From random sampling to AI-powered risk assessments
For Crowe MacKay, innovating is a business mindset. Having a technology-focused approach has allowed the firm to stand out and provide more value to its clients. The team not only embraces new technology to streamline their own processes but also extends their technological expertise to clients who need guidance on choosing and implementing new accounting solutions.
To stay current, Crowe MacKay invests time and resources in exploring the latest accounting and auditing technology trends. That’s why when MindBridge reached out to Crowe MacKay about the Ai Auditor software, the team was eager to start a trial.
Specifically, the auditors wondered how the technology could help them become more thorough and effective in assessing risks and testing journal entries. According to a senior accountant at Crowe MacKay, who quickly took an active role in the adoption of the MindBridge AI platform at the Yellowknife office, random sampling is not necessarily a foolproof method for detecting Risks.
“Our auditors are highly skilled at identifying riskier transactions or things that might seem amiss on a general ledger during an audit. That said, standard accounting practice today often involves running the general ledger through an accounting software and randomly selecting transactions to test. When we’re working with clients that have thousands of transactions in a given year, professional judgement may not always be enough to spot those riskier entries,” said the senior accountant.
Using the Ai Auditor software, the team could become more effective at identifying real risks and anomalies versus a firm’s typical transactions, and direct resources to investigate those potential red flags. This would enhance the accuracy of their audits and help their auditors deliver better financial insights to their clients.
Small transactions flagged in Ai Auditor drives big insights
Since implementing the Ai Auditor platform, the Crowe MacKay team in Yellowknife has seen the most notable successes. One story that stands out was when the Ai Auditor platform flagged a typically insignificant transaction value which led to bigger questions.
“What’s great about Ai Auditor is that it highlights certain transactions and ranks them by risk. During expense testing in a client audit, the Ai Auditor platform had flagged a $1.67 transaction on the high-end of moderate risk, and that caught our auditors’ attention. We pulled that transaction for testing and later discovered that the client had accidentally overpaid a supplier by $60,000. That $1.67 was just a tax portion of that transaction. Had we simply relied on random sampling, we might have overlooked that transaction,” said the senior accountant.
Luckily, the client was aware of the overpayment and was in the process of resolving the issue. However, by bringing that transaction to their client’s attention, the Crowe MacKay team were able to concretely demonstrate the quality of their audit methodology.
“The client was curious about how we spotted that transaction, and that’s when we told them about MindBridge. They were pleased to hear that we were using these advanced auditing tools, but more importantly, that we were asking the right questions,” continued the accountant.
The Ai Auditor platform runs multiple algorithms across client transactions simultaneously and cross-correlates data using dozens of testing criteria. These include various control points which can be anything from duplicate transactions and unusual amounts for a customer to high monetary values and suspicious keywords. The platform’s proprietary machine-learning algorithms also help detect anomalies such as rare monetary flows and unique account activity, which can be difficult, if not near impossible, for auditors to anticipate or test on their own. This is further exacerbated when they are faced with a high volume of transactions.
Since the Ai Auditor platform was able to quickly detect that random low-value transaction, the Crowe MacKay team knew that the algorithms and control points were working effectively. This gave the auditors added confidence in the platform’s ability to spot those riskier transactions for future engagements. The AI platform is now an invaluable auditing tool that enhances the team’s audit methodology and testing.
“I think it can be easy to dismiss small value transactions as less risky, but it’s stories like these that drive home the value of AI auditing technology. Our team is now really aware that even the smallest anomalies that get highlighted by the MindBridge platform should be tested,” added the Crowe MacKay accountant.
Identifying financial gaps with intuitive visualizations
After uploading client data to the Ai Auditor platform, Crowe MacKay auditors usually analyze risks within the general ledger using the software’s easy-to-understand visualization dashboard. This gives them a holistic view of a client’s financial transactions from month to month.
The team can also use the intuitive dashboard to dive deeper into the data and better understand areas that stand out based on their professional judgement, or that have been assigned a high-risk ranking by the platform.
“The graphs in Ai Auditor help us to quickly see whether the transactions over the year have been consistent, or if something doesn’t look right. That could be a month that has many more transactions than others. The visualizations also give us a quick breakdown of the risk assessment and we can then explore everything that has been flagged as a potential issue,” said the accountant.
Recently, in the early stages of a new client engagement, the Yellowknife team saw how powerful those visualizations truly are. The client had 15 branches with a lot of financial data to review and the Crowe MacKay auditors knew some of those branches were still tying up loose ends on their year-end reports. However, it was only until they uploaded the client data into Ai Auditor that they saw months-worth of financial information missing.
“Using Ai Auditor, we were able to take a quick screenshot of the month-to-month transactions graph, which clearly showed gaps in financials. We sent that to our audit partner who was impressed at how fast we were able to pinpoint this issue and provide a visual document to support the claim. He then sent that to the client’s headquarters team and informed them of what was happening. And because we didn’t yet have the complete financial picture for the year, the partner made the decision to put the audit on hold. With Ai Auditor, our firm was able to quickly identify those gaps early in the audit engagement and make informed decisions to ensure the best results for our client,” explained the senior accountant.
From an internal standpoint, Ai Auditor has been an asset in building a stronger audit team within the Yellowknife firmoffice. “As a manager, it was great to be able to deliver that information to our partner and showcase the value that comes from using both cutting-edge auditing technology alongside critical thinking. This instance really showcased how the platform can help us support one another during an audit,” continued the senior accountant.
Supporting risk assessments and audit plans with AI power
During the audit planning stage, the Ai Auditor platform adds a quantifiable element to assessing risks, allowing the team to check the soundness of their own assessments. Whatever gets flagged in the platform’s analysis can validate the riskier transactions that the team has chosen to test and can point them to other areas that might be of interest. All of this gives the team added confidence to move forward with their audit plans.
“We have a MindBridge memo that we fill out during the audit planning stage. And when I’m writing that memo, it’s really great to see how Ai Auditor’s risk assessment supports our own risk assessment of the file. And then if the MindBridge platform detects riskier accounts or transactions that we haven’t yet identified, we take a step back to determine if that’s something we should address in our audit plan,” said the accountant.
Using Ai Auditor to select samples also increases the confidence level in their sample size calculator. According to the Crowe MacKay manager, their team can test fewer transactions because they are using MindBridge to validate all client transactions and relying on the platform’s risk assessment for added assurance and quality.
“Knowing that Ai Auditor supports our risk assessments increases our trust in the intelligent sampler, which automatically pulls riskier transactions for further testing. So using MindBridge Ai Auditor, we’re testing anywhere between one to five fewer samples on an expense test, depending on the audit. That gives us additional time to focus on what really stands out as potential risks and deliver stronger audits for our clients,” explained the senior accountant.
Today, Crowe MacKay auditors at the Yellowknife firm regularly use the intelligent sampler in the MindBridge platform. “Anything that’s over performance materiality, we’ll test no matter what. So, our auditors usually will sculpt that into the data population and run the intelligent sampler on it. If the intelligent sampler flags those transactions within that sample selection as risky, we’ll investigate further even if they are not of material value to the audit,” said the accountant.
On another client audit, the team used the intelligent sampler feature in Ai Auditor, which highlighted a $100 transaction as high risk. When the team asked for a supporting invoice, the client couldn’t find a receipt and assumed the amount might have been withdrawn from a bank account.
“Again, I don’t think our auditors would have necessarily selected that particular transaction, but the MindBridge platform did. We were able to provide the client with a management letter that pointed to that transaction and outlined recommendations about how to improve some internal controls. That was an incredible value-add that we were able to offer our client using the Ai Auditor platform,” said the senior accountant.
Expanding the benefits of MindBridge firmwide
Currently, most Crowe MacKay offices are using the MindBridge platform at varying levels. Much of the firm’s early success with the Ai Auditor platform comes from the formation of a change management team. A few key people from each office host virtual meetings every six weeks to discuss new opportunities or learnings that they’ve uncovered using the AI auditing platform. When asked to offer advice to other firms, the senior accountant said a data strategy is essential.
“Having a really good grasp of data ingestion and assigning specific people to handle that task is critical. Once I set the data up in the MindBridge platform, the auditors at our Yellowknife office can simply go and look at the risk assessment and start selecting samples. With this strategy, we have found that their willingness and desire to use Ai Auditor increases exponentially,” said the senior accountant.
Moving forward, Crowe MacKay is looking to centralize data ingestion for all client engagements firmwide. Since the Yellowknife office has systems in place to leverage the MindBridge platform for audit planning, sampling, and overall risk assessments, the team will also start expanding their use of Ai Auditor. This includes testing accounts payable and accounts receivables using those specific risk analysis modules, as well as using the AI auditing platform for engagement reviews.
“We’re just beginning to uncover all the benefits that MindBridge Ai Auditor has to offer our team. Yet, we have already experienced how the platform can strengthen our risk assessment and sample selection processes during audits. As a forward-thinking organization, we know AI technology is the future. Our goal is to keep looking at new ways to leverage the MindBridge platform so that we can continue to offer greater value and insights to our clients,” concluded the senior accountant at Crowe MacKay.