BDO Survey Finds AI is Expected to Unlock More Efficient Audits, but Can't Replace Human Element

October 07, 2024 at 07:00 AM EDT

Companies rely on advanced technology to bolster the audit process amid talent shortages and data management challenges

Survey highlights

Finance leaders believe technology can improve audit quality: Just over half of respondents anticipate technology will enhance audit quality (54%); however, finance leaders continue to place high importance on auditor industry knowledge and professional skepticism as contributors to a high-quality audit.
Mindfully deployed technology unlocks new levels of trust: 63% of senior finance leaders say trust is somewhat or significantly enhanced for them and their key stakeholders when auditors use advanced technology, and 64% say they look for a firm to use AI before even engaging with an auditor.
Finance leaders will leverage AI to supplement the talent shortage: Although recruiting experienced accountants is the top strategy for companies grappling with the labor shortage, 61% plan to improve workforce inefficiencies with AI.

The inaugural 2024 BDO Audit Innovation Survey, released today, finds that companies increasingly expect their audit firms to leverage advanced technologies like AI to enhance the audit process, believing that this will lead to a higher-quality audit. However, survey results also indicate that companies believe working with experienced, effective audit professionals is just as important as ever, even with the advent of new technologies.

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The survey, which polled 200 finance leaders at middle-market companies, sought to better understand how technology is impacting the audit experience. This includes gaining insight into which technologies companies are investing in and the top challenges to a smooth financial audit. The results reveal that when properly utilized, advanced technology is expected to enhance the audit experience for both finance teams and their external auditors. But they also find that despite the perceived benefits, the use of advanced technology in the audit doesn’t circumvent all challenges.

For example, the data reveals that compatibility issues between the auditing firm’s technologies and the organization’s existing financial systems and processes can create a challenge for companies during the audit engagement. The survey also revealed that although many companies say they believe technology will unlock a more efficient and transparent audit, they aren’t willing to compromise on hiring an auditor with a proven track record. Hiring an experienced auditor is especially important as companies indicate that they continue to face challenges finding high quality in-house accounting talent. As a result, many are turning to solutions like hiring non-accountants or leveraging AI to fill those gaps.

“We know that innovations like AI are reshaping the audit landscape, but it’s essential that we understand finance leaders’ top priorities and challenges in this shift,” says Demetrios Frangiskatos, National Managing Principal, Assurance Operations. “What we learned validated the critical importance of aligning audit technology with client needs and underscored the demand for auditors who can skillfully leverage these tools to maintain and enhance audit quality. By understanding these needs and expectations, we can help ensure that audit quality and trust remain at the forefront as the profession evolves.”

Finance leaders are tired of misalignment

Finance leaders identify insufficient technology alignment as the top challenge when working with an audit firm. Eighty percent of respondents agree that a lack of compatibility between an audit firm’s tech and the audited organization’s financial systems and processes is sometimes or often a challenge. The majority of those polled (77%) also cite extracting and merging data from various systems as a challenge area when working with an external audit firm. These and other instances of misalignment are pushing finance leaders to reevaluate whether their auditors’ technology capabilities are consistent and up to par with their own.

Effective deployment of technology helps instill trust in auditors

Though technology use has become a top consideration in the auditor selection process, the BDO Audit Innovation Survey reveals that technology use goes hand in hand with auditor trust. Sixty three percent of leaders say trust is somewhat or significantly enhanced for them and their key stakeholders when auditors use advanced tools, and an overwhelming majority (84%) say they anticipate audit quality to improve with increased integration of technology. This belief underscores the critical role technology, including AI, plays in shaping the future of audit quality and trust. However, it is important to note that 72% of respondents say a lack of confidence in the technical expertise of external auditors and their ability to interpret the technology’s outputs is sometimes or often a challenge. So, while technology might be growing in importance, it is the training and education of auditors that ultimately drives trust and ensures the effective interpretation and use of these tools to enhance audit quality.

A poor data foundation can stunt technology’s potential

To embrace new audit technology, organizations need a strong data foundation and consistent data governance. However, data maturity remains a challenge. When asked about the top barriers to a smooth audit experience, 69% of respondents cite establishing data governance and internal data management as the top hurdle. Nearly half (45%) of finance leaders say their data governance is either not mature, or only somewhat mature.

Talent shortage forces finance leaders to get creative with staffing strategies

Leaders whose workforces have been impacted by the accounting talent shortage are leaning into various strategies to help fill critical gaps in their organizations. The lack of talent also affects the ability to implement technology effectively and establish strong data governance, both of which are crucial for maintaining robust audit quality. Aside from recruiting experienced accountants, which 68% cite as a strategy they plan to deploy, 61% of finance leaders are turning to AI to improve efficiencies, and 61% are focusing on upskilling and reskilling. Another emerging strategy is the hiring of non-accountants (such as data scientists) to help fill the gaps in the finance function. Amid the increasing reliance on advanced technology, an educated and adaptable workforce is essential to ensure both the effective deployment of these tools and the ability to navigate the complexities of modern audits.

Download the full BDO Audit Innovation Survey here.

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About the BDO Audit Innovation Survey

The 2024 BDO Audit Innovation Survey polled 200 senior finance leaders at U.S. private and publicly held companies with revenues ranging from $250 million to $3 billion. The survey was conducted in May 2024 by Rabin Roberts Research, an independent marketing research firm, using Slice MR’s panel of executives.