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Audit Tech and AI Sandbox - Assessment Criteria

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Audit Tech and AI Sandbox application assessment criteria

Each criterion described should be met, but the positive indicators are examples only to support applicants and assessors (they do not need to be met).

Assessment criteria Description
Core eligibility (screening)

The applicant is a registered audit firm in the UK.

The application:

  • Identifies a technology or application of AI which could improve the quality of the firm’s audit work, and may be innovative for the firm or in the market.
  • Describes steps taken to consider how the technology can be integrated into the practice or audit methodology, the key compliance issues, the relevant auditing standards and any key problems or challenges identified.
  • Describes progress to a point where their proposed use of technology is ready for critical evaluation against regulatory frameworks, ready for testing or piloting, or in limited deployment.
  • Demonstrates that the firm is prepared to commit time from appropriate staff to the sandbox engagement.

An application may be rejected if:

  • The application includes significant risks which are unlikely to be controlled by the participant.
  • The application is focused on asking the FRC to endorse or promote products or businesses.
Assessment criteria Description Positive indicators Negative indicators
Audit Audit Quality - Improvement

The proposal seeks to deliver audit quality improvements.
  • The initiative has the potential to improve audit quality and/or increase trust in corporate information and disclosures.
  • The initiative has the potential to support a more resilient market by increasing the competitiveness of the firm.
  • The improvement outcomes of the proposed initiative are unclear.
  • The prospective participant does not indicate an understanding of the application of the FRC’s regulatory standards.
  • The proposal includes significant risks which are unlikely to be controlled by the participant.
  • The benefits of the proposal are heavily weighted to cost efficiencies without clear audit quality benefits.
Audit Quality - Firm Innovation

The proposal seeks to address a technology, product or feature which is new or under-leveraged in the audit practice.
  • The proposal identifies differences between current practices and the new approach for the firm, and describes the qualitative or quantitative benefits envisaged.
  • The proposal includes plans or opportunities to test, experiment, assess risks and/or measure benefits of the new initiative against established firm practices.
  • The proposal does not identify clear differences from current firm practices.
  • The proposal does not provide a realistic opportunity to measure benefits.
Audit Quality - Market Innovation

The proposal seeks to address a technology, product or feature which is new or under-leveraged in the wider market.
  • The proposal relates to a technology solution which differs from common market practices among firms of a comparable size, and describes the qualitative or quantitative benefits envisaged.
    • For larger firms, there are no or few comparable examples in the national market.
    • For smaller or less mature organisations, there are limited examples of this innovation in use among comparable entities.
  • The proposal includes plans or opportunities to test, experiment, assess risks and/or measure benefits of the new initiative against established market practices.
  • The proposed initiative is already commonly used among comparable organisations.
  • The proposal does not provide realistic opportunity to measure benefits.
Market or public interest benefit

Collaboration with the FRC has the potential to deliver wider benefits to the markets we regulate and/or wider benefits in the public interest, for example by addressing cross-industry barriers or leveraging new opportunities.
  • The proposed initiative addresses a problem which is shared by other organisations operating in the same market.
  • The initiative has the potential to support a more resilient market by increasing competition
    • The proposal allows for findings or key lessons to be shared with others in the market.
    • The benefits of the proposal are realistically attainable by peers in the market.
  • The initiative could be delivered at scale to deliver improvements which extend beyond any specific use case to be tested or evaluated.
  • The proposal focuses on a problem relevant to only one or a very small number of firms.
  • Sharing the key findings of the project would be limited by contractual, IP or other restrictions.
  • The costs or barriers to wider adoption of the proposed initiative are prohibitive to market change in the medium/long term.
Assessment criteria Description
Participants reflecting market diversity Where demand exceeds capacity, the FRC will consider how to allocate available places, which may include prioritising applications which enable the sandbox cohort to be more representative of the diversity of the market. We aim to accept a range of applicants to represent different parts of the audit market (eg in terms of firm/audit practice size) and different technologies.

In assessing applications, we will also consider the following matters when making a decision on acceptance and prioritising participants:

  • Resources: The resources required by the FRC to engage with the proposal are available and proportionate to the opportunity represented by the proposal (including any wider benefits).
  • Risk: The proposals does not present risks to the FRC's delivery of its regulatory responsibilities, or such risks can be adequately managed through appropriate control mechanisms.
  • Alternative engagement: The Innovation & Improvement Hub is the most appropriate channel for engagement and proposal would not be better accommodated with existing FRC activities (e.g. inspection, supervision, research or existing stakeholder engagement).

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