The UK accounting sector is undergoing a significant transformation with the increasing use of automated tools and artificial intelligence in audits. A recent review by the Financial Reporting Council (FRC) found that the six largest accounting firms in the UK, including the Big Four – Deloitte, EY, KPMG, and PwC, do not formally monitor the impact of these technologies on audit quality.
The FRC’s first AI guide highlighted the lack of formal monitoring by these firms to quantify the impact of automated tools and AI on audit quality. While audit teams are using these technologies for risk assessments and obtaining evidence, the focus has been more on understanding usage rather than assessing quality impact.
The use of AI-powered tools in audits is on the rise, with firms investing heavily to enhance efficiency in various stages of the audit process. However, the FRC has raised concerns about potential risks and challenges associated with AI, including ethical issues and biases in tool outputs.
Despite the lack of formal monitoring, some firms are already seeing the benefits of AI in audits. For example, KPMG UK is using AI tools for sophisticated audit techniques such as AI transaction scoring, which scans millions of data transactions to identify key ones for auditors. Deloitte’s audit teams are using AI to streamline manual processes, extract information from contracts, and summarize board minutes.
To address the impact of AI tools on audit quality, the FRC has encouraged firms to define metrics for evaluation. While quantifying the impact of these tools may be subjective, firms are increasingly modernizing their oversight in this area. KPMG UK, for instance, aims to put AI in the hands of every auditor for every engagement.
Looking ahead, the Big Four are exploring new audit approaches that assess the effectiveness of clients’ AI tools. These audits could potentially create a new revenue stream for auditors, similar to the demand for assurance on environmental, social, and governance metrics.
Overall, the integration of AI in audits is reshaping the accounting sector, offering opportunities for enhanced efficiency and quality. Firms will need to adapt to the changing landscape and ensure that AI tools are used effectively to maintain audit quality standards.
