AI Application in Small CPA Firms

AI Application in Small CPA Firms Students Name Institutional Affiliation ABSTRACT Artificial intelligence has been hailed as an integral part of what has been called the “The Fourth Industrial Revolution.” It has continuously replaced jobs in the service sector with computers. It is on the cusp of revolutionizing the finance and accounting sector.it is a trend of the future in accounting and finance firms. This research proposal is going to look at how artificial intelligence has impacted accounting and finance. Its main focus will be how the big four audit firms have utilized artificial intelligence to improve their efficiency. It will look at the tools used by the audit firms and the areas of future development. It will also explore on how AI can further be utilized by the big four and other firms in the accounting and finance sectors to greatly improve and save time as well as resources. Managers will be able to know the implications of incorporating artificial intelligence in their firms, (Kokina, 2017). INTRODUCTION Background Most people’s understanding of artificial intelligence (AI) is a future whereby most of the world’s important jobs will be taken over by robots. Jobs across all the sectors like medicine, law, engineering, accounting and finance will be done by machines in a machine-intensive world signaling the end of a vast majority of jobs as known today. Many organizations however, don’t really understand the true meaning of artificial intelligence and how they can tap into this development to ensure enormous benefits for them. The misconception that artificial intelligence will take over all the jobs is not true as it can be used to empower existing professionals instead of removing them from their jobs. This is especially true for specialist professionals, (Mehr, 2017). The accounting and finance field is one of the sectors that will be greatly affected by AI. There is indeed fear in some accountants that by around 2025 there services will be rendered redundant as artificial intelligence will be able to perform the tasks they are paid to do. Furthermore, artificial intelligence will bring automation to the accounting sector the accountants who will be still under employment will be forced to adapt to their evolved roles in order to keep in pace with the changes in the workplace. Artificial intelligence should be welcomed as it will significantly reduce errors, save time as well as aid in compliance with the rules and regulation governing the profession, (Omoteso, 2012). Ai will also impact the finances of audit firms as it will greatly reduce its workforce. This will lead to the shrinking of the organizations’ payroll and hence save them money which would have been used in hiring new accountants. A top executive in EY, one of the big four audit firms, estimates that by 2020 that graduate recruitment will reduce by half due to the adoption of artificial intelligence in audit firms. This will have a negative impact on employment as accounting and audit firms are among the biggest recruiters of graduates in the world. These graduates will be forced to look for other industries to start their careers. Technology will replace their jobs. Artificial intelligence and automation will reduce the number of employees required to perform low- level paperwork in the audit and accounting firms, (Omoteso, 2012). Artificial intelligence, if properly utilized can prove to be a revolution in the auditing sector. It can be used by big audit firms as well as small businesses to improve their work. AI can be used to perform tasks more accurately and faster than human beings. It can be used in detecting anomalies as well as in the recognition of complex patterns in huge volumes of data making the audit process easier. For instance, Pricewaterhousecoopers (PwC) has developed GL.ai, a tool which they use in the detection of anomalies in a general ledger. The use of artificial intelligence in auditing will leave professionals with no option but evolve with the changing world. Those who don’t evolve risk being left out in this dynamic industry. They will have to be innovative to survive in the industry or be rendered out of business by the innovative. Algorithms in AI can detect errors and anomalies which would be difficult for humans to identify. The auditors will be left with the easier task of directing their efforts to the risks. This will improve the quality of their work as they will be able to present a deeper insight to the benefit of the stakeholders of a business. Statement of the Problem Artificial intelligence is at its infancy in adoption to accounting and finance. There is a debate if it should be embraced all shunned. Its proponents argue that it makes accounting faster, more efficient and reduces errors. However, its people opposing it have the fear that it will rob accountants of their jobs. Purpose of Study My purpose of study is to understand how AI’s application supports accounting and finance in corporations. I will research on how the big four audit firms use artificial intelligence in their practices. I will also explore if small companies can use artificial intelligence when developing their businesses. Specific Research Questions 1 How can artificial intelligence be integrated into accounting and finance in corporations? 2 How will artificial intelligence change the accounting industry? 3 What are the benefits or drawbacks of artificial intelligence in accounting? BODY Finance and accounting hadn’t witnessed robust changes in the past a hundred years except the use of computers. Artificial intelligence however has brought new capabilities and abilities enabling the accounting and finance industry embrace change. Previously accounting and audit firms used to prefer human beings for the processing of data. Nowadays, they are looking into tapping into technology and using AI to perform tasks. This has been made possible because of the numerous advantages of using artificial intelligence. Using artificial intelligence, it is now possible to analyze data and get complex conclusions that humans would normally have overlooked. Secondly, AI can process data in higher speeds than humans hence saving time and human resources. Furthermore, artificial intelligence significantly reduces or even eliminates errors that would have passed undetected by humans. This is made possible because it relies on programs and codes to perform its tasks, (Haddara, 2018). The big four audit firms use various approaches to using artificial intelligence. Natural Language Processing (NLP) for Document Review This is an area of artificial intelligence which is utilized by the audit firms in processing large volumes of data. It greatly enhances auditing as it enables the analysis of unstructured data. A vast majority of data encountered by the big four audit firms is in unstructured format which include emails, contracts as well as PDFs. Structured data like ledgers can easily be analyzed using data and analytics as well as automated capabilities. On the other hand, unstructured data presents a challenge as it cannot be analyzed using the said tools. Natural language processing has come in handy in processing these types of documents. NLP is used in analyzing the accuracy of these documents as well as reading emails, (Haddara, 2018). KPMG utilizes intelligent machine’s processing power, using correlation theory in extracting data from unstructured sources. The auditor using this tool instructs the technology on what to search for in the document. The tool then looks for the information using optical character recognition technology. This application searches for the instructed information in millions of documents faster compared to the time it would take an auditor in performing the same task. KPMG further combines NLP with robotic process automation (RPA) to even greater efficiencies. For example, in the United States KPMG uses this to analyze revenue and purchase transactions. This enables helps the auditor in decision making about risk areas as well as identifying potential outliers and exceptions. To verify the relevance of and reliability of the data the auditor has the simpler task of examining the source document. NLP creates files in a digital format for comparison with the records of transaction after reading the unstructured files. It does perform these procedures in high speed and effectively saving the auditor’s time. The auditor is able to focus most of his/her time in areas that require more critical judgment and consume a lot of time. NLP can also be used in reviewing large amounts of contracts. In Deloitte, it is utilized in combing through millions of documents to look for any change in control p...