CATEGORIES
- (2)Account / Profile
- (499)Accounting
- (6)Audit
- (119)Auditing and Assurance
- (1)Business
- (3)Business Rescue
- (59)CIPC
- (6)Compliance
- (6)Ethics and Professionalism
- (33)Financial Reporting
- (3)Guides
- (2)Law
- (36)Legal and Compliance
- (2)Management
- (12)Money Laundering
- (1)Personal & Professional Development
- (1)Practice Management
- (1)Professional Ethics
- (1)Public Sector
- (72)Regulatory Compliance and Legislation
- (26)SARS Issues
- (10)Sustainability Reporting
- (20)Tax
- (1)Tax Update
- (1)Technology
- Show All
IRBA: AI Audit Risks Mitigation Update
- 27 September 2024
- Auditing and Assurance
- South African Accounting Academy
Summary:
The Independent Regulatory Board for Auditors (IRBA) brings to the attention of registered auditors and firms some developments in artificial intelligence (AI) and the potential implications for the audit profession.
Article:
The use of AI tools in the financial reporting and governance processes, and specifically in the audit process, may provide certain benefits but it also poses significant risks that must be managed effectively.
IRBA highlights the emergence of new and improved AI tools, which have the capability to generate not only natural sounding language, but also images, videos, and audio, based on input prompts. These tools have the potential to create more realistic and convincing false evidence or fabricated working papers, which can undermine the integrity and reliability of the audit process and the financial statements.
IRBA had issued a communique on 12 January 2023, titled "Artificial Intelligence Audit Risks Mitigation", in which they recommended some safeguards to mitigate the risks posed by generative AI tools in the audit profession.
These safeguards included developing a clear policy on the use of AI tools within the firm and on audits, establishing procedures to verify the authenticity of evidence and working papers, developing a protocol to monitor the use of AI tools within the firm and on audits, and including language in engagement letters that covers the use of AI tools in audits.
The notice contains a summary of the risks mentioned in the previous communique and is updated on how they may have changed.
While confidentiality concerns were not explicitly mentioned in the previous communique, it has been recognised as an ongoing concern. The use of generative AI tools may lead to unintended disclosure of sensitive information, heightening the need for robust data protection measures.
IRBA reiterates the importance of implementing controls and safeguards and urge registered auditors and firms to review and update their policies and procedures to reflect the latest developments in AI and the associated risks.
ISQM 1 requires that as firms identify additional or modified risks, firms design and implement additional responses to those risks. In addition, at this stage, IRBA sets out some recommendations in this communiqué.
Click here to download the document:
Relevance to Auditors, Independent Reviewers & Accountants:
- Members of IRBA should stay up-to-date with the latest developments and guides that affect registered auditors.
- Registered auditors and firms play a critical role in ensuring the accuracy and integrity of financial information that is relied upon by investors, stakeholders, and the public. The use of AI tools in the financial reporting and governance processes, and specifically in the audit process, may provide certain benefits but it also poses significant risks that must be managed effectively.