{"id":218131,"date":"2025-06-27T08:20:21","date_gmt":"2025-06-27T08:20:21","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/218131\/"},"modified":"2025-06-27T08:20:21","modified_gmt":"2025-06-27T08:20:21","slug":"big-accounting-firms-fail-to-track-ai-impact-on-audit-quality-says-regulator","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/218131\/","title":{"rendered":"Big accounting firms fail to track AI impact on audit quality, says regulator"},"content":{"rendered":"

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The six largest UK accounting firms do not formally monitor how automated tools and artificial intelligence impact the quality of their audits, the regulator has found, even as the technology becomes embedded across the sector. <\/p>\n

The Financial Reporting Council on Thursday published its first AI guide alongside a review of the way firms were using automated tools and technology, which found \u201cno formal monitoring performed by the firms to quantify the audit quality impact of using\u201d them.<\/p>\n

The watchdog found that audit teams in the Big Four firms \u2014 Deloitte, EY, KPMG and PwC \u2014 as well as BDO and Forvis Mazars were increasingly using this technology to perform risk assessments and obtain evidence. <\/p>\n

But it said that the firms primarily monitored the tools to understand how many teams were using them for audits, \u201ctypically for licensing purposes\u201d, rather than to assess their impact on audit quality.<\/p>\n

The tools included those using artificial intelligence, such as machine learning. The regulator said that some firms were also deploying generative AI technologies, such as chat bots, although these fell outside the review\u2019s scope.<\/p>\n

All the firms bar one also did not have key performance indicators for the tools they used, the FRC found. The work was prompted by the regulator\u2019s audit quality review team, which had flagged an increase in the use of the technology. <\/p>\n

AI is rapidly transforming the audit sector, with firms including the Big Four heavily investing in AI-powered tools to enhance efficiency across multiple stages of the audit process. But the FRC said AI could also present \u201crisks and challenges\u201d in audits including ethical issues and the potential for bias in tools\u2019 outputs.<\/p>\n

Its scrutiny over the use of AI technology comes after the FRC criticised BDO and Forvis Mazars last year for shortcomings in their audits for the fourth straight year, threatening \u201cstronger action\u201d. <\/p>\n

Meanwhile EY said it would invest about $2bn from 2021<\/a> to improve the quality of its audits following scandals including the collapse of German payments group Wirecard in a high-profile fraud.<\/p>\n

\u201cAI tools are now moving beyond experimentation to becoming a reality in certain audit scenarios,\u201d said Mark Babington, FRC executive director of regulatory standards.\u00a0<\/p>\n

KPMG UK has begun to use AI tools for sophisticated audit techniques, including AI transaction scoring \u2014 it scans millions of data transactions to identify those of most note to the auditor, according to Emily Jefferis, head of audit quality, something she said was not possible via traditional techniques.<\/p>\n

Meanwhile Deloitte\u2019s audit teams use AI to summarise board minutes, extract information from complex contracts, and to streamline other manual processes, according to a person familiar with the matter. <\/p>\n

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Because of its rapid adoption, the FRC has encouraged firms to define metrics to evaluate the impact of AI tools on audit quality. \u201cThe use of [automated tools] has significant potential to improve audit quality, though this is dependent on the [tools] producing consistently reliable outputs and being used routinely in the intended manner,\u201d the report said.<\/p>\n

Since the review began, the regulator said that firms had begun to modernise their oversight in this area. <\/p>\n

KPMG UK\u2019s Jefferis said however that quantifying the impact of such tools was a \u201csubjective matter\u201d. She said: \u201cWe carefully monitor the adoption of all our tools using a range of KPIs and have the aim of putting AI in the hands of every auditor for use in every engagement. We are currently close to that target.\u201d<\/p>\n

The FRC\u2019s findings come as the Big Four race to devise a new kind of audit that would assess the effectiveness<\/a> of clients\u2019 own AI tools. The audits could open a revenue stream for auditors, similar to the demand for assurance for companies\u2019 environmental, social and governance metrics.<\/p>\n","protected":false},"excerpt":{"rendered":"Stay informed with free updates Simply sign up to the Accountancy myFT Digest — delivered directly to your…\n","protected":false},"author":2,"featured_media":218132,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3163],"tags":[323,1942,53,16,15],"class_list":{"0":"post-218131","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-technology","11":"tag-uk","12":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114754356795979181","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/218131","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=218131"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/218131\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/218132"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=218131"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=218131"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=218131"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}