Ensuring proper AI governance in tax and audit
Tax and audit firms are rapidly adopting AI, but unauthorized “shadow AI” use, hallucinations in filings, and new IRS guidance mean firms must formalize policies, training, and controls now.
Useful takeaways from this story.
Widespread AI use: 81% of tax and audit professionals use AI several times a week, but 35% use tools not authorized by their firm, creating governance gaps.
Regulatory action: The IRS has clarified that existing professional standards apply to AI use and expects firms to implement policies, training, and oversight.
Practical controls: Firms should provide professional-grade tools, log AI inputs/outputs, vet third-party vendors, and require human review to prevent errors and sanctions.
The useful part
Ensuring proper AI governance in tax and audit | Accounting Today Author Follow Us facebook linkedin whatsapp twitter © 2026 Arizent. Just like the race to tame the West, some outlaw behavior is emerging along the way. Processing Content According to Thomson Reuters' latest Future of Professionals report, 81% of tax and audit professionals are now utilizing AI tools at least several times a week.
How it works
- Surprisingly, 35% say they use tools that their firm hasn't authorized for work.
- The IRS has been watching this phenomenon closely, and this summer, the agency took its first formal steps to establishing some AI guardrails.
- The problem is, these consumer tools do not safeguard confidential data, ground outputs in authoritative content, or produce reasoning that can be explained and defended.
- The guidance covers that while AI offers powerful tools, practitioners remain fully responsible for the accuracy of their work, the confidentiality of client data and the reasonableness of their fees.
- AI should be making its way into every tax professional's workflow and should be front of mind for executives looking to ensure those implementations are effective and smooth.
What to take from it
That creates a big governance risk for both practitioners and clients alike. The risk is real While it may not seem like unauthorized solutions cause that much harm, there's a large swath of evidence to the contrary. Any of these unauthorized solutions — informally called "shadow AI" — that touch client engagements leave a hole in that record: no log of what the tool was given, what it produced, or whether anyone checked it against the standard the firm would otherwise apply.
Example or evidence
- Sections Show Search Search Query Submit Search M&A Tax Regulations IRS Artificial Intelligence Firm Growth Forum Research Tax AT Think Ensuring proper AI governance in tax and audit By Elizabeth Beastrom...
- Penalties in these cases have included significant financial sanctions, public censure and mandatory ethics courses.
- Still, according to the Thomson Reuters report, 28% of tax and audit professionals simply do not have access to professional-grade AI tools provided by their employers.
- In that vacuum, professionals who are likely using widely available consumer-grade chatbots and AI tools in their personal lives are experimenting on their own.
Details worth keeping
It's a move that all tax and audit firms should note: It's time to get a handle on how your people are using it. Anyone who has used a publicly available AI tool knows that errors are common.
Related coverage
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- Accountingtoday: PricewaterhouseCoopers has been ramping up its use of artificial intelligence in recent years, while making sure to control the technology as concerns abound.
More context around this story.
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