The ability for human beings to be able to ask a question to a machine or any similar device such as Apple Inc.’s Siri or IBM’s Watson, has fascinated me for years. For some time, a number of auditors and accountants have questioned if there could ever come a day when a device could do our jobs. Even before Siri’s or Watson’s time, from the development of software such as QuickBooks, Intuit, TurboTax and yes, H&R Block online and watching what seems the current (or maybe not too distant future trend) of a device doing our work, should this question bother us?

Of course the question, “Could my technical and professional skills be replaced by a device?” shouldn’t bother me today. But should (or could it) bother any of us tomorrow, next week, next year, or perhaps in the next five to ten years? Is it possible that Watson, or another device or technology, will be able to audit more transactions more efficiently than I can today? As an auditor, this bothers me.

Let’s focus on Watson. Watson does seem to be current technology and it does seem able to achieve a level of audited transactions more efficiently than most auditors today. H&R Block, with a market cap of more than $5 billion, and IBM with a market cap of more than $140 billion, both have to be taken seriously. IBM has the resources to burn cash for a long time in improving Watson in order to make it faster and more accurate. On the IBM website, it states, “Go beyond artificial intelligence with Watson.” Furthermore, the IBM website promotes “Watson Discovery,” “Watson Conversation,” ”Watson Virtual Agent,” “Watson knowledge Studio,” and “Explore Watson APIs.” When you read the descriptions of these applications for Watson, the content reminds me of what we as auditors do during the conduct of an audit engagement.

Watson has proven it can win at Jeopardy and has been used for cancer treatment protocols at the Sloan-Kettering Cancer Center. Heck, an earlier version of Watson, “Deep Blue,” could beat the best chess players in the world. It is not a stretch for me to visualize how Watson could be a very proficient auditor someday.

A banker once told asked me, “What’s more important – the fact the financial statements are accurate or the fact that the auditor is independent?” In the future, Is that same banker going to ask me, “Is it more important that a human, with all of the subjective requirements with the auditing standards, audited a small percentage of transactions or that Watson audits 100 percent of the transactions with accuracy, but does not have the subjective abilities required with the standards?”

This is going to require us to accept a significant change to the current audit model. It does not make any difference which standards (AICPA, PCAOB, GAO, IAASB) we apply to the audit model; those standards are going to have to change. We are going to have to do something besides continually staring at (auditing) what’s behind the auditee (i.e., the rearview-mirror-approach). This approach is going to have to change to a more forward-looking approach in order to more readily meet the requirements of the users of financial statements.

How will we meet the expectations of financial statement users? Are we going to be challenged to address the financial future of an auditee, the sustainability of the auditee and its environment, the creditworthiness of the auditee? I believe we will.

If not, we can always ask Watson.

Arthur Winstead, Jr., CPA, CFE, CFF, CGMA
Arthur Winstead, Jr., CPA, CFE, CFF, CGMA

Art Winstead, CPA, CFE, CFF, CGMA, is a general services partner in DMJ’s Greensboro office, primarily serving in the firm's Accounting, Auditing, and Attestation Services Area. He serves as team captain and team member for on-site peer reviews and off-site engagement reviews throughout the country and the State of North Carolina. In addition, Art currently serves as the A&A Consultant-Director for CPAmerica Inc. 

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