U.K. Watchdog FRC Seeks Transparency On AI Tools In Audit Processes

The Financial Reporting Council (FRC), the U.K.’s corporate governance regulator, has released new guidance on the use of artificial intelligence (AI) in external audits.

The guidance includes an overview and a 155-page ‘Thematic Review’ outlining how AI tools can be used and what documentation auditors must provide. The FRC encourages audit firms to disclose how AI is applied during audit processes and to ensure compliance with existing regulatory and legal requirements, especially regarding data use and security. The move is broadly supported by the audit sector, but concerns remain over how corporate data is used, stored, and protected. The FRC also emphasises that third-party AI providers must meet their legal responsibilities when working with audit data.