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AI, the Cycle of Hype and the Future

Nick Frost, Head of Audit Technology and Innovation, KPMG

Nick Frost is responsible for driving the use of innovative tech within the audit practice at KPMG. In this blog Nick outlines his thoughts on how AI can make a tangible difference:

“AI will enable companies to expand their offerings, develop more sophisticated services and increase the value add they deliver to clients in ways that are currently beyond our imagination”.

Read more below to find out how.

Every technology goes through a hype life-cycle. Generally, this is formed of three distinct phases: hype, depression that it’s possibly not as great as first thought, and finally implementation and the realisation that it’s actually alright.

AI is very much in the first phase of this cycle. Let me be clear: I am a huge advocate of AI and everything it can deliver. But the hype surrounding it is not the reality of being at the coal face, at least today. For example, I’ve heard of companies seeking to replace thousands of finance service centre jobs with one robot within five years. That, to me, doesn’t feel achievable in that time frame. Yes, the advantages it creates are exciting, but those opportunities shouldn’t be viewed in terms of reducing headcount. AI will enable companies to expand their offerings, develop more sophisticated services and increase the value add they deliver to clients in ways that are currently beyond our imagination – so it may not be such a significant headcount reduction overall.

“The hype around AI is exacerbated by the audit tendering environment, which is changing at an unprecedented pace. To win bids, you’ve got to prove you’ve got the best tech.”

For example, at a recent meeting with investment banks, we were chatting about company valuations. The conversation turned to what drives valuation and two key elements were discussed – morale and culture. These are huge indicators of whether or not a company is on track to succeed. AI could be deployed to score companies seeking valuation on these two factors.

That is an innovative application of the technology and underlines its second word – intelligence. I can’t stress enough how important that is. For example, a very basic AI algo could be written that finds swear words in emails. But what does that tell you about morale? Culture? Nothing. It just means that the team like to swear! However, an algo that understands context, tone and meaning is much better placed to review communications and come to insightful, evidence-based conclusions about morale and culture.

The hype around AI is exacerbated by the audit tendering environment, which is changing at an unprecedented pace. To win bids, you’ve got to prove you’ve got the best tech.

Unlike a 100 metre race, the winner isn’t obvious – there is strategy at play and it’s not always best to be the first mover. As a result, I speak to companies who are sat teetering on investment but not quite ready to press the big green button.

A challenge we face in the audit profession is that standards and regulatory bodies are finding it hard to keep up with the pace of technological change. Implementing AI at the coal face is all very well, but you’ve got to be able to prove compliance and that you’ve adhered to standards. As many algo’s are self-learning, the more intelligent the system becomes, the harder proving compliance will be because the decisions the AI makes could be based on logic, but not logic that’s easily demonstrated to the regulator – it’s going to be far from easy for them.

Education is undeniably needed; vendors need to take care with the hype and the profession, regulators, and our clients’ need to evolve. The future is bright, but it must remain grounded in reality.

 

Author: Nick Frost, Head of Audit Technology and Innovation, KPMG