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CA Final · Advanced Auditing, Assurance and Professional Ethics · Digital Auditing & Assurance

CA Meera is auditing a company whose management uses an AI tool to generate estimates of expected credit losses. The auditor intends to use the output as audit evidence. Which action is most appropriate?

The auditor should understand the AI model, test the accuracy and completeness of its input data, and evaluate assumptions and results before relying on the estimate. AI output is neither automatically reliable nor automatically unusable, and the auditor retains sole responsibility for the opinion.

  1. AAccept the output because AI models are more objective than human judgment
  2. BReject the estimate as AI outputs can never be audit evidence
  3. CUnderstand the model, test the reliability and completeness of the input data, and evaluate the assumptions and results before relying on the outputCorrect
  4. DAsk the vendor of the tool to sign the audit report with the auditor

Explanation

Information produced by the entity must be evaluated for accuracy, completeness and relevance, and estimates need testing of data, method and assumptions. AI output is not automatically reliable, nor automatically inadmissible. A vendor cannot share the auditor's responsibility.

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