New report explores internal audit’s role in addressing AI-enabled fraud

 Executive summary 

Artificial intelligence (AI) is rapidly reshaping organizational operations, enabling new levels of efficiency, automation, and insight across core business processes. These same capabilities, however, enable new fraud techniques and enhance the scale, speed, and effectiveness of traditional fraud methods. AI-enabled tools can generate highly convincing phishing schemes by fabricating financial documentation, manipulating audio and video evidence, and producing hyper-personalized communications designed to evade traditional controls. As organizations rapidly integrate AI into their operations, responsibility for understanding, assessing, and responding to these emerging fraud risks increasingly falls within the purview of internal audit, creating a critical imperative for the function to adapt to this evolving risk landscape. 

The Internal Audit Foundation, in partnership with AuditBoard, surveyed 373 senior internal audit leaders to understand how audit functions currently perceive AI-enabled fraud risk, their preparedness to address it, the barriers to an effective response, and the most important actions to take now. 

Insights indicate growing vigilance of AI-enabled fraud, but uneven familiarity and limited confidence in readiness. While 85% of respondents view AI-enabled fraud as a moderate to high risk, fewer than four in 10 believe their internal audit functions remain adequately prepared to detect it. Familiarity with AI-enabled fraud is associated with higher perceived risk, suggesting that a deeper understanding of AI-enabled fraud contributes to greater awareness of exposure rather than reassurance. Concern seems to be focused on more visible threats, such as AI-powered phishing, while rapidly expanding risks, like synthetic identity fraud, remain less widely recognized. 

Persistent barriers hamper preparedness in the form of: 

• Limited access to appropriate tools 
• Insufficient skills and expertise 
• Budgetary constraints 
• Competing organizational priorities 

At the same time, internal audit’s use of AI is increasing, and most respondents expect that trend to continue in the near term. This growing familiarity presents an opportunity for the internal audit team to strengthen its ability to identify misuse, assess controls, and advise management more effectively. 

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