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AI in financial reporting and audit: Navigating the new era

Jul 3, 2024

Financial reporting leaders’ AI expectations for their companies and external auditors.

AI is transforming financial reporting and auditing and is set to dramatically grow with varying levels of speed around the world and across industries – helping businesses create smarter and more joined-up information flows with better identification and response to risk and a much greater ability to detect anomalies and outliers.

KPMG’s ‘AI in financial reporting and audit: Navigating the new era’ study of senior executives and business leaders across 1800 companies globally confirms the importance of AI in financial reporting and auditing and clarifies, it is not hype. AI is changing auditing and businesses expect auditors to lead the way.

Our research conducted finds that we are standing on the cusp of a genuine financial reporting revolution: moving from the ‘digital age’ to the ‘AI age’ in which nothing will ever be quite the same again. Read our recent report to find out more.

AI is changing auditing — businesses expect auditors to lead the way

64% of companies expect auditors to have a role in evaluating their use of AI in financial reporting, providing assurance and attestation over their AI controls.

Companies want their auditors to use AI for three key purposes:

Improve the efficiency and accuracy of audits: Over two thirds want their auditors to prioritize the use of AI for data analysis and quality management.
Develop more proactive, continuous, and predictive processes: Over half want their auditors to prioritize predictive analysis.
Gather data and value-added audit insights: Many companies expect their auditors to harness AI’s ability to analyze vast sets of data and find insights that may not be identified through traditional analysis.

Top benefits of AI according to Leaders:

The ability to predict trends and impacts (65 percent)
Real-time insights into risks (60 percent)
Better data-enabled decisions (57 percent)
Increased data accuracy (57 percent).

Top barriers of AI according to Leaders:

Inadequate funding and investment (49 percent)
Uncertain ROI (45 percent)
Staff worries about displacement (42 percent)
Keeping up with regulations (42 percent)
The risk from use of algorithms with no human oversight (40 percent)

Four key traits of Leaders:

Leaders construct frameworks to reduce and manage potential AI risks
Leaders shed light on how to overcome barriers to AI adoption and use AI to enhance financial reporting function
Leaders recognize the importance of the use of ethical AI and work to mitigate GenAI concerns
Leaders implement best practices of AI-readiness