SOME people are frightened of artificial intelligence or AI. They may imagine situations portrayed in various movies or even in some episodes of Black Mirror wherein AI would be sentient and would take over the world. However, most of us are actually using AI in our daily lives such as Netflix giving you a recommended show to watch, or Grab connecting you to nearby drivers. With rapid developments in AI, businesses must be able to adapt and take advantage of the benefits of AI in order to stay relevant. Businesses that do not embrace AI may be faced with the risk of getting replaced by other businesses in the future.
Use of AI in accounting and audit
So how can we adopt AI in the field of accounting and auditing? One of the major tasks being performed by a certified public accountant (CPA) is data entry. We spend a lot of our time encoding financial data into accounting systems or audit working papers. With the use of AI technologies, such as optical character recognition (OCR) and robotic process automation, we can automate certain accounting and auditing processes, thereby allowing us to focus on tasks requiring professional judgment and providing business insights to our clients. Furthermore, the use of automation will help address the labor shortage that most companies and accounting firms are facing. An example is the use of OCR to automatically capture important details needed for the preparation of journal entries or audit working papers by simply scanning or taking a photo of the supporting document.
AI can also help CPAs perform better and more efficient audits, and other engagements for their clients. The use of AI, such as data analytics, can help CPAs identify better the areas with larger risks of material misstatements. As such, the CPA can focus on these areas in the conduct of their audits. Furthermore, the CPA, with the use of AI, can analyze the entire population of data, instead of testing only a sample of data, which can help the CPA reduce the audit risk to a sufficiently low level and perform a highly effective audit.
The use of AI in data analytics will also allow businesses and their auditors to anticipate potential problems and be prepared with solutions to those problems through the use of predictive data analytics. The use of AI may help predict trends in prices and allow the organization to enter into a hedge to mitigate the risks of rising prices. The use of AI may also assist in the identification of internal control deficiencies that may give rise to fraud in the future.
Confidentiality of information when using AI
Recently, OpenAI, the creator of ChatGPT, is being sued for allegedly stealing personal information to train its AI models. We also often hear people getting their Facebook accounts hacked or having their money in an online bank account getting stolen. Use of technology is not without risks and one of the major risks faced when using AI is the risk of security breach. As part of our work, we will be given access to highly confidential information.
When we use AI in the performance of our work, we need to be careful in order to protect confidential information. Before purchasing or using third-party software, we must first check if the information will be secured and that such information will not be leaked. For example, when we use OCR to automatically capture data from supporting documents, we must find out if the data will be stored and used by another organization.
When a client's confidential information is leaked due to improper use of AI in the conduct of a CPA's work, it will be very difficult to rebuild the trust that clients have in the CPA profession.
Will AI replace CPAs?
Even though AI is a powerful tool that we can leverage and may take over many of the tasks being performed by CPAs, it will not be a substitute for CPAs at the moment. Professional judgment is a big part of the accountant's role and current AI technology lacks the ability to exercise such professional judgment. CPAs will still have to interpret and explain the information to their clients and provide valuable business and practical insights, understand the needs of the client and empathize with them.
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Alger Tang is the co-chairman of the Acpapp Academy and is a partner of EJM and Associates and a faculty member of Chiang Kai Shek College. The views and opinions in the article are the author's and do not represent those of these institutions.
