The International Auditing and Assurance Standards Board has decided to pursue non-authoritative guidance for now addressing some of the practical difficulties of applying its current standards to uses of emerging technology, like artificial intelligence.
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In the latter half of last year, the standard-setting body conducted eight global roundtables engaging over 240 stakeholders from the accounting, auditing and standard-setting community to explore some of the technical challenges arising from AI and other emerging technologies. Among other areas of agreement, stakeholders felt there is a need for consistency in how quality management standards are applied to such tech tools, as well as in how regulators and other stakeholders manage and interpret them in the public interest.
In particular, the stakeholders focused on ISQM 1, which covers quality management for firms that perform audits or reviews, and ISA 220, which concerns audit engagements themselves. Both, according to the IAASB report, provide a strong foundation, but additional guidance could clarify how their principles should be applied when managing risks arising from certain emerging technologies like AI, especially where things like limited transparency, the capacity to adapt over time, and non-deterministic outcomes come into play.
Courtesy of IAASB and IESBA
More practically, stakeholders are concerned about how to evaluate whether the tools are fit for purpose, how to manage ongoing monitoring and documentation, overseeing staff training and direction and supervision, as well as reviewing work using these tools. While certain approaches like tiered certifications or iterative testing are being adopted at certain firms, their adoption varies widely.
At the IAASB’s December meeting, members decided that the board would approach these issues through non-authoritative guidance rather than binding standards, as it provides the ability to offer practical guidance grounded in existing standards, be updated as technology and emerging practices evolve, address themes like tool certification and monitoring as well as the exercise of professional skepticism and judgment, as well as support firms of all sizes through scalable and proportionate approaches.
While the specific form of the guidance has yet to be determined, the report said this guidance could be included in practice notes or publications written by staff or working groups. The IAASB said it would also explore whether there is a need for a new or enhanced mechanism for guidance in more complex areas like the development process.
The IAASB plans to discuss a more formal action plan for non-authoritative guidance at its next meeting in March.
