Artificial intelligence tools are being increasingly used in auditing. Photo: File.
The Federal Government has issued new artificial intelligence guidelines to help auditors.
The Auditing and Assurance Standards Board has posted a webpage for the public and private sectors to better understand AI when applied to audits.
Stressing the application of AI technology presents auditors with opportunities and risks, the advice highlights pitfalls and benefits.
Focusing on the use of AI audit tools, the advice refers to automated software that extracts information from unstructured sources; identifies patterns or anomalies in information; and makes judgements or recommendations based on an analysis of information for the auditor to consider.
“An AI audit tool uses criteria that may be changed by the tool based on information available, identification of patterns and relationships, by drawing on analysis used by similar applications and/or analysis of past exceptions identified,” it states.
“The use of AI audit tools can enhance the effectiveness and efficiency of an audit.
“However, AI audit tools must be used appropriately or audit quality may be compromised.”
Some AI audit tools may be termed “black-box” systems, making it challenging or impracticable to understand how the tool is arriving at its conclusions or outputs.
Organisations also need to consider data privacy and manage data security risks because much of the data auditors use is proprietary data of the audited entity.
Tools should be reviewed, assessed and approved for specific uses on each engagement.
This should be done by suitably qualified, experienced specialists.
Capability, capacity and cost/benefit analyses need to be regularly undertaken and an awareness “automation bias” must be avoided.
“Auditors must consider the risk technology poses to entities as part of the auditor’s risk-assessment process,” the advice states.
“Auditors should exercise caution not to over rely on the information generated using technology (automation bias).
“Audited entities may rely on AI applications in processes that produce or support material information or judgements in financial/sustainability reports. Auditors need to understand these applications, identify and assess risks in determining the nature and extent of audit work…”
The Auditing and Assurance Standards Board webpage says the auditor should also consider the control environment, the audited entity’s systems and processes (including general IT controls), as well as management review of inputs, assumptions, logic and outputs.
The guidelines caution auditors to be alert to the possibility of AI being used to fabricate documents that purport to be from third parties and support information in financial and sustainability reports.
It suggests auditors may need to place greater reliance on independent third-party data sources, such as direct confirmations, to validate evidence authenticity.
Additional challenges may exist where information is generated by third-party proprietary AI applications.
If there are restrictions on the auditor accessing the logic, data and assumptions used, a limitation on scope may exist if suitable alternative procedures are not possible.
AI applications are also available to assist in improving an auditor’s written communications,” the advice states.
“For example, AI applications may assist the auditor in writing for the audience, using clear and concise wording, improving grammar, and clearer presentation formats.
“Consideration should be given to cybersecurity threats and privacy of information.”
It states confidential information should not be provided to an external application.
“Ideally, tools should not send information outside the firm. Care should be taken in using AI-generated summaries of documents.
“The summaries may not be accurate, may omit important aspects or nuances, and may use information out of context.
“Documents generated by AI from web searches and third-party documents may not be reliable.”
