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

The use of generative artificial intelligence (GenAI) in auditing and financial reporting is on the rise, with the largest audit firms in the U.S. incorporating this technology into their administrative and research activities. A recent report released by the Public Company Accounting Oversight Board (PCAOB) highlighted the current use of GenAI, investment in GenAI-enabled tools, limitations on its use, and the supervision and review of GenAI in the auditing process.

According to the report, audit firms are utilizing GenAI for tasks such as preparing administrative documents, drafting memos, and researching internal accounting and auditing guidance. The global network firms are leading the way in developing and deploying GenAI-enabled tools, with non-affiliated firms following suit.

Investment in GenAI-enabled tools is ongoing, with firms exploring ways in which this technology can assist engagement teams in planning and performing audits. Potential areas where GenAI may be used include summarizing accounting policy and legal documents, evaluating the completeness of audit documentation, performing risk assessment procedures, scoping the audit, and evaluating financial statement disclosures.

However, there are limitations on the use of GenAI, particularly concerning data privacy and security. Audit firms have safeguards in place to prevent confidential information from becoming public and have policies that limit the extent to which staff can use GenAI tools in an audit. Human involvement remains essential in auditing and financial reporting, with GenAI expected to augment, but not replace, humans in the process.

Supervision and review of GenAI are crucial, with engagement team members responsible for the results and documentation of work performed with the assistance of GenAI. Firms are developing specific instructions and queries to improve the consistency and accuracy of responses provided by GenAI and are mindful of new and emerging risks associated with the use of this technology.

Overall, audit firms are emphasizing the importance of policies, procedures, internal controls, and training related to the use of GenAI, as they continue to explore ways to integrate this technology into the auditing process. The integration of GenAI in audits and financial reporting is still in its early stages but is rapidly evolving, with firms recognizing the potential benefits and challenges associated with this innovative technology.