Artificial brains to stop fraud

Audits of the big corporations are about to go through a revolution to cope with a phenomenal growth in use of the Internet for business-to- business transactions. That is increasing the risk of hackers and internal fraud, forcing auditors to become experts in data encryption, "firewalls" and on-line identity authentication.

Using computers as devices to communicate rather than simply to process data creates new challenges, and the big accountancy firms are devoting more resources to helping clients to improve their protection against computer fraud.

"Technology has not kept pace with the desire of business to use the technology," says Pat Russell, a partner in information systems risk management at Price Waterhouse. "We are working with clients to ensure that they are dealing with the person they think they are dealing with."

Medium-sized firms could be squeezed as a result of these new demands on auditors, suggests Clive Holtham, Bull Information Systems professor of information management at the City University, London, who is heading a research project on IT and the future of the audit. Small firms servicing small clients in traditional trading sectors will not be greatly affected by electronic commerce, he says, but larger firms, outside the big six, may struggle to meet the demands of clients committed to new technology, especially those operating multinationally.

Professor Holtham adds, though, that basic audit skills are as relevant as they have ever been. "Auditors continually emphasise that controls are their stock-in-trade," Professor Holtham says. "New technology will not change that.

Banks, insurers and the major retailing corporations are making strides not only in developing electronic commerce, but also in using "artificial intelligence" (AI) - where software uses evidence to make deductions or produce warnings - to strengthen their marketing and audit internally management controls and computer security.

AI is also being used by the big firms to check unauthorised access to confidential information. Forensic auditors use AI not only to analyse how a fraud has taken place, but also to detect it in action, and pre- empt it by locating control weaknesses. Effective AI software at Barings should have warned managers and auditors of what Nick Leeson was doing.

There are limits, though, to the use of AI as a substitute for old-fashioned, good quality auditing. Some auditors say there are simply too many transactions taking place in a large corporation for each to be analysed by computer.

AI should, though, prove useful in enabling auditors to benchmark clients against competitors, helping them to identify where a corporation is under-performing. John Mulholland, a senior manager at KPMG's audit research and development division, says that computer benchmarking is something to be gradually introduced into client audits. "Clients do appreciate a comparison," he says.

"Spider's web" diagrams can compress maybe 10 complex tables into a single graphic display: executives can see at a glance in which areas of activity their corporation under-performs against competitors. "People are much better at viewing patterns than reading tables," Mr Mulholland points out. But he adds: "The role of computers is to supply information so that people can bring their judgement to bear on the scenario. The main audit tool is still the brain"

Paul Gosling

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Graduate Recruitment Resourcer

    £20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

    Recruitment Genius: Telesales Executive - OTE £32,000+

    £18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

    Ashdown Group: Marketing Manager - B2B, Corporate - City, London

    £45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Neil Pavier: Commercial Analyst

    £50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

    Day In a Page

    Peter Ackroyd on Alfred Hitchcock: How London shaped the director's art and obsessions

    Peter Ackroyd on Alfred Hitchcock

    Ackroyd has devoted his literary career to chronicling the capital and its characters. He tells John Walsh why he chose the master of suspense as his latest subject
    Ryan Reynolds interview: The actor is branching out with Nazi art-theft drama Woman in Gold

    Ryan Reynolds branches out in Woman in Gold

    For every box-office smash in Ryan Reynolds' Hollywood career, there's always been a misconceived let-down. It's time for a rethink and a reboot, the actor tells James Mottram
    Why Robin Williams safeguarded himself against a morbid trend in advertising

    Stars safeguard against morbid advertising

    As film-makers and advertisers make increasing posthumous use of celebrities' images, some stars are finding new ways of ensuring that they rest in peace
    General Election 2015: The masterminds behind the scenes

    The masterminds behind the election

    How do you get your party leader to embrace a message and then stick to it? By employing these people
    Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

    Machine Gun America

    The amusement park where teenagers go to shoot a huge range of automatic weapons
    The ethics of pet food: Why are we are so selective in how we show animals our love?

    The ethics of pet food

    Why are we are so selective in how we show animals our love?
    How Tansy Davies turned 9/11 into her opera 'Between Worlds'

    How a composer turned 9/11 into her opera 'Between Worlds'

    Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
    11 best bedside tables

    11 best bedside tables

    It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
    Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

    Italy vs England player ratings

    Did Townsend's goal see him beat Kane and Rooney to top marks?
    Danny Higginbotham: An underdog's tale of making the most of it

    An underdog's tale of making the most of it

    Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
    Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

    Steve Bunce: Inside Boxing

    Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
    No postcode? No vote

    Floating voters

    How living on a houseboat meant I didn't officially 'exist'
    Louis Theroux's affable Englishman routine begins to wear thin

    By Reason of Insanity

    Louis Theroux's affable Englishman routine begins to wear thin
    Power dressing is back – but no shoulderpads!

    Power dressing is back

    But banish all thoughts of Eighties shoulderpads
    Spanish stone-age cave paintings 'under threat' after being re-opened to the public

    Spanish stone-age cave paintings in Altamira 'under threat'

    Caves were re-opened to the public