Digital innovation and how cognitive

technology can enhance audit quality

The use of computer technology has been a mainstay in

financial statement audits for decades. Typically, the
programs auditors use gather, organize and present a
limited sample of highly structured financial or operational
Unstructured Data Defined
data. But, recent advances in computing power will have a Unstructured data refers to information that doesn’t
transformative impact on both how audits are conducted reside in a traditional row-column database, instead it is
and the overall financial reporting landscape. KPMG is at the information that is contained in other formats or
forefront of this transformation working with leading sources such as emails, free text documents, videos,
technology companies to adapt the processing power and photos, audio files, presentations and web pages.
analytical capabilities of cognitive technology to the audit.
The application of cognitive technology will fundamentally
What is cognitive technology?
affect the way audit information is used and understood. By
significantly increasing the ability to evaluate larger volumes Cognitive technology is a broad concept that involves the
of both structured and unstructured data, cognitive combination of many sophisticated analytic technologies
technology will allow our audit teams to dig deeper into such as machine learning, data-mining and pattern
financial information recognition. A major element of artificial intelligence,
cognitive technology simulates human decision-making by
for a more detailed and comprehensive audit. It will also analyzing data, generating hypotheses, and evaluating
enable us to sharpen our focus on higher value audit supporting evidence to make judgment-based decisions.
activities in areas of increased business risk and reporting KPMG is developing these capabilities as part of a broader
complexity. cognitive ecosystem that expands upon the firm’s
investments in the use of advanced technology and its
commitment to continually raising the bar on audit quality.

The analytical capabilities of cognitive technology are well-suited to the increasingly data-driven processes
prevalent in today’s audit environment.

Cognitive systems mimic human brain functions

Perceive Natural language processing
(interpret sensory input 01
Artificial intelligence
beyond traditional data)
Machine learning
Reason
(hypothesize, weigh 02 Text analytics
supporting evidence)
Predictive analytics
Learn
03 Image recognition
(improve confidence
levels with experience) Voice recognition

© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved. NDPPS 561670 The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Key potential benefits of a cognitive – Heightens risk focus – Enables auditors to intensify
technology-enabled audit: their focus on higher value audit activities in areas of
– Advances quality – Provides the capacity to review heightened business risks and reporting complexity.
and evaluate more detailed transaction level attributes – Deepens insights – Allows for the combination of
to obtain a better understanding of the company, its audit information and the analysis of industry or market
business risks and its operating environment. data for new insights about the potential impact of
– Increases coverage – Increases audit coverage by events on the business.
enabling the ability to assess the accuracy and validity Today’s financial reporting environment is seeing an
of larger more complete volumes of both structured explosion of data and the rapid development of
and unstructured data. analytical tools to understand and effectively apply that
– Broadens perspectives – Enhances the transparency, data to decision making. We are inexorably moving into
consistency and depth of audit procedures and augments an era where sophisticated technological applications
the ability to evaluate the effectiveness such as artificial intelligence will fundamentally
transform how audits are conducted.
of company controls, accounting practices and
reporting processes. Cognitive technology is an important part of this changing
landscape and represents a vital element of the capabilities
KPMG is developing to advance audit quality and foster
innovation.

Unprecedented advances in computing technology are driving the ability to generate greater analytical depth and
more useful insights from our audit procedures.
Predictive analytics

Predictive analytics leverages data captured in

the audit by combining it with industry and/or
other market data allowing for a more robust
understanding of potential financial or business
risks. The technology can learn from each
encounter with new information by sensing
Digital automation and adapting to changing circumstances and
varying conditions or situations.
Digital automation
significantly enhances Cognitive technologies
information extraction and Predictive Cognitive technologies will
processing from a company’s analytics fundamentally affect how
systems. It aids in the audit information is used and
evaluation of larger data sets understood by enabling the
and enables a more granular analysis of both structured
analysis of underlying and unstructured data. As a
evidence by rapidly result, auditors will be able to
pinpointing data outliers and dig deeper into financial
process or performance Data &
information and deliver a
anomalies. analytics
more detailed and
comprehensive audit.
Digital Cognitive
automation technologies

To learn more about how advanced technology can enhance quality and bring new audit insights, read our
report: Harnessing the power of cognitive technology to transform the audit

kpmg.com/socialmedia
For more information contact:
Marc T. Macaulay
U.S. Cognitive Technology Audit
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© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG
KPMG Audit network of independent member firms affiliated with KPMG International Cooperative (“KPMG
Quality + Insight = Value International”), a Swiss entity. All rights reserved. NDPPS 561670
The KPMG name and logo are registered trademarks or trademarks of KPMG International.