Last week, the Public Company Accounting Oversight Board released its findings on generative AI usage in auditing based on their outreach to public auditing firms to understand how they are integrating the technology into operations. The report also highlights how auditors are investing generative AI tools, current limitations, oversight of usage and the lack of consistency in some generative AI tools.
Erica Williams, the recently re-elected chair of the organization who spoke extensively with CFO.com about her dedication to maintaining and enhancing the quality of audits, wrote about the importance of professional care and skepticism around generative AI tools in auditing on Linkedin after the report was published.
“Generative AI has significant potential to affect the way auditors plan and perform audits and the PCAOB is watching carefully to ensure investors are protected,” she wrote.
“Ultimately, firms must have strong quality controls in place to ensure they are meeting their responsibilities to investors and the requirements under PCAOB rules and standards anytime they are considering using new tools, whether that is AI or anything else,” she wrote. “Due professional care and exercising professional skepticism are essential when conducting an audit and cannot be replaced by AI.”
While there are no metrics or percentages to quantify the report’s claims, their interpretation of the findings is still worth noting. Here are five takeaways CFOs may find relevant from the report.
1. Global network firms are more likely to have generative AI deployed
Within their synopsis of the current use of generative AI, PCAOB researchers note that large firms registered on their global network are more likely to be using generative AI. In firms of all sizes, they said “some” indicated that they had developed and deployed generative AI-enabled tools to assist staff in researching internal accounting and auditing guidance.
2. Data security is a major concern
Data privacy and data security continue to be “areas of focus for firms.”
There’s also suggestions that “some” firms have established safeguards to regulate what information can be uploaded to their generative AI-enabled tools, preventing confidential data like that of companies under audit from being exposed to the public.
3. Humans — at least the ones who audit — are safe
The sentiment among auditors is that generative AI expectations are focused on augmenting and supplementing current labor done by people, not replacing them entirely.
“In their view, human involvement remains essential for auditors and preparers and is needed to review the output from GenAI,” the report notes.
4. Autonomy around AI is low
Many firms have started setting up guidelines around AI use for their employees. This means policies, supervision practices and review of work done with the help of generative AI tools. Use not only comes with strict guidance, but still bears the responsibility of accuracy of work done with any help of GenAI on the human behind the work.
5. Risks are still being assessed
Risks like reliability of output, generative AI hallucinations, “auditability” of content and data and the increased IT exposure are all being taken into consideration with use. Just like CFOs, these risks are a large part of the hesitancy of full adoption of these types of tools.
