Technology is driving transformation in how audits are conducted at an ever-faster pace, says Paul Goodhew, global assurance innovation & emerging technology leader at Big Four firm Ernst & Young -- and artificial intelligence will only accelerate that.
Transcription:
Dan Hood (00:04):
Welcome to On the Air With Accounting. Today, I'm editor-in-chief Dan Hood. Auditing is changing rapidly for a number of reasons, and technology is definitely one of them. With the Big Four firms often leading the way by pioneering tools like automation, data analysis, and very often of late artificial intelligence in all the many ways that they can improve and streamline auditing going into the future. It's a very exciting time. I'm here to talk all about all of that is Paul Goodhew. He's a global assurance, innovation and emerging technology leader at Big Four firm Ernst & Young. Paul, thanks for joining us.
Paul Goodhew (00:35):
Thank you, Daniel. Great to be with you today.
Dan Hood (00:37):
Yeah, this is, as I say, this is a pretty exciting topic. We don't really think of auditing as a, generally speaking, I think a lot of people don't think of auditing as a profession where there's a lot of tumult and change, but with the technological advances, there is a lot going on there. There's a lot of very exciting stuff, and I want to sort of kick off by talking about the application to technology to auditing. It feels, and you will have a much better sense of this than I do, but it feels like it's increased significantly over the past several years. Is that a fair assessment or is this just something auditors in the inside or is No, no. Technology's been a big deal all the time, or has it really kicked up?
Paul Goodhew (01:16):
Short answer, yes. I think it's a very fair assessment. Slightly longer answer. I think there's probably two components to this topic. One is how we use technology as an audit organization to deliver our audits. And then the second component is of course, how we need to consider the risks associated of technology that our clients are implementing as well. And it's very fair to say that we're in a period of great transformation with the development of new technologies and the implementation of new technologies over the last five to 10 years, which include cloud computing, automation, data analytics, and as you mentioned more recently, a huge wave of activity around artificial intelligence that is really accelerating the pace at which we need to consider this technology and how we can best harness its potential, but also how we need to consider the risks at ey. We've been using technology in various forms for quite some time to help our audit teams deliver audits.
(02:23):
Over the last 10 years, we've got into what I would call for platform business, developing global scale audit technology platforms that allow us to power and manage and deliver our audits. Right now we're in the fourth year of a four year publicly committed investment to spend a billion dollars in integrating and transforming our technology and ultimately delivering an AI powered technology platform. Building on the very strong foundations of our existing technology where we're bringing all of our core technology together into one platform and really harnessing the power of data and analytics, workflow, technology, and of course artificial intelligence and automation. And a lot of that comes with increased expectations and demands of the audit. Some of that driven by regulations, some of that driven by changing requirements, changing and evolving stakeholder expectations around the audit. And as I mentioned, some of that also comes because our clients have increasingly invested in technology as well.
(03:32):
So our clients have been implementing new ERP systems, they've been implementing data analytics to help run their business, and we have had to evolve our technology to cater for that. Now the second component to the answer here is also about how we need to consider the technology that our clients implement, not just connecting in with our technology, accessing their data and using their data to help inform our audits, but also considering the technology that our clients implement for risks associated with that technology and also informing our broader audits. And so it's an incredibly exciting time. There is a lot of change, but it's a great topic to be engaged with because it's the vanguard of how we drive change in the profession.
Dan Hood (04:23):
Well, I love the point about right, that client's use of technology is as big a driver as the auditors, right? It's great for auditors to say, we've got all these tools to make the audit faster and more efficient, deeper and better. But just the aspect of having to keep up with the technology that clients are using into being able to figure out its inputs to the financial statements that you're getting, that sort of stuff is an excellent point that I don't think a lot of people recognize as much as perhaps they should. It is a big driver of change. And to be fair, what clients do is always a big driver of change for accounting firms. But in the technology area in audit, I think in a particular big way, you have to be able to attest to some of the outputs in some cases and likely only to get weirder and more complicated as AI becomes more used at. Is it fair to say as AI gets more used by clients, more commonly deploying around business organizations than it'll become even more important?
Paul Goodhew (05:18):
That's great. I mean, it's a great topic, right? And it's something that we're discussing with many of the own organizations that we serve at the moment. You think about the discussions that our audit teams have day on day with finance and accounting teams around the world, there's a huge level of interest and curiosity around new technologies like artificial intelligence organizations realize that this may be a competitive differentiator in today's business world. And organizations, they want to, one, keep pace with their peers and where available sees that competitive advantage and they want to make sure that they're not falling behind. So we are actively working to understand where our clients are considering the implementation of artificial intelligence within their finance function and within their financial reporting processes to understand the implications of that artificial intelligence where it could lead or create risks, for example, a risk of material misstatement within their reporting.
(06:25):
And then ultimately to be able to respond and to be able to respond to understand those risks and address those risks as part of our audit. So that is something that as you can imagine, is a rapidly evolving topic as organizations are seeking to harness the potential of this technology. I think it has a long way to go still as we'll see more and more companies looking to build ai, generative AI and agenda AI into their finance function over the coming years. But it's a very active topic and I think that not a day goes by where our teams aren't talking to our clients around this.
Dan Hood (07:05):
Alright, it is a brave new world. It's going to be very exciting stuff. I want to dive more specifically into the tools, some tools that EY has recently announced. But before we do that, I want to talk a little bit again at a 10,000 foot level, talk just a little bit about the role of technology in the audit. I mean, we've talked about there's obviously a lot more technology coming at auditors and accountants in general, a lot more technology coming at clients, so clients are using a lot more technologies. Do you think the role of technology has changed or is it just the pace and volume of new solutions and new tools coming at auditors? Or is the profession approaching technology differently?
Paul Goodhew (07:44):
I think that the role of technology has stayed the same, but the magnitude of the impact of the technology has radically increased. Now, I would analogize it to the experience we have as individuals in our day-to-day lives, right? Technology is increasingly prevalent in everything we do, whether it's using your phone or you might have a refrigerator but orders food for you. I mean, it's remarkable just how much change has been introduced into our lives over the last few years. And I think that that magnitude of that impact is similar for when I think about the audit technology, but our teams are using today. When I think about why we do this, it's really ultimately one to enable us to deliver high quality audits where we can use technology, we can use data, we can use automation to introduce a level of precision and accuracy and consistency, which helps deliver high quality audits.
(08:45):
That's ultimately the bedrock and the foundation of what we look to do. But in addition to that, it's allowed us to introduce more benefits that includes the ability to improve the audit experience for our clients who are obviously looking to ensure that they've got a smooth and seamless experience when interacting with the auditor, but also for our people to attract and retain the best talent into the profession where people expect high quality technology powered experiences in their career. And I think the third component for me is technology and our use of data allows us to introduce really interesting perspectives. It can be a benchmark, it can be an insight through the use of data, frankly, it can also just be sharing experiences with our clients around our use of technology and our technology roadmap. The impact of technology has radically increased as we've introduced more technology into our day-to-day lives as professionals in our audit practice. So for me, that's the significant change that we're seeing, and I will only expect increases over the coming years, right?
Dan Hood (09:54):
Yeah, it's a bit of a flywheel, right? The more it goes, the more faster and more serious it becomes. But we've been talking a lot about new technology tools and like I said, I want to spend a little bit of time talking about some of the new AI driven tools that EY has recently put out. Why don't you dive in and tell us a little bit about those?
Paul Goodhew (10:14):
Look fantastic question. Look, and I mentioned at the start that we're currently in the middle of an investment cycle to integrate and transform our technology and to introduce really exciting new audit technology capabilities to our teams around our global assurance practice here at ey. Lemme give you a first example. That's a tool we call EY financial statement tie. So EY financial statement tie really helps with one of those classic areas of auditor frustration, which is the tick and tie process. So historically, if you are an auditor, you'll have gone through an experience or many experiences of sitting late at night in an audit room manually ticking and tying drafts of your client's financial statements, checking internal consistency, checking prior year comparison accuracy, checking the footnotes, and then you go through 20, 30, 40, a hundred plus pages of draft financial statements and guess what? You get the next draft from a client.
(11:18):
And that process was just one that involved a huge amount of repetitive activity on behalf of the auditor and it was not the best use of their time is incredibly important activity, but it's something that I don't think they necessarily enjoyed the most compared to some of the more technical and high judgment areas of the audit. So what we've done is we've introduced AI within this new technology tool, which actually supports the auditor and it takes the draft financial statements and it takes a first pass on of the auditor, it goes through, it reviews the internal consistency of a document, it performs a prior comparison on your behalf. It checks for clerical accuracy of the draft financial statements, and it flags to the auditor areas that they might need to follow up and look at and query with their clients as well. So for us, that's a really, really exciting example of how AI can help deliver a high quality audit, but also improve the experience for our people and frankly also for our clients who historically would receive all these questions, clarifying questions from the EY audit team, well now we can streamline that process using AI to take a first pass.
(12:33):
The second example I would give you is something that we've introduced very recently within our audit practice. So we've introduced a new tool called EYQ Assurance Knowledge. This is our first gen AI application within the audit. And what we've actually done is we have gone and built a first version of an AI assistant directly into our audit platform. So the platform that our auditors will have in front of them every single day. And what we've done is we've helped it make it easier for our teams to access all of the auditing and accounting content that they might need to interpret technical matters to query on the latest audit methodology and standards. And historically, they would've all had to do this separately via standalone accounting wiki. Now, that was no longer fit for purpose in our view. It was not having to go to a separate tool to search for the right answers, to take time to get the relevant information.
(13:35):
It put a big strain on our teams. It often caused our teams to have a lot of frustration to have to root around to get the right information. Teams often struggle to get the right answers. Now with the power of generative AI integrated into our platform, our teams have the ability to put in simple questions to a chat assistant in the platform. It goes away. It searches all of our accounting and auditing content, and it pulls back a short summary response for the auditor and it links them to the relevant information they need to deep dive into. This is an enormous time saver, but also a great quality booster for our teams, and we're really excited that we've been able to deploy this to all of our teams across our global organization. That's 150,000 plus audit engagements, 130,000 professionals. And so to be able to transform their experience with gen ai, it's just the start, but it's really exciting.
Dan Hood (14:32):
Yeah, yeah. No, very cool stuff. And this is one of those things I think for some people they say, well, wait a minute, how do you know all the information that that system is producing for you is accurate? It's one of those things I think for this constitutes a fairly narrow, in quotes, narrow set of information, right? Obviously it's a huge quantity of information, but it's all stuff you vetted looked at and you're a sure accurate kind of thing. So the likelihood of hallucinations, I'm assuming is pretty small or if non-existent.
Paul Goodhew (14:59):
I love this question because it flags two things. Number one, for any organization to be successful with ai, you've got to have the right data foundations. So any AI tool you have to really make sure when you build, test and deploy the artificial intelligence that you've really considered whether or not you have the relevant data in the first place. That's one piece. And we have a very rigorous process at EY for designing, developing, testing technology and ultimately certifying that technology before we release it. That's one piece. The second piece though is something we've had to be very thoughtful around is introducing the right level of training and guidance for our people, including acceptable usage guidance for when they use generative AI technologies in the audit so that the human and the human review and supervision is always driving the decisions that our auditors need to make. What do I mean by that? It means that our people are always have guidance at their fingertips, including every time they open this AI assistant that reminds them that their human judgment is ultimately what they need to rely on. And when they're using the tool, it's an assistant, it's a booster, it helps 'em find the right answer, but it's ultimately subject to their own review, and that's where we make sure that the human stays in control throughout the process.
Dan Hood (16:28):
Very cool. Very cool. Was there any other major tools in the recent release that we need to discuss? I want to talk about how it fits more broadly into, you've mentioned the sort of billion dollar investment the firm is making over the last several years, so I want to dive into that. But before we do that, were there any other individual tools, new tools we should be aware of?
Paul Goodhew (16:47):
Over the last couple of months, we've introduced over 30 new capabilities into our global assurance practice. Just to give you a flavor of some of those additional ones. When our teams perform their audits, they need to complete a disclosure checklist on our client's financial statements. We've introduced generative ai, which actually helps recommend answers to our teams via our checklist tool. In addition to that, we're also introducing and piloting the use of statistical analytics to help introduce predictive capabilities into our audits as well. So there's some really exciting applications of technology including AI that we're introducing and much more to come, which I'd love to talk to you a little bit shortly.
Dan Hood (17:38):
There's 28 to 30 we could discuss, but limits on time. Like I said, I want to talk about how that fits in more broadly with the long-term investment the firm is making. But we're going to take a quick first. Alright, and we're back talking to Paul Goodyear of EY about audit and technology and how the two are interacting and changing and moving forward. We've talked about some of the individual tools, particularly around AI that EY has recently launched, but you'd mentioned Paul, that as part of a billion dollar long-term investment that the firm is making. And maybe we could talk about how those things fit into that and what the goals of that big investment program are.
Paul Goodhew (18:20):
Yeah, absolutely. So look, I mentioned that we're going through a major platform integration and transformation exercise that's doing a couple of things. It's allowing us to bring our workflow, our data analytics and our AI and automation altogether in one cloud-based technology platform that's introducing artificial intelligence into our practice. And we've discussed some of those examples, but it's also part of a wider transformation, a wider transformation that we're going through here at EY within our assurance practice and within our audit business, which is to look not just at the technology, but also the methodology and how we can further transform and enhance our methodology as well as also how we think about the wider standardization and centralization of our overall delivery model. So there's kind of three pillars of the stool around our wider transformation. So number one, building out this AI powered technology platform. Number two, transforming and enhancing our methodology and our enablement to create a much better experience for our audit teams.
(19:31):
And thirdly, as I mentioned, implementing more of a smarter delivery model, which is helping to introduce that level of standardization so that the right work is being done by the right people in the right place and at the right time. And we can bring in use of specialized teams, for example, on technical topics as and when needed. All of those three pieces come together connected through technology. Just let me give you two examples. So historically when you were performing your audit activities in our technology platform, your methodology and your guidance would be in a separate tool. We're bringing that together through what we call the guided workflow, which is creating for a much more seamless and integrated user experience and interface in the platform where you are following steps guided by the technology as we go along. Second example would be a service gateway that we've introduced into our technology platform.
(20:29):
This allows you to connect with the relevant teams around the world. If you need, for example, administrative tasks to be performed, you can call up those relevant teams and exchange information with them directly through the platform for them to perform that work on your behalf. You might need highly specialized teams on technical accounting topics. You can connect with them through the platform as well. So those are some of the enhancements we're bringing together through technology as well as the introduction of new AI that I talked about, which is really driving a fundamental change in the way that we work here.
Dan Hood (21:02):
It it's fascinating, and I want to step back a little bit and talk for a couple our remaining time just sort of about audit as a whole and the technology's role there because it's to listen to you describe all these tools and the approaches that the firm is taking. It should be, I think, pretty obvious to anybody listening how all those things would make for a faster, more efficient, better audit, better access. Just talking about better access to research information. Obviously that's an obvious win for auditors and clients, but a lot of it, and this in no mean is to diminish it, but a lot of it is efficiency. It's getting the information you need faster, you're doing the work more quickly and more efficiently. And I'm curious about the general role of technology. At what point do you think we start to see, and obviously it's probably started to happen already, but where we move from technology streamlines and makes things more efficient to technology, gives you whole new capabilities in the sense of right now what we've been doing over the last 30 years for all of accounting's different areas, tax and bookkeeping and audit, is taking the processes and using technology to make them faster and better and more efficient and to deliver more value, but not to fundamentally change the audit or the ways how we think about an audit.
(22:21):
At what point do you think or do we think that technology will start to give you new capabilities that actually change the audit fundamentally or change the work that accountants do in general? More fundamentally,
Paul Goodhew (22:33):
I think it's already happening, and I think it's happening because of some of those triggers that we discussed earlier where clients are evolving, they're transforming themselves through the use of technology that creates new expectations, it creates new risks, and we've obviously also seen the evolution of standards over the last years, which is requiring and driving a change in the way that we work. I tend to think of technology as an enabler for the service to help drive quality, to drive a better experience versus creating for just more efficiencies. In fact, if there's one area, but I'm excited about efficiency, it's creating a more efficiently and a better experience for our clients in supporting the audit. Frankly, I think that's what matters to them most, is making sure that when it comes to providing information, when it comes to the tasks that our clients need to perform to help support our audit teams, that's a lot of work and we need to make sure that we can perform audits in an effective way.
(23:39):
We can get work done the right the first time, we can rely on the information that our clients provide us, and technology helps us do that. But going forward, I do think that things will only increase on this trajectory. What do I mean by that? Well, I believe longer term that we will see greater expectations around how we need to address our client's artificial intelligence, how we need to address their implementation of new technology, how we need to think about the underlying data that our clients will use and will generate how we need to think about the controls they have in place across their business, and ultimately leading up to how they're going to be using new technologies like artificial intelligence across their business. We are going to need technology to help us keep pace with this transformation and out some of this is looking over the horizon where we expect the scope of the audit might expand over the coming years, but for me, fundamentally, that's where we're going to need technology to help us keep pace with our client's business and where we can see that transformation going over the coming years.
Dan Hood (24:55):
Gotcha. Maybe where we're running up close to the end of our time, maybe we just talk a little bit about AI and where do you see AI taking the audit profession? And feel free to use as long a timeline as you like, can be as blue sky. I mean obviously there are a lot of people who are interested and a lot of people who are also concerned about what AI will do to what accountants do, what auditors will do, what tax people do, all that sort of thing. When you look ahead to the role and impact of AI on auditing into the future, what do you see?
Paul Goodhew (25:30):
Let's start with where I think the potential of this technology goes. Empowering the way we deliver our audits over the coming years. A number of the tools that we've discussed today are what I would call individual point solutions where we'll develop an AI product or an AI assistant to help do one specific thing, whether it's taking the time financial statements or if it's researching or auditing methodology or accounting interpretation. But these examples are individual applications of AI within the audit, which is great and it's exciting, but I think what's really exciting is when you bring the power of these capabilities together and you think about the transformation that comes with these really amazing new AI models that are being developed across the technology sector, that affords us the opportunity to introduce what we call agentic AI or a multi-agent framework into the way we deliver our audits.
(26:35):
I would analog it to where you might have multiple chat assistant in chat talking to and performing, having a conversation on your behalf. What we are doing with Agen AI is bringing multiple agents together to actually perform components of our audit where you might have multiple tasks in a string of activities being performed with a high degree of autonomy by the artificial intelligence. That's really exciting. We're exploring that technology at the moment. We're evaluating its potential. We believe it's something that can be introduced over the relatively near term, and we're talking months and years rather than five, 10 years plus. And we're actively working on how we can embrace the potential of this technology right now. We always need to think about how we keep that level of human supervision and review in the process that is critical for us, but fundamentally we think there's huge potential around this technology. There will be other considerations. I come back to our earlier discussion at the start of this conversation around how we also need to think about the impacts of AI that our clients will implement. That's going to require the audit firms to really adapt their approach to be able to take into account different types of artificial intelligence and some of the limitations that will exist with those types of artificial intelligence. But that's also a great example of where we're just going to need to keep pace with how our clients evolve as well.
Dan Hood (28:12):
Well, you're talking about keeping pace with anybody and anything, and then combine that with you. You talked about the timeframe of months and years as opposed to half a decade kind of thing for the implementation of AgTech ai. It is. One clear thing is that the pace of development in AI is far, far, far faster than any other technology I think that we've ever seen. And so while people still need to be in charge of it and on top of it and paying attention to it, there's got to be the human in the loop, the need for humans to react much more quickly to, AI seems to be growing over time, right? You still have a chance to look at it and say, well, does this work for us? Do we need to implement this? But you need to make those decisions. It seems much more quickly.
Paul Goodhew (28:57):
This is where I love the profession though, is that we have to retain a level of professional curiosity and skepticism when it comes to any type of emerging technology. And I think that that's where the audit profession is somewhat uniquely positioned at a time of great hype where it feels like every single day there's a new press release about AI and new technologies, it can be difficult to cut through all of that hype and that noise and understand what's actually real, what works and what doesn't work. And when we operate in a heavily regulated business like the audit, we need to really understand the nuts and bolts of the technology when we implement it within our own delivery model. But we also need to take that knowledge and that experience, and it translates to how we think about how our clients will implement artificial intelligence as well.
(29:48):
What I really enjoy and what I find personally, what is most engaging about working in this type of business is getting under the hood of really understanding how these technologies work. What's their real potential, what are their limitations, and how can we truly harness them as part of our ways of working? So there's going to be much more to come as for sure, this is a rapidly accelerating and developing technology with what we see around artificial intelligence, but it's looking at it from the perspective of an audit firm, I think affords us a really unique opportunity.
Dan Hood (30:27):
Absolutely. It's very exciting times. In a good way. In a scary way. Paul. Got you. Ey, thank you so much for joining us. Thank you. And thank you all for listening. This episode of On the Air was produced by Accounting Today with audio production by Adnan Khan. Ready to review us on your favorite podcast platform and see the rest of our content on accounting today.com. Thanks again to our guest, and thank you all for listening.