Auditors are working on improving their processes and standards, with a range of technologies being presented as a way to enhance this process.
However, the Financial Reporting Council (FRC) has strict guidelines about what the potential downfalls of any technology could mean for auditors.
Knowing the kind of issues that the FRC have highlighted can allow auditors to be more confident when choosing to adopt a new piece of technology.
What are the FRC standards for technology used by auditors?
Rather than creating a whitelist and blacklist of different technologies for auditors to use, the FRC has been more robust in its approach.
The FRC’s Generative and Agentic AI guidance outlines some of the core risk factors that are associated with different types of technology, provides clear measures for mitigation and demonstrates the application of the guidance through illustrative examples.
Through this, the FRC can provide assistance for auditors looking to enhance any stage of their process with technology, including generative AI and agentic AI.
In terms of risk, the FRC identify three main categories that must be monitored:
- Risk of deficient output – the risk that the output of the AI tool is deficient
- Risk of misuse of output – the risk that the output is misused, despite the output itself being appropriate
- Risk of non-compliant methodology – the risk that the firm’s methodology permits approaches, which include the use of the AI tool, that fail to meet auditing standards, even where the output of the tool is appropriate and is used as specified in the methodology
Regarding mitigation strategies, the FRC recommends the following four approaches:
- Designing and developing the system in a way that is responsive to the intended use
- Putting the tool through a robust certification process
- Equipping those who use the tool with the appropriate knowledge, and implementing business rules to govern that use
- Having a human review and/or oversee the outputs and operation of the tool
While risk cannot be removed entirely, it is the duty of the auditor to take reasonable steps to keep risk as low as possible so that clients can continue to trust in the service provided.
How can auditors be confident in the technology they use?
The FRC reminds auditors that the responsibility lies with them to determine how to obtain appropriate confidence, given that tools and use cases will carry different levels of risk and require different mitigation strategies.
What is clear from the FRC guidance is that auditors should be using specialist technology where possible, as this can reduce the risk of deficient output.
For instance, generic software may not be equipped to handle the complexity of an audit and generic AI could generate false information or compromise the confidentiality of client data.
Glasscubes has been designed to give accountants and auditors the tools they need to more efficiently engage with clients.
Client delays can be a frustrating bottleneck that ultimately increases the amount of pressure placed on teams and can make it more difficult to deliver quality work.
Automated reminders and a centralised workflow ensure that your team gets the information they need and can access it when required.
Unlike with generic AI systems that may fail to meet the FRC standards, Glasscubes has an in-built AI that is capable of extracting and summarising client information – potentially saving hours of manual reviews while preserving the value of your work.
The streamlining of workflows made possible by Glasscubes allows your team to demonstrate their talent more and oversee the process with confidence.
We can demonstrate the versatility of Glasscubes with you, so that you can see the ways in which the risks raised by the FRC can be mitigated through the system.
Book a demo to see how Glasscubes can become the right technological solution for your audit team.
