AI in finance and accounting
Section 10.35 requires a practitioner to possess the competence necessary for the matter they are engaged on, and says competence may be acquired by consulting experts or studying the relevant law. Section 10.36 puts a separate duty on whoever oversees a firm's practice to see that its procedures are adequate. A tool-use policy is where those two meet.
§ 1Who it binds
United States only. Section 10.35 binds every practitioner in practice before the Internal Revenue Service, matter by matter. Section 10.36 binds the narrower group who have principal authority and responsibility for overseeing a firm's practice before the Service — a role held by a person, so a firm that cannot say who holds it has already answered the question badly.
§ 2In practice
The competence provision is two sentences and both matter. "A practitioner must possess the necessary competence to engage in practice before the Internal Revenue Service. Competent practice requires the appropriate level of knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged." Preparation is the word that reaches tooling. Knowing what a tool does with a document, where it fails, and what it will produce when it has too little to go on is preparation for the matter, not a separate technical accomplishment somebody else holds. The section then adds that competence "may be acquired through various methods, such as consulting with experts in the relevant area or studying the relevant law", which locates the remedy where the practitioner can actually reach it.
Section 10.36 moves up a level. An individual — or individuals — with principal authority and responsibility for overseeing a firm's practice before the Service must take reasonable steps to ensure the firm has adequate procedures to comply with the regulations. That is the provision under which a written policy on which tools may touch a client matter stops being good practice and starts being answerable, and it is also the provision under which a partner is exposed to a pattern of non-compliance by people they supervise rather than to a single lapse. The ethics code imposes a parallel duty on professional accountants generally, reaching those working under the accountant's authority: see competence to use an AI tool.
The standard for discipline under §10.36 is deliberately high and should be read as such: the individual is subject to it where they, through wilfulness, recklessness or gross incompetence, do not take reasonable steps. A practice is not sanctioned here for an isolated error, or for a policy that turned out to be imperfect. What it is exposed to is having no procedures at all in an area where the risk is evident, or having them and ignoring what they said. That is a narrower target than most firm policy documents are written against, and it argues for a short procedure that is genuinely followed over a long one that is not. Where the same tool is used on returns as well as on advice, the diligence standards those attract sit at §10.22 and at §10.37.
§ 3What a weak answer looks like
A one-page artificial intelligence policy that names no tool, no owner and no matter type. It states that staff must use approved tools responsibly, that client data must be protected, and that output must be reviewed. Nothing in it could be breached, which is the tell: a procedure that cannot be departed from is not a procedure. Under §10.36 the question is whether reasonable steps were taken to ensure the firm has adequate procedures, and a document drafted so as never to be wrong is weak evidence that anyone took a step at all.
§ 4What discharges it
The artefacts an assessor asks to see, and what makes each one sufficient rather than merely present.
01
What a person must know before using a given tool on client work, and how that was established for each of them. Criteria that exist only as an induction slide have not been applied to anybody.
02
General awareness training does not prepare a practitioner for the failure modes of the instrument in front of them. The distinction between the two is the whole content of this artefact.
03
Short, current, and naming the tools. A procedure written in the abstract cannot be complied with or breached, which makes it worth less than its length suggests under §10.36.
04
The commonest structural gap in a practice: the reviewer has never operated the instrument whose output they are reviewing. Recording how that is bridged is the reasonable step §10.36 asks about.
§ 5Elsewhere
Where another instrument addresses the same obligation. These are correspondences, not comparisons — the Council does not rank one framework against another.
Clause 7.2 addresses competence as an organisational requirement: determining what is needed, ensuring people have it, and retaining the evidence. Section 10.35 addresses it as a personal condition of practising on a given matter.
Clause 5.2 concerns an organisational policy for AI, its content and its maintenance. Section 10.36 reaches the same artefact through a duty on the individual who oversees a firm's practice before the revenue authority.
A correspondence indicates that two instruments address the same underlying obligation. It is not a mapping endorsed by either body, not a statement that one satisfies the other, and not a judgement about which is more demanding.
§ 6When it applies
12 June 2014
Section 10.35 applicable from the publication of the current revision of Circular 230 (Rev. 6-2014). The competence standard is engagement-by-engagement, so it attaches to each matter taken on from that date rather than to the practitioner's admission.
§ 7Exposure
Censure, suspension or disbarment from practice before the Internal Revenue Service, and monetary penalties
Sanction under 31 U.S.C. 330(b) through Circular 230. Section 10.36 carries its own threshold: the individual with principal authority is subject to discipline where, through wilfulness, recklessness or gross incompetence, they do not take reasonable steps to ensure the firm has adequate procedures, or do not act to correct non-compliance they know of. That is a high bar and should be described as one; the exposure is to a pattern left unaddressed rather than to a single error.
§ 8Where this is assessed
Examined in 2 credentials, in the domains named on each card.
Responsible use and accountability · 15% of the paper
For finance and accounting professionals who use AI in analysis, close and reporting work — and verify the output before the numbers are relied on.
Governing AI use across the finance function · 20% of the paper
For senior finance and accounting professionals who set the terms on which AI is used across a finance function — and answer for the estimates, controls and disclosures it touches.
§ 9provenance
This page sets out what the instrument requires and what discharges it. The official text is the authority — these go straight to it.
§ 10Also read
Certification
What this page sets out is examined, on work the candidate has not seen, in the credentials beside it. Every paper is machine marked against its key and every result is reviewed and released by a named person, and every credential is on the public register.
AIAC-FNAF
Certified AI in Finance & Accounting, Fundamentals2 hours · remote, proctored · valid 2 years
AIAC-FNAP
Certified AI in Finance & Accounting, Professional2 hours · remote, proctored · valid 2 years
Ten questions on using AI at work. About two minutes, free. You finish as one of six types, with a card to share.
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A free quiz from the AI Assurance Council. Not a certification.