The Impact of Artificial Intelligence (AI) and Data Analytics on Automation and

Efficiency of Audit.

Literature Review

Auditing is a critical role that provides objective assurance regarding the reliability,
credibility and financial stability of a business. Thus, it contributes to the health of the
economy (Feliciano and Quick, 2022). Previously, auditing was largely dependent on human
proficiency, skill and manual procedures. But, as technology is advancing rapidly, the way
auditing is operated is also changing. Auditors and professional bodies are recognizing the
relevance of technology and have switched their focus on improving auditing procedures
using technology (Al-Hattami, 2023)

AI is clearly having an impact on a number of industries including gaming, education and

manufacturing industry. The latest advancements in AI have the potential to completely
change how disciplines and professions are conducted around the world. The application of
AI in accounting and auditing is growing in popularity. For this reason, in order to stay
competitive in this day and age, one must be aware of the most recent developments in AI
and stay up to date with interdisciplinary advancements (Hasan, 2022).

The traditional audit processes struggle to maintain pace with the increasing complexity of
financial data and for that reason artificial intelligence (AI) and data analytics have been
integrated into the auditing processes. The use of artificial intelligence (AI) and data analytics
has been marking a revolutionary era in the field of audit and assurance. This literature
review studies various existing body of knowledge including academic research and industry
reports and reviews the challenges, ethical considerations, workforce implications and
promises regarding the impact of artificial intelligence (AI) and data analytics on automation
and efficiency of audit.

The application of artificial intelligence (AI) in auditing is often acknowledged for its ability
to modernize traditional audit procedures. AI along with the deployment of machine learning
systems, enables auditors to process massive sized datasets at a much faster rate (Tiberius and
Hirth, 2019). AI can automate routine audit procedures like data extraction, transaction
testing, reconciliation etc. (Curtis and Payne, 2014). Auditors can efficiently utilize AI by
automating repetitive tasks. It accelerates the identification of irregularities and patterns as
well as allows auditors to take their focus on more important and complex tasks like strategic
decision making, higher level analytical activities, judgement-based assessments etc. Thus,
AI enhances the overall efficiency, accuracy and quality of audit (Di Vaio et al., 2020;
Ghobakhloo, 2018; Sirisomboonsuk et al., 2018).

Data analytics, emerging as a complementary powerhouse, works as an advanced tool for

extracting valuable data and insights from massive sized datasets. It analyzes datasets to
identify operations and associated risks and uncover hidden trends that might have been
missed in traditional audit procedures. This enables risk-based audits, focusing resources on
areas of higher concern and improving effectiveness. Data analytics is also capable of
detecting fraud, misstatements and of providing a better understanding of financial risks
(Appelbaum et al., 2017).

Amidst the promises, ethical considerations have aroused as a serious dimension in the
discussion surrounding AI and data analytics in auditing. The inherent biases within
algorithms can cause skewed results and raise ethical concerns in decision making
procedures. Additionally, the dependence on automated systems for significant audit
assessments triggers a reconsideration of the ethical consequences regarding the transparency
and accountability in the auditing profession. Recognizing the increasing use of AI and data
analytics in audit processes, regulators seek additional standards regulating technology use
(PCAOB, 2017).

However, the implementation of AI and data analytics in auditing procedures is not without
its challenges. Attention has been brought to the ethical considerations regarding AI adoption,
emphasizing the requirement of a strict ethical framework to guide the auditors in directing
the complications of automated decision making. The potential preconceptions contained in
the algorithms require cautious overseeing to guarantee fair and unbiased audit outcomes.

Beyond ethical issues, the literature highlights the importance of a skilled workforce to
employ the full potential of AI and data analytics in auditing. For auditors, audit quality is of
supreme importance. It conveys the auditors' credibility and reflects objectivity. It is also
regarded as the foundation of the auditing standards that regulate the audit engagements. The
transformative capability of AI and data analytics also brings into consideration the changing
role of auditors. Auditors are transitioning into data centric professionals and require a
concentrated understanding of AI algorithms. It is also argued that auditors should not only
acquire technical understanding but also acquire the ability to interpret and communicate the
results effectively. Thus, they can ensure transparency and accountability in the audit process.
Auditors should obtain capability in these technologies to interpret results efficiently. The
demand for auditors’ ability of incorporating technological advancements into audit
procedures is growing day by day, since different organizations are adopting to these tools.

Because AI biases have the potential to affect audit quality, they can be viewed as a barrier to
AI's use in audit processes. In the end, AI is composed of codes and is susceptible to
reflecting the prejudices of the programmers. Furthermore, the limits of the neural network
technology supporting AI's deep learning could magnify AI biases if the coding information
is devoid of the qualitative features (Janvrin et al., 2008; Solaimani et al., 2020). One
example of AI biases are the AI tools used to rank New York City landlords based on the
level of the care of their properties, which was revealed by an audit to have been adversely
affected by the biassed inspection reports that were relied upon (Hempel, 2018).

The potential risks regarding data security and privacy concerns arising from the increasing
dependence on technology make it difficult to comprehend the scope and efficiency of their
use. Concerns about whether these changes have a material influence on the nature of audit
and audit quality (Salijeni et al., 2018). In the era of technology driven audit practices, the
vulnerability of sensitive audit data to sophisticated cyber threats requires thorough attention
towards cybersecurity.

In conclusion, the literature review provides a broad understanding of the transformative

effect of AI and data analytics on automation and efficiency of audit. AI and data analytics
challenge traditional audit procedures and offer exceptional efficiency gains and analytical
expertise to auditors. Nevertheless, auditors must navigate a landscape filled with ethical
considerations, workforce development priorities and the need to address potential risks
correlated with increased dependence on technology.

Research Gap

The limited exploration of the long-term effects and sustainability of the impact of AI and
data analytics on automation and efficiency of audit could be the research gap in the existing
literature. While existing studies provide insights into the immediate efficiency gains and
changes in audit processes, there is a lack of comprehensive research on the sustainability and
long-term implications of adopting AI and data analytics in the field of auditing.
 References

Al‐Hattami, H. M. (2023). Understanding perceptions of academics toward technology

acceptance in accounting education. Heliyon, 9(1), e13141.

https://doi.org/10.1016/j.heliyon.2023.e13141

Appelbaum, D., Kogan, A., & Vasarhelyi, M. A. (2017). Big data and analytics in the modern

audit engagement: research needs. Auditing-a Journal of Practice & Theory, 36(4), 1–

27. https://doi.org/10.2308/ajpt-51684

Curtis, M. B., & Payne, E. A. (2014). Modeling voluntary CAAT utilization decisions in

auditing. Managerial Auditing Journal, 29(4), 304–326. https://doi.org/10.1108/maj-

07-2013-0903

Di Vaio, A., Palladino, R., Hassan, R., & Escobar, O. (2020). Artificial intelligence and

business models in the sustainable development goals perspective: A systematic

literature review. Journal of Business Research, 121, 283–314.

https://doi.org/10.1016/j.jbusres.2020.08.019

Feliciano, C., & Quick, R. (2022). Innovative information technology in auditing: auditors’

perceptions of future importance and current auditor expertise. Accounting in Europe,

19(2), 311–331. https://doi.org/10.1080/17449480.2022.2046283

Ghobakhloo, M. (2018). The future of manufacturing industry: a strategic roadmap toward

Industry 4.0. Journal of Manufacturing Technology Management, 29(6), 910–936.

https://doi.org/10.1108/jmtm-02-2018-0057

Hasan, A. R. (2022). Artificial Intelligence (AI) in Accounting & Auditing: A Literature

Review. Open Journal of Business and Management, 10(01), 440–465.

https://doi.org/10.4236/ojbm.2022.101026
Hempel, J. (2018, May 9). Want to prove your business is fair? Audit your algorithm.

WIRED. https://www.wired.com/story/want-to-prove-your-business-is-fair-audit-

your-algorithm/

Janvrin, D. J., Bierstaker, J. L., & Lowe, D. J. (2008). An examination of audit information

technology use and perceived importance. Accounting Horizons, 22(1), 1–21.

https://doi.org/10.2308/acch.2008.22.1.1

PCAOB, (2017). Standing advisory group meeting: The use of data and Technology in

Audits. Washington D.C. Available at: https://pcaobus.org/news-events/events/event-

details/standing-advisory-group-meeting_1059

Salijeni, G., Samsonova-Taddei, A., & Turley, W. S. (2018). Big Data and changes in audit

technology: contemplating a research agenda. Accounting and Business Research,

49(1), 95–119. https://doi.org/10.1080/00014788.2018.1459458

Sirisomboonsuk, P., Gu, V. C., Cao, R. Q., & Burns, J. R. (2018). Relationships between

project governance and information technology governance and their impact on

project performance. International Journal of Project Management, 36(2), 287–300.

https://doi.org/10.1016/j.ijproman.2017.10.003

Solaimani, R. (2020). The impact of artificial intelligence on corporate control. Virtus

InterPress. https://virtusinterpress.org/The-impact-of-artificial-intelligence-on-

corporate-control.html

Tiberius, V., & Hirth, S. (2019). Impacts of digitization on auditing: A Delphi study for

Germany. Journal of International Accounting, Auditing and Taxation, 37, 100288.

https://doi.org/10.1016/j.intaccaudtax.2019.100288