Artificial Intelligence for Audit, Forensic Accounting, and Valuation

CHAPTER 3What Is Artificial Intelligence?

AS THE YEAR 2017 CAME to a close, the Big Four audit firms in the UK found themselves in hot water. Those whose assurance was supposed to be the pillar of trust upon which the financial markets' credibility and investor confidence reside were questioned and fined by the regulator. Something wasn't right. The audit quality was slipping. The process was failing. It appeared that audit firms were becoming better at winning business, but unable to deliver against the high standards set for the profession.

The concerns rose across a wide spectrum of stakeholders and the rendering of fines did not terminate the mounting trepidation. The actions of the regulators were followed by Parliament getting involved. A bill was proposed to break up the Big Four monopolies. In early 2019, the Business, Energy, and Industrial Strategy Committee of the UK Parliament held a session to question the representatives of “challenger” accountancy firms, including Grant Thornton, BDO, and Mazars (Parliament, 2019). The session was followed by questioning the Big Four – PwC, EY, Deloitte, and KPMG. The Committee raised concerns about the problems with the audit quality as well as lack of competition in the audit market. Pointing to the fact that 97% of the FTSE 350 market share is held by the Big Four audit firms, smaller firms pleaded that they needed to invest in technology and people in order to qualify for large clients (Competition and Markets Authority (CMA), ...