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KPMG Audit Technology Evolution Content Series: Machine Learning

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KPMG Audit Technology

Evolution content series:

Machine Learning
Point of View article

The rise of the machines? Machine learning and the audit

Machine learning (sometimes known as cognitive automation) and deep learning (or artificial
intelligence) are two of the three forms of what is sometimes termed ‘digital labour’, with the third
being robotic process automation (RPA).

On a spectrum of technological advancement, RPA is the most basic, machine learning is more
sophisticated and deep learning is the most sophisticated. Machine learning is a key subset of
artificial intelligence (AI), which originated with the idea that machines could be taught to learn in
ways similar to how humans learn. While humans are just beginning to comprehend the dynamic
capabilities of machine learning, the concept has been around for decades. The proliferation of data,
primarily due to the rise of the internet and advances in computer processing speed and data storage,
has now made machine learning a significant component of modern life. Common examples of
machine learning can be found in e-mail spam filters and credit monitoring software, as well as the
news feed and targeted advertising functions of technology companies such as Facebook and
Google.1

Whereas RPA uses technology to automate a process such as collecting data, machine learning uses
algorithms to analyse data and make correlations and predictions (with human oversight). It is a more
‘intelligent’ form of technology than RPA.

Deep learning is where the technology appears truly intelligent as the machine may learn from its
own experience, teach itself how to perform a task or analyse it, and so improve its own performance
or effectiveness. It is as though the technology has a brain.

Machine learning and the audit

So, what are the implications of machine learning and deep learning for the audit?

Machine learning provides the potential for significant improvements in audit speed and quality, but
also entails certain risks.

Along with RPA, machine learning is arguably the biggest modern technology already at play in the
audit. On top of RPA processes, we are also applying machine-learning techniques where, through
complex algorithms, the technology can scan information, model it against thousands of assumptions
drawn from external scenarios and highlight risks and insights. This predictive analytics is a step
towards deep learning where, in the future, the application will be able to ‘think’ for itself, learn from
the results and run more scenarios and tests accordingly.

1 Gabe Dickey, CPA, Sandra Blanke, PhD and Lloyd Seaton, PhD, CPA, CMA (June 2019). Machine Learning in
Auditing: Current and Future Applications. Retrieved on 4 August 2021 from: Machine Learning in Auditing

Document Classification - KPMG Confidential

KPMG Audit Technology
Evolution content series:
Machine Learning
Point of View article

Machine learning is a vital step beyond robotics because the technology can capture data and identify
correlations and patterns. It is also more intelligent than robotics — for example, it can locate specific
line items by currency symbol and/or other keywords even if the placement varies from invoice to
invoice — something robotics alone is not able to achieve. The technology can therefore be used to
scan huge volumes of information. For example, on various valuation matters, we are developing
applications to read bank loan agreements, leasing contracts, and other documents in order to find
specific data and identify subjective areas.

Deep learning
Deep learning — full-fledged artificial intelligence where a machine continuously integrates the latest
information, draws conclusions and absorbs the learnings to enhance its cognitive abilities — is seen
as one of the greatest potential prizes of emerging technology.

There are issues that will need to be resolved. For example, it will be critical to show that the
algorithms and technology behind deep learning are valid and robust to understand and document the
outcomes derived and not to be led to false positives.

Regulators are actively working to keep pace with these emerging technologies. In the US, the
American Institute of Certified Professional Accountants (AICPA) has recently published a guide to
data analytics in the audit.

What is the impact on audit quality?

There is a clear consensus across audit professionals that the array of technologies being developed
will help to increase audit quality. The ability to analyse 100% of datasets rather than sampling
provides obvious benefits. Technology enables auditors to focus their efforts on the outliers and
anomalies, devote greater time to areas of higher risk and have meaningful conversations — resulting
in a better quality audit.

The power of robotics, machine learning, natural language processing (NLP) and, in time, deep
learning will mean that an audit may become deeper and further reaching than ever before, based on
increasingly granular and sophisticated analysis of data.

The fundamentals of an audit will not change as the need for human judgment and professional
scepticism will always be necessary. The real use case for technology is that it will enable us to
obtain — more easily, quickly, accurately, and extensively than ever before — the corroborating
evidence that is needed in an audit.

Document Classification - KPMG Confidential

KPMG Audit Technology
Evolution content series:
Machine Learning
Point of View article

— New technologies set to power an audit

— Auditing and the Cloud – blue skies ahead?
— Robotic process automation (RPA) powering up the audit
— A more fluent audit with natural language processing

Key Contacts

Shaaheen Tar-Mahomed
Director
M: +27 60 674 9138
E: [email protected]

Document Classification - KPMG Confidential

KPMG Audit Technology
Evolution content series:
Machine Learning
Point of View article

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