Fears of auditors losing their jobs to artificial intelligence (AI) have considerably subsided, but accountants must adopt technology rapidly while retaining core human skills and professional ethics to attain audit excellence, said two top executives of the US-based International Federation of Accountants (IFAC) in an interview with Mint.
Lee White, chief executive of the global body, flagged the rapidly evolving nature of AI and advised auditors to embrace it to upgrade their skills and generate insights. But public trust in their work is something that auditors must continue to earn through ethical practices.
The intersection of AI and auditing has come under the spotlight in recent months, as technological advances not only make it easier for both auditors and auditees to source and use information quickly, but can also influence auditors’ judgements.
This has prompted audit watchdogs worldwide to weigh the need for new regulations to ensure that this intersection doesn’t lead to unintended consequences. Gaps in remain stark across countries, too.
The Public Company Accounting Oversight Board of the US recently asked stakeholders if it should explore standard-setting in this area. India’s National Financial Reporting Authority, in July, issued “general principles” on AI adoption, encouraging the use of the latest tools but emphasizing that the ultimate audit quality responsibility lies solely with the auditor.
Jean Bouquot, president of the IFAC, said accountants need to exercise their professional scepticism in pursuit of audit excellence.
The global body has 188 members, mainly top accounting institutions of various countries, with the Institute of Chartered Accountants of India (ICAI) being one of the founding members.
Both White and Bouquot were in New Delhi to attend the IFAC’s board meeting between 2 and 3 September, a first for India, during which technological transformation and the country’s role in driving tech-led innovation were among the key issues under discussion.
AI and public trust
White said accountancy has “always been a technology-led profession”. “But this (AI) is quite rapid. So, great opportunities for us, as a profession overall, to continue to enhance who we are and our skill sets,” he said.
“Professional scepticism, which we know is an expectation of our profession, is also expected by our regulator colleagues. So always be alive to learning, rely heavily on your core skills, maintain your strength of ethics, but embrace technology,” he added.
Bouquot suggested that the question of the AI displacing auditors is behind now, but earning and maintaining stakeholders’ trust in audit work is always a work in progress.
Sustainability reporting
With sustainability reporting globally gaining further traction by the day, White called on auditors to build the necessary skill sets to handle such work and also familiarize themselves with the rules in respective jurisdictions.
The IFAC has finalised assurance guidance—ISSA (Standard on Sustainability Assurance) 5,000, designed by independent standard setters—for professional auditors and accountants to use, he said.
In India, the ICAI has also firmed up sustainability reporting standards for auditors to follow.
The Securities and Exchange Board of India () has also stipulated the Business Responsibility and Sustainability Reporting framework, which mandates that the top 1,000 listed companies comply with a broad set of reporting requirements covering various ESG (environmental, social, and governance) aspects. These include disclosures on environmental resource management, emissions, biodiversity, climate change mitigation and adaptation.
Mutual recognition of degrees
Responding to a question on mutual recognition of degrees among the IFAC’s 188 members, White said there is a framework within the global body that facilitates such recognition, but at a broader level, these matters are often negotiated bilaterally.
Mutual recognition agreements in accounting are important for India, as they allow the country’s more than 4,67,000 chartered accountants to offer services in other jurisdictions, usually on a reciprocal basis.
The has already signed mutual recognition agreements and memoranda of understanding with a number of international accounting bodies, including those of Australia, New Zealand, England and Wales, South Africa, Canada, Malaysia, and Nepal, to allow qualified accountants to obtain reciprocal membership through bridging mechanisms.