Preparing to Audit AI-Enabled Business Environments

Artificial intelligence (AI) is no longer a distant innovation; it is already transforming business operations, decision-making, and governance. For internal auditors, the rapid adoption of AI presents both an opportunity and a responsibility: ensuring that organizations implement and manage AI in a way that is transparent, accountable, and compliant with emerging regulations.

This article outlines the key standards, regulations, and frameworks shaping the audit of AI-enabled business environments, and how internal auditors can prepare for this new mandate.

The Regulatory and Standards Landscape

Over the past decade, global standard-setters and regulators have accelerated efforts to create a structured foundation for auditing AI:

1. 2017: The IIA issued its first guidance on auditing AI.
2. 2021: The European Commission proposed the EU AI Act.
3. 2022: Draft ISO/IEC 42001 released for public comment.
4. 2023: The EU AI Act final text was agreed; ISO/IEC 42001 was published; the IIA issued an updated AI Auditing Framework.
5. 2024 to 2027: The EU AI Act enters phased enforcement.

Value for auditors: AI auditing is no longer optional guidance; it is fast becoming a regulated requirement.

ISO/IEC 42001: The "What"

ISO/IEC 42001 provides auditable, certifiable requirements for an AI Management System (AIMS). Built on the Plan-Do-Check-Act model, it emphasizes continuous improvement in AI governance.

Key Requirements

• Establish formal AI policy and measurable objectives.
• Conduct comprehensive AI risk assessments.
• Implement lifecycle controls from design to decommissioning.
• Define governance roles and responsibilities.
• Embed responsible AI principles: fairness, transparency, and accountability.

Key Audit Activities

• Assess AIMS effectiveness and scope.
• Review risk management processes and treatment plans.
• Test controls for data quality, model validation, logging, and security.
• Verify lifecycle documentation at each stage.

Value for auditors: ISO/IEC 42001 gives objective criteria for what good looks like in AI control environments.

The EU AI Act: The "Why"

Unlike ISO/IEC 42001, which is voluntary, the EU AI Act is a binding regulation that introduces a risk-based approach to AI.

Four Tiers of AI Risk

• Unacceptable Risk: Prohibited (for example, social scoring).
• High Risk: Permitted with strict obligations.
• Limited Risk: Transparency requirements apply.
• Minimal Risk: No additional requirements.

High-Risk AI Requirements

• Robust risk management and high-quality data governance.
• Detailed technical documentation and logging.
• Transparency and information provided to users.
• Effective human oversight mechanisms.

Value for auditors: The EU AI Act defines why organizations must implement controls; compliance is not optional.

The IIA AI Auditing Framework: The "How"

The IIA provides a practical roadmap for internal auditors, aligned to the AI lifecycle.

Lifecycle Anchors

• AI Strategy: align initiatives with business objectives.
• AI Governance: structures, policies, and oversight.
• Design & Development: model building and training.
• Deployment & Monitoring: in-production management.

Sample Audit Questions

• Governance: Are oversight committees and policies adequate?
• Data & Algorithms: Are sourcing, quality, and appropriateness of training data effective?
• Deployment: Is model performance monitored to detect drift or degradation?

Value for auditors: The IIA framework equips teams with the "how": a structured way to scope, plan, and execute AI audits.

Applying the Frameworks Together

To effectively audit AI environments, combine the three perspectives:

• IIA Framework — The "How": structure scope and lifecycle phases.
• EU AI Act — The "Why": define compliance obligations and legal accountability.
• ISO/IEC 42001 — The "What": provide auditable, certifiable control criteria.

Example mapping:
Scope (How): focus on the deployment phase and data ethics. Objective (Why): ensure compliance with EU AI Act data quality requirements. Criteria (What): assess controls against ISO/IEC 42001 for model validation and logging.

Final Thoughts

AI is reshaping industries, and internal audit must evolve with it. By adopting a structured approach grounded in ISO/IEC 42001, the EU AI Act, and the IIA AI Auditing Framework, auditors can safeguard compliance and help their organizations harness AI responsibly, building trust, resilience, and long-term value.