For many business owners, the prospect of an audit is seen as a necessary evil at best. It’s a statutory requirement that sounds disruptive, time-consuming, and backward-looking exercise in ticking boxes.
And there is often an expectation gap between what business owners believe an audit is for, such as guaranteeing the complete absence of fraud, and its actual (admittedly dry-sounding) purpose: to provide reasonable assurance that financial statements are free from material misstatement.
However, the audit process is looking at a major shift, driven by Artificial Intelligence (AI) and machine learning. It's a change that will redefine what an audit is, what it delivers, and what it means for your business.
The new audit experience
By their nature, audits are data-heavy exercises. The need to draw a representative sample of financial documents and management information can be a big ask for many financial teams – especially if much of the information is in one person’s (often the owner's) head.
While the rise of cloud accounting has helped put more data into one system, audits do tend to require significant time and input from your finance team, pulling them away from their urgent work to find and provide sample documents for the auditors.
AI has the chance to streamline this by automating many of the repetitive, labour-intensive tasks that used to take up so much time.
- Connecting directly and securely to your systems, AI-powered tools can analyse vast quantities of data without constant human intervention.
- With the ability to assess volumes of data in little time, the time onsite for any audit team will be cut dramatically.
- With auditors freed from manual data entry, the audit becomes a smoother, quicker, and significantly less onerous part of your year – meaning fewer headaches for owners.
From document checking to deep insight
The single biggest change AI brings to the audit process is the ability to analyse up to 100% of your company's financial transactions, rather than relying on traditional sampling methods.
This move from a small sample to the entire data population is a huge leap in audit quality and depth. While the scope of audit is still set by statutory requirements, it is likely that the demands for what is required will catch up with what is possible, once proven.
For business owners, this could mean that auditors’ time is reallocated from data gathering to analysis, critical thinking, and applying their professional judgment. Instead of spending hours on manual checks, they can focus on interrogating the output from the AI, investigating anomalies, and understanding the story behind the numbers. This deeper analysis can:
- Improve risk assessment by identifying unusual patterns or trends that might indicate emerging business risks.
- Enhance fraud detection by flagging transactions that deviate from the norm far more effectively than human sampling ever could.
- Deliver genuine business intelligence that goes beyond the statutory requirements.
Audit as a live business management tool
A more theoretical but increasingly practical evolution is the concept of the 'always-on' audit – something we explore more in this article.
Instead of a single, year-end event, AI has the potential to facilitate a continuous process where financial data is monitored in near real-time.
Imagine an audit that functions more like a live financial health check for your company. Anomalies, errors, or control weaknesses can be flagged and addressed as they occur, not months after the fact when they are harder to unpick.
This shifts the audit from a historical report into an integrated part of your company's ongoing financial management and governance. It provides you with a continuous layer of assurance, helping you manage risk and make better-informed decisions throughout the year.
What you can do to be ‘AI-Ready’
The bottom line is that the future of audit with AI should be a smoother, more useful and more relevant examination of your business’s activity. But to unlock the full value that AI can offer, the single most important factor is the quality of your own financial data.
The most advanced analytical engine in the world can't produce reliable insights from inconsistent or inaccurate information.
Taking the time to get your business 'AI-ready' goes beyond preparing for your next audit – it can help you build a more efficient and resilient company.
1. Good data hygiene
‘Data hygiene’ simply means ensuring the financial information you record is accurate, consistent, and complete. This is the bedrock of a modern, data-driven business.
- Consistency is key: Ensure your team is using a consistent format for data entry, such as correctly dating invoices and using the right codes for expenses.
- Reconcile regularly: Don't leave bank reconciliations to the year-end. Regular, timely reconciliations catch errors early and provide a true picture of your cash flow.
Good data hygiene leads directly to a smoother audit with fewer queries and interruptions. More importantly, it gives you access to reliable management information throughout the year, allowing you to make better business decisions.
2. Cloud-first finance
Modern cloud accounting platforms like Xero, QuickBooks, and Sage are the data foundation for a better finance system. These systems are specifically designed to enable the seamless and secure sharing of data that AI tools rely on.
- Real-Time access: Cloud platforms allow your auditor to securely access live data, eliminating the time-consuming process of manual data extraction and transfer.
- Built-in accuracy: Many of these platforms have features that improve data quality, such as automated bank feeds and smart categorisation rules, which reduces the chance of human error.
- Single source of truth: Integrating your cloud accounting system with other business tools creates a single, reliable source of data, giving you a powerful, holistic view of your company’s performance.
Ready to see how AI could transform your audit process?
Preparing your business to make the most of new technology is one of the most valuable strategic steps you can take.
At Haines Watts, we work with businesses of all sizes to help them get the most out of their numbers and their technology. We can help you review your internal processes, advise on the right systems for your goals, and help you turn your financial data into smarter decisions.
If you’re ready to build a more data-driven business, contact us today.
