Financial Fraudsters Beware: The Auditors Have Backup

An Ottawa startup's AI tools are helping auditors cut their workloads and catch issues that had previously slipped through the cracks.


For auditors, uncovering irregularities in financial data is very much a needle-in-a-haystack scenario. The sheer volume of datasets means that manually going through every single transaction is not an option, nor is simply hiring more auditors.

Standard practice involves using software to review a strategically selected sample of transactions within an assignment, but this leaves stones unturned, and clever individuals can exploit this if they know what they’re doing.

“Fraud is a one-in-10,000 scenario, so the idea you’ll find that from a statistical sample is ridiculous,” said MindBridge’s Chief Technology Officer Robin Grossett to the Globe and Mail.

MindBridge is an Ottawa-based start-up whose AI Auditor is changing the field of financial compliance investigations. This analytics software platform was specifically designed for accounting professionals and uses AI to speed up the job and help them to process huge volumes of data that would be impossible to complete manually. It offers a far more efficient and thorough examination of an assignment since it covers all entries and flags those that are irregular or suspicious.

For the client, it allows them to minimize their risk exposure to financial losses and support their auditing team as they strive to meet regulatory and industry standards.

MindBridge has cut deals with over 260 accounting firms in 14 countries, including 40 out of the top 100 firms in the US, and the company has raised $45 million in funding to date.

AI Auditor’s features improve with human feedback

AI Auditor is trained to search for irregularities that human auditors typically look for (e.g. an unusually sized transaction), but it can also spot those that might otherwise be missed. Sequence gaps in transactions constitute a missing piece of the audit trail and highlight an increased fraud risk, and the AI is adept at rooting out entries that are simple filing errors and those that are genuinely phony.

Once the AI Auditor finishes its data review, users are presented with an interactive summary table listing all the flagged entries, and from there, auditors can then use their own judgement.

The program also learns by observing how human auditors interact with the flagged entries, so whatever the individual sees fit to follow up with, the AI will know that findings like this are valuable. Conversely, if a point is raised by the AI and the auditor does not follow up on it, it will know that examples like this are normal. This makes the flagging process smarter with continued use.

“MindBridge helped us realize that machine learning and AI will be far more efficient and powerful for auditors to do their jobs than the antiquated and very cumbersome processes they now use,” said Real Ventures partner, Sam Haffar, to the Globe and Mail.

Bank of Canada partnership

In late 2019, the Bank of Canada and MindBridge announced a partnership that will involve the latter developing an AI solution to spot anomalies in payment transactions.

One of the central functions of the Bank of Canada is to deliver funds management services on behalf of the government as well as other customers. Relevant and timely intelligence is essential for monitoring these transactions and securing the inflow and outflow of payments.

MindBridge is expected to deliver a proof-of-concept for the project detailing how AI can improve existing controls, learn from transaction history, monitor new transactions, and flag suspicious activity.

“We are excited to collaborate with the Bank of Canada through its innovative PIVOT program,” said Eli Fathi, MindBridge’s CEO, in a press release. “Working alongside a leading central bank accelerates MindBridge’s capabilities in delivering impactful solutions in the financial sector and further demonstrates the extensibility of the MindBridge AI platform.”

AI is set to change the field of accounting

According to a publication released by the Chartered Professional Accountants of Canada, AI is set to revolutionize the way accountants work and improve the quality and accuracy of financial results. Routine tasks will be automated via AI, freeing up valuable time and eliminating the burden of excessive workloads.

One example of this is the cyclical nature of financial reporting, which may become redundant since AI can reconcile accounts daily, overtaking the sluggish process of doing so manually at the end of each month.

The paper rejects the notion that the profession itself is under threat by AI, and similarly, MindBridge has stated that their technology is a tool to assist auditors, not to replace them.

“The entire market of auditors will adopt AI,” said Brian Mulvey from PeakSpan Capital to the Globe and Mail. “Those who don’t will cease to be relevant.”

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Barry is a journalist, editor, and marketer for several media outlets including HeadStuff, The Media Editor, and Buttonmasher Magazine. He earned his Master of the Arts in Journalism from Dublin City University in 2017 and moved to Toronto to pursue a career in the media. Barry is passionate about communicating and debating culture, science, and politics and their collective global impact.