Revolutionising Finance: How AI is Transforming Accountancy Firms

20 Nov 2023
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ChatGPT is the brainchild of the artificial intelligence research company OpenAI. When ChatGPT launched in November 2022, it revolutionised the technology world overnight. Industries started embracing it, from healthcare to finance. An EY study has found that 84% of CEOs and business leaders in the US see AI as an essential driver of their companies’ success.

This article looks at how accounting firms are applying AI to their business processes. We explore both the benefits and limitations.

How is AI used in accountancy firms?
Accountancy firms are turning to automation to streamline manual processes. This includes gathering signatures, routing, analytics, data entry, reconciliations, and financial reporting. Automation eliminates repetitive tasks and automates steps in areas such as bookkeeping and tax preparation. Staff members can shift their focus towards value-added work and concentrate on strategic elements like financial analysis, forecasting, and decision-making.

Modern technology is helping the accounting sector evolve. From automating administrative tasks to analysing complex data, accounting firms are using AI to stay ahead of the competition. AI helps different areas of accounting, including data analysis, financial forecasting, and detecting fraud.

AI can perform complex calculations. It can also process large amounts of data and identify patterns, trends, anomalies, and outliers. Tasks such as auditing, tax preparation, and compliance can be improved.

AI can use historical data and external factors to predict future outcomes. It can adjust forecasts based on real-time data and feedback. Tasks such as budgeting, planning, cash flow management, and risk assessment can become easier.

A growing area in the world of finance is fraud. Here, AI has real benefits; it can detect and prevent fraud by analysing transactions and behaviours. This means that accountants and auditors can be alerted to suspicious or unusual activities. This is beneficial for tasks including forensic accounting, internal control, and assurance.

AI in auditing
Accounting firms with an auditing function or department may benefit from a more comprehensive and efficient audit process with AI in their toolkit.

AI can assist in auditing processes. There are different uses of AI in auditing. One such use is gaining greater insight from data. AI can analyse vast datasets quickly and accurately, identifying unusual patterns or anomalies that may indicate fraud, errors, or non-compliance. AI can also perform advanced statistical analysis to assess risk and prioritise audit tasks.

AI in tax
The Thomson Reuters ChatGPT and Generative AI survey conducted in May 2023, found that 73% of tax professionals acknowledge the tech can be used for tax, accounting, and audit work, yet only about half think that it should be.

ChatGPT has been trained on the US tax code, and it can answer complex tax questions in a matter of seconds. Its answers aren’t always correct and could mislead people. There are expectations that ChatGPT’s performance will improve as it learns.

A main objection by tax professionals to using ChatGPT currently is that, while it may be useful for tax research, it struggles with complex tax questions. They have pointed out that tax rules are not black-and-white. Often, tax work takes place in the grey areas, where human interpretation is required.

It is only a matter of time before accountancy firms and tax departments include ChatGPT and generative AI skills as a job requirement for new hires.

AI and the Big Four
The accounting and finance industry is adapting to AI to get ahead of its competition. The Big Four accounting firms of Deloitte, PwC, KPMG, and EY are embracing AI with artificial intelligence initiatives. They are investing in them for long-term gains.

AI at Deloitte
A Deloitte article broke down AI technologies into three categories. This included 'product', where AI is embedded into the product or service to provide end-customer benefits. 'Process', whereby AI technology is streamlined into daily workflow to automate and increase productivity. Finally, ‘insight’ where AI makes informed and strategic decisions to provide targeted advice to a company. Deloitte’s AI-related initiatives seem to fall into the ‘process’ and 'insight' categories. In June 2020, Deloitte launched an AI research centre, integrating AI into its offerings to support client transformations.

AI and PwC
In April 2023, it was reported that PwC dedicated $1 billion to expand AI capabilities. This includes accessing ChatGPT maker OpenAI’s language model and training staff in AI capabilities. PwC will develop and embed generative AI into its technology stack and client-services platforms. It is also believed that the Big Four firm will also advise other companies on how to use generative AI.

AI and KPMG
This Big Four firm is using AI to spot trends, predict outcomes, and analyse huge volumes of data. In July 2023, KPMG announced they were entering a landmark agreement with Microsoft to put AI at the forefront of professional services. The industry-leading collaboration between the two includes a KPMG multibillion-dollar commitment to Microsoft Cloud and AI services over the next five years. It is expected that it will help unlock a potential incremental growth opportunity for KPMG of over US$12 billion.

EY and AI
EY has launched EY.ai, a unifying platform that brings together human capabilities and artificial intelligence. EY has also developed a large language model called EYQ, a conversational AI assistant that helps EY people harness the power of natural language processing (NLP). The firm has invested $1.4 billion in AI strategy, tools, and training. The investment covers areas such as data and analytics, intelligent automation, computer vision, machine learning, and generative AI. They plan to train all their employees on workplace AI. 

Problems with AI
AI systems today are powerful and are improving all the time. They provide outputs that can be accurate, replacing and, sometimes, superseding human endeavours. As of yet, they do not replicate human intelligence.

There are data limitations. While this is seldom an issue for large accountancy practices, smaller accounting firms may collect insufficient amounts of data to build models around some areas for analysis. For small accountancy practices collecting and housing data can be expensive and time-consuming. It might mean the integration of new systems and the establishment of key processes.

The future of AI in accounting firms
It is impossible to predict the extent to which AI will replace human decision-making over the coming decades. There is much more to be debated about security as well as ethics. Economic, social, and political factors also contribute to the future of AI. Future AI technology will also be different from what we see today. As a result, accountancy firms need to take a flexible approach when thinking about how AI will work in the future.

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