The American Institute of CPAs (AICPA) has issued guidance to help auditors assess the implications of AI in financial reporting and financial statement audits.
The practice aid ‘AI Considerations for Financial Statement Auditors’ explains how the use of AI may affect business processes and financial reporting.
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It is intended to help CPAs identify AI-related risks, understand its effect on controls, determine suitable audit responses and assess their use of AI tools.
The practice aid is currently divided into two sections.
The first explains AI, its different forms, how it differs from conventional automation and the potential effect on risk assessment.
It examines how the accuracy, completeness, diversity, quality, relevance and volume of data can influence the reliability of an AI system.
The section also highlights the need to assess audit team capabilities, as engagements may require auditing expertise, AI knowledge, data skills, professional scepticism and specialist support.
The guidance addresses how to determine whether an organisation’s use of AI affects financial reporting and the application of professional standards, along with associated risks.
The second section covers quality management policies and procedures relating to the company’s responsibilities for AI tools.
It also highlights the need to assess the competence and capabilities of engagement teams and to plan how AI will be used on specific audit engagements.
Further, engagement partners should understand the AI tools used by their teams, confirm that the tools have been approved by the company and ensure that staff use them appropriately.
AICPA assurance and advisory innovation vice-president Amy Pawlicki said: “AI tools are already benefitting the efficiency and effectiveness of both financial statement preparation and the audit in a number of ways.
“But as powerful as they are, these tools can introduce new risks that auditors must be cognisant of in fulfilling the critical role they play in performing financial statement audits.
“This practice aid is intended to help auditors understand and mitigate these risks in a rapidly evolving environment.”
