The Rise of Artificial Intelligence in Accounting and Finance

Artificial intelligence is now stronger, faster, and more efficient than ever. AI-powered software holds the power to transform the accounting and finance industries, with companies investing large sums of retained earnings in AI-driven automation that may save businesses up to $3 billion annually in costs, according to a report from PwC; however, controversy arises about its ethical, moral, and reliability hazards that concern complex tasks and the future roles of professionals in these sectors. 

AI Applications in Accounting and Finance

1. Automation and Tax Compliance: The accounting industry has long embraced technological advancements to improve efficiency. For example, QuickBooks, TurboTax, Xero, and several other firms automate their bookkeeping, tax preparation, and data entry services, reducing the time and effort previously held expected. Furthermore, AI-powered tax software has also helped businesses and individuals optimize their tax filings via automated deduction identification, ensuring compliance with ever-changing regulations.

   
   

2. Risk Analysis: AI can scan financial records in seconds and uncover discrepancies that may indicate fraud and malicious activity. For example, major firms such as PwC and KPMG have adopted AI-powered tools to strengthen their fraud detection and risk management. The self-learning AI-powered tool PwC developed is GL.ai, which analyzes general ledger data and can learn after analysis. So far, this has been proven successful- improving audit quality and efficiency. Additionally, KPMG adopted an initiative that leverages AI to deliver solutions to clients that may have been otherwise costly for their clients.

3. Investment and Financial Forecasting: Major firms have also increasingly used AI to predict market trends and assess investment risks. BlackRock, the world’s largest asset management firm, has integrated AI into its advanced investment management and risk analytics platform, Aladdin, which manages over $20 trillion in assets worldwide. Aladdin uses AI to analyze data sets/outcomes for investments, simulate various investment scenarios (e.g., different market conditions), and use these algorithms to optimize portfolio performance.

However, it’s crucial to be aware of potential problems that may arise. As beneficial as AI is for firms, it may not benefit the general public. AI can displace jobs for entry-level roles, attain biased decision-making (e.g., credibility for a loan), hold risks concerning data breaches and computerized threats, and its dependence on high-quality data. 

Lower-skilled workers, especially those coming out of college, may struggle to find work in their relevant sectors, which could, in turn, increase unemployment rates. Furthermore, who will be held accountable if an AI tool makes a harmful decision that results in losses? AI is a new sector, so its moral and legal risks must be addressed. For the time being, it’s essential for the firms utilizing AI to be very modest and concerned about these practices. Given these challenges, business students must adapt by developing expertise in AI-driven tools. To remain competitive in the job market, it’s essential to understand how AI functions and influences financial decisions. This can be achieved through AI workshops, online courses, certificates, research, and, most importantly, practice! Large Language Models (LLM), such as Chat GPT or Bard, can be a fantastic starting point for exploring and understanding AI.

So, while AI presents opportunities and efficiency, it’s crucial to responsibly navigate its ethical, legal, and workforce challenges to ensure sustainable sector growth.