The Financial Reporting Council (FRC) has published its first
guidance on the use of artificial intelligence (AI) in audit,
alongside a thematic review of the six largest firms' processes
to certify new technology used in audits.
As AI tools continue to be utilised in audit, this new
guidance outlines a coherent approach to implementing a
hypothetical AI-enabled tool, and offers insights into FRC
documentation requirements, all designed to support innovation
across the audit profession.
The guidance was developed collaboratively with FRC's Technology
Working Group, which drew on a number of technical experts across
the audit profession. This guidance should support auditors and
central teams at audit firms as they develop and use AI tools in
their work, while also providing third-party technology providers
with the regulatory expectations for their customer base.
Mark Babington, FRC Executive Director of Regulatory
Standards, said:
“AI tools are now moving beyond experimentation to becoming a
reality in certain audit scenarios. When deployed responsibly,
they have significant potential to enhance audit quality, support
market confidence, drive innovation and ultimately contribute to
UK economic growth.
“The FRC continues to support and encourage innovation in audit.
This guidance aims to illustrate how AI can enhance audit work as
well as clarify FRC expectations around proportionate,
appropriate documentation of tools that use AI.
“We recognise that this field is moving quickly and will continue
to engage across the profession, both in the UK and
internationally, to support innovation and the appropriate use of
AI."
The accompanying thematic
review summarises insights on the processes and controls at
the six largest firms to certify automated tools and techniques
for use in audits. It includes insights and examples of good
practice in these processes, which are fundamental to the
delivery of audit quality.
Key features of the guidance:
- Two-part structure – Illustrative example of one potential
way AI can be leveraged in an audit, as well as principles that
are intended to support proportionate and robust documentation of
tools that use AI
- Broad and forward-looking AI definition – Encompasses both
traditional machine learning and deep learning models, including
generative AI
- Balanced documentation expectations – Proportionate approach
to prevent over documentation
- Sophisticated view on appropriate explainability –
Acknowledges that appropriate levels of explainability vary based
on context and usage
- Versatile principles – Illustrates topics, judgements and
considerations that have broad applicability to other instances
of AI use in audit
- Alignment with Government AI principles - Documentation
guidance reflects the UK government's five AI principles
- Relevant across market – The guidance contains material that
clarifies how expectations translate into contexts where a tool
is obtained from a third party
While comprehensive in scope, the guidance is not prescriptive
and does not introduce new regulatory requirements, instead
focusing on supporting innovation while maintaining appropriate
standards.
Read the guidance on the use
of artificial intelligence (AI) in audit.
Read the thematic review of
the six largest firms' processes to certify new technology used
in audits.
