How AI can improve audit quality and efficiency

The first A&A Focus webcast of 2026 brought together experts from the profession and the AICPA for a discussion of technology, tariffs, and themes of concern for smaller firms. Hosted by Bob Durak and Andrew Merryman, the January program featured Danielle Supkis Cheek, CPA, who presented additional information on the use of artificial intelligence (AI) in the accounting and assurance space; Tom Groskopf, CPA, who discussed how tariffs requiring additional examination are affecting the work of CPAs; and the new AICPA small firms advocate, Stephanie Otero, CPA, who joined the webcast to share areas of focus for smaller assurance firms and to invite members to reach out directly to her.

Harmonizing efficiency and quality: AI’s true value in audit

Supkis Cheek, senior vice president of AI, analytics, and assurance at Caseware, returned to continue her series on practical uses of AI in the profession, focusing this month on the relationship between efficiency and audit quality. Supkis Cheek cautioned against viewing AI as a simple time-saving “silver bullet,” noting that while automation can reduce the time needed for certain manual tasks, the more significant and sustainable benefit comes from improving the quality of work earlier in the engagement. In her view, quality and efficiency are not competing objectives. When risk assessment and professional judgment are strengthened at the front end, downstream rework and last-minute corrections can be reduced, improving both engagement flow and overall outcomes.

Supkis Cheek discussed recent research suggesting that, although AI tools can save time, much of the apparent productivity gain is often absorbed by rework, training, and additional analysis. She emphasized that these activities are not necessarily wasteful. Iteration, coaching, and review are core to building competence. The real opportunity, she explained, lies in using AI to elevate the work of less-experienced staff more quickly by giving them structured guidance, better access to authoritative information, and tools that help them think through complex issues in a manner similar to more seasoned professionals.

A central theme of her remarks was the concept of “upskilling through assistance.” Well-designed prompts and workflows can help staff use software to analyze documents, identify risks, and challenge assumptions in ways that previously required years of experience. She described how AI can be used not only to draft or summarize, but also to perform a form of self-review, prompting staff to assess their own work from the perspective of an engagement’s senior auditor or manager and to consider what might be missing or unclear.

Supkis Cheek also highlighted the importance of maintaining strong control concepts as automation increases. Preventive and detective controls, including human review of both underlying data and automated outputs, remain essential. She noted that thoughtful integration of AI into assurances processes, combined with disciplined prompt design and professional judgment, can shift efforts toward higher-order analysis, reduce late-engagement time crunches, and support both audit quality and staff development over time.

Accounting and assurance impacts of tariffs

Groskopf, assurance service line leader at Barnes Dennig and technical director of the AICPA Center for Plain English Accounting, addressed the accounting and auditing implications of tariffs, a topic that continues to affect many entities as trade policy evolves. He explained that, for most organizations, tariffs ultimately find their way onto the balance sheet and income statement, most commonly through inventory costs, even when the entity is not the importer of record and the charges are paid initially by third-party logistics providers.

Groskopf reviewed the application of existing U.S. GAAP, noting that tariffs generally qualify as inventoriable costs under FASB ASC Topic 330, Inventory, and are capitalized by the entity when they are directly attributable to bringing inventory to its present location and condition. Practical challenges arise, however, in identifying and capturing those costs when invoicing is indirect, rates change frequently, or amounts are embedded in broader freight or customs charges. These circumstances can affect standard cost systems, purchase price variances, and overhead allocations, and they require careful attention from both preparers and assurance providers.

With respect to revenue, Groskopf emphasized caution regarding if and when an entity can recognize tariff-related price increases, highlighting the consideration of enforceable contract terms or formally approved contract modifications. Management expectations, verbal understandings, or ongoing negotiations with customers do not, by themselves, create a basis for revenue recognition under U.S. GAAP. Groskopf noted that in many cases companies may be absorbing tariff costs temporarily while discussions continue, but until pricing changes are contractually agreed to and legally enforceable, those amounts cannot be recorded as additional revenue. He also cautioned that even when contracts contain escalation clauses or passthrough provisions, entities must carefully evaluate whether the conditions for those clauses have been triggered and whether collectibility is probable. These judgments can affect not only the timing and measurement of revenue, but also required disclosures, particularly in environments where margins are under pressure, pricing models are being restructured, and supply chain arrangements are evolving in response to rapidly changing trade policies.

Groskopf also discussed the pending Supreme Court case challenging certain tariffs imposed under the International Emergency Economic Powers Act and the related question of potential refunds. He noted that, while some view the possibility of recovery as an asset, the legal and procedural hurdles are significant, and recognition under U.S. GAAP would face a high threshold until the outcome is known and realization is probable. He encouraged auditors to incorporate these matters into their risk assessments, understand clients’ processes for tracking tariff costs and any refund claims, and consider appropriate disclosures related to risks, uncertainties, and subsequent events.

Regarding potential disclosures, Groskopf revisited the topic when asked by an audience member to expand on his thoughts. In his response, Groskopf specifically pointed to disclosure themes including:

• Risks and uncertainties, particularly where tariffs are creating volatility in margins or uncertainty about future pricing and supply chain stability.
• Nature of operations and concentrations, for example, when a significant portion of inventory, components, or sourcing is subject to tariff regimes.
• Subsequent events and contingencies, especially in light of the pending Supreme Court case and the unresolved question of whether any refunds might ultimately be available.

He also observed that, because the accounting treatment and potential recovery of tariffs involve significant judgment, transparent disclosure can be important to explain management’s assumptions, the status of any contractual renegotiations, and the degree of uncertainty surrounding future cash flows and profitability.

Small firm accounting and assurance challenges

In the final guest segment of the program, Otero, vice president–Small Firm Advocate at the AICPA, provided an overview of the issues she is hearing most frequently from small and sole-practitioner firms through networking groups, state society roundtables, and direct outreach. She described small firms, generally those with fewer than 30 professionals, as highly diverse in structure but facing a common set of pressures that are often more acute than in larger organizations.

Otero identified capacity as the overarching challenge, with many practitioners simultaneously serving as engagement partners, technical reviewers, practice administrators, and compliance leads. The implementation of the new quality management standards, peer review preparation, and ongoing regulatory changes have added to this strain, particularly for firms with limited personnel and time to devote to system design, documentation, and monitoring. She noted that, for small firms, peer review can feel especially personal, as the firm’s reputation is often closely tied to the individual practitioner’s name and standing in the community.

Staffing and succession were also recurring themes. Smaller firms often struggle to attract and retain professionals with a few years of audit experience and face competitive disadvantages in recruiting compared with larger firms. Those larger firms often have more formal campus recruiting programs and training pipelines.

At the same time, many small firms are reassessing their service mix, with some considering whether the cost, complexity, and risk associated with audits remain sustainable in light of resource constraints.

Otero discussed steps the AICPA has taken to assist small firms and emphasized the importance of scalable guidance and practical support. She encouraged small firm leaders to focus on steady progress rather than perfection; to make use of AICPA resources such as quality management implementation tools, peer review guidance, and the Private Companies Practice Section; and to engage in professional communities where challenges and solutions can be shared. She also highlighted opportunities for small firms to leverage technology, including AI, to create efficiencies, strengthen documentation, and better align limited resources with areas of highest risk and professional judgment.

In closing, Otero invited small firm members to reach out to the AICPA, including directly to her, for guidance, resources, and tailored assistance.

Looking ahead

Durak closed by thanking viewers for their participation in the first A&A Focus webcast of 2026 and reminded them that the next broadcast is scheduled for Feb. 4. Scheduled guests for the February program include Julie Killian, CPA, who will continue her discussion of special-purpose frameworks, including the tax, cash, and modified cash bases and FRF for SMEs; Joe Lynch, CPA, who will address changes in requirements and anticipated challenges related to engagement quality reviews; and Carl Mayes, CPA, vice president at the AICPA, who will provide an update on the CPA Ready Initiative and broader efforts to strengthen the profession’s future pipeline.

AICPA members are encouraged to attend these monthly events and review the accompanying newsletters for more in-depth coverage of these critical topics. Members can access archives of past sessions at the A&A Focus Series webpage.

— Dave Arman, CPA, MBA, is senior manager–Audit Quality at the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.