Artificial Intelligence (AI) Is Getting Smarter and Makes Human
Intelligence Appear Dumber
“Dumber” may be somewhat drastic. Remember, the intelligence of humans designed
and manufactured the AI. The comparison of intellect is probably skewed at best.
Auditing is evolving. When someone mentions an audit of financial information, many
people think of the auditor as a Tim Conway type character (Mr. Tudball). They picture
a stooped shouldered short fat person with an attaché case and thick glasses and the
personality of a statue. Well, times are changing. Most auditors are well educated,
sharply dressed people with a string of initials after their name. Certified Public
Accountants (CPA), Certified Fraud Examiners (CFE), Government Accountants (GAO)
and many more are far from a Mr. Tudball type. They are trained to recognize variations
in recorded data in various disciplines. But they are not as smart or quick to respond as
newly introduced artificial intelligence (AI). Computers can scan documents, compare
data with known sources and catch non-compliant entries with a non-sympathetic eye.
The computer does not care who entered the data, or what their circumstances are and has
no allegiance to anyone. Truth prevails.
In a recent article by Olivia Carville , she wrote that statistics attributed to AI indicated
that many fraudulent transactions were quickly identified by the computer. Many of
those entries could have been overlooked by the human eye. Some examples of the
fraudulent entries include: an employee boarded his dog and charged the kennel fee as
hotel expense for a business trip. Yoga classes were recorded as client entertainment. A
trip to a strip club was charged as a client steak dinner. Algorithms caught the frauds. In
a short period, all the bogus charges were discovered and rejected.
The article introduced AppZen, an 18-month-old AI accounting company. The company
has been hired by big companies, including “Amazon.com Inc., International Business
Machine Corp., Salesforce.com Inc. and Comcast Corp. and claims to have saved its
clients $40 million in fraudulent expenses. AppZen and traditional firms like Oversight
Systems say their technology isn’t erasing jobs—so far—but rather freeing up auditors to
dig deeper into dubious claims and educate employees about travel and expense
policies.” The computer can do more work in seconds than auditors can do in hours.
Also, the computer does not complain about eye strain or tedious work or overtime spent
in the laborious task of searching data.
The Association of Certified Fraud Examiners reported that 2,700 fraud cases from
January 2016 to October 2017 resulted in losses of $7 billion. The human eye and brain
are not blessed with cognitive reasoning like that of computer brains. “The world’s
largest anti-fraud organization (CFE) found that travel and expense embezzlement
typically account for about 14 percent of employee fraud. It has become easier to fool
finance departments thanks to websites such as fakereceipts.us that make it easy
to create a bogus paper trail.” Yes, there is an online source for lying to your company
and others including, your auditors and the Federal Government (IRS). Yes, such activity
is illegal and thereby criminal.
AppZen, based in San Jose, California, can audit 100 percent of expense reports in real-
time by running receipts through an algorithm that hunts for duplication, discrepancies or
inflated expenses. It reimburses legitimate employee expenses on the same day and kicks
back any dubious claims to human auditors for further investigation.
How does it work? The algorithm can compare the average cost of a flight from New
York to Nashville against the amount expensed and will flag it if the price seems
exorbitant for that day and time (or if the employee upgraded the flight to first class). It
will also sound the alarm if a company listed on a receipt doesn’t exist or if a strip club is
masquerading as a steakhouse. The algorithms have already exposed some creative—and
costly—frauds such as employees tacking on bottles of vodka to their “work lunch” bill,
buying $3,000 worth of Starbucks gift cards and claiming it as “coffee with a contact.”
According to the article, one employee expensed her $900 office farewell party and
submitted a claim that contained an animated photograph of her face instead of any
receipts—she must have had little confidence in the auditors. Sneaky, huh? Would you
believe someone bought a Python and charged it to his expense account as advertising?
Yes, he did. The Python purchase was allowed due to a company advertising campaign;
however, the hundreds of dollars spent for steak fed to the snake did not pass scrutiny.
So, are we to believe artificial intelligence will completely replace human
auditors? According to a principal in KPMG’s Forensic Advisory Services, some lower-
level jobs will be upgraded to more specifically defined positions to assist the computer
results to be compiled into a readable report. I appreciate Olivia Carville for her extensive
analysis of AI and her article from which I have quoted some of the information herein.
The “take-away” from this article is simple. Be honest, be vigilant and fraud will stop
being the deep monetary hole it has been for centuries.