California just regulated AI audits — and forgot to require the truth

California issued some of the nation's first rules on Sept. 9 governing who may audit artificial intelligence systems, but the policies require no proof that an AI audit's numbers are correct, according to a former member of the board that regulates public company auditors. The author, who spent four years on that board often as its lone dissenter, cited $162 billion in improper payments reported by federal agencies in 2024 and an estimated $830 billion in annual corporate fraud at 2021 valuations to show the gap between passing an audit and getting the numbers right.

On Sept. 9, California https://www.washingtonexaminer.com/tag/california set some of the nation’s first rules for who may audit artificial intelligence https://www.washingtonexaminer.com/tag/artificial-intelligence . I spent four years on the board that regulates https://www.washingtonexaminer.com/tag/regulation/ public company auditors, often as its lone dissenter, and the state got more right than wrong. The problem with the policies is that nothing requires proof that an AI audit got the numbers right, which defies the whole point. Financial auditors, like everyone else, are increasingly adopting AI in their work, but faster audits are useful only if they avoid the persistent, costly mistakes we keep making. In 2024, federal agencies reported an estimated $162 billion in improper payments, despite most receiving clean opinions on their financial statements. In the private sector, researchers estimated that corporate fraud destroys $830 billion annually at 2021 valuations. These losses are not all audit failures, but they do show how wide the gap has grown between passing an audit and getting the numbers right. Stay informed.Stay ahead. Join Washington Examiner for unlimited access to the news, analysis, and commentary that matter most. See Options https://www.washingtonexaminer.com/subscribe/digital/ Already a member? Log in https://www.washingtonexaminer.com/sign-in/ Click here to login/register your account https://www.washingtonexaminer.com/print-subscription-check