PCAOB posts TIA Working Group’s technology in audit recommendations

The Technology Innovation Alliance Working Group gave the Public Company Accounting Oversight Board four strategic ideas to promote responsible use of technology in the audit industry, posted on the PCOAB’s site today.

The TIA Working Group was formed in November 2022 by board member Christina Ho. It is composed of professionals in emerging technologies from outside the PCAOB, and its aim was to provide a study and recommendations to the PCAOB. In a statement, Ho noted that it’s been 15 months since the TIA presented its recommendations to the board, but “they remain relevant even with the unprecedented advancement in technology.”

The TIA gave four recommendations to the board with the goals of building high-quality and usable technology, guiding the appropriate use of AI, leveraging innovation in audit, nd increasing engagement and learning opportunities. 

The quality of artificial intelligence output largely relies on the quality of data input. Higher data quality also increases user confidence in the technology and opens up more opportunities for using AI in other processes. As such, the TIA’s first recommendation to the board was “promoting structured data creation and dissemination in public audit company audits” by way of standardizing audit documentation taxonomy and working with the Securities and Exchange Commission on its digital signature initiative.

Its second recommendation was exploring the use of AI within the PCAOB. This includes the PCAOB learning more about AI’s functions and its potential use in the audit industry, and creating risk management guidance to help firms evaluate and govern responsible use of the technology. The TIA also suggested creating an AI Task Force.

In addition to the PCAOB using AI itself, the TIA’s third recommendation was to deepen its understanding of audit firms’ AI usage. The PCAOB could do this by establishing an “Innovation Lab,” which would commission time-bound standard setting projects to test the application of technology used in conducting audits. 

The TIA heard from stakeholders that some auditors lack skillsets in technology, data analysis and AI. Thus, the its final recommendation to the PCAOB was encouraging research studies on the impact of auditor technology literacy on audit quality; consulting with academic stakeholders like the American Accounting Association on ways to encourage colleges to incorporate subjects like data analytics, computer science and artificial intelligence in their accounting curriculum; and developing internal training programs on using generative AI tools, like ChatGPT, to aid PCAOB inspection and standard setting programs.