The Current and Future Use of Generative Artificial Intelligence in U.S. Audit Firms: A Report by the PCAOB

The use of generative artificial intelligence (GenAI) in auditing and financial reporting is rapidly evolving, according to a recent report released by the Public Company Accounting Oversight Board (PCAOB). The report highlights the current use of GenAI by the largest audit firms in the U.S., as well as the potential areas where GenAI could assist in the future.

Currently, audit firms are using GenAI mostly for administrative tasks and research activities. This includes preparing documents, drafting memos, and researching internal accounting and auditing guidance. The report notes that global network firms are further along in developing and deploying GenAI-enabled tools compared to non-affiliated firms.

Audit firms are continuing to invest in GenAI-enabled tools, with potential areas of assistance in planning and performing audits including summarizing accounting policy documents, evaluating audit documentation completeness, performing risk assessment procedures, scoping audits, evaluating financial statement disclosures, and comparing financial statement amounts.

However, there are limitations on the use of GenAI, particularly related to data privacy and security concerns. Audit firms have safeguards in place to prevent confidential information from becoming public and have policies limiting the extent to which staff can use GenAI tools in audits.

Despite the integration of GenAI, audit firms emphasize the importance of human involvement in auditing and financial reporting. Human supervision and review of GenAI output remain essential, with engagement team members responsible for the results and documentation of work performed with GenAI assistance.

Audit firms are also focusing on the auditability of source data and GenAI-created content when using GenAI-enabled tools. They are developing specific instructions and queries to improve the consistency and accuracy of GenAI responses and mitigate risks related to unreliable output or biased content.

Overall, audit firms are prioritizing policies, procedures, internal controls, and training related to the use of GenAI. They are developing resources and training for staff on the appropriate use of technology tools, including GenAI. As GenAI continues to evolve, audit firms are identifying and assessing new risks and ensuring that proper measures are in place to address them.