FRC urges auditors to embrace AI without compromising independence

The Financial Reporting Council of Nigeria (FRC) has urged auditors and other stakeholders in the financial reporting ecosystem to embrace artificial intelligence (AI) while ensuring that its adoption does not compromise professional judgment, auditor independence and public trust.

Rabiu Olowo, executive secretary and chief executive officer of the FRC, made the call at the 2026 Audit and Assurance Summit hosted by the council, noting that the rapid adoption of AI and other emerging technologies was transforming the audit profession.

He said technologies such as machine learning, predictive analytics, intelligent automation, data analytics and continuous auditing were changing how financial information is generated, processed, analysed and reported.

According to Olowo, AI is already enabling auditors to analyse significantly larger volumes of data, improve fraud-risk assessment and enhance the efficiency and coverage of audit engagements.

“This development presents enormous opportunities. Artificial intelligence can enable auditors to analyse significantly larger volumes of data. In fact, I think at a conference last week, the concept of sampling is no longer a thing.

“They process large volumes of data, almost 100 percent of the population because it can be done. This enhances fraud risk assessment, improves audit efficiency, and provides a deeper analytical insight and coverage.”

However, he warned that the increasing use of technology also presents significant risks, particularly around professional skepticism, bias, inaccurate reporting, manipulation and cybersecurity.

Olowo challenged auditors to ensure that AI complements rather than replaces professional judgment.

“How do we preserve professional skepticism in an increasingly automated audited environment? How do we ensure that technology complements rather than replaces professional judgment? How do we address the risks of our governing bias, inaccurate reporting from big data, manipulation, and the big elephants in the room, cybersecurity threats?”

FRC flags threat to auditor independence

The FRC chief executive also raised concerns about the growing overlap between financial statement preparation and independent auditing, warning that such practices could undermine auditor independence.

“The Financial Reporting Council of Nigeria has observed with increasing concern practices that blur the professional boundaries between the preparation of financial statements and independent audits of those same statements. Where auditors become involved, directly or indirectly, in the preparation of financial statements, the subsequent audits, significant self-review threats may arise.”

He emphasised that management, rather than auditors, remains responsible for preparing financial statements and maintaining appropriate internal controls.

“The auditor is not responsible for creating the financial statement.”

Olowu said preserving that distinction was critical to maintaining accountability and confidence in Nigeria’s financial reporting system.

He also identified the audit expectation gap as another major challenge facing the profession, noting that the public sometimes expects auditors to detect every instance of fraud, prevent every corporate failure or guarantee the financial soundness of companies.

He argued that management, boards, audit committees, auditors, regulators and investors all have distinct but complementary responsibilities in maintaining the integrity of the financial reporting ecosystem.

“Restoring public trust cannot be achieved by auditors alone, it is a collective responsibility.”

According to him, stronger audit quality and credible financial reporting are particularly important as Nigeria seeks to attract investment and achieve its ambition of building a $1 trillion economy.

“These are not the exception capitalists, those who bring FDIs into our country unless they have sound and significant reliance on the credibility of financial statements coming into this country, and that’s why we owe a duty to our country to ensure that this is so.”

Also speaking, Chris Isogu, permanent secretary of the Federal Ministry of Industry, Trade and Investment, who represented Jumoke Oduwole, the minister, said credible financial reporting was essential to attracting investment, supporting economic growth and strengthening Nigeria’s competitiveness.

Isogu said technology was transforming financial analysis, risk assessment, fraud detection, internal controls and audit processes, creating opportunities to improve the efficiency and timeliness of assurance.

“However, as machines become increasingly capable of generating and analysing financial information, ensuring the continued trustworthiness of that information must remain a fundamental priority,” he said.

He said technological advancement must not weaken the fundamental principles underpinning the audit profession.

“Technology may change in terms of assurance, but it must never change the principles upon which assurance is built. Integrity, independence, professional skepticism, transparency, and accountability must remain at the centre of the audit discussion, irrespective of how advanced technology becomes.”

The permanent secretary noted that reliable financial reporting provides investors, banks and governments with the information required to make sound economic decisions.

“A credible financial report reduces uncertainty, strengthens confidence, and enables better economic decisions which supports investment, expands productivity capacity, creates jobs, promotes export, and strengthens sustainable economic growth.”

He said audit quality and credible financial reporting were directly linked to the Federal Government’s objectives of economic diversification, industrialisation, trade expansion, investment promotion and job creation.

Isogu, however, cautioned that the benefits of AI must be balanced against risks including poor-quality data, algorithmic bias, opaque decision-making and cybersecurity threats.

“AI should enhance, they should not replace professional judgment, skepticism.”

The summit brought together regulators, professional accounting bodies, audit firms, financial reporting practitioners, investors, technology experts and other stakeholders to discuss the impact of AI and emerging technologies on audit and assurance in Nigeria.

Olowo said the FRC would continue to work with stakeholders to strengthen audit quality, corporate governance, compliance with standards and ethical requirements.

He said the future auditor would likely rely on more sophisticated technological tools and analyse larger volumes of data, but would still be required to exercise judgment, challenge management and demonstrate professional skepticism.

“The future of assurance will undoubtedly be shaped by artificial intelligence, but trust in financial reporting will always depend fundamentally on human integrity, ethical leadership, and self-professional judgment.”

He urged participants at the summit to move beyond identifying challenges and develop practical recommendations that would strengthen audit quality, reinforce auditor independence and improve confidence in Nigeria’s financial reporting architecture.