The rapid proliferation of artificial intelligence (AI) technology has presented organizations with both unprecedented opportunities and significant challenges. While AI has the potential to enhance operational efficiency and drive innovation, it also brings a host of risks, particularly in areas like bias, privacy, and decision-making integrity. Internal audit functions are uniquely positioned to help organizations navigate these complexities by providing assurance that AI implementations are aligned with the organization’s strategic objectives and ethical standards.
The AI Landscape: Risks and Challenges
As organizations increasingly integrate AI into their operations, internal audit teams must expand their focus to include the unique risks posed by these technologies. According to the Berkman Klein Center, AI can exacerbate existing societal issues such as discrimination and bias. For example, algorithmic decision-making can reinforce prejudices present in the data used to train these models, leading to inequitable outcomes in areas like hiring, lending, and even criminal sentencing.
Furthermore, the Harvard Business School highlights the potential for AI to introduce new forms of operational risk, particularly when it comes to decision-making processes. AI can amplify the effects of human cognitive biases and create a false sense of objectivity, making it essential for organizations to establish robust governance frameworks to oversee AI use.
Implementing an Effective AI Defense Program
A comprehensive AI defense program requires a proactive, systematic approach that integrates various aspects of governance, risk management, and compliance. It is essential for organizations to develop clear policies and frameworks that define the ethical use of AI. This includes establishing a formal AI Defense Committee, appointing a Chief AI Defense Officer, and ensuring that AI strategies are aligned with the organization’s overall goals and values.
Kathleen Hamm from the Public Company Accounting Oversight Board (PCAOB) emphasizes the importance of maintaining sufficient professional skepticism and understanding the direct and indirect impacts of emerging technologies on financial reporting and internal controls. This vigilance is crucial as internal audit functions begin to incorporate AI into their own operations, whether for fraud detection, compliance monitoring, or risk assessment.
Strategies for Internal Audit
- Continuous Risk Assessment: Internal audit should not treat AI-related risks as static. A continuous risk assessment approach, with regular updates to the audit plan, ensures that emerging AI risks are identified and mitigated in real-time.
- Stakeholder Engagement: Engaging with a broad range of stakeholders, including business leaders, compliance officers, and IT professionals, is critical for building a comprehensive understanding of how AI is used across the organization. This collaborative approach helps ensure that all relevant risks are considered in the audit process.
- Training and Awareness: As AI technologies evolve, so too must the competencies of internal audit professionals. Investing in training programs that cover AI fundamentals, data ethics, and advanced auditing techniques is essential for equipping auditors to effectively evaluate AI systems.
- Use of Technology: Leveraging advanced audit tools that incorporate AI can enhance the internal audit function’s ability to analyze large datasets, identify anomalies, and provide deeper insights into organizational risks. However, it is important to ensure that these tools themselves are subject to rigorous validation and oversight.
Looking Ahead: The Role of Internal Audit in AI Governance
As organizations continue to adopt AI, the role of internal audit will become increasingly pivotal in ensuring that these technologies are used responsibly and effectively. By adopting a proactive, risk-based approach, internal audit can provide critical oversight and guidance, helping organizations to harness the benefits of AI while mitigating potential downsides.
To stay ahead in this evolving landscape, consider leveraging Connected Risk’s Internal Audit Management solution. Our platform offers comprehensive tools for risk assessment, audit planning, and real-time monitoring, enabling your internal audit team to provide agile and informed oversight in the age of AI. Contact us today to learn how Connected Risk can help strengthen your AI governance framework.
