FRC issues new guidance to support audit firms using emerging AI technologies

The Financial Reporting Council (FRC) has published new guidance to help audit firms using generative and agentic AI tools in audit engagements.

The guidance explains how audit firms can manage audit quality risks while realising the significant benefits these tools offer, including enhanced audit quality and efficiency. The FRC has also published a short factsheet to help you get to grips with the guidance quickly.

This is the FRC’s second publication on the use of AI in audit. The latest publication supports firms as they adopt generative and agentic AI. It’s not a response to identified audit quality deficiencies. Instead, it sets out good practice, promotes audit quality, builds confidence in the use of new technologies, and provides a starting point for the FRC’s future work in this area. 

It outlines a framework for considering how appropriate confidence in the quality of AI tool outputs can be obtained. Determining the nature and extent of mitigating activities is a matter of professional judgement, and will depend on the specific tool and its intended use.

The FRC has included illustrative examples to help firms apply its principles in practice, such as summarising board minutes and using AI tools to review contracts for revenue recognition testing.

Firms and Responsible Individuals continue to hold regulatory accountability for the use of AI tools and for the quality of audit outcomes. In line with auditing standards, ultimate responsibility always rests with the human auditor. This guidance doesn't change that position. Therefore, firms are encouraged to consider how their use of AI aligns with their broader quality management responsibilities under International Standard on Quality Management (UK) 1.

More on AI in accounting

Learn more about the impact of AI on human judgement in accounting in our latest Shaping the Profession study, ‘Generative AI and Professional Judgement in Accounting’.

Plus, find out why all CAs must remember the Code of Ethics when using AI and how IESBA and the Code of Ethics deals with AI hallucinations.