UK Regulator FRC Says Auditors Cannot Hold AI Responsible For Audit Failures

The Financial Reporting Council (FRC) has stated that auditors cannot hold artificial intelligence (AI) responsible for audit failures, as it issued guidance on the use of such tools. The regulator said accountability will remain with audit partners, even when AI systems are involved in audit processes.

The guidance outlines risks linked to AI, including incorrect outputs, misuse of results, and data distortions that may affect audit conclusions. Firms have been advised to ensure human oversight, apply professional judgement, and invest in staff training and system design. Major firms, including PwC, KPMG, Deloitte, and EY, have invested in AI to improve efficiency and reduce costs. The regulator noted that audits continue to depend on professional judgement despite automation.

The FRC is also increasing its own use of AI for reviewing corporate reports, while highlighting the need to manage risks and monitor system behaviour.