“How many of you still remember back in 1985, when we started our careers in audit?” Deloitte partner Mark Davis asked attendees at the Financial Executive International’s annual Current Financial Reporting Issues (CFRI) conference in New York City. “We were using 12-column yellow paper, eight-column yellow, pens and pencils, drawing straight lines, and checking things off.” A couple of hands in the audience were raised.
During a morning session at the CFRI, Davis and Joe Maneri, an audit senior manager at Deloitte, talked about how technologies--such as Artificial Intelligence, Machine Learning, Big data, Drones, and Robotics--have transformed, and are continuing to change the audit and accounting profession.
AI, Machine Learning Used to Comply With New Accounting Standards.
As companies start to implement the new revenue recognition and lease accounting standards, the question for auditors will become how to audit those principles-based standards that require a tremendous amount of judgment.
“By using AI and Machine Learning,” Davis told Bloomberg Tax, “we are able to analyze thousands, not dozens, of contracts that are written in different languages and formats.”
“We have a client,” Davis said, where “the company has over 200,000 lease contracts that need to be reassessed under the new leasing standards, ASC 842. The pure quantity of the contracts, not to mention the judgment involved, makes the assessing process extremely hard. But with AI, computers are able to ‘read’ the text and pull out key terms from the new standards, and use those terms to filter [the contracts]. Computers are also able to continuously ‘learn’ as they review more and more documents, and to identify ‘outlier’ contracts--those that don’t fit a particular standard. So that we auditors don’t need to review every contract. We only need to review the ‘outliers.’ But at the same time, we are also able to analyze all 200,000 contracts.”
In terms of progress, Davis told Bloomberg Tax that the Deloitte team is still in the process of finishing the contract review. They expect the whole project to take three to four months--instead of, “forever,” without AI.
Drones Used in Audit.
“Drones, are impacting our lives not only by delivering groceries, but also by doing some physical work that is hard for us auditors to do.” Maneri told the audience. “For example, testing the existence of assets, such as buildings, can now be done by drones.” Maneri said.
Another example Maneri gave was testing for the existence and completeness of inventory-- observing counts, test counting inventory, and verifying that all inventory count tags were accounted for. If a company has multiple inventory storage locations, auditors may need to test the inventory in those locations where there are significant amounts of inventory, “but now, all those tasks can be done by drones.” Maneri said.
Robotics Aren't Robots.
“You won’t be necessarily seeing the physical robots doing audits.” Maneri explained. “But when we say robotics, they are actually software. They are replacing some of the manual and repetitive tasks that we do today. For example, when I request something through email, someone sends a file back. I will save the file to my computer, upload the file to a central dashboard, and I will need to click on some filters to get the output that I want. Those tasks are not hard, but they can take me an hour to finish. But now, Robotics can do those tasks for me, and send an email notification saying my dashboard is ready. All I need to do is to click on the dashboard, and I will get the output I need.”
What Drives Innovation.
“Thinking about the journey that took us to where we are today, innovation doesn’t come from our clients, but starts with insight and seeing challenges in a new way.” Davis told Bloomberg Tax, in response to the question of what motivates the audit profession to be innovative.
“Innovation means the work is done in a more transparent and efficient way. It is not the end of auditors. Auditors will be doing different kind of work that requires more judgment. There is always a need for interaction, there is always a need for judgment.” Davis said.
Rely on expert practitioners for practical guidance and real-world approaches to complex accounting issues with Bloomberg BNA’s Financial Accounting Resource Center. Take a free trial today.
Continue the discussion at Bloomberg BNA Accounting LinkedIn Group.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)