Artificial intelligence (AI) is slowly reshaping the landscape of the accountancy profession and accounting industry. AI pushes accountants to embrace a more strategic and data-driven role in business management, rather than the traditional routine and mundane tasks.
Though AI poses a threat to job security in other fields, accounting professionals have nothing to worry about because AI—no matter how intelligent it gets—can’t replace the human element of providing accounting, advisory, and assurance services. It cannot beat the years of real-life experience that an accountant possesses in dealing with clients, handling transactions, and solving accounting issues.
AI Trends in Accounting
The rise of AI created a lot of mixed views among accounting professionals. Some saw AI as a tool to eliminate repetitive tasks, while others grew concerned about data privacy.
Here are some AI trends that continue to redefine the accounting profession.
Focusing on Strategy Over Routine
Accounting is the process of data gathering, reorganization, analysis, and presentation. With AI, accountants can reduce the time needed to gather and reorganize data and focus more on analysis.
Here’s how the Big 4 accounting firms are using AI to their advantage:
- Ernst & Young (EY) is integrating AI into its auditing processes by using machine learning to perform advanced pattern recognition and utilize the brain power of AI to convert unstructured data (e.g., contracts and invoices) to structured data (e.g., data presented in tabular form).
- PricewaterhouseCoopers (PwC) uses generative AI to boost productivity, especially in developing IT systems.
- Deloitte uses the power of AI to automate document review and improve existing workflows, allowing professionals to extract information from documents and recognize patterns.
- KPMG uses AI to develop customized client solutions while being ethical, client-driven, and value-driven.
Redefining the Accountant’s Job Description
Companies that embrace AI in their processes can expect accountants to shift to a more active role in sharing accounting expertise and advisory, rather than being stuck on mundane tasks. This is because they will have more time to analyze data and evaluate business performance with the help of AI and its data analysis capabilities.
| Role | Eliminated or Reduced by AI | Enhanced by AI | Made Possible by AI |
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| Data Entry |
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| Financial Reporting |
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| Tax |
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| Audit |
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| Budgeting |
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Will AI Replace Accountants?
No, AI won’t replace accountants. Rather, accountants with expertise in generative AI and machine learning will have a significant advantage over those without it. The accountancy profession is constantly evolving and has stood the test of time since the 13th century. Since then, accounting has evolved from merely bookkeeping to something more profound and valuable for businesses.
With AI, accountants can expect processes to be more streamlined and efficient. They can also expect a reduction in manual processes and faster information processing, which would usually require hours of manual work.
Using AI in Accounting
AI has a lot of potential in accounting. It can be an assistant that can perform mundane and repetitive tasks or a research aid that can perform advanced calculations and dig deeper into large data sets easily.
1. Automating Processes
AI can help accountants automate and simplify processes. For example, if you copy-paste bank statement information into an AI tool like ChatGPT, the tool can convert the data into a structured format that you can paste into Excel.
Moreover, AI can write emails for sending invoices or payment reminders, which can help save time. Let’s look at an example of how ChatGPT
Here’s ChatGPT’s response:
Advanced Techniques for Process Automation Using AI
Aside from making emails, AI can do the following:
- Perform intelligent document processing by using optical character recognition and natural language processing to extract, process, and match information from contracts, invoices, and other documents
- Create automated dynamic pricing systems that use market conditions, competitor pricing, and consumer behavior to adjust prices in real-time
- Automate dynamic expense categorization that uses machine learning to match similar expenses based on past transactions
- Conduct audit trail analysis to spot anomalies and discrepancies without manual intervention
- Perform risk assessment that informs users of internal and external risks and helps users create mitigation strategies
2. Detecting Fraud
Accountants can use AI’s power to detect fraud and prevent fraudsters from stealing the company’s data. To illustrate, we asked ChatGPT to inspect an email that we suspect is fraudulent.
Here’s what ChatGPT came back with:
Though ChatGPT didn’t conclude that the email was fraudulent, it gave convincing insights that the email was highly suspicious. In the workplace, these kinds of insights can help accountants make individual decisions on their own, which could improve productivity and efficiency at work.
Advanced Methods for Fraud Detection Using AI
Beyond inspecting suspicious emails, AI can offer a wide range of capabilities. But as fraud becomes complex, fraud detection via AI also becomes complex as it involves creating custom AI-enabled or AI-powered solutions that can detect fraud, such as:
- Anomaly detection: AI can detect anomalies in large data sets through machine learning. It uses machine learning to understand the structure and pattern of the data, which enables it to detect unusual patterns as they occur.
- For example, the company usually spends $500 to $1,500 using the company credit card. AI may flag a transaction as fraudulent if the transaction amount is $2,000.
- Predictive modeling: Through machine learning, AI can recognize patterns and trends based on past data and create a specific set of criteria that it predicts as fraud.
- Let’s assume that in the past, AI has learned that purchases above $500 made from 1 a.m. to 3 a.m. are usually fraudulent. Based on these criteria, a purchase amounting to $501 made at 1:01 a.m. will be flagged as fraudulent.
- Behavioral analysis: AI can analyze and monitor behavioral patterns based on several data points like dates, times, time spent, actions, etc.
- Say the company’s CFO logged in to the company’s system at 11:50 p.m., which is already outside working hours. AI can detect this unusual login time but may not potentially flag it as fraudulent. However, if the CFO withdraws a large amount of money outside working hours, AI can flag this transaction as fraudulent and alert another employee about this unauthorized withdrawal.
3. Analyzing Financial Statements & Information
Analyzing financial statements and information requires a lot of calculations. It can be done using Excel, but the accountant will still need to enter formulas manually for financial ratio analysis and other statistical modeling or calculations. But with AI, you can skip the manual calculations. Whether you want a DuPont or correlation analysis, AI can do it in less than a minute.
To illustrate, here’s a sample income statement. We’ll ask ChatGPT to perform cost-volume-profit and trend analysis.
| 2021 (USD) | 2022 (USD) | 2023 (USD) | |
|---|---|---|---|
| Revenue: | |||
| Sales Revenue | 2,000,000 | 2,500,000 | 2,800,000 |
| Other Income | 50,000 | 60,000 | 70,000 |
| Total Revenue | 2,050,000 | 2,560,000 | 2,870,000 |
| Expenses: | |||
| Cost of Goods Sold (COGS) | (1,200,000) | (1,450,000) | (1,650,000) |
| Selling, General & Administrative Expenses | (400,000) | (450,000) | (500,000) |
| Depreciation and Amortization | (100,000) | (110,000) | (120,000) |
| Interest Expense | (20,000) | (25,000) | (30,000) |
| Total Expenses | (1,720,000) | (2,035,000) | (2,300,000) |
| Net Operating Income | 330,000 | 525,000 | 570,000 |
| Other Comprehensive Income: | |||
| Unrealized Gains (Losses) on Investments | 10,000 | (5,000) | 15,000 |
| Foreign Currency Translation Adjustments | 5,000 | 7,000 | (10,000) |
| Total Other Comprehensive Income | 15,000 | 2,000 | 5,000 |
| Comprehensive Income | 345,000 | 527,000 | 575,000 |
This is what ChatGPT responded with:
In my opinion, ChatGPT’s analysis above is too generalized. So, when you ask AI tools to analyze data for you, take it with a grain of salt. It’s good to have these quick insights, but I highly recommend you do a deep dive into data based on ChatGPT’s findings.
However, since AI tools like ChatGPT are relatively new, it’s expected that they won’t provide the best and most accurate answer to your questions, which is why consulting an experienced accountant can provide you with a richer analysis. AI tools still need a lot of development before they can produce human-like analysis.
4. Cleaning & Summarizing Data
Another use of AI is summarizing and cleaning data—and these two tasks are time-consuming if performed manually. With AI, you can organize data into a machine-readable format or present it in a clean manner.
Let’s look at the messy budget below as an example.
It would take a couple of minutes for an expert Excel user to clean the data above, whereas ChatGPT can fix this budget in just a few seconds. Let’s also ask ChatGPT to summarize the budget for users with little knowledge of accounting.
Here’s ChatGPT’s response:
In my opinion, ChatGPT’s ability to clean and summarize data is a big help for accountants. It saves them from hours of data cleaning that could’ve been used for more important tasks, such as data analysis and problem-solving.
5. Using Quantitative Techniques
Accountants engaged in advisory services often dip their toes in statistics and probability to provide forecasts and estimates to clients. With the help of AI, accountants can easily create statistical models and analyze large datasets. AI enhances the accuracy and efficiency of complex calculations, enabling accountants to focus more on interpreting information and relaying these insights to clients.
To illustrate, we’ll ask ChatGPT to help us decide how to allocate scarce resources.
“We produce two products, Anemo and Hydro. Anemo requires one hour of baking and three hours of finishing, while Hydro needs four hours of baking and two hours of finishing. We have a weekly capacity of 1,600 hours for baking and 2,400 hours for finishing. The market demand for each product is 20,000 units. The contribution margin is $25 per unit for Anemo and $22 per unit for Hydro. By using linear programming, how many units of Anemo and Hydro should we produce to get the highest contribution margin?”
This is what ChatGPT came back with:
If I were to advise the client based on the calculations above, I would recommend allocating more resources to Anemo than Hydro. Additionally, considering that the total production capacity is limited to 880 units (640 Anemo units + 240 Hydro units) against a market demand of 20,000 units, I would advise the client to invest in additional ovens and finishers to significantly scale up production capacity and better meet the substantial market demand.
If we were to compute that manually, it would require the use of logarithmic functions and the rules of inequality. Not all accountants are mathematicians, and it would take time to do these calculations by hand. But with AI, accountants can skip the math and jump straight to analysis where their forte lies.
Frequently Asked Questions (FAQs)
How is AI being used in accounting?
Accountants are using AI to reduce or eliminate repetitive and manual tasks, such as transaction data entry, expense categorization, invoice matching, and data processing.
Is AI replacing accountants?
No, and AI will never replace accountants. As a matter of fact, AI will make the work of accountants lighter and more efficient. With the help of AI in calculations, accountants can focus more on analysis and strategy.
Which Big 4 accounting firms are using AI?
All Big 4 accounting firms (EY, PwC, KPMG, and Deloitte) are using AI and have invested in using AI-assisted solutions.
What type of AI is best for accounting and finance?
Machine learning is the most suitable type of AI for accounting and finance because it gets smarter the more it learns from past data. With enough information, it mimics the human brain by using algorithms to predict behaviors and patterns.
Bottom Line
AI is a disruptive technology that revolutionized how businesses and accountants work. Through AI, accountants can now focus more on strategy and analysis and let AI do the grunt work for them. It also enables accountants to perform complex calculations easily and provide the best service to their clients.
