"Need for System Reform for Digital Innovation in Audit... Review of Standards and Legal Amendments Required"

With advancements in technologies such as artificial intelligence (AI), there have been suggestions that institutional arrangements are necessary to enable the use of new audit tools for digital innovation in the field of accounting audits.

The Korean Institute of Certified Public Accountants announced on the 21st that it held the 2023 Press Corps Accounting Issues Seminar under the theme "Accounting Audits in the Era of Big Data and AI" the previous day. At the seminar, Wonil Park, Managing Director at Samjong Accounting Corporation, explained, "For digital innovation in accounting audits to succeed, institutional arrangements are needed to allow new audit tools to be used with confidence. Accountants feel burdened using new tools not mentioned in audit standards, it is difficult to verify the appropriateness of tools due to lack of understanding of the technology, and developers find it hard to justify the appropriateness of tools without clear standards."

He continued, "It is necessary to reduce the usage burden and verification responsibility on frontline accountants and establish a certification system that developers can refer to during development," adding, "In the short term, issuing guidance would be helpful, and in the long term, reviewing the need to amend audit standards and related laws is required."

He also called for systematic support to promote collaboration and sharing within the Korean accounting industry. He said, "The Big 4 accounting firms can develop, certify, and share globally, but others may find it difficult to proceed at the individual firm level," and added, "It is necessary to promote joint development at the association level or among multiple firms." Furthermore, he stated, "If developers comply with the certification system, they should receive appropriate compensation and legal protection, and users should not be burdened with verification responsibilities."

There was also an explanation that the introduction of AI will bring changes to the accounting audit market. Seungyoung Lee, Senior Advisor at Anjin Accounting Corporation, said, "Data-driven audits enable audits based on facts rather than intuition," adding, "It will allow accurate identification of causes for revenue increases and detection of anomalies." He continued, "It enables direct analysis of audit data as large as 50GB and allows analysis regardless of data type," and explained, "It becomes possible to manage the entire population rather than traditional sampling methods, and a smart work environment can be realized through automation of work processes."

However, he noted that using generative AI such as ChatGPT for audits may pose risks including bias, quality issues, limitations of the training period, confidentiality and personal data protection, and intellectual property rights. There are also risks related to terms of use. The senior advisor said, "According to the current terms of use of ChatGPT, users cannot present any content output by ChatGPT as human-generated," and added, "If audits are conducted using generative AI, it may be difficult to verify the audit tool through logic verification of the solution."

Dongchun Son, Partner at Han Young Accounting Corporation, stated, "New tools that enhance audit efficiency and simplify processes to minimize effort will be introduced to the market," and said, "Companies will demand more insights, and expectations will change toward a future-oriented perspective, real-time feedback, and full transaction testing." He emphasized, "Experienced professionals who recognize and embrace these changes will be at the center of this transformation."

Additionally, at the seminar, Jaedong Kim, Partner at Samil Accounting Corporation, also explained audit content using generative AI.

Kim Young-sik, President of the Korean Institute of Certified Public Accountants / Photo by KICPA

Youngsik Kim, Chairman of the Korean Institute of Certified Public Accountants, said, "The development of new technologies such as AI, robotics, blockchain, and big data has brought changes not only worldwide from industrial sites to daily life but also in all areas of our society," adding, "This trend is no exception in accounting audits."

He continued, "New technologies have been concentrated in global large accounting firms, and there is still a strong perception that they are the exclusive domain of global firms," and said, "To strengthen auditors' capabilities and change stakeholders' perceptions, we intend to actively improve infrastructure and provide practical support. As a first step, we have formed a Technology Innovation Group composed of experts from various fields and recently started its activities."

This content was produced with the assistance of AI translation services.