can then ask a client to prove that transaction is valid, saving her time and improving the quality of the audit.

“It gives me a comfort level that I’m looking in the right place,” Bowling said.

Bowling said she hopes to use AI to grow her audit practice. For example, she can decide whether or not to take on a new client by dropping their general ledger into MindBridge Ai Auditor. She said she will also charge clients more when she uses the software for an audit.

Leading Maryland CPAs

Bowling took the reins of the MACPA on July 1 as the organization’s chairwoman. In that role, she hopes to convince other CPAs to abandon old processes and embrace emerging technology. She’s labeled her plan the “innovation revolution.”

“It is time for Rip Van Winkle to wake up,” Bowling told the organization’s members in her speech accepting the position.

Using AI to survey a company’s transactions is just the beginning of using the technology in accounting, Bowling said. She anticipates tax preparation will be automatic within the next five years. The Internal Revenue Service will send taxpayers an automated bill, for example, which a CPA could explain and correct for a client, she said.

In partnership with IBM, the MACPA is building a platform to teach CPAs about emerging technologies like artificial intelligence, Hood said. They plan to donate copies to Maryland universities for student use. This coincides with Bowling’s goal to use technology to keep small firms relevant.

“The goal is to show CPAs that this technology isn’t scary,” Hood said.

Hood’s team also presented about emerging technologies, including AI, at the Public Company Accounting Oversight Board’s June 2018 meeting with its standing advisory group. PCAOB, the U.S. audit regulator and standards setter, doesn’t currently have rules governing the use of high-tech automated tools in audits.

Patrick McNamee, deputy chief auditor in the board’s Office of the Chief Auditor, said they have “a lot of questions” about the technology in November 2017, Bloomberg Tax previously reported.

“Technology has never been as affordable as it is now for everyone,” Bowling said. “It’s moving so fast that I think people just need to be more aware that if they’re struggling and they can’t get something done, there probably is a solution and they just don’t know about it.”

To contact the reporter on this story: Courtney Rozen at crozen@bloombergtax.com

To contact the editor responsible for this story: S. Ali Sartipzadeh at asartipzadeh@bloombergtax.com

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