Among the more thankless tasks undertaken by junior accountants is meticulously checking off inventory at clients’ warehouses, which can involve scaling ladders with paper and pen in hand.

But handling mundane jobs is set to become more sophisticated, as auditors try out specialised drones to use artificial intelligence and image recognition to analyse information and zap it back to their headquarters.

The new technology, which is being piloted by companies including EY and PwC, is part of a new range of digital tools the UK’s largest accountancy firms are exploring as they seek to automate parts of the audit process.

Better technology can improve the quality of audit work by carrying out tasks faster, and potentially more accurately, than a human ever could. It can also assess huge volumes of data and generate new types of insights.

The Big Four firms — PwC, EY, KPMG and Deloitte — are ramping up investment in this area as they seek to defend market share and as regulators take an increasingly tough stance on failures in the profession.

This month, the UK’s Financial Reporting Council fined PwC £5.1m, the largest penalty it has ever issued, for “extensive misconduct” in its audit of a smaller professional services firm, RSM Tenon. Also this year, the FRC launched investigations into the audit of UK companies including Rolls-Royce, BT and Mitie, which involve KPMG, PwC and Deloitte respectively.

Auditors argue they can harness the power of data mining and AI to help avoid further high-profile failures. They say automating some repetitive manual tasks will improve efficiency, by freeing up employees to concentrate on areas where human judgment is needed.

Many already use data analytics and robotics technologies to complete assignments at record speed. Firms are now exploring more sophisticated artificial tools that “learn” over time the more information they gather, gradually gaining the ability to recognise complex patterns. Innovations in the pipeline include systems that can detect anomalies across all of a company’s financial transactions, such as unexplained entries that do not reflect what the business normally does.

“It’s becoming very clearly apparent to us that AI is going to have a huge impact on our business, therefore we are building stronger and stronger capability in that space,” says Jon Andrews, head of technology and investments at PwC in the UK. Investment in this areas is likely to grow “at an exponential rate”, he adds. 

While many projects are at pilot stage, some AI tools are beginning to be brought to market more widely. EY, which says it is spending “millions annually” to boost its digital capabilities in audit, will this year roll out an AI tool that will help clients review and classify all their lease contracts.

Rival KPMG plans to deploy a system “imminently” that can evaluate credit information related to a bank’s commercial loan book, including “unstructured” data from social media, for example.

Instead of sampling a snapshot of data, as has long been industry practice, auditors intend to use machine learning to analyse entire populations of data to illuminate apparent anomalies.

The technology can also be deployed when building predictive models that, based on data from the past, generate forecasts. Over the past 18 months, this has been a focus for KPMG, which is partnering with IBM Watson alongside smaller start-ups to develop its AI capabilities.

The accountancy firms are touting these technological capabilities as they try to grab audit business from rivals.

New EU rules designed to increase choice and competition have sparked a wave of audit tendering — when companies invite pitches from accountancy firms. They stipulate that companies must tender their audit every decade and rotate to a new one at least every 20 years. There were nearly 50 audit tenders among FTSE 250 companies in 2016, up from five in 2012, data from the UK’s FRC show.

“The expectations of audit generally continue to increase and the regulatory oversight that sits above audit is ever demanding,” says Stephen Griggs, head of audit at Deloitte. “Firms are distinguishing themselves by evidencing that their approach to innovation and the developments they’ve secured are more impressive than the competition.”

Still, critics warn that hype surrounding the potential of AI to revolutionise the audit world is overplayed. The FRC said in a January report that the use of data analytics was being “overemphasised” by auditors in their attempts to win competitive tenders.

Others point to limitations of the technology itself. “In practice, AI may not do much more to help auditors do a better job,” says Andrew Gambier, head of audit and assurance at the Association of Chartered Certified Accountants, the global professional body.

For example, where humans might be able to pick up on “where things have been missed out or not reported properly”, machines will only look at what they are faced with, he says. “This may also create opportunities for the system to be gamed.”

There are also barriers to progress. “The cost of technology — and how much do we buy versus build — is going to be the big challenge,” says Hermann Sidhu, global assurance digital leader at EY.

He also points to the difficulty of having to collect data from large organisations that may have complex and varied finance systems, and also having to find a uniform manner of gathering that internally.

Others voice concern that current regulations and standards will not be able to keep up with the pace of change. 

For PwC’s Mr Andrews, the challenge will be convincing stakeholders — clients, colleagues, audit committees and regulators — of AI’s validity. “It’s going to take time to reach a level of confidence in the new technology.