The Big Four audit firms, through a record-level investment of billions into AI technology, are drastically changing the way they have traditionally operated.
Tax preparation, auditing and business consultation are the kinds of services that are traditionally dependent on predominantly human capital. But artificial intelligence (AI) now has disrupted these business models, and fundamentally changed the nature of accounting. For example, when the tax authorities make a new regulation, audit companies had to manually re-examine thousands of documents for clients to comply with the new law. By using NLP to extract information with a human-in-the-loop to validate the results makes the AI system more consistent and efficient.
This is why the Big Four audit firms, through a record-level investment of billions into AI technology, are drastically changing the way they have traditionally operated. Three out of the four largest accounting firms announced $9 billion on artificial intelligence (AI) and data analytics capabilities, according to Bloomberg. The firms’ focus is also on training employees to bring advanced digital solutions into all consulting and audit practices across the firms.
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The technology transformation at big accounting and consultancy firms travels far beyond automating standard auditing and accounting processes. With an emphasis on artificial intelligence, data analytics, and large scale tech training, the most prominent organisations in accounting are making tech a part of their permanent identity, which is the key to survival in the age of AI.
Here We Look At Each Big Four Audit Firm On Their AI Investments
KPMG in December 2019 announced that it would allocate $5 billion for five years in advanced technologies like AI. According to KPMG, the announcement is based on a 2015 strategic decision to make automation and artificial intelligence central to its future. KPMG’s spending is focused around building new cloud-based technology, creating innovative solutions for clients, either in-house or by collaborating with other firms, and lastly training its employees to leverage new technologies like AI and automation. The firm has also been focusing on AI and data analytics that could be utilised both for audit processes and to sell to consulting clients. KPMG’s $5 billion spendings on AI makes it the largest firm among the big four accounting firms to invest in cutting edge technology.
PWC, on the other hand, announced in September a program to spend $3 billion over the next four years, mainly to train its forces to exploit new technology. To address the skills gap, PwC also launched a digital fitness application to measure the staff’s technology skills around two years ago. The firm also gives what it calls a digital accelerator program that goes deeper into a particular tool or technology, then explores possible uses to take back to their teams and clients.
Further, Ernst & Young (EY) had announced a two-year investment of $1 billion a year prior in 2018. As part of its plan for expenditure of $1 billion over two years in advanced tech capabilities, EY has been transforming traditional client solutions and started rolling out innovative services. For example, when it comes to artificial intelligence (AI) and natural language processing, EY Document Intelligence is assisting EY teams in evaluating client documents and contracts more efficiently than human auditors. In 2019, the solution had been pushed to the Azure cloud platform and successfully tested with EY assurance teams worldwide on lease accounting change and audit engagements, which decreased processing time up to 90% and increased accuracy by up to 25%.
While Deloitte has not announced a precise investment number for its investments on tech capabilities, it is working hard to become one of the biggest providers of automation solutions to law firms. Deloitte has been working on the deployment of an artificial intelligence contract analysis tool, Kira, which is an ML-based system. The partnership with Kira Systems helps Deloitte detect what is crucial to reviewers in contracts and then identifies essential information across a massive range of agreements. Deloitte said it had 3,000 active users of Kira and has trained the platform to discover thousands of different data insights for clients.
Rising Competition From Tech Companies
Of course, one of the significant reasons why big audit firms have taken AI investments so seriously is because they see a threat from big tech companies — which are riding on the power of open-source innovation. Another factor is that tech companies are already assisting firms in many parts of the finance and banking functions.
A survey report of 150 big companies in the U.S. and U.K. by research company found that about one-third were delegating audit processes to save funds, with another 44% thinking of doing it. About 45% said that would delegate auditing to technology firms. And it’s not just large tech companies that may be competing with audit firms. Even smaller independent software developers are selling AI-based software that is assisting firms in auditing and accounting services.
Although the big professional services and accounting firms haven’t become tech companies, technology does remain core to their future. Developing analytics and advanced AI/ML models to derive valuable insights will be more beneficial to audit companies than just traditional processing. With analytics, firms could evaluate the entire set of client’s transactions in real-time, giving them the capability to spot trends and anomalies.