Dive Brief:
- The American Institute of CPAs issued guidance to help CPAs and finance professionals evaluate and manage how artificial intelligence affects auditing and company financial reports, according to a Tuesday press release.
- The 51-page practice aid, which has been in the works for several years, provides advice for the use of AI in two main areas, including how AI is used by businesses in their financial reporting or controls and how auditors use AI in the auditing process.
- “Our primary audience is CPAs but anytime the CPA is getting guidance on doing the audit, that’s of interest to CFOs because it’s their information that is being audited,” Jennifer Burns, the AICPA’s chief auditor, said in an interview.
Dive Insight:
The guidance comes as CFOs and their financial teams seek to gain efficiencies from AI while ensuring accurate reports and guarding against such risks as rogue AI or hallucinated numbers. AICPA is an industry group and does not have the power to sanction auditors.
Accounting firms are developing their own AI platforms or using purchased tools. For example, auditors at PricewaterhouseCoopers have used a wide range AI for some time but just last year began using the firm’s own enterprise-led generative AI tools, CFO Dive has reported.
“This is a new and evolving area,” Burns said, noting that the pace of change and adoption of the new technology is moving quickly.
The Artificial Intelligence Considerations for Financial Statement Auditors maps out best practices for auditors working with firms and how they can best assess a company’s use of AI. For example, the quantity and diversity of data can affect the reliability of an AI platform, the release said.
“What we’re trying to do is walk through the audit and say, ‘Hey if I’m doing the audit and my client is using financial AI the risks are going to be different,” Carrie Kostelec, senior manager of assurance and advisory innovation and artificial intelligence at the AICPA, said.
Regarding the risk of rogue AI, a financial statement auditor is focused on guarding against material misstatements that relate to financial statements and control deficiencies with the focus of its work and testing ultimately on issuing an audit opinion, Burns said.
“If something happens and the data goes awry, that would be an issue and would be something we would consider in how the entity is using AI and what are the controls around AI,” Burns said.
The report includes answers to frequently asked questions that AI raises. For example, it addresses when an auditor uses AI in the performance of an audit and whether the engagement letter needs to include information regarding that use.
The answer provided is not clearcut. While disclosure is not required by AICPA auditing standards, “it may be required by applicable laws, regulations, contractual agreements or firm policies…For example, some states have established laws requiring licensed professional to provide advance disclosure to their customers of certain uses of AI; such disclosures may be included in the engagement letter.”
