{"id":17868,"date":"2023-10-06T18:05:21","date_gmt":"2023-10-06T12:35:21","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/?p=17868"},"modified":"2023-10-06T18:05:23","modified_gmt":"2023-10-06T12:35:23","slug":"using-ai-for-audit-techniques","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/editorial-analysis\/06-10-2023\/using-ai-for-audit-techniques","title":{"rendered":"Using AI for Audit Techniques"},"content":{"rendered":"\n<p><strong>Syllabus: GS2\/Government Policies &amp; Interventions,&nbsp; GS3\/Science &amp; Technology<\/strong><\/p>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">In Context<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Supreme Audit Institutions G20 conference emphasised the<strong> need for a common international audit framework<\/strong> relating to AI.<\/li>\n<\/ul>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">Artificial Intelligence<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It is the<strong> science and engineering<\/strong> of <strong>making intelligent machines<\/strong>, especially intelligent<strong> computer programs.<\/strong>&nbsp;<\/li>\n\n\n\n<li>It is related to the similar task of using computers to understand human intelligence, but AI does not have to confine itself to methods that are biologically observable.<\/li>\n<\/ul>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">Significance\u00a0 of AI<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>AI would not replace people but create new opportunities in various fields.&nbsp;<\/li>\n\n\n\n<li>It works on data, and if we could train our machines, it could do wonders for us in milliseconds by automating processes.&nbsp;<\/li>\n\n\n\n<li>AI is creating new opportunities which could not be achieved by traditional technology.<\/li>\n<\/ul>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">AI for Auditing\u00a0<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>In India:<\/strong>\n<ul class=\"wp-block-list\">\n<li>According to the CAG, <strong>One Indian Audit and Accounts Department One System<\/strong>, a web-enabled IT application is going to support multiple <strong>languages<\/strong>, offline functionality, and a mobile app, enabling complete digitalisation of the audit process from April 1, 2023.\n<ul class=\"wp-block-list\">\n<li>The CAG conducts financial audits, compliance audits, and performance audits.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>This will perform with <strong>only one exception<\/strong>, the<strong> defence audit,<\/strong> because of security dimensions.&nbsp;<\/li>\n\n\n\n<li>The SAI G20 conference emphasised the need for a common international audit framework relating to AI.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Global AI auditing frameworks:<\/strong>\n<ul class=\"wp-block-list\">\n<li>Global organisations have developed many AI auditing frameworks. These include:\n<ul class=\"wp-block-list\">\n<li>The COBIT framework for AI audit, the US Government Accountability Office framework, and&nbsp;<\/li>\n\n\n\n<li>The COSO ERM Framework. The U.K.\u2019s Information Commissioner\u2019s Office has published draft guidance on the AI auditing framework.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">Significance<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Increased efficiency and accuracy: <\/strong>Audit Artificial intelligence implementation addresses the daunting task of sifting through vast amounts of data, <strong>automating tasks<\/strong> like data entry and analysis, leading to increased efficiency and precision.\n<ul class=\"wp-block-list\">\n<li>This streamlining of the auditing process enhances accuracy and expedites operations, ultimately improving audit outcomes.&nbsp;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Increased reliability: <\/strong>One of AI audit software&#8217;s most significant contributions lies in its ability to provide deeper insights into complex data sets, uncovering valuable patterns and trends that enhance the reliability of audit reports.&nbsp;<\/li>\n\n\n\n<li><strong>Better scrutinization of irregularities: <\/strong>AI also plays a crucial role in detecting fraudulent activities, scrutinizing transactions, and alerting auditors to potential irregularities.\n<ul class=\"wp-block-list\">\n<li>By producing detailed reports on suspicious activities, AI audit software empowers auditors to<strong> proactively address financial misconduct<\/strong>, ensuring greater integrity and compliance.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">Challenges<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Alert on over dependence: <\/strong>The Comptroller and Auditor General of India (CAG), Girish Chandra Murmu, who is the<strong> chair for the Supreme Audit Institutions (SAIs)<\/strong> of the G20, warned that<strong> absolute dependence <\/strong>on Artificial Intelligence (AI) for auditing purposes may lead to<strong> inaccurate findings<\/strong>.\n<ul class=\"wp-block-list\">\n<li>He also emphasised ethics as the cornerstone of responsible AI.&nbsp;<\/li>\n\n\n\n<li>According to him, the auditing challenges of AI include ensuring transparency, objectivity, fairness, and avoiding bias.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Multiple sources &amp; platforms: <\/strong>Since in India, the data for various government entities are taken from different sources and stored in multiple divergent platforms, the AI auditor will face enormous risks and challenges.\n<ul class=\"wp-block-list\">\n<li>Audits cannot be based on big data from unauthorised sources. Data integration and cross-referencing become cumbersome.&nbsp;<\/li>\n\n\n\n<li>The data platforms of all entities must be synchronised through the government\u2019s IT policies.&nbsp;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Potential for escalate existing threats: <\/strong>Generative AI is compounding or can compound some existing online threats like the<strong> use of deepfakes for disinformation campaigns<\/strong>.\n<ul class=\"wp-block-list\">\n<li>There are multiple ways in which <strong>cheaper and more accessible generative AI models <\/strong>can compound issues that we\u2019re still struggling to regulate, especially in <strong>cybersecurity and online harms<\/strong>.<\/li>\n\n\n\n<li>These <strong>can threaten the basic foundations of democracy<\/strong>.&nbsp;<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">Suggestions<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Responsible AI must be ethical and inclusive: <\/strong>Only ethical AI can add credibility, trust, and scalability to the CAG audit. Data sets must be complete, gathered on time, accurate, available, and relevant.\n<ul class=\"wp-block-list\">\n<li>If integrity of the data fields is not ensured, we will have inaccurate audit findings.&nbsp;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Role of AI auditor: <\/strong>The AI auditor must be extra-vigilant about the risk of inherent AI data bias if data are taken from unauthorised sources like social media, where data manipulation and fabrication are common.\n<ul class=\"wp-block-list\">\n<li>Since there is wide variance among AI systems and solutions, the auditor <strong>must adopt an appropriate AI design<\/strong> and <strong>architecture <\/strong>while defining the audit\u2019s objective, scope, approach, criteria, and methodology.&nbsp;<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Capacity building of auditors: <\/strong>There needs to be capacity building of auditors in varied aspects of the AI technology landscape so that they are familiar with AI frameworks, tools, and software.&nbsp;<\/li>\n\n\n\n<li><strong>Consultation with data specialists: <\/strong>AI audit assignments may require consultation with data scientists, data engineers, data architects, programmers, and AI specialists.&nbsp;<\/li>\n\n\n\n<li><strong>Data Protection Impact Assessments: <\/strong>Data Protection Impact Assessments are legally required if organisations use AI systems that process personal data to avoid potential risks.\n<ul class=\"wp-block-list\">\n<li>The AI auditor must ensure that personal data is processed in a manner that guarantees appropriate levels of security.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><strong><span style=\"text-decoration: underline;\">Way Ahead<\/span><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>With few frameworks available for auditing AI, auditors can only focus on the risks, controls and governance structures that are in place to determine whether they are operating effectively.<\/li>\n\n\n\n<li>AI is a powerful tool, but at the end of the day, we should be mindful of the fact that it is a means to an end and not an end in itself.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><span style=\"text-decoration: underline;\"><strong>Daily Mains Question<\/strong><br><\/span><strong>[Q] <\/strong>Analyse the significance of enabling complete digitalisation of the audit process in India. What are the challenges of absolute dependence on Artificial Intelligence (AI) for auditing purposes?<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.nextias.com\/ca\/wp-content\/uploads\/2023\/10\/06_10_Using-AI-for-Audit-Techniques.pdf\">Download PDF<\/a><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Syllabus: GS2\/Government Policies &amp; Interventions,&nbsp; GS3\/Science &amp; Technology In Context Artificial Intelligence Significance\u00a0 of AI AI for Auditing\u00a0 Significance Challenges Suggestions Way Ahead Daily Mains Question[Q] Analyse the significance of enabling complete digitalisation of the audit process in India. What are the challenges of absolute dependence on Artificial Intelligence (AI) for auditing purposes?<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[22],"tags":[],"class_list":["post-17868","post","type-post","status-publish","format-standard","hentry","category-editorial-analysis"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/17868","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=17868"}],"version-history":[{"count":2,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/17868\/revisions"}],"predecessor-version":[{"id":17872,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/17868\/revisions\/17872"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=17868"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=17868"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=17868"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}