FRC publishes landmark guidance providing clarity to audit profession on the uses of AI
News types: Guidance
Published: 26 June 2025
The Financial Reporting Council (FRC) has published its first guidance on the use of artificial intelligence (AI) in audit, alongside a thematic review of the six largest firms’ processes to certify new technology used in audits.
As AI tools continue to be utilised in audit, this new guidance outlines a coherent approach to implementing a hypothetical AI-enabled tool, and offers insights into FRC documentation requirements, all designed to support innovation across the audit profession.
The guidance was developed collaboratively with FRC’s Technology Working Group, which drew on a number of technical experts across the audit profession. This guidance should support auditors and central teams at audit firms as they develop and use AI tools in their work, while also providing third-party technology providers with the regulatory expectations for their customer base.
Mark Babington, FRC Executive Director of Regulatory Standards, said:
“AI tools are now moving beyond experimentation to becoming a reality in certain audit scenarios. When deployed responsibly, they have significant potential to enhance audit quality, support market confidence, drive innovation and ultimately contribute to UK economic growth.
“The FRC continues to support and encourage innovation in audit. This guidance aims to illustrate how AI can enhance audit work as well as clarify FRC expectations around proportionate, appropriate documentation of tools that use AI.
“We recognise that this field is moving quickly and will continue to engage across the profession, both in the UK and internationally, to support innovation and the appropriate use of AI."
The accompanying thematic review summarises insights on the processes and controls at the six largest firms to certify automated tools and techniques for use in audits. It includes insights and examples of good practice in these processes, which are fundamental to the delivery of audit quality.
Key features of the guidance:
- Two-part structure – Illustrative example of one potential way AI can be leveraged in an audit, as well as principles that are intended to support proportionate and robust documentation of tools that use AI
- Broad and forward-looking AI definition – Encompasses both traditional machine learning and deep learning models, including generative AI
- Balanced documentation expectations – Proportionate approach to prevent over documentation
- Sophisticated view on appropriate explainability – Acknowledges that appropriate levels of explainability vary based on context and usage
- Versatile principles – Illustrates topics, judgements and considerations that have broad applicability to other instances of AI use in audit
- Alignment with Government AI principles - Documentation guidance reflects the UK government's five AI principles
- Relevant across market – The guidance contains material that clarifies how expectations translate into contexts where a tool is obtained from a third party
While comprehensive in scope, the guidance is not prescriptive and does not introduce new regulatory requirements, instead focusing on supporting innovation while maintaining appropriate standards.
Read the guidance on the use of artificial intelligence (AI) in audit.
Read the thematic review of the six largest firms’ processes to certify new technology used in audits.