The International Forum of Independent Audit Regulators (IFIAR) released its 2025 report on 27 March, focusing on how technology, including artificial intelligence (AI) and generative AI (GenAI), is being utilised in the auditing process. The report provides a comprehensive review of current practices, emerging trends, risks, and future directions.
Key Observations:
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Growing Use of Technology: There is an increasing deployment of automated tools and techniques (ATTs) in areas such as journal entry testing, risk assessment, and substantive procedures. In 2024, 88% of members frequently observed ATTs used in journal entry testing, up from 86% in 2023.
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AI and GenAI: The report explores how firms are beginning to integrate AI and GenAI into audits. While current use is limited, their potential to improve efficiency and insight is recognised, alongside substantial risks related to judgement, bias, and data privacy.
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Audit Quality Risks: Inspection findings reveal recurring issues such as misinterpretation of ATT results, insufficient testing of IT general controls, and improper tool usage. These highlight a need for better oversight and understanding.
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Infrastructure and Governance: IFIAR calls on audit firms to modernise infrastructure, prioritise impactful technologies, and establish governance frameworks for emerging tech. This includes clear accountability between global and local entities and transparent, explainable AI systems.
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Training and Responsibility: Emphasis is placed on maintaining human oversight. Auditors must be trained to critically interpret AI outputs and retain professional scepticism and responsibility for audit judgements.
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Standards and Certification: Alignment with ISQM 1 is essential. Firms are encouraged to ensure technological tools meet reliability and quality standards, with regular certification and re-certification procedures.
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Transparency and Monitoring: Firms should be able to identify and flag critical audit areas where GenAI is used, aiding internal reviews and external inspections.
Conclusion:
IFIAR supports the evolution of auditing practices through technology, provided it enhances audit quality and is implemented with strong governance, oversight, and professional accountability. The organisation encourages broader stakeholder awareness and preparedness for the ongoing transformation in financial reporting and audit processes.
