The Modern Accountant Weekly Newsletter | 🔎 AI in Audit: What the FRC Just Released

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Sector Spotlight 🌟

AI IN ACCOUNTING

Can Agentic AI Truly Manage Complete Tax and Audit Workflows Effectively

Move over basic bots—agentic AI is redefining what’s possible in tax, audit, and compliance.

Unlike traditional automation, agentic AI doesn’t just assist—it acts. These intelligent systems can identify errors, take corrective action, communicate with third parties, and manage workflows end-to-end, all with minimal human input.

🔍 Emerging use cases include:

• Auto-updating filings in response to tax law changes

• Reviewing computations and flagging discrepancies

• Drafting reports and documentation

• Coordinating deadlines across teams

• Resolving audit queries autonomously

Think of it as a digital tax team, complete with AI “colleagues” that specialise in different domains—operating 24/7, learning as they go.

While some firms remain cautious, the trajectory is clear: agentic AI is moving fast from experimental to essential. And for forward-thinking accountants, it could free up time for deeper advisory work and more strategic impact.

AI IN AUDIT

FRC Unveils New AI Guidance for Enhancing Audit Practices

The Financial Reporting Council (FRC) has released guidance on employing AI in audits, providing a structured yet flexible approach that promotes innovation without compromising regulatory standards. Crafted with the FRC's Technology Working Group, this guidance offers an illuminating example of AI's application in audits, emphasising the need for proper documentation and alignment with UK governmental AI principles. Such guidance aims to enhance audit quality and market confidence.

Regulatory ambiguity poses challenges to widespread AI adoption, as noted by ICAEW leaders, who call for greater transparency. While the guidance marks progress, there remains a keen demand for practical use cases and more nuanced instruction to fully harness AI's potential within the audit field. The FRC's initiatives signal a positive trajectory towards integrating AI in audits, aiming to achieve a balanced approach between innovation, risk management, and ethical considerations.

PRIVATE EQUITY TRENDS

Mid-Tier Accountancy Sees Increased Interest in Private Equity and ESG Trends

There's a noticeable surge of interest in private equity (PE) and Environmental, Social, and Governance (ESG) services among mid-tier UK accountancy firms, according to recent ICAEW research. Furthermore, firms are grappling with the challenge of acquiring the right skills, as evidenced by nearly half of firms indicating this as a barrier to growth. A quarter of these firms are considering PE investments, while roughly half are inclined to offer ESG services soon. Though enticing, PE investments raise concerns over potential cultural shifts and talent retention.

ACCOUNTING SOFTWARE

Opinion - AI Can't Yet Surpass Excel in Accounting Due to Trust and Flexibility

Artificial intelligence promises to automate and enhance accounting processes, yet Excel remains indispensable. Despite AI's abilities, such as real-time data integration and error prediction, accountants cling to Excel's simplicity and customisation. Trust in AI has not reached a level where Excel's flexibility and reassuring control can be comfortably replaced.

While AI offers enticing potential, including streamlined data capture and insightful analytics, the appeal of spreadsheets lies in their adaptability, visibility, and the comfort of manual control. AI needs refinement to match Excel's meticulous customisation. Until then, spreadsheets will likely continue to be a reliable ally for accountants, balancing AI’s promise with practicality.

MENTAL HEALTH CHALLENGES

Reasons Behind Accountants' Reluctance to Seek Help for Burnout and Stress

Accountants in the ICAEW community are facing a troubling issue: despite high rates of burnout and financial strain, a significant number remain hesitant to seek help. According to a study by caba, over 7,000 accountants could benefit from emotional or financial aid annually. Yet, a mere 32% actively pursue professional support, often held back by concerns about the cost of help, an uncertain path to access resources, and a pervasive sense of shame tied to asking for assistance.