Thought Leadership, Research & CPA Spotlights

No Algorithm for Ethics: AI and Regulatory Guidance

Regulatory Standard Edition: January 2026 | Published: December 8, 2025

CPAs are exploring the use of AI to enhance their work. To do this effectively, while upholding the highest standards of the profession and protecting the public, it is essential to understand the obligations laid out in the CPA Code of Professional Conduct. The fundamental principles in the Code are tools for CPAs to navigate the potential of generative AI.

Through The Regulatory Standard newsletter, the Guidance on Compliance Knowledge Hub and CPA Ontario Insights CPA Ontario has also provided members with resources to help them understand their obligations when using AI. One such resource is the article Accountabilities for CPAs in the Age of Artificial Intelligence, which explores the implications of AI and its potential risks, including:

How to develop and administer the governance and policies on the ethical use of generative AI.
How to identify risks, including data hallucinations, data bias and cybersecurity.
How to build capacity within your organization with the necessary technical expertise in the fields of AI.

CPA Ontario supported this guidance through two case studies (CPA Ontario | CPAs and Artificial Intelligence: A Case Study and the Hidden Risk of Shadow AI: A Case Study) on how to understand and mitigate some of the risks associated with data hallucinations and large language models used in data collection and research.

CPAs should apply the same obligations and accountabilities that govern the use of any software when using artificial intelligence. Where AI has been used in the performance of assurance engagements, firms should ensure documentation includes:

A clear understanding of the AI tool’s capabilities, limitations and the specific tasks it is designed to perform.
An evaluation of data sources, including how data was collected and any potential biases that could affect the tool’s performance.
Confirmation that the tool’s algorithms and methodologies are based on accurate, current and relevant information.
Evidence of a thorough understanding of the AI tool’s inner workings, including its algorithms, decision making processes and underlying assumptions.
Validation of the tool’s outputs, including comparisons with results obtained through traditional methods to ensure reliability and accuracy.

As AI continues to evolve, CPA Ontario will continue providing members with resources to help them adapt while continuing to uphold the integrity, objectivity and quality expected of the profession.