Artificial Intelligence for Audit, Forensic Accounting, and Valuation

CHAPTER 9Automating Internal Controls Assessment

RECENTLY, PRICEWATERHOUSECOOPERS (PWC) settled two major high‐profile malpractice lawsuits in the UK. In the two cases (MF Global and Taylor Bean & Whitaker), the allegations against PwC indicated that the plaintiffs expected the audit firm to go beyond the management assertions and include management decision‐making in the scope of the audit. Another firm, travel company Thomas Cook, was also audited by PwC between 2007 and 2016. Between 2017 and the collapse of Thomas Cook in 2019, Ernst & Young (EY) took over as the auditors. Upon investigation it was discovered that PwC provided remuneration advice to Thomas Cook, and that while both firms, PwC and EY, had information about the deep problems facing Thomas Cook, both gave clean audit reports to Thomas Cook. Commenting on audit failures, Bob Moritz, global chairman of PwC, said, “The expectations of the market is above the regulatory requirement. When big failures happen, it is not necessarily an audit failure. The controls might be appropriate, but the continuation of the business, its financial position and long‐term sustainability can still be in question” (Kinder, 2019).

• Would it be possible for PwC and EY to gain deeper insights about their clients' material weaknesses in internal controls, even before an audit is launched?
• Is it possible for PwC to develop greater insights into the business operations of a firm?
• How can management, board, and the audit committee receive ...