8/20/22, 1:15 AM Implementation of Artificial Intelligence and its Impact on Human Auditors – Finance International Program

FINANCE INTERNATIONAL PROGRAM

Implementation of Artificial
Intelligence and its Impact on
Human Auditors

By: Qonita Zahra 2101694620

Abstract

This research paper has an objective to answer the question of possibility of auditors being
replaced by Artificial Intelligence (AI). Emergence and rapid development of technologies lately
possibly disrupts many fields of work, including auditing. Technology such as generalized audit
software has been used in current day audit, and AI advancement can also be utilized in the
process. Early functions of AI are already adopted in big audit firms, and possibilities of
implementing deep learning and AI-based automation in audit in the future exist. This paper
supports the idea that human auditors are irreplaceable by AI due to the lack of human-like
professional judgement and skepticism. Current and future auditors as well as students should
however still prepare for the technological breakthrough of AI by improving their IT proficiency
and database knowledge.

Chapter 1 Introduction

In the recent years, newly emerging sophisticated technologies such as artificial intelligence has
been slowly implemented into many lines of work, and that also includes financial auditing. The
possibility of machine that can think and learn like a human being raises a question of whether
auditors can will be replaced by artificial intelligence or not. But technology is already a part of
current day auditing, as it is not rare for auditors to work alongside systems or software that can
assist audit procedures.

1.1. Current Role of Auditors and Technology

The purpose of audit is to provide reasonable assurance that a company’s financial statements
are fairly presented, hence the method of sampling selection is done with an assumption that
those samples will reflect the financial statements as a whole when tested (International Auditing
and Assurance Standards Board, 2009). Currently, selection of computerized data can be done

https://international.binus.ac.id/finance/implementation-of-artificial-intelligence-and-its-impact-on-human-auditors/ 1/7
8/20/22, 1:15 AM Implementation of Artificial Intelligence and its Impact on Human Auditors – Finance International Program

with the used of generalized auditing software, shortened as GAS, with some examples being
programs such as Audit Command Language (ACL), IDEA, and ProAudit. According to Debreceny
(2005), other than sample selection, GAS is utilized to detect misstatements and is also able to
FINANCE INTERNATIONAL PROGRAM
thoroughly analyze a company’s financial data in their accounting system.

Although GAS can do various functions to assist audit procedures, it still needs to be operated by
human auditors. According to Ahmi (2013), functions of GAS can fulfil requirements in auditing
standards issued by American Institute of Certified Public Accountants (AICPA) and Auditing
Practices Board from United Kingdoms. However, the use of GAS, according to Janvrin (2009),
requires consideration of other factors to determine whether it is applicable or not. Janvrin (2009)
mentioned that if a client has complex IT structure and the assessed control risk is low, which
indicates that the auditor relies on the internal control, computer-related audit procedures or
other GAS are more likely to be used. To obtain understanding of internal control during audit
planning stage, professional judgement of auditors is needed to determine the client’s control
risk. Other than that, the size of the auditing firm also affects the use of GAS. From a survey
conducted by Janvrin (2009), auditors from big 4 firms are “more likely than smaller firms and
national firms to use computer-related audit procedures”. Both factors mentioned to affect GAS
implementation are caused by numbers human force in a firm and judgement from human
auditors.

The implementation of GAS is encouraged by auditing standards, but there are still factors that
affects auditors to not use it. Singleton (2006) stated that computer assisted auditing tools and
techniques, known as CAATTs, are already adopted but underutilized due to the computer skills,
such as databases and data management knowledge, needed. Technological proficiency requires
general training that incurs cost for auditing firms that possibly outweigh the benefits of
implementing use of GAS. Underutilization aside, current adoption of GAS and CAATTs in auditing
still heavily relies on intervention from humans, as these systems are not yet able to operate on
their own. Current auditing practices utilize technology to ease several audit procedures, such as
selection of sample, but the role of human auditors in collecting evidence and for controls and
dollar misstatement is still a prominent part in auditing.

Chapter 2 Findings and Discussion 

Artificial intelligence is defined as a computer system with the ability to imitate human behavior
and intelligence to perform tasks (Marr, 2018). In the field of auditing, such technology can be
utilized in performing audit procedures or judgement-making decisions, which will be covered in
this chapter.

2.1. Artificial Intelligence in Audit

As technological advancement happens worldwide in a fast rate, the capability of programs to run
and think on their own might also change, especially with rapid development of artificial
intelligence. Artificial intelligence, shortened as AI, is usually implemented into systems to execute
data processing and judgement-making, and significant progress has been made to apply it in
business situations in the last few decades, which includes public accounting firms that offers
auditing services (Vasarhelyi, 2016).

https://international.binus.ac.id/finance/implementation-of-artificial-intelligence-and-its-impact-on-human-auditors/ 2/7
8/20/22, 1:15 AM Implementation of Artificial Intelligence and its Impact on Human Auditors – Finance International Program

The intelligent computer capable of making decisions are in line with the main purpose of auditing
as an assurance service, which involves gathering and evaluating data for samples and generate a
reliable opinion on the presentation of the financial statements, as AI are able to aid auditors in
FINANCE INTERNATIONAL PROGRAM
making judgements (Omoteso, 2012). According to Carlson (1983), as cited by Omoteso (2012),
there are three main phases of a decision-making process: “intelligence (which involves gathering
data, identifying objectives, diagnosing problems, validating data and structuring problems),
design (which comprises manipulating data, quantifying objectives, generating alternatives and
assigning risks or values to alternatives) and choice (which involves generating statistics on
alternatives, simulating results of alternatives, explaining alternatives, choosing among
alternatives and explaining choice)”. An AI-based system with the ability to make decisions in a
similar fashion to a human being by fulfilling the phases of decision-making can thus make better
judgements by removing unknown biases that might arise in the work of human beings. Other
than decision-making, AI can also assist investigative procedures such as analytical procedures,
fulfil the classification audit objective, and assess and evaluate risk and internal control.

Applying AI systems to auditing brings various benefits, such as reduction of cost and efficiency of
audit due to its capability to process large amounts of data efficiently (Bizzaro, 2017). The client
being audited are using various documents in their business cycles that supports the numbers
presented in financial statements that can be analyzed by AI, and other information stored online
are easily accessible as well. AI is able to scan and test the large amount of complex data, as
traditional audit procedures might be less efficient compared to newer inventions. This more
efficient and less time-consuming method that can be learnt by AI to process data containing
information can also be cost saving.

2.2. Future Implementation of Artificial Intelligence in Audit

With the rapid development of AI, it is not too far ahead from the future until a time where public
accounting firms adopt technologies to incorporate audit and more sophisticated AI together.
Given the known benefits and use of AI currently, the advancement of technology can be more
useful in an audit process. In a few decades from now, it is possible for simpler auditing tasks to
be assisted by AI.

2.2.1. Deep Learning

One specific form of AI technology that can be applied to auditing in the future is the deep
learning technology enabled by convolutional neural networks. Deep learning is defined by LeCun
(2015) as “computational models composed of multiple processing layers to learn representations
of data.” Deep learning systems can learn structures of large data using algorithm to influence
machines to react to representations.

Varashelyi (2016) mentioned that the features of a deep learning AI can utilize visual recognition
to learn from existing images presented, which are connected to tags according to the visual
content and relate the picture with specific logical classes. For example, Applebaum (2016) stated
that such deep learning AI can scan current product catalogues, then scan a real-time recording of
warehouse through automated drone camera for inventory counts that replaces a physical one.
Other than that, deep learning AI can inspect written statements using linguistics analysis to
identify patterns or trends which can be used to analyze conference transcripts and management
discussions to be used in audit analysis (Sun, 2016). The AI can also be taught to classify texts

https://international.binus.ac.id/finance/implementation-of-artificial-intelligence-and-its-impact-on-human-auditors/ 3/7
8/20/22, 1:15 AM Implementation of Artificial Intelligence and its Impact on Human Auditors – Finance International Program

from conference transcripts into “fraudulent” and “non-fraudulent” based on its interpretation
that has been taught, where the lines deemed as “fraudulent” and possible accounts associated
with it would be given more substantive attention by an auditor during testing (Varashelyi, 2016).
FINANCE INTERNATIONAL PROGRAM
The endless possibilities persist in the field, and development of machine learning to help
auditors make better judgements in the future is technologically feasible.

2.2.2. Artificial Intelligence-Driven Automation of Audit

The use of AI and deep learning techniques can also help automatize various stages in an audit in
the future. Louwers (2015) mentioned that there are general phases of an audit, which all can be
automated with support of AI systems.

As an example, the first phase involves planning and designing the audit, where the next step
after accepting a client is continued by gathering initial knowledge of the client and the industry.
Varashelyi (2016) suggested the use of AI to compile data of the business from external sources,
learn the operational methods and accounting system of the client, and then estimate initial risks.

Next, to understand the internal control of the client, the AI can utilize deep learning in the form
of visual recognition previously covered to analyze and recognize patterns in identifying risk
(Varashelyi, 2016). The audit evidence of observation can be replaced with automated drones,
where the captured images or videos will be processed by the AI. During the tests of controls, a
monitoring system supported by AI is suggested by Issa (2014) to search for exceptions in control,
and each violation is compiled into a database that will indicate lacking key controls that might
lead to material misstatements for the auditor to prioritize in testing.

In performing substantive tests, the implementation of AI auditing will enable firms to examine
documents in real-time continuously. Rather than an interim or year-end test for transactions
using samples, Varashelyi (2016) stated that the AI will be able to perform inspections on 100
percent of the population continuously. With this suggested system, Issa (2014) also stated that
the constant, thorough examination of documents and records can detect misstatements caused
by error or fraud and prevent it to be inputted to the financial statements. After all required audit
procedures has been done, all data and information collected by the AI together with the
professional judgement of an auditor will be used as a basis to issue an audit report containing an
opinion on the financial statements.

2.3. Impact of Artificial Intelligence on Auditors

The possible implementation of AI features and deep learning technology in the future for an
audit process might make the impression that human auditors are soon to be replaced, but it is
not quite the case. Brenna (2017) mentioned that AI lacks human characteristics that can justify
reason, exercise professional judgement, and apply skepticism. In processing large amounts of
data in a shorter timeframe, it might be superior, but the skills of auditors to uncover actual
reasons behind findings of errors or misstatements are still irreplaceable. Other than that, the
ability of an auditor to exercise judgement and the intuition for incomplete or missed things are
unable to be done by AI. EY digital leader Herman Sidhu (2017), as cited by Murphy (2017), stated
that AI or machines can only work with data that they are given. In a scenario where client
purposefully do not record transactions and it does not get recognized by the system, the AI

https://international.binus.ac.id/finance/implementation-of-artificial-intelligence-and-its-impact-on-human-auditors/ 4/7
8/20/22, 1:15 AM Implementation of Artificial Intelligence and its Impact on Human Auditors – Finance International Program

might not know that the transaction ever happened because it is not in the data, and it cannot
fulfil the audit objective of completeness.

FINANCE INTERNATIONAL PROGRAM

Murphy (2017) also mentioned that it is possible for the standards and regulations to not catch up
with rapid technological changes, and citing PwC’s Jon Andrews (2017), convincing the
stakeholders such as audit committees, client, and regulators about the credibility of AI use in
audit is a challenge. Auditor’s experience is also highly value to determine the individual’s
competence in their specialization. With that in mind, it can be assumed that it is unlikely for
stakeholders to fully trust AI in providing reasonable assurance alone. Instead of replacing the
function of auditors, further development of AI will eventually be used in assisting auditors during
the audit process. The use of auditor’s professional judgement will still be relied on, but the
implementation of AI to be used alongside auditors instead of replacing them give users of
financial statements higher level assurance because of the analytical capabilities provided by the
AI.

2.4. Anticipating Technological Changes

Since AI will ideally be used in the future to help auditors make judgements in terms of optimizing
work time and enabling auditors to analyze larger numbers of data to obtain reasonable
assurance, current and future auditors need to prepare for the technological breakthrough. For
individuals who eventually will work alongside AI, Deloitte’s chief innovation officer Jon Raphael, as
cited by Ovaska-Few (2017), stated that future auditors need to prepare by improving their
database and IT proficiency by joining projects, taking classes, and participating in seminars.
Other than that, the professional skepticism still needs to be applied at all times, because even
the most developed AI is not immune to errors, and auditors have to be able to detect when the
AI’s analysis is incorrect and find ways to deal with unexpected exceptions in the system (Ovaska-
Few, 2017). As mentioned by Issa (2014), tasks given to new auditors might be done by AI or
automation powered by AI. In the future, individuals who are not able to contribute in
technological awareness to operate the system and lack professional judgement to interpret
analysis of the AI are in a position where they can be replaced, so proficiency to operate AI-based
systems or exercising better judgement needs to be prepared.

Although the exact time when AI will be fully implemented in auditing is not determined yet, it will
eventually be done so not only professional auditors but also university students taking
accounting major also need to be exposed to the information and given general idea, as well as
exercises to operate current GAS to build technological proficiency that can be useful when more
complex systems are utilized in the future.

Chapter 3 Conclusion

In conclusion, the field of auditing has implemented technological tools to assist auditors in their
work, and through technological changes, the main purpose of audit to provide reasonable
assurance that the client’s financial statements are fairly presented remain unchanged. With
emerging, possibly disruptive technologies such as AI, the job of auditor will not be fully
eliminated, and the AI can be utilized to ease the audit processes by analyzing data or documents
given and recognizing patterns of errors or misstatements that can be useful. At the end, the
report which contains the audit opinion will still be issued by human auditors, but the process
leading to it such as tests and data collection and analysis are helped by technology. To prepare

https://international.binus.ac.id/finance/implementation-of-artificial-intelligence-and-its-impact-on-human-auditors/ 5/7
8/20/22, 1:15 AM Implementation of Artificial Intelligence and its Impact on Human Auditors – Finance International Program

for the upcoming changes, auditors need to be technologically proficient to be able to interpret
analysis of the system, and professional skepticism will always be needed so auditors do not rely
blindly on technological innovations.
FINANCE INTERNATIONAL PROGRAM

References

Abdolmohammadi, M., & Usoff, C. (2001). A longitudinal study of applicable decision aids for
detailed tasks in a financial audit. Intelligent Systems in Accounting, Finance & Management, 10(3),
139–154. https://doi.org/10.1002/isaf.204

Ahmi, A., & Kent, S. (2013). The utilisation of generalized audit software (GAS) by external auditors.
Managerial Auditing Journal, 28(2), 88–113. https://doi.org/10.1108/02686901311284522

Bizarro, P. (n.d.). Artficial Intelligence: The Future of Auditing. Internal Auditing., 32(5), 21–26.

Brenna, B., Baccala, M., and Flynn, M., Artificial intelligence comes to financial statement audits,
CFO Magazine (Feb 6, 2017). Available at: http://ww2. cfo.com/auditing/2017/02/ar t i ficial -
intelligenceaudits/.

Debreceny, R., Sook-Leng, L., & Neo, W. (2005). Employing generalized audit software in the
financial services sector: Challenges and opportunities. Managerial Auditing Journal, 20(6), 605–
618. https://doi.org/10.1108/02686900510606092

Issa, H., and A. Kogan. 2014. A predictive ordered logistic regression model as a tool for quality
review of control risk assessments. Journal of Information Systems 28 (2): 209–229

Janvrin, D., Bierstaker, J., & Lowe, D. (2009). An Investigation of Factors Influencing the Use of
Computer-Related Audit Procedures. Journal of Information Systems, 23(1), 97–118.
https://doi.org/10.2308/jis.2009.23.1.97

LeCun, Y., Bengio, Y., & Hinton, G. (2015). Deep learning. Nature, 521(7553).
https://doi.org/10.1038/nature14539

Marr, B. (2018). The Key Definitions of Artificial Intelligence (AI). Retrieved from
https://www.forbes.com/sites/bernardmarr/2018/02/14/the-key-definitions-of-artificial-
intelligence-ai-that-explain-its-importance/#120b67534f5d

Murphy, H. (2017). Auditing to be Less of a Burden as Accountants Embrace AI. Retrieved from
https://www.ft.com/content/0898ce46-8d6a-11e7-a352-e46f43c5825d

Omoteso, K. (2012). The application of artificial intelligence in auditing: Looking back to the future.
Expert Systems with Applications, 39(9), 8490–8495. https://doi.org/10.1016/j.eswa.2012.01.098

Ovaska-Few, S. (2017). How Artificial Intelligence is Changing Accounting. Retrieved from

https://www.journalofaccountancy.com/newsletters/2017/oct/artificial-intelligence-changing-
accounting.html

https://international.binus.ac.id/finance/implementation-of-artificial-intelligence-and-its-impact-on-human-auditors/ 6/7
8/20/22, 1:15 AM Implementation of Artificial Intelligence and its Impact on Human Auditors – Finance International Program

Singleton, T. (2006), “Generalized audit software: effective and efficient tool for today’s IT audits”,
Information Systems Control Journal, Vol. 2, p. 1.

FINANCE INTERNATIONAL PROGRAM

Vasarhelyi, M. A. (2016). Research Ideas for Artificial Intelligence in Auditing: The Formalization of
Audit and Workforce Supplementation. Journal of Emerging Technologies in Accounting., 13(2), 1–
20.

Share to your friends

BINUS INTERNATIONAL | FINANCE

The Joseph Wibowo Center

Hang Lekir I No. 6, Senayan

Jakarta 10270, Indonesia

Copyright © BINUS Higher Education. All rights reserved

https://international.binus.ac.id/finance/implementation-of-artificial-intelligence-and-its-impact-on-human-auditors/ 7/7