Advances in Technology for Auditing Firms: KPMG to Announce Deal with IBM Watson

A recent article in The Wall Street Journal discussed the technological improvements among auditing firms (KPMG in particular). KPMG is expected to announce an alliance with IBM to use their artificial-intelligence technology, IBM Watson, which will allow KPMG to audit all of the data for their clients rather than only samples of the data. The technology is not meant to replace human auditors, but will help them know where abnormalities may exist in the client’s books.

The other major accounting firms have also heavily invested in similar technology (some spending up to $400 million for an initial investment in the technology). The benefit of being able to audit 100% of the data is that nothing is missed due to sampling error. This allows auditors to see where problems may exist and “know exactly where to dig in and dive.” New technology has the potential to improve audits by making them both more effective and more efficient. While a managing partner at PwC correctly stated that “human intervention and judgment will always be the most valuable part of any audit,” it is also clear that technology will play a crucial role in audits going forward.