Key Takeaways:

• GenAI can be used to enhance the efficiency and effectiveness in financial reporting and internal controls over financial reporting. Currently, GenAI can help with tasks such as drafting financial statement disclosures, summarizing key contract terms, categorizing expense transactions, and preparing travel and expense reports.
• However, GenAI is predictive technology that provides users with a probable response, so it’s not going to be 100% accurate and requires human oversight, review, and judgment.
• Boards should consider the rigor of their GenAI-related governance policies for:
• - Responsible, ethical use
• - Expertise and training requirements
• - Data privacy and security requirements
• - Deployment, technology testing, and monitoring
• - Mitigating fraud, legal, regulatory and associated compliance risks
• Boards should engage in critical conversation with management about their decisions to use GenAI and how they are assessing related risks, including risk introduced by third parties, and the need for new/enhanced controls.
• Boards should also apply an appropriate risk framework. Asking the auditor how audit procedures are being adjusted to evaluate significant risks associated with use of data and the GenAI models in developing estimates, judgments and other information that has an impact financial reporting and disclosure. This would further include understanding technologies that the auditor may be using to perform their audits.

Additional Resources:

• CAQ Publication: Auditing in the Age of AI

• CAQ Audit in Action: The Age of Generative AI: How the Profession Can Respond