Audit firms roll out more AI tools as regulators issue new guidance

In short: Big audit firms are adding more AI to how they check company accounts, and regulators are trying to catch up with new guidance.

What's going on

Large accounting firms are building more AI into audits, which are the independent checks of a company’s financial statements. EY is updating its Canvas audit platform this month with features meant to speed up planning, point staff to relevant accounting rules, and pre-fill audit documents.

KPMG is also adding AI tools to its Clara audit platform. It recently said it is testing “orchestration” agents, which are AI helpers that coordinate other AI tools (like a team lead assigning tasks). The goal is for AI to handle more routine work so auditors can spend more time on tricky decisions.

This shift could make audits faster and, firms say, more thorough. But AI can also produce incorrect information or be misunderstood, similar to a calculator giving the wrong answer if you type in the wrong numbers.

What to watch

Regulators are starting to respond. The UK’s Financial Reporting Council (FRC) has published what it says is its first guidance for audit firms using “generative” and “agentic” AI, meaning AI that can create text and sometimes take steps on its own. The FRC highlights three main failure risks: the AI output is wrong, people misread the output, or the AI work is not enough to meet the standard expected from a human auditor.

The FRC also stresses accountability. As the FRC’s Mark Babington told the Financial Times, auditors cannot blame the tool, and they remain responsible for the final work. Next, watch whether regulators in the US and elsewhere invest in their own tech skills and update older rules that assume audits rely on small samples, not full data checks.

Source: Financial Times