Overseeing the external auditors

August 2026

Key takeaways:

Technology and transparency are reshaping expectations. As AI becomes more embedded in the audit, committees should understand where it is being used, how tools and data are governed, and how human judgment remains involved.
Strong relationships can strengthen audit oversight. Audit committees should set clear expectations, maintain candid and ongoing dialogue with the lead audit partner, and create opportunities to discuss sensitive issues. At the same time, they should actively safeguard auditor independence and understand how company events, services, and relationships could affect it.
Audit quality requires active, ongoing assessment. Committees should regularly evaluate the external auditor’s performance, including the quality of services and resources, communication, independence, objectivity, and professional skepticism. An annual assessment can help identify opportunities for improvement and reinforce accountability.

How the audit committee can effectively oversee external auditors during evolving times

As a key component of corporate governance, the audit committee serves as an independent and objective body responsible for overseeing the integrity of financial statements and compliance with relevant laws and regulations. Regulators view audit committees as vital gatekeepers who act as a check and balance mechanism to protect investors from potential financial misstatements and fraudulent activities. External auditors play a key role in helping the audit committee discharge this responsibility.

SEC rules require the audit committee to be directly responsible for appointing, compensating, retaining, and overseeing the work of the external auditors. This makes the relationship between the audit committee and the external auditors important.

AI is beginning to change how external audits are planned and performed. Used appropriately, AI and related technologies can help auditors analyze larger volumes of data, identify unusual patterns, focus audit effort on higher-risk areas, and provide deeper insights. As these technologies become more embedded in the audit, audit committees should understand where and how the external auditor is using AI, how its use may affect audit quality, and whether AI-related risks are appropriately reflected in the audit plan.

Audit committees should also understand how the external audit firm governs, tests, and monitors its AI tools, including how it evaluates the reliability of AI outputs and incorporates human review. AI can support the audit, but it does not replace the auditor’s professional judgment, skepticism, or responsibility for the audit opinion.