Opportunities And Threats Of AI In Accounting Essay.

The Meaning of AI

1. a) What is the purpose of your report?

The purpose of this report is to explain the opportunities and threats attached to AI to my accounting and non-accounting clients who are torn between the AI impacts in their present business models in order to recommend a position on whether or not the AI should be adopted or embraced.  This will help allay the fears of my clients and also buttress belief of the AI proponents by clearly explaining the key elements of AI for effective and complete understanding of the correlation between AI adoption and the current business models. To achieve this purpose, such key elements of AI as meaning of AI, how technology has changed the accountants work in recent decades, opportunities of AI use and threats of AI use will be presented alongside their associated impacts on accounting.   

1. b) What is the audience for your report?

The key audience to my report will include both accountants and non-accountant as the boards of accounting firms usually encompass both accountants and non-accounting professionals. As indicated in the case study, several of my clients are accounting practices who have great interest in the possible opportunities and threats that AI (Artificial Intelligence) generates. My clients thus have a feeling that AI could threaten their present business models while others believe that AI will avail opportunities to offer services to clients more effectively and efficiently.

1. c) What are the (key) decisions to be made?

The key decision that will have to be made is whether to adopt or embrace the AI in accounting. With AI becoming a reality as an inevitable in the accounting and other professionals, both accounting and non-accounting people in the organization must make critical decisions about AI becomes it will definitely cause disruptive changes in business models in the short run. For this decision to be made, the opportunities and threats of using AI must be ascertained and weighed against each other. Moreover, the impacts of AI on accounting and business models must be clearly understood to facilitate the decision making process. This is because employees and the number of department will have to be downsized as most of the basic bookkeeping and data entry work will be automated due to machine learning and automation saves to AI (Cohen and Feigenbaum 2014). The organization must decide on the number of optimal departments and employees before adopting the AI. They will also have to decide on what changes will be necessary to be made in the current business models including the effects of such changes to the profitability and the cost of the organization.

1. d) What information would help you to make these decisions?

Technology and Accounting

The information that will help the managers make these decisions will include meaning of AI, how technology has changed accountants’ work in the recent decades, opportunities of AI use and threats of AI use to accounting and business models. Detailed discussion of the information that will help make the above mentioned decisions is presented below:

1) What is AI?

According to John McCarthy, the founder of AI, Artificial Intelligence is the “science and engineering of making intelligent machines, particularly intelligent computer programs”. AI is a mechanism of making a computer, computer-controlled robot, or a software think intelligently, in identical manner the intelligent human think. It is accomplished via the study of human brains thinks, and how the human learn, decide, work while attempting to get a solution to a problem, and subsequently utilizing the results of such a study as the foundation for the intelligent system and software development. The AI development began with the intention to establish similar intelligence in machines found and regarded high in humans.

The goals of AI: (i) To create expert systems which exhibit intelligent behavior, learn, demonstrate, and explain as well as advice its users. (ii) To implement human intelligence in machines by creating systems which understand, think, learn as well as behave like humans. What Contributes to AI: AI remains a science and technology anchored on disciplines like biology, computer science, linguistics, engineering, and mathematics. AI’s major thrust is in the computer functions development linked to human intelligence like learning, reasoning and problem-solving (Spathis and Ananiadis 2005). An intelligent system is thus built when one or multiple disciplines mentioned contribute. 

The technological evolution has changed the accounting profession a great deal. Some say that access to novel software gas made the job of accountant much easier. It remains imperative for anyone seeking to be accountant to learn about the profession in today’s contemporary world. Gone are those days whereby accountants utilized pens, calculators and papers to balance books as well as verify ledgers as accurate. Accountants now have tools which reduce the error margin (Rezaee, Sharbatoghlie, Elam and McMickle, 2002). They have word processing tools and specialized accounting software that makes a valid argument to assert that technology has dramatically enhanced accuracy in accounting and decreased margin error (Dustin, Garrett and Gauf 2009). Whereas certain accountants still utilize Microsoft Excel for entry of data and running ledgers, many firms shall buy special software which offer simplified entry of data and guaranteed ledgers as well as financial reports are accurate. This remains particularly beneficial for businesses since errors can culminate in tax penalties or uninformed decision makers. A reduced error margin culminate in more financially stable firms which are better equipped to remain afloat (Rich and Waters 2014).   

Opportunities of AI in Accounting

Technological advancement has led to a need for less basic training and more strategic training. With special software introduction, the need for basic accounting training has plunged. An accountant with access to a computer alongside the right system is able to perform tax preparation services effortlessly, statistically analysis as well as forecast modeling even much more efficiently without spending many years finishing core training.

The AI leads to automation that is really transforming the accounting profession. The automation has led to shift from low paid hourly bookkeeping to billing fixed fees as high-value virtual controllers. The AI will eliminate the  tedious code-accounting which will be a true zero data entry hence saving the cost of having junior accountants and bookkeepers AI will prioritize the next day’s work while we sleep and provide accountants and managers insights regarding their clients (Quinlan 2014.). This will enable accountants and managers to redefine their roles especially as accountants and bookkeepers in a manner that is increasingly far more lucrative for them, and more valuable to their clients. It will lead those accountants willing to embrace it into a prosperous and a bright future. First, it will make accounting easier. The data entry elements of bookkeeping or the historical recordkeeping will be fully eliminated by automation alongside cloud accounting ecosystem (Brown and Hellerstein 2005). Manual keying of bills and paper checks printing are now things of the past. By switching to cloud accounting apps due to AI has provided an enormous efficiencies that instantly cut time spent on clients. With cloud accounting software, the bookkeeping workload will be reduced by half as it can automated 80 to 90 percent of clients’ transactions. This will not only save the organization money but also boost efficiencies AI will, in the future, save accountants from even having to configure them. Both business owners and accountants will come to expect accounting software as well as services which use AI automaton for the delivery of better experience.  

AI’s machine learning provides an opportunity to recognize patterns as well as predict a result accurately. By adopting machine learning in accounting software, accountants will boost their efficiencies a great deal.  Accountants will be able to give more back to their clients once software companies integrate AI into their application to highlight patterns as well as anomalies automatically (Baldwin, Brown and Trinkle 2006). Machine learning will be applied to general ledger applications for efficient analysis of historical as well as pending transactions thereby effectively predicting future cash-flow hence eliminating spreadsheets. AI’s machine learning will also be used in the analysis of sales’ trends as well as suggest purchases which maintain ideal levels of inventory.

Threats of AI in Accounting

The main threats of using AI is the inevitable short term disruptive changes in the business models and fear of job loss among junior accountants who do the basis data entry and bookkeeping. The business will have to incur more to set up the AI’s automation and machine learning. Employees will also have to be re-skilled and this will further attract cost to the business. Another threat is that AI creates a sustained competitive edge and hence corporation swill have to compete for the latest ones in order to thrive in the industry without which they might be outstripped.  Such a competition would mean additional cost to the corporations and hence a definite ultimate effects in the profitability in the short run.   

1. e) When you search for relevant information (in a database for example) what keywords will/are you using?

Automation

Accounting software

Artificial Intelligence

Machine Learning

Conclusion

It is true that AI will lead to disruptive changes in the business models, however, this will only be in the short run and the pros and benefits will outweigh the cons once the setup is completed and up and running. This in itself allays the fears that opponents of AI have on its adoption. It is also a fact that AI’s machine learning will help with tasks currently held by junior accountants and bookkeepers. However, this will only be an opportunity for the company to re-skills them to be more efficient and productive rather than being replaced. Judgement shall still be required and hence the fears that AI will lead to job losses should be dispelled. Automation shall indeed assist accountants to get from data collection to making faster decisions.

Machine learning will indeed give accounting professionals unprecedented insights into their client base. Accountants will henceforth be able to spot trends and patterns amongst their clients’ base and provide better advice as well as recommendations. Thus with AI’s automation and machine learning, accounting professionals will be increasingly efficient and hence have spare time to talk to clients regarding their reports as well a review payroll and payables. This will be a higher levels advisory service which assist clients feel increasingly in control of their finances as well as assist solidify accountants as clients’ trusted and business advisors.

References

Baldwin, A.A., Brown, C.E. and Trinkle, B.S., 2006. Opportunities for artificial intelligence development in the accounting domain: the case for auditing. Intelligent Systems in Accounting, Finance and Management, 14(3), pp.77-86.

Brown, A.B. and Hellerstein, J.L., 2005, June. Reducing the cost of it operations-is automation always the answer?. In HotOS.

Cohen, P.R. and Feigenbaum, E.A. eds., 2014. The handbook of artificial intelligence (Vol. 3). Butterworth-Heinemann.

Dustin, E., Garrett, T. and Gauf, B., 2009. Implementing automated software testing: How to save time and lower costs while raising quality. Pearson Education.

Quinlan, J.R., 2014. C4. 5: programs for machine learning. Elsevier.

Rezaee, Z., Sharbatoghlie, A., Elam, R. and McMickle, P.L., 2002. Continuous auditing: Building automated auditing capability. Auditing: A Journal of Practice & Theory, 21(1), pp.147-163.

Rich, C. and Waters, R.C. eds., 2014. Readings in artificial intelligence and software engineering. Morgan Kaufmann.

Spathis, C. and Ananiadis, J., 2005. Assessing the benefits of using an enterprise system in accounting information and management. Journal of Enterprise Information Management, 18(2), pp.195-210.