Meet Your New AI-Powered Auditor

This article is co-written by Solon Angel and Anders Liu-Lindberg 

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Let me share some of my personal experiences with auditors with you. Before I do so let me say that I have the utmost respect for auditors and the work they do. They help safeguard company and societal assets and their responsibility should not be undervalued. In many ways, though they are on a mission impossible! Why? Because there is no way they can review and qualify all transactions taking place in a company. 

At the beginning of my career, I worked as a financial controller and quickly had my first experience with auditors. They were auditing the annual accounts of A.P. Moller-Maersk. I was a controller at the corporate level and at the business unit and entity levels auditors were also auditing the books every step of the way. My role as a financial controller was largely to highlight the main variances by the entity (and later BU) on all accounts included in the annual accounts. 

My insights into what was happening in entities and BUs were very limited and I could only rely on the comments provided by them. I take it the auditors I worked with could only do the same. Only one time did they find cause to correct my work since I had misstated some currency holdings. Hence, I wondered what kind of assurances the auditors could provide? Perhaps the assurances were simply closely linked to audits done at BU or entity level? 

A few years later I got the opportunity to work as a business controller at the BU level at Maersk Drilling. Somehow history seemed to repeat itself. I knew little about what went on at the entity level and could only provide high-level commentary to the auditors. Somehow, I became more confident that this was just the way to “handle” auditors. However, the assurances would be provided at the entity level, right? 

Lo and behold yet another few years later I became a finance manager at Maersk Drilling USA Inc. Now I finally got the chance to interact with auditors at the entity level. Now I would be expecting a thorough review of our books and the quality of our work. I was disappointed by what I saw. A few randomly selected samples were what they would be checking. 

Not once did one of these checks lead to any corrections during my three annual book closes in the entity. And it was not because there were no issues to be found! In my first book close we double posted accruals worth USD 2m. We also had a USD 300k provision sitting on the balance sheet with absolutely no hope of recovering it. However, as I said, I do not blame the auditors because there was no way they could check all transactions even at the entity level. In many ways, they would have to get lucky to find any dubious transactions… 

The AI-auditor can solve the challenges 

It does not have to be like this though. It is said that auditing is one of the roles that have the highest risk of being automated. Now automation is here but it will not replace the auditor. Rather it will super-power the auditor to review all transactions in the company, produce a report of all potential issues, and ask much more thoughtful questions to the CFO and her team. 

This is exactly such a tool that Solon Angel and Mindbridge.ai have created. They want to address the fact that CFOs just like auditors typically evaluate financials top-down and rarely see the full picture. They can help detect anomalies, irregularities, interesting patterns in data, unusual trends, and much more. They have processed more than ten billion entries to date, so the method is tried and tested. 

Now imagine all your transactions being run through the AI-driven engine and you get a report like this.

Instead of a random sample, you now have a fully analyzed transaction report that can help you narrow in on the 30 transactions that are at high or medium risk. This would not be feasible for any auditor to do! Even more so when you filter to the next level and get the transaction-level data.

This AI-based risk identification will help auditors focus on the transactions that matter and can even help the CFO and the corporate finance team address issues long before they end up in an audit report or put your assets at risk. Moreover, they make your financials much more trustworthy for the users to share insights with business stakeholders and others. Not to forget it can help the CFO have more high-quality discussions with the management team. 

You can learn more about how Mindbridge.ai is helping audit firms increase the quality of their work and do more strategic thinking in the podcast “FUTURE-PROOF” with Bill Sheridan where he interviews Samantha Bowling from Garbelman Winslow CPAs. 

The role of auditors in the future 

What the AI-powered auditor can do is simply a task that the human auditors did not do well in the past. It was simply impossible for them to audit all transactions in the company. Hence, the tool will enable the auditors to take the more important and complex discussions that finance functions face every year. Did we implement IFRS 16 correctly? Did we treat the hedges according to our stated policy? What write-downs are reasonable to make? How can we strengthen our control framework, and so on… This development is real, and more audit firms are taking this approach every year. Just check out this recent press release involving Canada's fifth-largest audit firm. 

However, just like any other finance and accounting professional, it requires that auditors develop new skillsets to also become trusted advisors. At the end of the day, the CFO must trust that if the auditors have opened your books then they are correct and gives a true and fair view of the company’s activities. Most often this is the case, but it does not rely on a deep transaction review. Hence, there are uncertainties that should be addressed to satisfy the CFO and the board. An AI-powered auditor will help companies and auditors alike to get there. How confident are you in your financials once the auditors have looked at them?

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This was the fourth article in the series "Tech in Finance" and you can read previous articles in the series below.

How Technology Enables The Future Of Finance And Accounting

The Proper Way To Do A Tech Implementation In Finance

Taking An Experimental Approach To Discover The Impact Of Tech In Finance

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Anders Liu-Lindberg is the co-founder, COO (Chief Operating Officer), and CMO (Chief Marketing Officer) at the Business Partnering Institute and owner of the largest group dedicated to Finance Business Partnering on LinkedIn with close to 9,000 members. I have ten years of experience as a business partner at the global transport and logistics company Maersk. I am the co-author of the book “Create Value as a Finance Business Partner” and a long-time Finance Blogger on LinkedIn with 50.000+ followers.