What is AI?

Today’s machines have intensified the ability to ease human life by integrating cognitive ability. This ability is made possible through the aid of computers, which, when programmed, implement the act of acquiring, understanding, and deciding. A technology that aims to create intelligent machines, and introduces concepts and tools that mimic human intelligence is known as artificial intelligence (AI).
The common application of AI is machine learning, and with machine learning, the machine gradually improves in terms of performance proportional to the number of examples it goes through. In other words, the machine learns for itself, without being explicitly told what to do. Then machine learning functions result in processing, perception, intelligence, and algorithmic perspective of human-level creativity.

Machine learning introduced various methods and tools to attain the desired cognitive ability, such as search, probabilistic reasoning, statistical learning, neural network, and deep learning. Among these tools, the neural network is the most popular since it mimics the human brain activity and approximates a function to match the expected output for classification or pattern recognition. On the other hand, deep learning uses advanced neural networks, with multiple non-linear processing in both supervised and unsupervised learning. No doubt, AI presents the most advanced tools in intelligent systems; thus, its applications invaded real and practical solutions that support human decisions and eliminate the risk of human errors.

Why is there a need for AI and big data techniques in Auditing?

The emergence of AI is due to the presence of big data, and growing business analytics thus presents an opportunity in the field of accounting and finance to bring standard efficiency on their sets of decisions. Researches of big data in these fields are categorically used for modeling financial distress, financial fraud, market prediction and quantitative analysis, and auditing.
Among these tasks, auditing is not so receptive to the utilization of the measured big data since auditors feared to adopt more sophisticated auditing techniques which are far ahead of client firms. Although human intuition is a cognitive wonder itself, its advanced adaptability and flexibility have its limits; hence, regularly exposed to its own inconsistencies and biases.

Moreover, AI and big data techniques are valuable in the auditing profession due to its rigorous analytical procedure. With AI, innovative ideas are introduced to unburden workloads for practitioners on analytics modeling and quantitative analysis. Also, this would aid regulators on the updating of standards in auditing and suggest best practices and analytical methodology in the audit engagement.

What are the existing integrations of AI in Auditing?

Auditing is the act of gathering, examining, and evaluating the financial data of the organization or individual in an intensive method by an independent third-party expert. The auditors see to it that the financial information provided by the management is true and compliant with the accounting standards, and relevant legislation. Auditors are classified as internal or external, with three identified differences in their activities, namely, appointment, objectives, and responsibility.

The appointment, objective, and responsibility of the external auditors are independent of the company’s senior management and are defined by the state. On the contrary, the management sets the objectives for internal auditors in which they are accountable to.

The analytical techniques used to examine the data for auditing are categorized into audit examinations, regression, supervised, unsupervised, and other statistical tools. The recent integrations of artificial intelligent systems auditing consider IT-based decision audit using expert systems (ES) and neural networks (NN), which are both supervised analytical procedures. These two AI tools for auditing are discussed subsequently.

  • Expert System

An expert system is an intensive software-based tool that considers the experts’ point-of-view and expertise in decision-making methods. This system imitates the judgment of the experts about an application attribute and justifies its reasoning understandable to the auditor. The focus attributes of ES are considered in the different phases of audits such as planning, risk assessment, compliance testing, review, and opinion formulation, which provides considerable benefits to the audit profession. In fact, the audit has the most ES systems developed by the accounting firms.

  • Neural networks

A neural network (NN) is a tool for classification and clustering of data for estimation, decision, and prediction. This tool is made up of three layers such as input, hidden, and output, integrated with connection weights. These interconnections of the input signals to the processing elements create trends and relationships for future happenings. With this capability, NN is used to develop fraud classification model with financial data as factors and will prompt auditors when the financial statement is fraud. In fact, the NN through logistic regression models are significantly more accurate in identifying fraud than practicing auditors. However, the models are likely more important in organizations that generate large data. Experimental results using neural network models show that auditors’ internal control assessments can be simulated 65% of the time.

What are the challenges of AI in Auditing?

The limitation of AI is established on the data available. When the input datasets in the ES and NN used are insufficient or biased, then the machine learning model created will have some problems. To deduce the result, in this case, it needs higher degrees of confidence. Also, not all tasks on auditing can adopt AI since the platform works well with some degree of repeatability. The cost-benefit study should be done on the AI system in audit to weigh its worth in the audit expectations-performance gap. These opportunities of using AI paves the way for faster-outsourced accounting services, but the human can do many things naturally.

What is the promising future of AI in Auditing?

The benefits of adopting the intelligent system with the costs, design, and monitoring of audit effectiveness will eventually be ironed out in the future; thus, the AI in Auditing will pose interests in more firms. Also, future software developments in this area will tend to include assessing the current level of audit committee’s judgment through artificial intelligent systems. In the future, it is predicted that various machine learning tools will be introduced to the implementation of task for audit risk reduction and other audit-related concerns in a specific industry.

The answer to this question is very simple and can be summarized with a word. “Data” Companies are overwhelmed by avalanches of data which is so massive that they are often impossible to manage with human resources alone. For this reason, it is necessary to adopt technologies that can collect, analyze and process these data in a fast, safe and protected way including accounting. Now, in fact, we will immediately see how artificial intelligence is applied in this sector.

Utilization of AI-related to accounting software.
There are four examples of accounting software AI usage in the order of general accounting operations:

1. Automated reading of receipts by introducing AI-OCR
2. Automatic journal entry by AI
3. Efficient and accurate auditing and settlement check using AI
4. Supporting how to use accounting software with AI Chabot

In nature, accounting has not only the need for specialized knowledge and the existence of technical terms such as account items, but also a lot of routine work such as receipts, monetary input, journalizing, and auditing. Unless specialized knowledge is acquired, it is not a job that anyone can do right away, and conversely, there is an aspect that if you have specialized knowledge, you can go to any company immediately.

By incorporating the expertise and routine work into AI and incorporating it into the system, various work can be automated. Therefore, accounting software has a lot of room for AI, and it can be said that it is an area where AI can be easily used.

Some AIs are built into accounting software itself, while others are linked to accounting software. Some of them are built into the software and can be used as basic functions, while others can be used as an optional option.

There are some services that can be linked to many accounting software, even if they are different from accounting software.

Impact of Artificial Intelligence on Accounting

# 1. Changing the role of the accountant

One of the key benefits of technology development is to reduce the demand for slow and passive processes and to allow accountants more time to increase business value.

* Cloud technology is lowering the cost of supporting infrastructure for organizations.

* New technologies also use insights and actionable analytics to add more macro insights to business drivers and help you achieve a comparative advantage.

* Accountants are therefore changing to become strategic business partners out of accounting and management.

* Reducing routine, process-oriented roles and out-of-frame thinking will be required.

* The accountant will face the “cold” flow of technology as a whole so it is important to realize that changes in the future by completing tasks in a timely manner.

* But many people’s routines are so busy that it’s impossible to even think about doing things differently.

 

# 2. With the change, opportunity comes.

Technology enables the company’s finance team to immediately perform three key points: value creation, value creation methods, and the value creation process. In particular, accountants can now access software and use software-as-a-service technologies hosted in the cloud.

* This lowers infrastructure costs, reduces installation costs, and speeds up technology implementation.

* Cloud technology enables secure and smooth updates.

* The level of insight that can be gained outweighs most of the performance gains in direct operating systems, and new companies can be added immediately.

 

# 3. Cloud technology is a paradigm shift for accountants

* Remote tasking is one of the most important features of cloud technology.

* Fundamentally changing the way businesses operate because people can access their data anytime, anywhere

* Real-time reporting also changed the organization.

* More information can be delivered directly to the way business leaders want it.

* A completely different approach is taken by Cloud-ERP technology, for instance by recording the names of people relating to sales transactions.

 

# 4. Future accounting prospects are diverse and bright

* Factors such as Blockchain, Making Tax Digital, and Open Banking are changing the job of accountants, so accountants must move to keep up.
Artificial intelligence and machine learning will be part of accounting, which is a good thing.

* No need to worry about accuracy in the future.

• Have a qualified accountant check the figures produced automatically and make sure they are correct.

* Most accountants think that change is needed, but it is still in its infancy.
We need to persuade some customers to tell us that technology is the way forward.

* It is also important to remember that competitors are using technology to drive growth.

 

Will artificial intelligence replace accountants?

In the form of current technological development, there is a question raised about whether artificial intelligence will replace the accountant! As the Hollywood film about the development of artificial intelligence shows, human beings always have a subconscious fear when facing artificial intelligence and robots. The work of the industry will be completely taken over by the robot. Although this kind of worry is still superfluous at present, some industries should be prepared for a rainy day. For example, accounting may be one of the industries that artificial intelligence should replace.

The founder of SMACC hopes to use the concept of artificial intelligence automation to resolve the financial accounting problems encountered by the company in its operations and decided to develop a system to make the whole process simple. After receiving the customer’s report, SMACC converts it into a format that the machine can read, encrypts it and then assigns the account. And this platform can learn to track sales, costs, invoices and liquidity.

This artificial intelligence system can check 64 data nodes, verify invoices, VAT-ID, etc. Over time, the system will continue to self-improve, distribute data more quickly, and solve complex accounting problems for the company’s customers.

According to the company, the system is highly automated and learnable compared to other similar platforms and can be gradually improved over time. Although science and technology have been developing rapidly, the development of the industry is not determined by simple predictions. Therefore, practitioners in the accounting profession do not have to worry too much, at least in the current social environment, accounting practitioners are indispensable.

Of course, in order not to be eliminated by the times, accounting practitioners should learn more, practice more, and strive for excellence.

Experience is still indispensable

What artificial intelligence cannot exactly do is make a creative judgment and make a decision based on the context of the task. The most skillful artificial intelligence is not able to conduct an orchestra, given the nuances of performing a complex symphony, and is not able to understand the intricate rules of intercompany calculations.

No artificial intelligence algorithms today are able to take into account the complex relationships of the material world. The machine cannot judge. The future may come faster than we think, but today an accountant has a huge advantage over any advanced algorithms – human experience.

With the development of AI, accounting and finance operations that can be patterned more and more will be replaced by AI. In some cases, most of the accounting data can be created without any accounting knowledge such as journals. Artificial intelligence in accounting audits will become more widespread, and it will be necessary for certified public accountants and members of corporate finance/accounting departments to use the expertise.

Automatic accounting

A software that uses artificial intelligence in addition to recording the operations and accounting movements you can calculate both the ISR and VAT based on the information and data you have.

ISR calculation

It will be possible to calculate the value of ISR by means of the cumulative income (CFDI of issued income) minus the authorized deductions (CFDI of expenses) by the rate that is equal to the determined ISR.

RPA
Robotic Process Automation , in Spanish Robotized Automatic Processes are systems that are responsible for automating anything up to the accounting process. This technology has the ability to capture all invoices both issued and received in real time.

How to adapt to change
In order to make the best use of artificial intelligence in the accounting part of your company and to adapt to the change, consider the following aspects.

  • Make a calculation of Artificial Intelligence through a strategic evaluation.
  • Know the different AI options that will allow you to achieve business goals.
  • Have an organizational culture
  • Have a good management and control in the company.

The arrival of artificial intelligence does not mean the end of public accountants, on the contrary, it is a tool that will allow you to carry out tax activities in an easier way. There is also the opportunity to create new jobs, because technology far from replacing human activities enriches them.

The accountant of the future

In the near future, accounting activities will also be fully automated and managed by the AI, some say as early as 2030. Today, 2019, the road is traced with excellent results: in the detection and writing of repetitive data such as filling out payslips, declaring incomes, manage invoices and fiscal deadlines, update all data in real-time. Again, in the detection of anomalies such as a bill much higher than the previous ones, a missing document, a beginning of fraud. In all these fields and many others, artificial intelligence has proven to be far more efficient, faster, more precise and safer than human control.

These complex IT and technological systems are already able to manage the flow of digital information from the company to the accountant’s office or from the bank to the accountant.

Here are some certain advantages of automation:

  • Optimize costs by avoiding repetitive tasks
  • Reduces the number of errors
  • Ensures legal compliance thanks to real-time updates
  • Facilitates collaborative management: with a simple password, more people can enter invoices, expense reports, etc.
  • Streamlines the exchange between the professional or studio and the accountant
  • It allows instant access to accounting data even from a mobile phone via a dedicated app.

But in this scenario of sure great appeal for the advantages in terms of efficiency, how then does the profession of accountant change? How will those who assist us work in accounting, administrative procedures and tax return verification learn and work? The accountant who will use the AI will work better and faster than before and will therefore be able to add significant professional skills.

Artificial Intelligence and Accountancy Industry

Introduction

The concept of artificial intelligence often leads one to think of the distant future, where machines do the most important work for doctors, lawyers, and including professional accountants. One way or another, all the most important professions in the world will be affected by technological progress, but to what extent, and what exactly will artificial intelligence really be – organisations have no clear answer to these questions.  The application of AI in the accounting field has begun to be discussed, and actual use cases are gradually increasing. However, the use of AI is mainly in financial accounting and auditing, and the fact is that much attention has not been paid to the use of AI in the field of management accounting.

What is Artificial Intelligence?

Artificial intelligence technologies are not something that will appear sometime there in the distant future. They already exist and are actually used in practice. For example, in medicine, AI helps diagnose serious illness at an early stage. Some companies even create AI systems that predict the likelihood of developing certain diseases in the patient in the future. Artificial intelligence technologies are also used by some banks to analyse the financial situation. Various major global automakers promise to soon produce smart drones that can independently perform a number of tasks – from parking to paying a check for refueling. Artificial intelligence has great potential in the accounting field. Its main advantage is that it is capable of processing huge amounts of information in the shortest possible time. This means that in the future, AI will be able to compile various reports and do it quickly. The technology is also useful in various studies, allowing you to collect and analyse data tens of times faster. It is worth noting that the largest audit and financial companies have already adopted AI systems. We are talking about various programs and applications that use AI and cognitive technologies to perform certain calculations and data analysis. Such technologies are still used to solve narrow problems, but the range of their capabilities is expanding every year.

Constant evolution in accounting operations

The profession of accountant, auditor, and financier has always been one of the pioneers of automation. Along with scientists, accountants became the first users of arithmometer in the 17-18th century. Later, calculators replaced the arithmometers, and then computers took up not only the niche of computing, but also the storage of accounting data. Half a century ago, the emergence of accounting systems that automate thousands of standard operations was supposed to jeopardise the profession of an accountant in the same way as the emergence of artificial intelligence now. However, the industry survived, specialists are still appreciated. On the contrary, they created new jobs and gave accountants the opportunity to work in a new way. And this is the key point. Each new round of informatisation makes the work of an accountant less difficult. Along with this, the number and complexity of accounting rules is growing. All of them can be digitised and taught the accounting system to follow them. The problem, as usual, arises at the junction of the digital and the real world: the computer mind stumbles in those places where the solution to the problem does not lie in the formalised field or requires a creative approach.

However, the development of AI accompanying the recent evolution of Deep Learning has begun to have a noticeable impact on accounting operations.