Artificial intelligence (AI) regulation is gaining momentum worldwide. The European Union’s AI Act, U.S. federal guidance, and industry-specific standards are setting expectations for responsible AI use. Organizations must prepare for increased regulatory scrutiny, and internal audit functions are uniquely positioned to guide this preparation.
The first step is regulatory awareness. Internal audit should actively track developments in AI regulations, both globally and locally. Regulations often address risk classification, transparency, data protection, and accountability. By maintaining awareness, auditors can identify compliance gaps early.
Next, auditors should evaluate whether the organization has implemented AI risk assessments aligned with regulatory expectations. For example, under the EU AI Act, high-risk systems such as those impacting employment or finance must meet strict requirements. Internal audit can verify whether management has identified which AI applications fall into these categories.
Auditors must also assess documentation practices. Regulators will expect organizations to maintain records of AI model development, testing, and monitoring. Internal audit can recommend processes for version control, model documentation, and audit trails.
Another area of focus is data governance. Regulations emphasize lawful data usage, consent, and data quality. Internal auditors should confirm that privacy controls and data lineage documentation are sufficient to withstand regulatory review.
Ethics and transparency are also central. Internal audit should evaluate whether AI outputs can be explained in a way that regulators, customers, and stakeholders understand. If not, auditors should recommend implementation of explainable AI methodologies.
Additionally, auditors should ensure organizations establish incident reporting procedures for AI malfunctions or adverse outcomes. Regulatory bodies are likely to require prompt disclosure of significant AI failures, making readiness essential.
Internal audit should also test organizational training and awareness programs. Employees using AI systems must understand compliance responsibilities, data handling protocols, and escalation procedures. Auditors can review training effectiveness and coverage.
Finally, board-level oversight must be confirmed. Regulators expect boards to assume responsibility for AI governance. Internal auditors should ensure that AI-related risks and compliance updates are regularly reported to the board.
By preparing for regulatory scrutiny now, organizations reduce the risk of costly penalties, reputational harm, and operational disruptions. Internal audit’s role is to provide independent assurance that AI compliance efforts are robust, comprehensive, and forward-looking.
In summary, internal audit readiness is critical in navigating AI regulation. Through awareness, risk assessment, documentation, governance, and oversight, auditors enable organizations to meet regulatory demands confidently while leveraging AI responsibly.
