Cognitive Technologies and the Impact on Audits

by Alissa Wuerfel, CPA, and Anthony Sikora, CPA, KPMG LLP | Jan 05, 2018

Data produced in the world is growing at a rapid pace. This raises a number of challenges for many businesses, including how to protect and manage that data. But it also creates a potential advantage for auditors who are able to harness technology in order to collect, transform, and analyze data while enhancing audit quality.

Auditors are encountering the big data phenomena as their clients and the general public generate an increasing amount of electronic and digital data. As the standard independent auditor’s report states, an audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. This typically is accomplished by examining select items in order to express an opinion on the accuracy of the financial statements. But new technology now allows auditors to interpret large populations of data.

For example, cognitive technology allows auditors to mine companies’ internal data and external structured and unstructured data. This technology uses algorithms to enable software to read multiple forms of data to summarize information and reach conclusions much in the same way that a human thinks and makes decisions. The use of advanced analytics and cognitive technologies make it possible to rapidly and precisely analyze larger, more-complete populations of financial and non-financial information, while generating richer, more-detailed audit evidence for evaluation and providing executives with actionable insights about their organizations, their core processes and their controls.

A Shift in the Auditor’s Role

While the use of cognitive technology adds to the evidence to support the audit opinion, interpreting the results and identifying the most appropriate data to support the audit conclusion remains with the auditor, not the technology. In fact, identifying which data set is relevant to the overall conclusion requires significant judgment by the auditor, particularly in addressing disconfirming evidence. As the potential sources of structured and unstructured data increase, the presence of disconfirm­ing evidence will become more prevalent, requiring an experienced auditor with relevant industry experience to interpret the results and form an audit conclusion.

Investing in the Tools and Skills

In deploying these new cognitive technol­ogies, audit firms will need to make significant investments in infrastructure and programs. Firms also will find that it will take time to learn how to best use the data and tools to enhance audit quality and provide the business insights their clients expect. Summarizing and organizing the data so an auditor can interpret the results should be of the highest priority, and to achieve this, both partners and employees will need new skills.

Firms will also find it important to attract individuals with information technology backgrounds, or those with degrees in data science or data analytics, to supplement the basic audit skillset. While it will take time for firms to develop the right skills, the use of technologies, including cognitive, process automation, and data and analytics, means changes ahead for both firms and their clients. The tools used in a cognitive audit will continue to evolve rapidly as new data sources, both structured and unstructured, are created and included in the auditors’ assessment.

Audit firms will continue to identify ways cognitive technologies can transform audit procedures that support audit conclusions and the audit opinion. Audit evidence will increase through the use of these technologies. However, firms will need to continue to rely on auditors with the right knowledge and industry expe­rience to interpret the results, document the audit considerations based upon the outcome of these procedures, and form the appropriate audit conclusions.

Wuerfel_AlissaAlissa Wuerfel, CPA, is a senior manager in KPMG’s audit practice where she has worked primarily with life sciences, chemical and industrial product companies.She is currently in the National Audit Solutions group developing custom data solutions for use in audits. Alissa can be reached at

Sikora_AnthonyAnthony Sikora, CPA, is a senior manager with KPMG primarily serving consumer market and industrial manufacturing clients. He can be reached at

This article was reprinted from the November/December 2017 issue of New Jersey CPA magazine ( with permission, and appeared in the winter 2018 issue of the WashingtonCPA Magazine. Read more here.

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