Navigating audit’s future: AI, ESG and compliance

It has been a turbulent time for the audit profession. The introduction of the International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements in 2024 signalled a leap forward for sustainability reporting while stretching audit and assurance into new territories.

Advanced technologies like artificial intelligence (AI) are raising the bar on efficiency and effectiveness while demanding rapid upskilling in a talent-short market. Firms are updating their practices and methodologies to keep up with rapidly evolving demands.

How will the audit profession adapt to change and what does the future hold? Here are four transformative trends to look out for.

1. AI-powered innovation

Technology is already enhancing audit quality and efficiency, but the latest iteration of AI, agentic AI, marks a huge shift in capabilities by identifying patterns, anomalies and risks to enable autonomous decision-making.

Christina Larkin, EY Oceania digital assurance leader, says the current application of technology is “light years away” from where it was a decade ago. In 2017, EY made what Larkin describes as “a couple of big bets” for delivering digital audit into the future.

“We began to focus on technology-enabled auditors and then, from about 2022 through to 2025, with the introduction of generative AI tools, it shifted to integrating AI with people at the centre,” she says.

“Now we’re on a journey toward having our auditors become like the air-traffic controllers for AI. We’re moving to a world where auditors are providing the direction and oversight to guide agentic AI workflows.”

 

"I suspect in five years’ time, auditors will be required to work very closely with more disciplines, such as data scientists and environmental engineers, than perhaps they’ve worked with to date. I think that’s a skill that auditors are going to have to become more adept at."

 

EY’s audits are now powered by online audit platform EY Canvas and data analytics platform EY Helix. The third piece is “our AI and automation capability, and all three pieces of the puzzle fit together in our technology platform,” explains Larkin.

Blockchain technology has also created buzz within the industry due to its transparent and decentralised ledger system. Tony Corry, director, technology assurance and advisory at PKF Brisbane, says the technology holds great promise, but that AI is currently taking the front seat for transformation.

“Blockchain improves the accuracy and efficiency of audit because it is almost impossible for any transactions to be altered,” he says. “The technology is still evolving. I also think the audit industry needs to enhance its processes to incorporate a client’s use of the technology.”

As AI continues to transform the audit function, Corry says governance will play a vital role.

“There certainly must be policies in place for audit teams to follow and an expectation that they’re using AI responsibly,” he says. “For example, I think it’s well understood that you don’t put client-specific data into a tool like ChatGPT.”

Climate reporting is mandatory for certain entities in APAC markets like Singapore, Australia, New Zealand and Malaysia, and similar directives are set to follow in China and Hong Kong. With investors and stakeholders increasingly seeking transparency in environmental, social and governance (ESG) initiatives, audit is extending to non-financial disclosures.

“Sustainability reporting and assurance requirements are going to transform not only the data that we look at, but also the procedures that we conduct,” says Larkin, adding that there are challenges to navigate.

“The level of maturity in non-financial disclosures is nowhere near the level of maturity we have with financial disclosures — one of the reasons being that often non-financial information exists in disparate systems,” she says.

“I suspect that between now and 2030, a lot of work will go into increasing the maturity, trust and reliance on sustainability datasets and, from an audit perspective, augmenting those procedures using AI.”

Larkin expects that digital capabilities for financial audit will be leveraged for non-financial audit, but that this will require “a huge amount of upskilling for auditors, because suddenly the types of datasets they’ll look at will expand”.

“I suspect in five years’ time, auditors will be required to work very closely with more disciplines, such as data scientists and environmental engineers, than perhaps they’ve worked with to date. I think that’s a skill that auditors are going to have to become more adept at.”

3. A complex regulatory spotlight

Audit is a highly regulated profession. However, collaboration between international regulatory bodies to harmonise standards is complex, and the pace of regulatory reform is much slower than the current rate of technological advancement.

The International Auditing and Assurance Standards Board is trying to bridge that gap by introducing a new Technology Position to help it adapt work practices and keep pace with technology. While this is a step in the right direction, Tiffany Tan, audit and assurance lead, policy and advocacy at CPA Australia, says that more needs to be done.

“The rate of change in areas like AI, blockchain, automation and data analytics is exponential, whereas standard-setting and regulatory processes are inherently slow,” says Tan. “By the time a new standard is developed, the technology landscape may have shifted again, making it difficult to stay relevant.”

It is not just the pace of change that makes alignment between the technology that underpins auditing, and the regulatory framework that guides it, harder to manage, Tan continues. It’s the nature of modern regulatory approaches.

 

"The rate of change in areas like AI, blockchain, automation and data analytics is exponential, whereas standard-setting and regulatory processes are inherently slow. By the time a new standard is developed, the technology landscape may have shifted again, making it difficult to stay relevant."

 

“Current auditing standards are principles-based and technology-neutral, which can lead to interpretation challenges. There is often uncertainty around how to apply existing standards to new, tech-driven audit procedures such as blockchain transaction verification.”

Audit’s evolving regulatory landscape is also driven by factors like a breakdown in the trust that underpins audit quality. In most cases, trust in audit quality is well deserved. However, recent violations of audit independence among large audit firms and high-profile corporate collapses have put audit quality and ethics in the global spotlight.

Governments and regulators in the UK and EU have responded with changes around audit market operation, while an Australian Parliamentary Joint Committee report into structural challenges in the audit, assurance and consultancy industry recently proposed enhancing the Australian Securities and Investments Commission’s (ASIC) power to take enforcement action against audit firms, not just individuals.

Another key driver of regulatory change in audit is the growing commitment to environmental sustainability. ASIC commissioner Kate O’Rourke notes that ASIC’s financial reporting and auditing surveillance program for 2025–26 will expand to include sustainability reports.

“We encourage entities required to prepare a sustainability report for financial years commencing 1 January 2025 to start preparing for those obligations now,” O’Rourke says.

“ASIC will take a pragmatic and proportionate approach to these new reporting requirements and will be supporting preparers through regulatory guidance. We recognise the important role that auditors will play in providing assurance over sustainability reports.”

4. New challenges call for new skills

The influence of factors like AI, ESG reporting and regulatory change will require new skills across the audit profession.

At EY, for example, upskilling includes areas like prompt engineering.

“In a way, I think auditors are very good at this, because they’ve always had to provide clear guidance and direction to those that are more junior. In a similar way, when you’re creating a prompt, you need to give really clear direction and be able to articulate your requests in a way that is going to give you the results that you need,” says Larkin.

“When you receive those results, you need a level of auditor judgement and scepticism, which is a skill that has to be honed over many years as an auditor.”

Corry says that auditors won’t need to know the intricacies of a computer programming language like Python, but they will need a strong grasp of how AI works.

“Will auditors need to know Python scripts? No, they won’t, but they will probably need to know the basics of how a Python script runs within an AI tool.

“I think auditors are also going to need an understanding of how AI and data analytics work,” adds Corry. “There has been growing focus on this skill for the past five years, but being able to use a data analytics tool and then being able to interpret the results for a non-technical stakeholder is going to become much more important.”

While skill development is on the audit agenda, the talent shortage remains a challenge. Rachel Kay, business director for finance and accounting at recruitment firm Robert Walters, says demand for auditors remains strong across various levels of the profession.

“There are fewer graduates pursuing accounting qualifications, yet the demand for technical accounting professionals has risen due to stricter regulatory requirements and scrutiny on financial reporting,” she says.

Kay notes that with technology playing a bigger role in auditing, proficiency in data analytics and automation tools have become highly valued among employers.

“Auditors are also expected to stay updated on regulatory changes and provide valuable insights beyond financial assessments.”