The Impact of Artificial Intelligence on Auditing and Assurance Services

In the era of digital transformation and the evolving landscape of Artificial Intelligence (AI), external auditors have an indispensable need to modernize their skill sets and be adaptable to the ever-evolving environment they are auditing in. As AI technologies advance, change to traditional approaches of audit methodology and processes followed by external auditors in executing audits is required. AI could revolutionalize various audit phases, such as the risk assessment, planning, gathering of audit evidence and reporting stages. This chapter will focus on the use of AI in the gathering of audit evidence stage, which has been proven to reduce testing time, allow for the testing of larger populations, and improve overall audit quality compared to traditional approaches of handling data. This chapter further explores how AI has shaped and influenced traditional external audit processes through a critical literature review with two main objectives. Firstly, to evaluate the existing literature on the impact of AI on external audit processes. Secondly, to link the impact explored in the literature review to the framework on gathering audit evidence as proposed by the International Standard on Auditing 500 (ISA 500) revised. The qualitative research approach, employing critical literature review, reflects and consolidates research on the impact of AI on external auditing, using International Standards on Auditing, specifically ISA 500 revised framework as its broad theoretical lens. The role of AI in gathering audit evidence promises to enhance the efficiency of auditors by cultivating modern audit skills and allowing for increased focus of their role toward unpacking more complex and unstructured data. The use of AI in gathering audit evidence comes with its challenges. As this chapter highlights the possible use and adoption of AI in gathering audit evidence, limitations such as ethical concerns on handling of data and insufficient documentation on the use of these technologies together with the lack of uniform regulations across the audit profession need to be considered. These challenges provide for areas of further research, especially on proposed measures that can be adopted to mitigate the concerns.