Financial audits reveal a company's financial health and performance. By closely examining key financial documents – such as receipts and financial statements – auditors can gauge risks and areas for improvement. Yet, a full audit is time-consuming, sometimes taking more than five weeks. Many tasks within a financial audit are administrative and time-consuming, including data entry, document review and reconciliation.
Consequently, fintechs are now developing intelligent solutions that allow auditors to leverage their strategic expertise by automating repetitive tasks.
Financial audit tools offer many benefits – here are three of the most prominent.
Automated audit tools can complete tasks in seconds that would otherwise take hours. You can use this extra time for more strategic activities, such as enhanced communication with stakeholders or focused analysis.
A well-calibrated financial audit tool will validate its output, flagging any areas that require manual review.
The time savings and increased productivity mean that well-implemented financial audit technology has a high return on investment (ROI). The cost savings come from various angles, including:
Consequently, the right financial audit tool can save your business up to 75% of costs.
Audits rely on human ingenuity, such as when to apply professional scepticism. Rather than end-to-end automation, analysts can access automation technologies that take them from A to B faster and more accurately. Here are three key examples of these tools.
Before the 2020s, audit documents (like receipts and financial statements) complex and variable structures resisted automated data extraction. Simplistic and untrained OCR could not source and capture data points. But all of that changed with the advent of AI, which takes high-quality OCR and adds an essential component– contextuality.
Instead of reviewing all the data points in isolation, AI can understand the interaction between the data in a document. Now, the only manual action required to extract data is uploading the document. Then, the data extraction technology will automatically deposit the captured data into the user’s chosen repository.
Automated data extraction tools work beyond simply gathering information from financial statements. Our tool, Financial Statements AI (FSAI) can also leverage the extracted data to calculate key financial ratios – such as operating expenses (OPEX), EBITDA, gross profit, etc. Using a tool like FSAI skims valuable minutes off short-term tasks – and hours in the long term.
Data validation monitors two key data variables:
How data validation mechanisms monitor accuracy will depend on the technology vendor. For example, some automated protocols will validate that the data falls in a certain range.
Alternatively, other mechanisms may deploy checks that validate internal consistency (e.g. when parsing a balance sheet, they might check that the extracted value of the total assets equals the sum of total liabilities and shareholders' equity). Some validation mechanisms can even check external consistency by comparing income reported on the company's financial statements with tax filings submitted to the government.
Intelligent algorithms will be pre-trained on the desired data format. Any deviations will be automatically corrected or flagged for manual review.
Do you have terabytes of historical data trapped in a data lake? You may be wondering how best to convert it into actionable insights. Data extraction, summarisation and visualisation technologies will assist you in identifying key trends that may help guide future decision-making.
Evolution AI has helped firms extract insights from challenging projects. For example, we helped litigation funder LitFin extract data from 300,000 ancient Germanic invoices.
Suggesting that audit automation technology offers benefits without any potential pitfalls would be misleading. Integration and security issues threaten to detract from automation technology’s overall value, but these can be mitigated and managed.
This section will cover three possible limitations and how to address them.
One of the most common objections to automation technology is integrating it into the current company's IT architecture must be complex and technical. Rather than embarking on a new project, auditors persist with current, time-draining workflows – perhaps partially explaining why 73% of accounting leaders reportedly don’t use any form of AI.
It’s certainly true that connecting systems can have nightmarish outcomes if it fails. If the connection fails, analysts don’t want to be constantly on the phone with their IT departments.
You can avoid the hassle of difficult integration using a lightweight, cloud-based, platform directly. Or by connecting to a financial audit tool SaaS (delivered by a vendor with integration expertise).
Financial audit data is highly sensitive, and introducing a third party (i.e. an automation technology vendor) may cause security concerns. The first step to resolving such concerns is to check the vendor’s certifications (e.g. whether they have an ISO27001 or SOC2 certification). General Data Protection Regulation (GDPR) compliance is also a must-have.
Additionally, encrypting the data during transit will also ensure the data transfer between the supplier and vendor is fast and secure.
There is no reason to invest resources in an automation project that could become obsolete in two years. Scalability is a serious issue for many intelligent automation systems, which should scale alongside a growing organisation. Additionally, the automation technology vendor should commit to updating and improving their technology to avoid becoming outdated. In the future, financial audit tools will become faster, more accurate and likely to host generative abilities (e.g. report generation). Don’t let your firm get left behind.
The versatility of audit automation technology can deliver significant value for those willing to experiment with new solutions. Our final recommendation is to try demos and Proof of Concepts (PoCs), which will indicate whether financial audit technology is a good fit for your organisation.
Don’t be afraid to ask vendors difficult questions. After all, choosing the right automated audit technology can deliver clear benefits like time & cost savings and increased productivity.
Interested in extracting and analysing data from financial statements? Try Financial Statements AI and remove the laborious admin work from financial audits. Book a demo to find out more.
