MCA asks Cost-Auditors in India to leverage AI for Audits

• The Ministry of Corporate Affairs (MCA) is calling on Cost Auditors to embrace AI for smarter audits, as per a report from ET!
• From spotting hidden patterns to tackling inefficiencies, AI could revolutionize how risks and financial health are evaluated.

What’s going on?

The Ministry of Corporate Affairs (MCA) in India is urging cost auditors to harness the power of artificial intelligence (AI) to supercharge their work.

This approach will empower auditors to spot issues in company financials faster and with pinpoint accuracy, making the entire audit process smarter, sharper, and more efficient.

Looks like AI is coming for the cost auditors too!

What does MCA want?

The MCA wants cost auditors to:

• Focus on risky areas: They want auditors to pay extra attention to areas where problems, like high costs or financial inefficiencies, could hurt the company.
• Look at cost inefficiencies: Auditors should check how poor cost management affects the company’s overall financial health.
• Analyze more data: The MCA suggests using AI tools to dig through huge amounts of data. This will provide auditors with a bigger picture, making their findings more reliable.

What’s the role of Cost Auditors?

In short, cost auditors are responsible for reviewing a company’s cost records.

These records track all the expenses involved in producing goods or services, like materials, labor, and overheads. These are super important for:

• Taxes: Companies need accurate cost records to calculate their taxes.
• Government programs: Proper cost records are necessary to qualify for government subsidies or incentives.
• Project funding: Cost audits are used to ensure that government-funded projects are being carried out efficiently and that money isn’t being wasted.

Cost audits also help company management spot areas where they can cut costs or run things more smoothly.

Also read: GenAI in Accounting, Tax and Finance….Impact on Billable Hours!

How can AI help?

The Ministry believes that AI can make the audit process much faster and smarter by:

• Processing data faster: AI can look at lots of data in no time, allowing auditors to find issues quickly instead of spending hours going through records.
• Spotting hidden patterns: AI can detect patterns or irregularities that might not be obvious to the human eye, helping auditors find potential problems earlier.
• Making audits more accurate: By using AI, auditors reduce the chances of human error, which leads to more precise findings.
• Finding anomalies: AI helps auditors spot things that don’t quite add up in the numbers, which could be a sign of bigger issues like fraud or mismanagement.

The bigger picture

The push for AI in cost audits is part of a larger plan by the government to make audits more efficient and transparent.

Earlier this year, a government panel suggested raising the turnover limit for companies required to keep cost records, making it easier for smaller businesses to comply.

The government also wants cost records to be kept for all large infrastructure projects worth at least Rs 100 crore, to ensure that money is being spent wisely.

Also read: AI-agent for “Accountants” backed By Khosla Ventures raises $34Mn

Wrapping up

By using AI, the MCA hopes to make cost audits smarter, faster, and more accurate.

This will help auditors provide better insights, help businesses manage their costs more effectively, and allow the government to make better decisions about things like subsidies and infrastructure projects.

So, in a nutshell, AI is being used to make sure that companies are managing their money well and that public funds are being spent where they should be.