How will AI impact the Accounting profession in the next 10 years?

 

Section 1: Introduction

This modern age is the era of rapid technological transformation and especially with the rise in artificial intelligence, technology is becoming an essential part of our daily life. We use technology to bring ease to our lives either from turning on Siri to play music to using google assistant without touching phone to navigate around. AI is simplifying these tasks even more and working as a better substitute brain to make things more efficient. AI is where revolutionary it is equally disruptive as it is fundamentally disturbing our traditional methods and processes. The field of accounting is no exception to the AI’s impact. Fields like content creation, and automation already felt the impact. We see YouTube automation, AI Chatbots for writing, and websites that can generate graphics with a prompt saving hours of hard work. Similarly finance and accounting industry is on the brink of this major transformation as AI is growing influence across all sectors. The reason every field is inclined to AI is because of unprecedented opportunities it provides for efficiency, accuracy, and innovation. In accounting AI can completely transform the processing of financial data that manually can take years, analyze and interpret the figures in a blink of eye. It can in intelligently perform human tasks with much more efficiency, and helps in making informed decision strategically for businesses.

This paper aims to provide the AI role in accounting, the growing influence, its current applications, advantages, challenges, and future trends in next 10 years. By examining these different aspects we tend to elucidate the transformative potential of AI in reshaping the centuries old and most established accounting profession. It further aim to prepare future accountants for the changed accounting landscape of technology-driven finance.

1.1 Artificial Intelligence (AI) and its Key Components:

AI is an ability of a machine to infer, perceive, and synthesize a piece of information and then perform the desired function with its own cognitive thinking mimicking a human mind (The Basic Components and Branches of Artificial Intelligence, 2023). AI encompasses several technologies that enable a machine to function as a human brain. Machine learning, that is a subset of AI, focuses on developing algorithms that learn from system and make decisions and predictions based on available data without any explicit programming. The chatgpt and other related AI Chat bots used Large Language Model (LLM) and Natural language processing (NLP) to gather data and facilitate communication between human and computers. There are other key components such as neural networks, deep learning, and computer vision, each contributing to the diverse capabilities of AI systems in accounting (C. Li et al., 2020).

Figure 1: Neural network system modelled on human brain. Source: slideshare.net.

Section 2: Current Applications of AI in Accounting

AI is reshaping the accounting and finance profession by automating tedious tasks. AI improves accuracy that is of prime importance in this field. It can skim through chunks of data and gather insights that can manually take weeks or months. A key application of AI however lies in its ability to automate repetitive tasks. Tedious processes like data entry and reconciliation can now be automated by AI.

 

Figure 2: How AI brings value. Source: PwC analysis

2.1 Data Entry Automation

Automate repetitive task is a super power of AI. Traditional data entry work requires time and concentration. It is tedious and hectic desk job that men are doing from long. Still, a small error can lead to a big loss if not properly proofread. This work of many can be automated using AI with a minimum chance of error. AI tools such as optical character recognition (OCR) and intelligent document processing (IDP) systems can scan a document in seconds and structure all the information in a document. These tools are extensively used to extract information from documents, invoices, and receipts.

Figure 3: How OCR works (Khandelwal, 2021)

Figure 4: IDP Overview (altexsoft)

2.2 Fraud Detection

It is another area in which the use of AI is invaluable and it is making significant strides. Frauds are common in finances and after the businesses started to shift online, it is becoming a common problem everyone faces now and then. AI can be a strong and formidable weapon against fighting frauds. AI algorithm can analyze and scan large volume of data and identify patterns, anomalies, and suspicious transactions. These odd patterns cannot be easily identified with human eye. For example, AI ability to detect unusual activities in spending patterns, transactions, and duplicate payment can save an accountant from falling victim to a fraud. AI can analyze large chunks of data and raise red flag if any unusual activity is identified   (Awoyemi et al., 2017).

Figure 5: Source PWC analysis

2.3 Data Analysis

Accounting and finance is similar to play the chess of data. You predict the next move of market and in turn gain financial benefits by making right move. AI helps in making such informed decisions in accounting by assisting accountants to structure data, analyze it, and gather useful information from it. AI-powered analytics tools can analyze complex datasets quickly and accurately without making an error. They can identify trends, patterns, and correlations that may not be seen through traditional analysis methods or with mere human eye. This capability can be leveraged by accountants to make more informed decisions and provide strategic advice to businesses (AI Is Playing a Crucial Role in Accounting and Finance, n.d.).

Figure 6: PWC analysis, Baldassarre, 2016 University of Bari, Italy

2.4 Accounting Firms and Businesses

The success of a business depends on its operational efficiency. AI in 10 years can fast process operations and streamline the processes in accounting firms and businesses with improved efficiency. For example Xero is a cloud-based accounting software that uses machine learning algorithms to automate invoicing, bank reconciliation, and financial reporting tasks. Another example is BlackLine, it is another AI-powered software that provide solutions for account reconciliation, journal entry management, and financial close automation.

Figure 7: Xero accounting software (Xero)

The benefits and influence of AI is not going to stop here. A research by AlKoheji et al (2022) examined the AI impact on accounting and state the potential areas getting affected in future. According to this study AI can improve accuracy, and increase productivity allowing accountants to handle more complex tasks effectively. AI is being used in predictive analytics for forecasting financial trends. These informed predictions helps in optimizing resource allocation. For example, AI algorithms can analyze historical financial data to predict future cash flows, sales trends, and investment opportunities.

Section 3: The Power of AI: Advantages and Benefits in Accounting

Artificial intelligence can offer numerous advantages in finance sector. The AI adoption in numerous sectors is evident of its potential and benefits.

3.1 Advantages:

• Improved Accuracy: AI reduces human errors in calculations. It can improve data entry process with and provide accurate financial reports and statements.
• Enhanced Efficiency: AI automates repetitive tasks, such as data entry and reconciliation. It can save time and allow accountants to focus their energies on more strategic activities.
• Cost-Effectiveness: AI reduces the need for manual labor. It lowers the operational costs for accounting firms and businesses and benefit them financially.
• Data Analysis: Human errors are unfortunate reality in accounting while AI can analyze large volumes of financial data quickly and accurately.
• Predictive Analytics: Machine learning algorithms can forecast future trends, meticulously extract details, and analyze patterns based on historical data. It reduce the fraud chances and make the process secure, helping businesses make proactive decisions and seize opportunities.

Examples:

IBM Watson offers AI-powered analytics solutions for accounting by providing a cognitive computing. It enables to analyze financial data and derive actionable insights in a fast and accurate way. Another example is KPMG's Ignite platform that uses AI to automate auditing processes. It used NLP, document ingestion, deep learning, and OCR to improve efficiency and accuracy (Marshall & Lambert, 2018; KPMG Ignite, n.d.). A study by Deloitte claimed that AI adoption in accounting can lead to a 50% reduction in time spent on data entry and reconciliation (Faggella, 2020).

3.2 Disadvantages:

While AI offers many advantages it comes with some disadvantages as well.

• Job Displacement and Reskilling Needs: A significant concern surrounding AI adoption is its potential to displace traditional jobs. With AI automates routine tasks the accounting positions such as data entry and bookkeeping might become obsolete. A recent study by (Manyika et al., 2017) suggests that up to 14% of accounting jobs could be automated by 2030.
• Dependency on Technology: Over-reliance on AI may lead to a lack of human oversight. While this has numerous benefits but in wrong hands it increase the risk of errors or fraud.
• Cost of Implementation: Implementing AI technologies can be expensive. It requires special skilled persons with years of research and organize their thoughts to establish a system. Such RND will be expensive especially for small businesses or accounting firms.
• Data Security and Privacy Concerns: There is an increased ethical concern with AI. Models such as NLP and LLM scrap data without the consent of user. AI in accounting necessitates the handling and storage of vast amounts of financial data that raises concerns regarding privacy and security.

Section 4: The Future of the Accounting Profession with AI

4.1 Shifting Skillsets for Accountants in the AI Era

Imagine a future PwC, a Big Four accounting firm, will use AI to automate 80% of its data entry tasks, freeing up its workforce to focus on analyzing vast financial datasets generated by AI tools instead of typing all day long on computers. As per a survey about 15% of accounting firms use AI. It is evident from current trends that AI will be widely adopted in future. AI will streamline routine tasks, freeing accountants to focus on higher-value activities such as making decisions. Data analysis skills will be crucial to interpret and utilize the vast amounts of data generated by AI tools and more jobs will be created in this domain. Critical thinking and problem-solving skills will be essential as these are the complex scenarios where human judgment is irreplaceable. Accountants will increasingly need strategic thinking and business acumen to provide valuable strategic advice to clients (Lazanis, 2023).

4.2 Transformation of the Accountant Role

Role of accountant will expected to be transformed from data processor to trusted advisor. This shift will pave a path to have AI-enabled accountant. It will be a professional who leverages AI tools to enhance work efficiency and provide analysis to clients. PwC is already leveraging AI to automate auditing tasks, allowing accountants to focus on more strategic activities requiring these skill (Dorland, 2024). Deloitte, for instance, is using AI to analyze financial data and identify trends.

4.3 Upskilling and Reskilling for the Future

The future of accounting demands a commitment to continuous learning and development both in academics and in professional world. To stay relevant in AI-powered future they need to actively upskill and reskill themselves. Training programs and certifications in data analytics that incorporate AI for accounting, and business acumen will be highly sought-after.

Section 5: Conclusion and Recommendation

The way AI is streamlining business, transforming traditional jobs, and increase use of Virtual Assistants and Chatbots, it can be confidently said that Artificial Intelligence (AI) in the accounting profession is set to bring about significant changes over the next decade. AI technologies such as machine learning, natural language processing, and data analytics, will change our working dynamics and how accounting tasks are performed. The future will revolve around increased efficiency, accuracy, and strategic insights. The ability of AI to automate regular arduous repetitive tasks and analyze large volumes of data quickly will help accountants a big time. These small tasks will probably be done by AI bots and accountants will focus their energies more on providing advisory services and strategic planning. This role shift will require academics and firms to equip accountants with new skills, including data analysis, critical thinking, and strategic decision-making, to remain competitive in the AI-driven landscape.

Recommendations

A technology comes with both challenges and oppurtunities. To prepare for future accounting profession it is important to keep an eye on how the big firms are filtering the candidates for jobs. What opportunities they are offering and creating. Accountants should prioritize continuous learning and development to acquire new skills especially data analysis, use of basis chatbots, and prompt engineering to stay abreast of advancements in AI and technology. Accountants should focus more on developing their advisory skills to provide value to a firm. A strategic guidance is always needed by clients and a human can better communicate it.

As AI adoption increases, it is equally important to consider ethical implications of AI in accounting as it is important to upskill in accounting. The future will thrive on AI-powered decision making but it will always require a human to push the button.

References:

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Li, C., Song, H., & Ming, F. (2020). Research on the Impact of Artificial intelligence technology on Accounting. Journal of Physics: Conference Series, 1486(3), 032042. https://doi.org/10.1088/1742-6596/1486/3/032042

Khandelwal, R. (2021, December 14). An introduction to optical character recognition for beginners. Medium. https://towardsdatascience.com/an-introduction-to-optical-character-recognition-for-beginners-14268c99d60

Awoyemi, J. O., Adetunmbi, A. O., & Oluwadare, S. A. (2017). Credit Card Fraud Detection Using Machine Learning Techniques: A Comparative analysis. IEEE. https://doi.org/10.1109/iccni.2017.8123782

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Marshall, T. E., & Lambert, S. L. (2018). Cloud-Based Intelligent Accounting Applications: Accounting task automation using IBM Watson Cognitive Computing. Journal of Emerging Technologies in Accounting, 15(1), 199–215. https://doi.org/10.2308/jeta-52095

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Faggella, D. (2020, April 3). AI in the Accounting Big Four – Comparing Deloitte, PwC, KPMG, and EY. Emerj Artificial Intelligence Research. https://emerj.com/ai-sector-overviews/ai-in-the-accounting-big-four-comparing-deloitte-pwc-kpmg-and-ey/#:~:text=The%20company%20claims%20that%20this,recently%20partnered%20with%20IBM%20Watson.

Manyika, J., Lund, S., Chui, M., Bughin, J., Woetzel, L., Batra, P., Ko, R., & Sanghvi, S. (2017). Jobs lost, jobs gained: What the future of work will mean for jobs, skills, and wages. In McKinsey & Company. https://www.mckinsey.com/featured-insights/future-of-work/jobs-lost-jobs-gained-what-the-future-of-work-will-mean-for-jobs-skills-and-wages

Lazanis, R. (2023, November 7). AI in Accounting: A Guide Written by Artificial Intelligence. Future Firm. https://futurefirm.co/ai-in-accounting/

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