AI becomes reality

Audit firms have been warned to document how artificial intelligence models applied to audit work meets ethical standards—and also the governance architecture applied to the use of the tool.

The advice comes in guidance published by the Financial Reporting Council, the UK financial reporting and audit watchdog.

The FRC intends to clear what kind of documentation watchdogs will require when an AI is applied to audits.

Mark Babington, the FRC’s executive director of regulatory standards, says the guidance will illustrate how AI can enhance audits as the field evolves.

“AI tools are now moving beyond experimentation to becoming a reality in certain audit scenarios.

“When deployed responsibly, they have significant potential to enhance audit quality, support market confidence, drive innovation and ultimately contribute to UK economic growth.”

Board Agenda notes the word “responsibly” in that comment. Be warned.

The ins and outs of reporting

The UK government released its industrial strategy this week to much fanfare. Fingers crossed it’s all going to work in increasing business investment in eight critical sectors.

There are few nods to governance. To optimise regulation the government says it will “simplify corporate reporting requirements”. The government will therefore “streamline” non-financial reporting.

Elsewhere in the report, the government says business services will receive a boost by expanding into “environmental, social and governance reporting”.

Streamlining and expanding? Hopefully that all makes sense.

Walking the (ethical) talk

Responsible business guru Alison Taylor has been speaking to members of the Institute of Business Ethics (IBE).

Taylor outlined changes in the business landscape that see corporates facing more transparency through social media, demands on company managers to take a stand on key social and political issues and the increasing trend for employees expecting employers to adapt to their needs.

Blogging on the talk, IBE’s research director, Elli Siapkidou, writes: “There is an urgent need to return to ethics, to the principles of transparency and honesty, human rights, dignity and respect.

“It is about avoiding overpromising and making big commitments, but instead acknowledging challenges and learnings. For those who want to lead ethically, it is about closing the gap between what you say and what you do.” And frankly, we could all do with a little more of that.