Question 1
Domain 5 — AI Assurance, Audit, and Responsible AdoptionIntroduction to AI for Auditors Course: An auditor is reviewing a company's financial transactions using an AI-powered tool. The tool flags a series of transactions as potentially fraudulent based on patterns it has learned from historical data. What should the auditor do next?
Correct answer: B
Explanation
The AI tool only “flags” transactions as potentially fraudulent, so the auditor must apply professional judgment before concluding fraud exists. Auditing standards require evidence and verification, not reliance on an automated alert alone, so the next step is to manually review the flagged transactions to confirm whether they are fraudulent.
Why each option is right or wrong
A. Rely solely on the AI tool's judgment and proceed with the audit without further review.
B. Manually review the flagged transactions to confirm if they are indeed fraudulent.
Under ISA 240.12–13, the auditor is required to maintain professional skepticism and obtain sufficient appropriate audit evidence when fraud risk indicators arise; an AI alert is only a risk indicator, not audit evidence. The next step is to inspect the flagged items directly—supporting documents, approvals, bank records, and transaction details—before any conclusion is drawn, because the standard does not permit a fraud finding based solely on an automated pattern match.
C. Immediately report the flagged transactions as fraud to the authorities.
D. Ignore the flagged transactions as the AI tool might have made an error.