Part IX
Analyzing Historical Audit Data with AI:
Identifying Emerging and Systemic Risks

Mary Breslin, CFE, CIA

In today’s dynamic business environment, the ability to identify emerging risks and systemic issues across an organization is critical for auditors. However, this task often involves sifting through years of work papers and audit reports—a process that can be both daunting and time-consuming. This is where AI, particularly ChatGPT, can revolutionize the way auditors approach risk analysis by uncovering patterns and insights that might otherwise go unnoticed.

Uncovering Patterns in Historical Data

One of the key challenges in risk identification is detecting patterns that may not be immediately obvious. Traditional methods require auditors to manually review historical data, often leading to the possibility of missing subtle trends. ChatGPT can expedite this process by quickly analyzing vast amounts of data from past audit reports, work papers, and other relevant documents. For example, it can identify recurring control weaknesses, compliance breaches, or operational inefficiencies that have appeared over multiple audit cycles. By highlighting these patterns, ChatGPT helps auditors pinpoint systemic risks that require attention, enabling a more proactive approach to risk management.

Identifying Emerging Risks

In addition to analyzing past data, ChatGPT can assist auditors in identifying emerging risks that may not have been prominent in previous audit cycles. By leveraging its extensive knowledge base and access to real-time information, ChatGPT can provide insights into new regulatory developments, technological advancements, or shifts in market conditions that could impact the organization. For instance, if there is a growing trend of cybersecurity threats in the industry, ChatGPT can flag this as a potential risk area, even if it hasn’t been a focus in prior audits. This foresight allows auditors to incorporate emerging risks into their audit plans, ensuring they are well-prepared to address potential challenges.

Thematic Risk Identification Across the Organization

Beyond detecting individual risks, auditors must also consider broader, thematic risks that may span across different areas of the organization. ChatGPT can help in this regard by cross-referencing data from multiple audits to identify overarching issues. For example, if multiple business units are struggling with similar compliance issues, ChatGPT can highlight this as a systemic risk that requires a coordinated response. By identifying these thematic risks, auditors can recommend organization-wide improvements, rather than isolated fixes, leading to more robust risk management strategies.

Enhancing Auditor Judgment with AI Insights

While ChatGPT is a powerful tool for data analysis, it also complements the auditor’s professional judgment. By providing data-driven insights, ChatGPT enables auditors to make more informed decisions. For instance, if ChatGPT identifies a pattern of minor compliance issues that could indicate a larger cultural or governance problem, auditors can delve deeper into these areas, using their expertise to assess the significance of the findings. This synergy between AI and human judgment enhances the quality of the audit, leading to more accurate risk assessments.

Streamlining the Audit Review Process

Finally, ChatGPT can streamline the review process by summarizing findings from historical data and suggesting areas that warrant further investigation. During the planning phase, auditors can use ChatGPT to generate summaries of key risks identified in previous audits, saving time and ensuring that no critical issues are overlooked. Additionally, ChatGPT can assist in drafting reports that communicate these risks to stakeholders, providing clear and concise explanations that are grounded in data.

Mary Breslin, CFE, CIA, is president and founder of Verracy, a training and consulting company. Contact her at mbreslin@verracy.com.