Guest Article | The New Light of Gen AI

Steve Cox weighs the risks and benefits of what Gen AI might mean for the future of accountancy.

As we quickly approach ChatGPT’s first anniversary on 30 November, it is clear that there is no single industry which hasn’t been impacted by Generative Artificial Intelligence (Gen AI). When it comes to the accounting world, AI has been deployed in the audit space for many years, bringing about digital transformation and ensuring fairness and accuracy in financial statements.

The recent acceleration in the use of Gen AI has compelled the rest of the industry to take notice and recognise the technology’s potential to rejuvenate their business practices. Indeed, according to the latest report by Forrester, the ‘Big Four’ are heavily pouring funds into AI, with KPMG joining PWC, Deloitte and EY in making multi-billion dollar investments.

However, even in this age of digital change, the accounting industry has been slow to embrace cloud technology. Compounded by the media attention focused on the negative aspects of AI, especially after the UK’s recent AI Summit, it’s no wonder many accountants remain wary. An industry cautious of change Despite the introduction of Making Tax Digital (MTD) and cloud-based solutions, only 20% of small and mid-sized enterprises (SMEs) describe themselves as tech-savvy and open to digital transformation. As a result, 80% stick to their more conventional methods. Significant AI adoption may take a while.

This challenge stems mainly from concerns about the shifts in tools and culture required for AI implementation, often coupled with the pressures that firms face in managing their existing workloads. Significant numbers of accountants have issues automating administrative tasks, in part due to budget constraints when it comes to making technological investments. If there is to be adoption of AI by the accountancy profession, it will be necessary to educate professionals and businesses on the benefits of such innovative technologies to bring about behavioural changes.

There’s also a common misconception that specialised knowledge is needed for the operation of AI-enhanced tools. Gartner recently highlighted one of the Gen AI risks as the need for competency, calling for a unique set of skills that must be sourced either through upskilling existing staff or hiring externally from start-ups.

Introducing new talent with AI skills is certainly beneficial to the overall business. However, most AI tools have already been integrated into office software, so more emphasis should be placed on the fact that AI doesn’t require strenuous training – no more than any other new software used in the accounting industry.

The implementation of technologies that eliminate manual processes and analyse essential insights from the financial data enables firms to alleviate employee burnout and to focus on strengthening partnerships with their clients. But it’s no surprise that some firms may have an initial apprehension of the new technology, given the financial costs associated with more sophisticated software, training and time spent on implementation.

There isn’t a single, immediate solution to the challenges that the accountancy industry faces in terms of its current talent and technology. This emphasises the need for a forward-thinking, long-term strategy. Discussions regarding the transition to cloud technology have been circulating in the accounting industry for over a decade, and debates about AI’s influence have been ongoing for more than five years. The challenge now is to transition from discussing the technology to effectively implementing it through a grounded strategic approach.

This approach not only future-proofs firms for the succeeding years but also enhances value proposition for clients. By nurturing a more profound relationship with clients and employing data-driven insights, firms can upsell or cross-sell their services more effectively, resulting in increased revenue from their existing client base. However, it’s also important to take an honest look at the risks and benefits of Gen AI to create a well-balanced roadmap for adoption.

Benefits of AI adoption

Discounting the initial hesitations, AI implementation promotes several advantages, primarily streamlining time-consuming and costly mundane tasks, which can effectively provide accountants with the precious commodity of time.

The adoption of AI technologies is already visible with the running of automated audits for a comprehensive view of operational and customer data. Audio transcription services eliminate the need for notetaking during client calls, while message-generation services produce content faster than ever possible.

It’s no secret that the accounting industry is grappling with a persistent talent shortage, causing professionals to be spread thin between routine compliance tasks and providing value-added services to clients. This staffing dilemma shows no signs of alleviation, with a 36% decrease in accounting applicants between 2021 and 2022.

To effectively navigate these challenges, accountants are slowly introducing AI tools to address their unique requirements, allowing them to efficiently prioritise their clients, business and time management. For example, AI-powered training tools can record speaking pitches, which the AI then reviews and provides feedback, addressing the talent shortage by upskilling accountants and preparing them for interviews and client pitches.

Introducing the idea of human-centric AI counters the concerns of ‘job replacement’ by offering a user experience aligned with traditional methods, while facilitating a natural progression into new capabilities. With AI-powered auditors, there is no need to spend extensive time sorting through samples; they can immediately dive into analysis and decision-making using insights generated by the platform.

We have also seen the use of AI-powered chatbots to foster learning and skills development among junior staff. AI further provides expertise on novel techniques to market practice or approach a new prospect. It allows accountants to integrate learning models into their systems to recognise new opportunities, such as identifying potential clients for advisory services through pattern matching and trend analysis.

Risks and pitfalls

Despite the seemingly glowing prospects, adopting AI is not without concerns. The main worry is that AI might replace jobs, but it is important to note AI technology is still in its infancy. Therefore, it can’t and shouldn’t be used to replace jobs. However, it is crucial to address the issue of trust. Notorious instances where Gen AI has provided false responses by hallucinating further fuel the hesitations. Attention to detail and accuracy are fundamental for accountants but Gen AI, with its ‘black box’ nature, can potentially stand in the way, making accountants apprehensive about AI integration.

In addition, accounting operates within a broad institutional framework, implying that regulators and standard setters also need to cultivate their proficiency in AI applications and develop a comfort level with the inherent risks. Without this institutional backing, implementing changes in areas such as auditing or financial reporting becomes impossible.

Therefore, the proactive participation of standard setters and regulators is pivotal. For instance, audit standards authorities should work with organisations to investigate where auditors apply these methods to collect evidence and evaluate the reliability of these techniques.

Finally, the most significant risk associated with AI is failing to educate accountants about the potential benefits of AI and teach them how to utilise the technology optimally. Unfortunately, many accountants lack the time to familiarise themselves with Gen AI, so they might not know the correct prompts to help with their tasks. The industry must invest more time and effort into training and cultivating technical skills to overcome this issue.

Firm steps forward

AI undoubtedly promises a new and improved way of doing business for accountants. Despite widespread hesitation, educational initiatives could help to progress the long-awaited AI revolution in the accounting industry. Hesitation and scepticism are not unusual reactions to change, but proper guidance and understanding will give way to readiness and anticipation for AI adoption.

More importantly, as the appetite for AI services increases, expertise in this technology is expected to become a necessity in the sector. In fact, the recent Thomson Reuter’s ‘Future of professionals report’ shows that just under 90% of tax professionals predict that AI training will be mandatory for practitioners within the next half-decade. Therefore, the real concern for today’s accountants isn’t whether AI is going to replace them but, actually, whether a client will replace them with an accountant using AI.

Accountants’ roles extend beyond pure analysis. They strategise and empathise, combining a deep understanding of nuances and a resilience that machines can’t emulate. However, the accounting profession is shifting towards trend spotting, data analysis and holistic business environment assessments. An accountant well-versed in AI is able to deliver more agile and modern services.

This shift in trend is not only recognised by the AI trail-blazing companies. Accountants who don’t get on board with the AI revolution will end up being left behind by the governments, too. We have seen multiple examples in Europe where AI and machine learning algorithms were used to detect fraudulent VAT tax activities. However, one theme is prevalent across these examples – accountancy cannot solely rely on basic detection algorithms but rather needs a combined effort that encompasses a human-centric approach.

The journey towards AI should not be hindered by apprehension or hearsay. Instead, we must recognise how AI redefines the concept of reasonable assurance and empowers accountancy teams to provide added value, entrusting data processing and number crunching to sophisticated computer algorithms. Failing to create a roadmap to AI could result in losing a critical advantage. The reality is that AI will not replace accounting professionals; however, those who harness AI’s capabilities will outperform those who don’t.

 

Author biography

Steve Cox is a Director of Business Intelligence at IRIS Software Group.

"As the appetite for AI services increases, expertise in this technology is expected to become a necessity in the sector. Therefore, the real concern for today’s accountants isn’t whether AI is going to replace them but, actually, whether a client will replace them with an accountant using AI."

Steve Cox, Director of Business Intelligence at IRIS Software Group.