Innovations in audit: KPMG deploys smart glasses

Cecilia Nysing

When the pandemic hit America, many workers were required to go remote. But for auditors, the opposite was true: They could no longer “go remote” to client sites — and since they were unable to invade client offices, factories and warehouses for crucial audit functions like inventory counts, they had to get creative.

KPMG, fortunately, was ahead of the game. Prior to the pandemic, the Big Four firm had already been exploring a potential solution, smart glasses, but for reasons related to efficiency. If clients could count inventory themselves, while being monitored via smart glasses by an offsite auditor, this would save time and money.

To perform physical inventory counts, an auditor has to travel to a client site, comb through a warehouse counting every item, and travel back. If the inventory consists of items that can expire, rot or become damaged, a subject matter expert may have to be consulted to confirm the quality of the item. Sometimes, a partner in charge would have to be called in to make a decision on whether an item should be counted or not. All in all, it can involve a large expenditure of money, time and man hours.

Smart glasses enable the wearer to connect to the internet, and via augmented reality add information to what the wearer is seeing in real life. More to the point for auditors, they also allow people at different locations to see what the wearer sees.

A man demonstrates a pair of augmented reality smart glasses.

David Paul Morris/Bloomberg

KPMG saw the potential in what smart glasses technology could do, and the glasses were in a proof of concept exploratory phase before COVID hit. When the pandemic forced a change in how audit inventory exercises had to be carried out, the firm invested in 150 units of XpertEye smart glasses, made by AMA. The glasses come with technologies like assisted reality, workflow management and scheduling. KPMG is now using them, together with the XpertEye glasses, for audit.

“When we realized what COVID really meant, we put our foot on the gas because we knew we needed to do something rapidly,” said KPMG chief technology officer Matt Bishop. “During the summer, we launched field trials and took the technology to five client teams. The overwhelming feedback was that this provides significant value to audit. It’s not just a COVID thing — this is the new way.”

KPMG used XpertEye’s platform in conjunction with the glasses for about 150 observations, and the firm plans to scale it up. The specific benefits KPMG have found are manifold.

First, Bishop said, the smart glasses actually enhance audit quality: “The glasses replicate the efficacy of a person being on site doing inventory count, but it scales it. The client performs the check on site with the glasses, while the auditor monitors it remotely from a safe location. The partner on the job can also be monitoring it in real time. Smart glasses enable us to pull in all these players, as well as the client and people from professional practice, at one time and in real time.”

For instance, if something during the inventory check is abnormal — damaged product, for example — the auditor can immediately pull in the subject matter expert at the firm for their live advice.

From the client perspective, using smart glasses is less intrusive than having a team of auditors physically in their offices, warehouses and factories. The client can wear the glasses themselves and perform the inventory exercise without hosting auditors on site. Because of GPS capabilities built into the glasses and software, and other security measures from both the software provider and KPMG’s own processes, it’s not easy to “cheat” the audit even if no auditor is physically present.

It’s also safer — no auditor has to be out at risk in a hazardous environment when smart glasses are in play.

“Virtualized audit is here to stay,” Bishop said. “The smart glasses are now a permanent part of our process, and we plan to scale it to other service areas when the time is right.”

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