June 11, 2025

Key Considerations for Financial Statement Auditors Before Leveraging Artificial Intelligence in Their Audits

By Angel Rafael Otero, Ph.D., CPA, CFE, CISA, CITP, CRISC, CICA

Technology is continuously advancing, yet the concept of artificial intelligence (AI) has consistently captivated people's interest. AI systems are trained to recognize data patterns, make predictions and perform tasks commonly associated with human intelligence1.

Generative AI, a subset of AI, utilizes deep learning models to create human-like content in response to diverse and complex prompts2. ChatGPT, a generative AI model, was introduced in 2022 as ChatGPT 3.5, a free version developed by the OpenAI nonprofit research organization. ChatGPT 3.5 (hereafter referred to as ChatGPT) is designed to engage in and refine natural language conversations, adapting to specified lengths, levels of detail, styles, and languages3.

ChatGPT is among several advanced generative AI tools introduced in recent years, alongside comparable technologies such as Google's Gemini and Microsoft Copilot4. Gemini is noted for its strength in bidirectional training for language comprehension, while Copilot offers features like information retrieval, text generation (e.g., emails and summaries) and image creation from text prompts. Recent research emphasizes ChatGPT's exceptional ability to produce human-like text, attributed to its extensive training data and transformer-based architecture5.

Amid these unprecedented technological advancements, auditors continuously seek to adopt these new AI models to enhance the efficiency of the financial audit process6. Financial statement audits may be conducted by external auditors or internal auditors. Both external auditors and internal auditors recognize the importance of integrating innovative solutions, such as AI, to increase the effectiveness of their audits7.

Advantages of AI’s ChatGPT in Financial Statement Audits

ChatGPT enhances financial audits by improving data analysis, risk detection, regulatory adaptability, predictive insights, automation, and cost efficiency.

Data Analytics and Processing

In financial statement audits, the volume of data to be analyzed can be overwhelming. Traditional methods to analyze these extensive datasets are time-consuming and prone to errors8.

ChatGPT allows both external auditors and internal auditors to navigate through massive datasets, extract relevant information and identify patterns with remarkable speed and accuracy, ultimately enhancing the auditor’s understanding of potential risk patterns or scenarios9. Access to this type of information can be advantageous, especially when it is used in risk assessments or audit procedures like testing automated controls.

Continuous Learning and Adaptability

Continuous learning, when related to AI, can revolutionize the financial statement audit process by enabling machine learning algorithms to evolve and enhance their understanding of complex financial data patterns over time10. This characteristic empowers ChatGPT to discern subtle anomalies, outliers and nuanced trends that may elude a human auditors’ scrutiny11.

Furthermore, ChatGPT could learn to recognize subtle indicators of revenue manipulation by continuously analyzing transaction patterns, seasonal trends and industry benchmarks.

The adaptive capabilities of ChatGPT make it a valuable asset for organizations navigating the ever-changing landscape of regulatory requirements in financial statement audits12. ChatGPT can quickly adapt and incorporate changes in regulations into its understanding, ensuring alignment with the latest audit regulatory requirements. By leveraging ChatGPT, organizations can streamline their compliance processes and effectively incorporate new regulations into their financial auditing practices13.

Predictive Analytics

Predictive analytics allow external auditors and internal auditors to validate historical financial information and obtain understanding of the potential trajectory of an organization’s financial performance. Forecasting financial trends, for example, is a prime application of predictive analytics in internal audits14.

ChatGPT can analyze historical financial data and discern patterns that may not be immediately apparent15. By using ChatGPT to project these patterns into the future, auditors can gain a better understanding of an organization’s financial performance.

Audit Efficiencies

ChatGPT can generate significant efficiencies by automating routine tasks like data extraction, data analysis and document review16. Using ChatGPT in financial statement audits can provide auditors with new skills and abilities to improve existing audit procedures like generating faster and high-quality work papers and performing consistent automated testing of financial transactions17. ChatGPT can also quickly analyze significant amounts of financial data, identify patterns, and flag discrepancies or anomalies that require further investigation18.

Cost Savings

ChatGPT provides cost savings by automating workflows and tasks, such as data entry, reconciliation and basic analyses19. Additionally, ChatGPT can streamline the identification of discrepancies and trends, decreasing the time and resources spent on manual reviews20.

Disadvantages of AI’s ChatGPT in Financial Statement Audits

There are also concerns to be considered when using ChatGPT.

Data Security and Privacy Concerns

Integrating ChatGPT into financial statement audits raises significant concerns about data security and privacy21. A major security concern stems from the cloud-based nature of ChatGPT. Although auditors have their own policies prohibiting client/organization data from being stored on the cloud, these policies may not always be followed22.

The above may result in client/organization data being stored on third-party servers, exposing sensitive financial information and potentially causing financial harm. ChatGPT could also inadvertently expose private data to unauthorized parties, especially if security measures are not implemented.

Training Data Bias

ChatGPT’s trained data may contain biases leading to the reinforcement of prejudices or spread of misinformation23. To ensure unbiased interactions, careful data curation during training and ongoing monitoring are essential.

Addressing training data bias is a complex challenge in financial statement audits and thus requires careful curation of diverse and representative datasets. Both external auditors and internal auditors should conduct thorough assessments to identify and rectify any underlying biases in the data used to train ChatGPT.

Limited Understanding of Regulations

As we know, the landscape of financial regulations is dynamic, calling for frequent updates and changes. Consequently, integrating ChatGPT into financial statement audits poses a challenge in ensuring that the platform stays abreast of the latest regulatory developments.

Unlike human auditors, ChatGPT lacks the inherent ability to track and understand evolving financial regulations. This limitation can lead to compliance risks, as outdated or incomplete generated information may be relied upon when utilizing ChatGPT for regulatory compliance assessments.

Inability to Verify Source Data

Auditors rely on the accuracy and reliability of the data used in financial statement audits to draw meaningful conclusions. Nonetheless, ChatGPT cannot verify or ensure the accuracy or integrity of source information, posing a notable challenge in financial audits.

The inability to cross-check and validate original sources in an audit could result in the acceptance of erroneous financial data or overlooking critical discrepancies. This lack of verification undermines the audit's integrity, causing auditors to base their decisions on incomplete or misleading data, thereby increasing the risk of financial misstatements and compliance issues.

The Role of AI in Financial Statement Audits

The integration of ChatGPT in financial statement audits marks a major turning point in the trajectory of traditional auditing practices. Successfully using ChatGPT in financial statement audits depends on a close partnership between human auditors and AI as they work together in this intricate process.

Even with the drawbacks mentioned in this article, the efficiency and time-saving gains from utilizing ChatGPT in financial statement audits may ultimately compel auditors to increasingly rely on this technology in the completion of their audits.

Summary of Advantages and Disadvantages to Consider

Advantages:

  • Efficiency and Accuracy – Speeds up data processing, risk assessment and compliance
  • Predictive Analytics – Helps forecast financial trends
  • Cost Savings – Reduces manual workload and expenses

Disadvantages:

  • Security and Privacy Risks – Potential data exposure
  • Bias and Regulatory Limits – AI may reinforce biases and struggle with evolving regulations
  • Verification Issues – Cannot independently confirm data accuracy

About the Author: Angel Rafael Otero, Ph.D., CPA, CFE, CISA, CITP, CRISC, CICA, is Associate Professor of Accounting Information Systems and Academic Chair for Accounting and Finance Online Programs in the Nathan M. Bisk College of Business at the Florida Institute of Technology. Contact him at aotero@fit.edu.

Footnotes

1. Gao, X., & Feng, H. (2023). AI-driven productivity gains: AI and firm productivity. Sustainability, 15(11), 8934.

2. 4. Luna, J. C. (2024). The Top 10 ChatGPT Alternatives You Can Try Today. Datacamphttps://www.datacamp.com/blog/10-chatgpt-alternatives

3. Marr, B. (2023). A short history of ChatGPT: How we got to where we are today. Forbeshttps://www.forbes.com/sites/bernardmarr/2023/05/19/a-short-history-of-chatgpt-how-we-got-to-where-we-are-today/?sh=7c107750674f

5. Aydin, Ö., & Karaarslan, E. (2023). Is ChatGPT Leading Generative AI? What is Beyond Expectations? Academic Platform Journal of Engineering and Smart Systems, 11(3), 118-134. doi: 10.21541/apjess.1293702. Chu, M. -N. (2023). Assessing the Benefits of ChatGPT for Business: An Empirical Study on Organizational Performance. IEEE Access, 11(1), 76427-76436. doi: 10.1109/ACCESS.2023.3297447.

6. Otero, A. R. (2015). Impact of IT auditors’ involvement in financial audits. International Journal of Research in Business and Technology, 6(3), 841-849.

7. Almufadda, G., & Almezeini, N. A. (2022). Artificial intelligence applications in the auditing profession: A literature review. Journal of Emerging Technologies in Accounting, 19(2), 29-42. Otero, A. R. (2018). System Development Life Cycle. In A. R. Otero (Ed.), Information Technology Control and Audit (5th ed., pp. 201-236). Boca Raton, FL. CRC Press and Auerbach Publications. ISBN #: 9781498752282

8. 17. Fedyk, A., Hodson, J., Khimich, N., & Fedyk, T. (2022). Is AI improving the audit process? Review of Accounting Studies, 27(1), 938-985.

9. 16. Almufadda, G., & Almezeini, N. A. (2022). Artificial intelligence applications in the auditing profession: A literature review. Journal of Emerging Technologies in Accounting, 19(2), 29-42.

10. 11. 18. Dong, M. M., Stratopoulos, T. C., & Wang, V. X. (2023). A Scoping Review of ChatGPT Research in Accounting and Finance. (December 30, 2023). (Working paper). http://dx.doi.org/10.2139/ssrn.4680203

12. Hacker, B. (2023). Will ChatGPT revolutionize accounting? The benefits of AI in accounting. ECONSTORhttps://www.econstor.eu/bitstream/10419/273360/1/1851793127.pdf

13. Deloitte. (2010). Continuous monitoring and continuous auditing – From idea to Implementation. Deloitte. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/audit/us-aers-continuous-monitoring-and-continuous-auditing-whitepaper-102910.pdf

14. 20. Eulerich, M., & Wood, D. A. (2023). A Demonstration of How ChatGPT Can be Used in the Internal Auditing Process. (Working paper). http://dx.doi.org/10.2139/ssrn.4519583

19. Emett, S. A., Eulerich, M., Lipinski, E., Prien, N., & Wood, D. A. (2023). Leveraging ChatGPT for Enhancing the Internal Audit Process – A Real-World Example from a Large Multinational Company. (Working paper). http://dx.doi.org/10.2139/ssrn.4514238

21. Alshurafat, H. (2023). The usefulness and challenges of chatbots for accounting professionals: Application on ChatGPT. (Working paper). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4345921

22. Silvius, A.J.G., & Dols, T. (2012). Factors influencing Non-Compliance behavior towards Information Security Policies. CONF-IRM 2012 Proceedings. 39. https://aisel.aisnet.org/confirm2012/39

23. Kalla, D., & Smith, N. (2023). Study and analysis of ChatGPT and its impact on different fields of study. International Journal of Innovative Science and Research Technology, 8(3), 827-833.

 

Thanks to the Sponsors of Today's CPA Magazine

This content was made possible by the sponsors of this issue of Today's CPA Magazine:

Accounting Biz Brokers

Accounting Practice Sales

CPA Charge

Goodman Financial

Poe Group Advisors

SafeSend

 

 


  • Building the CPA Pipeline: A Faculty Perspective

    The CPA profession faces a shrinking pipeline, with fewer candidates entering the field even as demand grows. Faculty research highlights strategies to boost Exam success to better equip students, especially first-generation and future candidates under Texas’ new additional licensure pathway. Strengthening these supports is key to preparing the next generation of CPAs and securing the profession’s future.
    View Article
  • CPE: Joint Ventures and Equity Method Accounting

    Joint ventures enable organizations to combine resources under shared control to achieve strategic objectives, yet their accounting treatment has often posed challenges. To address this, FASB issued ASU 2023-05. This article examines the new guidance and its implications for equity method accounting.
    View Article
  • From Pipeline to Mobility: TXCPA Champions Two Major Wins for the Accounting Profession

    TXCPA achieved two landmark victories at the 89th Texas Legislature: an additional CPA licensure pathway for candidates and a modernized mobility law that strengthens practice standards in Texas. These wins not only expand opportunities for future CPAs but also set a precedent for other states, reinforcing TXCPA’s role as a leading advocate for the profession’s future.
    View Article
  • Finding Community and Purpose: Mariella Bosquez’s Journey in Accounting and TXCPA Houston

    Mariella Bosquez’s path to accounting was anything but traditional, but through TXCPA Houston she found both community and purpose. From psychology major to active student leader, her story shows how diverse backgrounds, mentorship and involvement can open doors and inspire the next generation of CPAs.
    View Article
  • Saved by the Byrd Rule: PCAOB Survives the One Big, Beautiful Bill

    Lawmakers looked to eliminate the Public Company Accounting Oversight Board (PCAOB) by folding its duties into the SEC, but the effort was blocked under Senate budget rules. Supporters argued the move would save money, while critics warned it would weaken audit oversight and investor protection. For now, PCAOB remains intact.
    View Article
  • TXCPA’s 2024-2025 Outstanding Chapter Awards Recognize Leadership, Service and Impact

    TXCPA’s Outstanding Chapter Awards celebrate small and medium-sized chapters that go above and beyond in leadership, service and community impact. This year, the San Angelo, East Texas and Rio Grande Valley chapters were recognized. Together, their achievements highlight the dedication and creativity shaping the profession.
    View Article
  • Your Old Plan vs. a Better Plan: How Accounting Firms Can Attract More CAS Clients

    Many firms still rely on outdated, exhausting methods like cold calls, referrals and random networking to win CAS clients - but those days are over. By embracing SEO, accounting firms can attract a steady stream of qualified, high-value clients who are already searching for their services, resulting in more revenue, stronger client relationships and the freedom to focus on delivering value.
    View Article
  • What’s Happening Around Texas - September-October 2025

    From networking luncheons and campus connections to hospital tours and a gathering at the Rusty Axe Brewing Co., members in Brazos Valley, Dallas, East Texas, and El Paso came together in a variety of ways. Professionals and students are finding community, inspiration, camaraderie, and fresh opportunities while chapters are setting bold visions for growth.
    View Article
  • Celebrating Our 2025-2026 TXCPA Faculty and Student Ambassadors!

    Through our Ambassador Program, TXCPA works with Texas educators and students each year to share resources and engage the next generation of CPAs, building connections on campuses across the state. TXCPA Ambassadors help us strengthen our presence and learn more about what we can do to help build and support the CPA pipeline.
    View Article
  • Stronger Together: Empowering the Next Generation

    The September/October issue of TXCPA’s magazine shines a spotlight on building the CPA pipeline and supporting future professionals. The issue is packed with ways to grow and stay connected. Most importantly, it’s a reminder that the future of our profession is built together - with your passion, time and voice.
    View Article
  • TXCPA Pipeline Resources at a Glance

    TXCPA’s Pipeline Resources offer something for everyone in the accounting pipeline — students, candidates, educators, and employers. Whether you’re exploring the field, teaching it or hiring talent, TXCPA connects you to the tools, people and opportunities that make an impact.
    View Article
  • The Statement of GreenHouse Gas Emissions

    Global standards for climate disclosure are rapidly evolving and companies are under pressure to measure and report indirect emissions across their value chains. A proposed Statement of GreenHouse Gas Emissions could give investors and stakeholders clearer, more comparable insights into corporate sustainability performance.
    View Article
  • 110 Years Strong: TXCPA Returns to Its Roots at the Tremont House

    TXCPA marked its 110th anniversary by returning to the historic Tremont House, celebrating a legacy of leadership while setting bold goals for the future. From legislative victories and a new tiered membership model to expanded student outreach and the launch of AcctoFi, the organization is driving transformation across advocacy, education and member engagement.
    View Article
  • Take Note

    In this edition of Take Note: Insurance Benefits Tailored for TXCPA Members; Enhancing Your Social Wellness; Stand Out as a Leader with the CGMA® Designation; TXCPA’s Career Center; Your Next Learning Opportunity
    View Article
  • Classifieds

    The classified ad section features listings for practice sales, firm buyers and specialized services. Whether you're expanding, selling or exploring niche opportunities, these ads connect you to valuable prospects and resources.
    View Article

CHAIR
Mohan Kuruvilla, Ph.D., CPA

PRESIDENT/CEO
Jodi Ann Ray, CAE, CCE, IOM

CHIEF OPERATING OFFICER
Melinda Bentley, CAE

EDITORIAL BOARD CHAIR
Jennifer Johnson, CPA

MANAGER, MARKETING AND COMMUNICATIONS
Peggy Foley
pfoley@tx.cpa

MANAGING EDITOR
DeLynn Deakins
ddeakins@tx.cpa

COLUMN EDITOR
Don Carpenter, MSAcc/CPA

DIGITAL MARKETING SPECIALIST
Wayne Hardin, CDMP, PCM®

CLASSIFIEDS
DeLynn Deakins

Texas Society of CPAs
14131 Midway Rd., Suite 850
Addison, TX 75001
972-687-8550
ddeakins@tx.cpa

 

Editorial Board
Derrick Bonyuet-Lee, CPA-Austin;
Aaron Borden, CPA-Dallas;
Don Carpenter, CPA-Central Texas;
Rhonda Fronk, CPA-Houston;
Aaron Harris, CPA-Dallas;
Baria Jaroudi, CPA-Houston;
Elle Kathryn Johnson, CPA-Houston;
Jennifer Johnson, CPA-Dallas;
Lucas LaChance, CPA-Dallas, CIA;
Nicholas Larson, CPA-Fort Worth;
Anne-Marie Lelkes, CPA-Corpus Christi;
Bryan Morgan, Jr, CPA-Austin;
Stephanie Morgan, CPA-East Texas;
Kamala Raghavan, CPA-Houston;
Amber Louise Rourke, CPA-Brazos Valley;
Shilpa Boggram Sathyamurthy, CPA-Houston, CA
Nikki Lee Shoemaker, CPA-East Texas, CGMA;
Natasha Winn, CPA-Houston.

CONTRIBUTORS
Melinda Bentley; Kenneth Besserman; Kristie Estrada; Holly McCauley; Craig Nauta; Kari Owen; John Ross; Lani Shepherd; April Twaddle; Patty Wyatt