AI in Auditing: Should My Firms Be Worried or Prepared?

Significant advancements in technology have modified the ways we perform our everyday tasks. With the presence of machines and robotic platforms, you can now finish your work with just the press of a button. It’s that simple.  

Industries such as finance and accounting (F&A) are among the many to experience the upgrades brought about by Artificial Intelligence (AI). F&A tasks are made simpler and more efficient through AI, particularly the auditing process.  

Related: Audit Intelligence: How Can Auditors Use AI in Internal Audit? 

But as the fintech industry continues to mature, auditors and accounting firms in Canada are starting to feel the pressure to keep up with the pace of change. Many professionals are concerned about how technology might affect their roles, especially as automation and AI continue to take over routine tasks. 

Understanding Artificial Intelligence in Auditing 

Artificial Intelligence may sound like a complicated concept, but in the context of auditing, it simply refers to the use of technology or smart systems that can analyze data, recognize patterns, and support auditors in making better and faster decisions. 

Traditionally, much of an auditor’s work involves repetitive tasks, such as checking transactions, reviewing invoices, and verifying records. While these are essential, these manual processes can also be time-consuming and prone to human errors. 

But with the use of AI-powered tools, these tasks can now be automated. This gives auditors more time to focus on tasks that require professional judgment, such as assessing risks, interpreting results, and advising clients. 

Difference between Automation and AI? 

Now that you understand what AI is, let’s see how it differs from traditional automation. Automation mainly follows a set of programmed rules to perform tasks the same way each time. 

An example is how automation can handle data entry, invoice processing, or payroll calculations without human intervention. Once the rules are set, the system will continue to repeat those steps almost the same way each time. 

AI, on the other hand, can learn patterns from data and make predictions. For instance, it can detect unusual spending behavior, flag potential fraud, or predict which accounts are most likely to contain errors. This ability to learn from experience allows AI to adapt and improve over time, making it far more dynamic and helpful than traditional software tools. 

How AI is Changing the Auditing Process 

Many firms have seen how powerful AI is, and they’re now using its full potential to transform the way they process and analyze client financial information.  

Below are some of the ways AI is redefining how audit process works: 

1. Full-data analysis instead of samples

 AI allows auditors to analyze entire datasets instead of just a small portion of transactions. Historically, time and resources often limit audit professionals to checking only a few samples, which can lead to missing hidden errors or unusual trends. 

Now, with AI-powered systems, auditors can examine an entire company’s financial data in one go. This makes it easier to spot irregularities, detect inconsistencies, and understand it on a deeper level instead of surface-level checking. 

2. Early Error Detection of Data Irregularities 

Using AI in auditing also increases your ability to recognize suspicious behavior before it turns into a bigger problem. Rather than waiting for discrepancies to appear in reports, AI systems can continuously monitor transactions and flag anything that looks unusual. 

For example, AI can identify patterns that don’t match a company’s normal spending behavior or detect duplicate and altered entries that could indicate manipulation. 

3. Continuous auditing

AI also allows firms to move away from the traditional year-end audit cycle and adopt a more proactive approach known as continuous auditing. Instead of reviewing financial data only once a year, AI-powered audit systems can now monitor transactions as they happen. 

This constant monitoring helps auditors identify issues early on, whether it’s a missing entry, an unusual expense, or a compliance risk. For example, if an irregular transaction occurs, the system can immediately alert the audit team, enabling them to investigate before the issue escalates.

This not only improves audit accuracy but also strengthens risk management and transparency throughout the year. It also allows auditors to make quicker, more informed decisions. 

4. Smarter document reviews and risk assessments

On top of analyzing transactions, AI can also improve how auditors review documents and assess risks. 

Here’s how AI improves document reviews and risk assessments: 

a. Find specific clauses, like termination terms, in contracts. 

AI tools can quickly search and highlight key contract details that auditors would normally spend hours locating manually. 

b. Compare policies to identify inconsistencies. 

With natural language processing (NLP), AI can understand the context of words, making it easier to spot differences or irregularities between multiple policy documents. 

c. Pull financial figures from unstructured documents, such as scanned PDFs. 

AI can also extract relevant numbers and data even from scanned or unformatted files, saving auditors from manual data entry and potential human errors.  

Overall, these features help auditors save time, reduce errors, and focus more on analyzing results rather than getting stuck in repetitive document checks. 

Challenges and Risks in using AI in Auditing 

Now that you have a clearer understanding of how AI is redefining the audit process, the next thing you need to understand is that its adoption also brings challenges and risks. While AI offers major benefits, it also introduces concerns that firms must manage carefully to ensure reliable and ethical audit outcomes. 

Here are some of the key challenges to keep in mind: 

a. Data volume, complexity, and error risk

As audits become more data-driven, managing massive datasets can be difficult. Any error, whether input, structure, or format, can affect data accuracy. Firms must set up processes and policies in place to ensure AI systems get clean, complete, and accurate data to avoid misleading results. 

b. Algorithm transparency and bias

 
One major concern with AI is the “black box” effect where auditors may not fully understand how the algorithm arrived at a specific result. If the data used to train the AI model is biased or incomplete, the system may generate unreliable findings.  

To avoid this, firms must emphasize transparency, integrity, and accountability in their use of AI. This means regularly testing and validating algorithms, documenting how AI tools make decisions, and keeping auditors in the loop when interpreting results. 

c. Data accuracy and security

AI usually depends heavily on high quality data. This means any errors, gaps, or outdated information can lead to inaccurate conclusions. At the same time, managing large volumes of sensitive financial data increases the risk of data breaches or unauthorized access. 

 
To manage this risk, organizations must invest in robust cybersecurity systems and establish clear data governance policies that ensure data integrity and protection. 

d. Human judgment remains essential 

Even with AI handling repetitive tasks and analyzing large datasets, auditors’ professional judgment cannot be replaced. Critical thinking, ethical awareness, and contextual understanding are skills only humans bring to the table. This is why, AI should be seen as a supporting tool that enhances human decision-making, not a substitute for it. 

By keeping humans in the loop, firms can make sure that audits remain accurate, trustworthy, and aligned with both client needs and regulatory expectations. 

Read: From Stress to Support: How Audit Support Services Add Value 

Preparing Your Firm for AI in Auditing 

Understanding the benefits and challenges of AI is just the first step. The next step is preparing your firm to adopt AI tools effectively while maintaining control, compliance, and human oversight.  

Here are practical steps your firm can take: 

1. Upskill Internal Teams

Take the time to equip auditors with the skills needed to work alongside AI. This involves understanding how AI tools analyze data, identifying anomalies flagged by the system, and interpreting AI-generated insights.  

Doing this not only helps your team work more efficiently but also gives your firm a competitive advantage, allowing it to deliver higher-quality audit services and stronger insights to clients. 

2. Start with Pilot Programs

Before fully implementing AI across your firm, it’s wise to begin with small, low-risk projects. Pilot programs allow your team to test tools, refine processes, and learn how AI integrates with current workflows. 

Here’s how to approach pilot programs in the most effective way: 

• Choose low-risk areas first – Focus on processes where mistakes won’t cause major disruptions. 

• Test AI tools on real data – Let the system analyze actual transactions to see how it performs. 

• Measure results – Track improvements in accuracy, efficiency, and error detection. 

• Gather feedback from auditors – Understand what works, what doesn’t, and how workflows can be improved. 

Starting with small steps helps your team gain confidence with using AI, reduces implementation risks, and lays the foundation for a trouble free, firm wide rollout. 

3. Establish Governance for AI Oversight 

Establish clear rules and oversight when using AI in your processes. Proper governance indicates that your firm is using AI responsibly, and your audit outputs remain reliable and compliant. 

Here’s how to set up effective governance: 

• Define roles and responsibilities – Decide who monitors AI outputs, validates results, and makes final decisions. 

• Set clear procedures – Document how AI will be used in audits, including which tasks are automated and which require human review. 

• Regularly review AI performance – Check for errors, biases, or unexpected behavior in the system. 

• Ensure compliance – Align AI processes with audit standards and regulatory requirements. 

With proper governance, your firm can confidently leverage AI while maintaining control, accountability, and compliance. 

4. Leverage Outsourcing Partners

Partnering with experienced outsourcing providers can help your firm adopt AI more efficiently and cost-effectively. On top of that, outsourcing allows access to advanced tools and expertise without the full upfront investment. 

Here’s how reliable outsourcing can benefit your firm: 

a. Reduce costs

Instead of hiring full-time staff, outsourcing allows your firm to tap into a skilled workforce at a lower cost. For example, many firms take advantage of offshore teams in regions like the Philippines, where labor costs are significantly lower while maintaining high-quality standards. 

On top of that, many providers already use AI-powered tools for audit support tasks (such as data extraction or analytics), allowing your firm to access these capabilities without the heavy upfront spending. 

b. Gain specialized expertise

Outsourcing partners often have professionals well-versed in international accounting standards and audit practices. This expertise can help your firm handle complex tasks more efficiently and stay aligned with global best practices. 

c. Scale with flexibility

Outsourcing allows your firm to quickly adjust resources according to demand. During peak periods, you can expand support, while in slower times, you can scale back without dealing with the challenges of hiring or layoffs. 

This flexibility becomes even more valuable as your firm adopts AI because outsourcing partners often have teams already trained to work with AI-enabled workflows, making it easier to scale up or down without interrupting your audit processes. 

By working with an outsourcing partner with sufficient AI expertise, your firm can harness the benefits of AI, access expert talent, control costs, and adapt easily to changing workloads. 

Read Next: From Seasonal Spikes to Talent Gaps: Is Audit Support Worth It? 

Choosing the Right Support Partner 

With the huge number of outsourcing providers in the market, finding the right one can be challenging. Not every provider delivers the same level of quality, and the success of your audit preparation will depend heavily on who you choose to work with. 

Here are a few key factors to consider when evaluating potential partners: 

1. Relevant audit expertise 

Your chosen provider should be able to understand audit workflows, deadlines, and peak season pressures. Choose a partner who goes beyond basic accounting knowledge and can deliver the accuracy and attention to detail required in auditing. 

2. Commitment to data security 

Protecting your client’s sensitive information should be your number one priority. Hence, your provider must have clear policies for storing, accessing, and transferring data. Their approach should also reflect the same high standards of security that your firm maintains.  

3. Clear and consistent communication 

Strong communication is key for a smooth partnership. This is why you should look for providers with structured processes for updates, assigned points of contact, and quick issue resolution. Having this on check, helps prevent delays and keeps everyone on the same page. 

4. Proven track record 
 

Lastly, before committing to any partnership, make sure to do your due diligence and check for client testimonials, references, or examples of past engagements. This helps you understand the provider’s reliability, experience, and ability to deliver consistent results. 

The Bottom Line

AI will not take your job away. Instead, it's a tool that enhances productivity and efficiency for your employees, allowing you to leverage their accounting skills.  

By automating repetitive work such as bookkeeping, data entry, and payroll processing, your employees can focus more on delivering quality solutions for your clients. AI in accounting and auditing empowers your staff to make better decisions and raises the bar for quality audit services. 

Need an extra hand in managing your audit clients?   

Consider D&V Philippines. We offer scalable and cost-effective audit support solutions to help you get the job done without sacrificing the quality of your work. Schedule a free consultation with us today or visit our website to know more about our audit support solutions.       

You may also download our case study, How a US based Accounting and Audit Firm Resolve their Talent Shortages Through Accounting Outsourcing to learn how our audit support solutions have helped a US audit firm and can help you at the same time. 

This post was first published on 8 August 2019 and edited on December 18  2023 for relevancy and comprehensiveness.  

Edited by: Angelica Garcia