Harnessing the power of cognitive technology to transform the audit

Our work as audit professionals is fundamentally about “trust.” For the capital markets to operate effectively and to the benefit of investors and society more broadly, there must be integrity and confidence in the system.

In serving the capital markets and the public interest, we work to help instill trust and confidence in the information used to make important decisions.

In the following pages, we begin to explore how we can continue to promote trust during a time of profound change across the business landscape. Given the explosion of data and the digitization of our lives, we want to promote a discussion about how the audit profession must evolve its tools and approach to keep up with the pace of change and remain relevant in a dynamic marketplace. Specifically, our profession must embrace the use of advanced technologies, including data and analytics (D&A), robotics, automation and cognitive intelligence, to manage processes, support planning and inform decision making. At KPMG we are constantly thinking about the development of innovative capabilities and technologies that will enhance quality and strengthen the relevance of our audit into the future.

Where auditors once searched manually through reams of financial information to hunt down the anomaly that may give pause to the appropriateness of a company’s assertion, the accumulation of large data sets and the application of advanced analytics and cognitive technologies make it possible to rapidly and precisely analyze larger, more complete populations of financial and non-financial data. The use of these technologies can also generate richer, more detailed audit evidence for evaluation and provide executives with actionable insights about their organizations, their core processes and their controls. What’s more, supervised cognitive systems can learn from each encounter with new information enabling continuous refinement of the knowledge and analytical capabilities of the system.

To prepare for this environment, tomorrow’s teams of professionals must possess more than just an understanding of accounting and auditing – they will need stronger critical thinking, analytical, data science and IT skills to complement their financial and business acumen. To that end, KPMG is committed to fostering a culture of innovation and learning, especially within our Audit Practice. We are working with universities, regulators and leading technology organizations to enhance the skill sets of our people, develop new capabilities to advance audit quality and build on the foundation of trust that is the cornerstone of our profession.

We hope you enjoy this report.

Investing in innovation

It’s really simple: Cognitive technology isn’t just changing the face of financial reporting and auditing, it’s revolutionizing it.

“We’re seeing some very compelling and profound changes in the audit space as cognitive technology evolves, and we’ve only just begun to explore what’s possible,” stated Vinodh Swaminathan, Managing Director in KPMG LLP’s (KPMG) Innovation and Solutions practice. “We believe these changes, combined with others – such as robotic process automation (RPA) and advanced analytics – will permanently change the auditing landscape. It’s imperative that audit firms step up to this challenge in order to meet the ever-changing needs of the profession.”

As businesses grow and transform, their operations become more complex, perhaps more global, and many will be modifying or overhauling their own IT systems with more sophisticated technologies. The exponential explosion of data in business has fostered unprecedented advances in data processing capacity and analytical power which will transform how data is used and understood.

“The firms you’ll want to handle your audit are the ones making big investments in innovative, new technology,” stated Marc Macaulay, KPMG’s U.S. Cognitive Technology Audit Leader. “It demonstrates their commitment to delivering high quality audits that dig deeper into the data and reveal more about a business and its risks. Equally important, it helps them deliver audits with deeper insights on a company’s controls, accounting practices and reporting processes.” 

“That’s a major reason why KPMG is investing so heavily in cognitive technology and artificial intelligence capabilities,” Macaulay added. “We’re at the forefront of this transformation, working with leading technology companies, including IBM and Microsoft, to apply the power of cognitive technology to the audit. Audit firms that don’t make the necessary investment in advanced capabilities won’t be able to continue delivering the quality that their clients require and deserve.”