Report: Current and Future Use of Generative Artificial Intelligence in U.S. Audit Firms

The Future of Auditing: How GenAI is Revolutionizing the Industry

In a recent report released by the Public Company Accounting Oversight Board (PCAOB) on July 22, it was revealed that the largest audit firms in the U.S. are increasingly utilizing generative artificial intelligence (GenAI) in their operations. While GenAI is currently being used primarily for administrative and research tasks, the potential for its integration into various aspects of planning and performing audits is high.

According to the PCAOB report, audit firms are exploring ways to incorporate GenAI-enabled tools in auditing and financial reporting processes. Some firms have already implemented GenAI for tasks such as preparing administrative documents, drafting memos, and conducting research on internal accounting and auditing guidance. Global network firms, such as the Big Four, are leading the way in developing and deploying GenAI-enabled tools.

Investment in GenAI is also on the rise, with firms continuing to develop tools internally or working with third parties to enhance their capabilities. Potential areas where GenAI could assist engagement teams in the future include summarizing accounting policies, evaluating audit documentation completeness, performing risk assessment procedures, scoping audits, and evaluating financial statement disclosures.

However, there are limitations to the use of GenAI, particularly in terms of data privacy and security. Audit firms have implemented safeguards to prevent confidential information from being exposed and have policies in place to limit the extent to which staff can use GenAI tools in audits. Human involvement remains essential in auditing and financial reporting, with GenAI expected to augment, rather than replace, human auditors.

Supervision and review of GenAI-generated output is crucial, with firms emphasizing the importance of auditability and accuracy. Some firms are developing specific instructions and queries to improve the consistency and reliability of GenAI responses. Additionally, the use of GenAI by preparers could introduce new IT risks, such as those related to segregation of duties.

Overall, the integration of GenAI in audits and financial reporting is still in its early stages but rapidly evolving. Audit firms are focused on developing policies, procedures, internal controls, and training programs to ensure the appropriate use of GenAI tools. As the industry continues to embrace technological advancements, the future of auditing looks to be shaped by the innovative capabilities of GenAI.