Regulator Highlights Big Accounting Firms’ Inability to Monitor AI’s Influence on Audit Quality

The Financial Reporting Council (FRC) found that the six largest UK accounting firms — Deloitte, EY, KPMG, PwC, BDO, and Forvis Mazars — do not formally monitor how automated tools and artificial intelligence (AI) affect audit quality. Despite increasing technology integration, firms primarily track usage for licensing rather than assessing impact on audit outcomes. The FRC’s new AI guide highlights the benefits and potential risks, such as ethical issues and bias, associated with AI in audits. While some firms have begun modernizing their oversight, only one firm had established key performance indicators for these tools. Investments in AI, like KPMG’s advanced transaction scoring and Deloitte’s automation of tasks, are seen as crucial for improving efficiency, though quantifying effectiveness remains subjective. The FRC encourages firms to develop metrics to evaluate AI tools to enhance audit quality and potentially create new revenue streams in auditing clients’ AI systems.

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