How AI can Revolutionize Internal Audit: Shaping the Future of Assurance

In recent years, Artificial Intelligence (AI) has emerged as a transformative force across various industries. One area that stands to benefit significantly from AI's capabilities is internal audit. AI has the ability to revolutionize the landscape of internal audit and controls, making processes more efficient, insightful, and adaptable, but nevertheless, concerns persist. However, as businesses navigate a rapidly evolving and competitive risk environment, harnessing AI's potential could prove essential for staying ahead of the curve.

Traditionally, internal audit functions have relied on manual processes and sampling methods, which are often time-consuming and resource-intensive, but internal audit driven tools and technologies have been changing the game by automating mundane tasks. AI could further provide auditors with the ability to analyze large datasets swiftly and accurately.

While AI's potential in internal audit is undeniable, its adoption remains relatively low. One reason for cautious AI adoption is the fear of rendering internal audit teams obsolete. Many maintain, however, that AI is poised to enhance rather than replace human intelligence. By processing vast volumes of data in real-time, they argue that AI can help auditors identify subtle nuances that may elude human detection. For instance, AI can pinpoint unusual transaction patterns or trends, enabling auditors to focus their efforts more effectively. Nevertheless, concerns persist surrounding the adoption of AI.

AI's strengths extend to its ability to consider both internal and external information sources. This capability can empower organizations to recognize emerging risks and threats previously overlooked. For example, a government agency auditing COVID-19 benefits payments could use AI to populate a risk register based on past audits, accelerating the process and ensuring compliance.

Moreover, AI equips internal auditors with actionable insights to mitigate risk effectively. In a retail setting, AI might detect a sudden surge in thefts of specific products. Armed with this information, a district manager could promptly address the issue by moving these items behind the counter.

However, AI adoption faces several challenges. Organizations must develop internal expertise in data science, as AI solutions are only as effective as the data they analyze. Standards for developing AI in auditing are also currently lacking, although initiatives are underway to address this issue. Additionally, ethical concerns related to AI, such as potential biases in models, need careful consideration.