The UK's Financial Reporting Council published its Annual Review of Audit Quality 2026, dated July 2026. Its section headed "A developing UK audit market" has a part on technology. Parts of that part follow, not the whole review.
Moving Beyond Peripheral Tasks
"The use of advanced technologies in audits, particularly generative AI (GenAI), is accelerating," the review says. "Moving beyond peripheral tasks, some firms are now deploying GenAI tools to perform audit procedures and generate audit documentation." This trend, it says, "is expected to continue, with firms placing increasing reliance on technology generated outputs." It describes agentic AI as "capable of autonomously coordinating multiple tasks towards a defined objective," and says its use is also expected "to emerge in the near future within audit."
"While these developments offer significant opportunities," the review says, "they also introduce new risks to audit quality." Firms, it says, need to ensure that their systems of quality management, which it shortens to SoQMs, "have robust governance, certification and monitoring processes that evolve appropriately alongside the use of these technologies, including maintaining effective human and firm oversight and accountability."
When a tool performs an audit procedure and also writes the documentation of it, the work and the record of the work come from the same place. That is where the oversight the review asks for has to stand.
Skills, Fees, Suppliers and the Companies Under Audit
The increasing use of AI and advanced technologies, the review says, "also has implications beyond individual audits." As technology changes how audit work is performed, "so too will it change the required skills," and that "will impact firms' staffing structures, training models and recruitment." "Traditional audit fee structures will be challenged to balance technology-related efficiencies against the investment required to develop and deploy them," it says.
Third-party software providers, the review says, "play a crucial role, offering firms access to advanced capabilities that they may not have the resources to develop internally," in an evolving market, with new entrants challenging established providers. On the companies under audit, it says, "While the impact to date has been minimal, firms must ensure that audit teams are appropriately trained to identify and respond to the use of advanced technologies by the entities they audit."
The FRC's Supervisory Approach and Wider Work
The review says the FRC will keep forward-looking visibility over planned developments, GenAI and agentic solutions among them, and respond proactively as risks and use cases evolve, using a risk-based assessment with an emphasis on the firms' SoQMs. Its inspection work on those systems considers how firms identify, assess and respond to risks arising from the use of technological resources.
It will perform "a thematic review on how the largest firms govern, control and monitor the deployment and use of GenAI in audits," and says observations and examples of good practice from that work will be published. From its audit inspections, it says, "The use of AI-enabled techniques, such as transaction scoring procedures and automated evidence matching, are increasingly common. However, limited use of GenAI on audits was observed in the past year."
It points to guidance it released on GenAI and agentic AI in March 2026, which discussed the audit quality risks of these technologies and "possible mitigations based around system design and development, certification, staff education and ‘human in the loop’ review." And among its initiatives through its Innovation & Improvement Hub, it names the Audit Tech & AI Sandbox, "to promote innovation and support the use of technology by firms."
When a GenAI tool has performed a procedure and drafted the documentation, what in the file would show that a person reviewed both?
Sources
- Financial Reporting Council (FRC), UK. Annual Review of Audit Quality 2026. July 2026. regulator