September 14, 2023

AI and the Future of Accounting: Balancing Potential with Caution

Compliance and Risk Management


Minutes to read

As we navigate the continuous waves of technological innovation, Artificial Intelligence (AI) is transforming various industries, and accounting is no exception. By automating tasks, AI could promise a future of efficiency and accuracy in accounting.

However, it's not all positive right now. There are challenges and shortcomings to recognize within this technology.

Accountants often manage a mountain of data. From balance sheets to income statements, they dive deep into numbers, making sure everything adds up correctly. Enter AI.

The technology streamlines processes, automates tasks, and eradicates human errors. It's like an accountant's dream come true. But can AI replace human accountants? To answer this, we need to remember the CPA exam.

AI systems attempted the CPA exam and failed, sparking debate on the capacity of the technology to understand and apply complex accounting principles.

Since the original failure, ChatGPT V. 4.0 passed the CPA exam.

It’s important to note that the original failure underlines AI's limitation: it lacks human qualities like judgment, ethics, and intuitive decision-making – all key skills of a proficient accountant.

No matter how powerful AI becomes, it can't emulate these human-centric attributes. Therefore, AI won't replace accountants, but it can be a robust tool for them.

How Can AI Help Accountants?

AI holds immense potential in predictive analysis. By studying patterns and trends, AI can offer future financial forecasts, helping businesses make informed decisions. Accountants, therefore, can focus more on strategy, planning, and advising clients.

AI can automate routine tasks such as data entry, reconciliation, and preliminary analysis. This saves time and reduces the chance of human error, enhancing accuracy and efficiency. AI's ability to handle massive datasets also provides more profound insights, aiding in predictive analysis and strategic decision-making.

AI-powered tools can be a game-changer in auditing and risk management by detecting anomalies and fraudulent activities more accurately than traditional methods.

AI can also assist in tax preparation, interpreting tax laws, and identifying potential deductions, simplifying the complex tax filing process.

How Can AI Hurt Accounting?

For one, implementing AI requires a significant upfront investment, which could be a barrier for smaller firms and businesses. Additionally, there's the challenge of integrating AI into existing systems, which can be complex and daunting.

There's also a concern about AI data security. Accounting involves handling sensitive financial information. As AI systems become more involved, the threat of data breaches could increase, necessitating robust security measures.

Lastly, the introduction of AI could lead to job displacement. While AI will not replace accountants entirely, it could reduce the need for entry-level positions, leading to fewer opportunities for newcomers in the field.

Brighter Future for AI Than the Present

AI's impact on accounting is a mixed bag of promise and pitfalls. It offers an exciting future with greater efficiency and data-driven insights but also introduces challenges around integration, data security, and job displacement.

Despite the current limitations and potential drawbacks, accountants could see a brighter future with AI. As the technology evolves, AI will become more sophisticated and reliable.

It will not replace accountants but empower them, transforming their roles from number-crunchers to strategic advisors.

As the industry moves forward, it needs to strike a balance between harnessing AI's potential and addressing its limitations. The future is not just about AI; it's about accountants with AI.

A Surprising Twist

In a twist of events, this very blog you're reading was written by AI. This lends an intriguing dynamic to our exploration of the future of AI in accounting.

AI’s perspective likely carries a certain bias towards the possibilities and benefits of its role in the field.

So, instead of taking AI’s word for it, let’s hear from real-life experts working in the accounting field.

Expert Opinions

First up, Mike Molloy – Principal on our Workiva Implementation Services Team.

“As a leader on our Workiva Implementation Services Team, I firmly believe that generative AI will play a transformative role in the world of finance, accounting, and ESG reporting in the near future,” says Molloy. “While AI won't replace jobs anytime soon, it has the potential to revolutionize how we work and the tasks we perform.”

“While AI won't replace jobs anytime soon, it has the potential to revolutionize how we work and the tasks we perform.”

Molloy believes ESG and Financial Reporting teams should consider internal uses for generative AI initially, such as preparing first drafts of earnings announcements or annual corporate sustainability reports, where errors are less likely to significantly impact the organization's reputation.

“It’s essential to have subject matter experts review AI-generated responses to ensure accuracy and maintain the quality of the final output.”

Molloy continues by noting that implementing generative AI tools will require some caution and oversight, as these tools are still evolving and may sometimes produce unexpected or incorrect outputs.

“However, some of this risk can be mitigated by leveraging generative AI features that are being rolled out as part of well-established accounting and financial SaaS solutions.”

“In the long run, generative AI will continue to expand its capabilities and become more valuable to finance and accounting teams as it becomes better trained with domain-specific data,” Molloy concludes. “While AI may replace some basic manual tasks, it will ultimately create new job opportunities for those who know how to work effectively with AI and interpret its output.”

Next up, Sean Feeley, CPA – Manager on our Business Development Team.

“It’s important for entry-level accountants to learn the effectiveness of AI,” says Feeley. “However, the importance of learning and understanding the AI output will prove to be of more valuable as their career progresses.”

Feeley notes that without the foundational knowledge, there would be no way to validate, utilize the AI data, or make informed decisions based on its results.

Feeley also states that automation and increased efficiency can have importance at all levels of business.

“The world’s forever changing, and the importance of staying up to date with new technologies and advancements ensures operational efficiency at all levels of business and that you’re reaching your highest potential.”

“I believe AI can prove to be most helpful when dealing with data accuracy and technical accounting standards. Having the ability to limit manual data entry and calculations and automate workstreams will allow for more efficient and reliable reporting,” Feeley continues.

“Also, the ability to use AI for technical accounting efforts related to new standard reporting, GAAP vs. IFRS reporting, or the ability to draft company memos and policies based on new adoptions would prove to be both efficient and accurate,” Feeley concludes.

Looking at the opinions of AI and experts in the accounting field, AI promises to be a transformative tool. It’s likely to be woven into the accounting field, revolutionizing traditional practices and opening doors to new possibilities.

But at the end of the day, the human touch still counts. It's not about accountants versus AI. It's about accountants and AI working together to reshape the future of accounting.

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