How AI Agents Will Transform Internal Audit and Compliance

When I first heard about AI agents, I wasn’t sure what to think. Were they just another buzzword in the ever-expanding field of artificial intelligence, or could they genuinely change how we approach internal audit? Over the past year, I’ve concluded that AI agents are not just a step forward; they represent a seismic shift in conducting audits, assessing risks, and managing compliance. This realization fills me with optimism about the future of our profession for those willing to invest in AI.

What Are AI Agents, and Why Should Internal Auditors Care?

AI agents are autonomous programs that perform tasks and make decisions based on predefined logic, data analysis, and contextual learning. Unlike traditional robotic process automation (RPA), which follows rigid, rule-based scripts, AI agents adapt to changes, make judgment calls, at least to the extent that AI in its current form can make judgments, and learn from experience. This distinction is critical for internal audit because, as we all know, audit environments are rarely static.

For a real-world example, instead of setting up an RPA bot to check a list of terminated employees against payroll records (which would fail if column headers change, amongst plenty of other changes each time the control is tested), an AI agent can scan for patterns, recognize variations in formatting, and flag discrepancies without breaking down. The level of adaptability with an AI agent is exactly what we need as audit functions become more data-driven.

The Benefits of AI Agents in Internal Audit

In a January 2025 flash poll we asked 2574 internal auditors where they see the best use for AI agents in the audit process. The results were telling, with half of respondents indicating that controls testing and fieldwork would provide the greatest benefit, followed by risk assessment (20%), planning (19%), and reporting (11%).

The findings align with what we’re seeing in the field. AI agents can conduct risk assessments by scanning regulatory updates and industry trends, automating planning by rolling forward audit programs and scheduling meetings, and even draft audit reports based on structured findings — but the real magic auditors envision happens in control testing.

A Practical Walkthrough: Automating Ghost Employee Testing

Let’s use an AI agent to break down a simple but powerful control testing example: testing for ghost employees. Ghost employees are terminated employees who continue receiving payroll payments.

1. The Data Analyst Agent: This AI agent retrieves and cleans data from payroll and HR systems, looking for mismatches between termination dates and payment records.
2. The Audit Manager Agent: It reviews the initial findings, identifies anomalies, and assesses the risk level.
3. The Senior Auditor Agent: This final agent compiles a structured audit report with an executive summary, key findings, and recommendations.

In this workflow, we have essentially recreated the traditional audit review process — but AI agents handle the repetitive, time-intensive tasks, leaving human auditors free to focus on strategic oversight.

Expanding AI Agents’ Role in Internal Audit

While ghost employee testing is a straightforward use case, AI agents have the potential to streamline numerous audit functions, including:

• Expense Monitoring: AI can flag suspicious transactions based on patterns and thresholds, pull down evidence, and compare the evidence to the transaction, reducing reliance on manual sample testing.
• Regulatory Compliance Checks: Instead of auditors sifting through updated regulations, AI can proactively monitor compliance requirements and highlight areas of concern.
• Completeness and Accuracy: AI agents can take the population we’re sampling from and compare it to the SQL code that generated the population to test it for completeness and accuracy.
• Audit Planning and Scheduling: AI agents can analyze prior audit data, assess risk levels, and recommend engagement timelines based on audit history and organizational trends.

The possibilities are vast. AI agents can help organizations shift from reactive auditing to proactive risk monitoring if properly implemented.

Overcoming the Hurdles: Security, Oversight, and Implementation

Of course, you cannot simply set up AI agents and hope for the best. If not implemented correctly, AI agents introduce risks related to data security, decision-making transparency, and auditability. Like human auditors, AI agents require defined permissions and oversight mechanisms to ensure they do not overstep their bounds. Before trusting an AI agent’s work, auditors must conduct quality checks just as they would with a junior team member, to validate and monitor its outputs. 

Many organizations may hesitate to adopt AI agents because they lack an AI subject matter expert to implement their ideas. However, the good news is that solutions like Microsoft Copilot are making AI-driven audit automation more accessible than ever. 

The Road Ahead: Will AI Agents Replace Auditors?

AI agents will elevate auditors by removing drudgery and unlocking new levels of efficiency. When we polled internal audit teams about AI adoption, only about 5% said they saw no need for AI agents, while 64% were exploring or considering AI agent adoption in the next 12 months. The sooner we start experimenting with them, the sooner we’ll see the benefits.

If you’re an internal auditor wondering where to start with AI agents, here’s my advice. 

1. First, get your hands dirty and experiment with AI tools. Start by integrating AI-driven tasks into your daily workflow, such as summarizing regulatory updates, drafting memos, or automating data analysis. 
2. Next, assess the internal audit department for automation opportunities by identifying repetitive tasks that AI could streamline. 
3. At this point, educating your team on AI agent capabilities would be important – AI literacy will be crucial as adoption increases.
4. As your use of AI agents improves and you explore new tools, collaborate with IT and security teams to ensure proper governance and compliance. 
5. In the longer term, ensure you are monitoring emerging AI solutions. The landscape is evolving rapidly, and staying informed will help your team remain competitive.

Final Thoughts

As we enter this new era of AI options, one thing is clear: auditors will continue to play a crucial role and auditors who embrace AI will be positioned to lead the field.. 

Internal audit functions that proactively integrate AI will gain efficiencies, enhance risk monitoring, and free up valuable time for strategic analysis. The question is no longer whether AI will transform audits but how soon your organization will make the leap. 

If you want to discuss AI agents further, consider joining a peer group and exploring these tools together. The future of auditing is unfolding now, so let’s shape it together.

For a deep dive into the subject, watch my full AuditBoard webinar on demand, “Up Next for Internal Audit: AI Agents” and register for my upcoming Audit Analytics & AI mini-conference on Wednesday March 5th.