In the face of labor shortages, accounting firms and CPAs are striving to maximize efficiency among their overextended employees. A Forbes report highlighted that over 300,000 accountants and auditors quit during the Great Resignation of 2020 and 2021. In the same article, this figure is supported by the Bureau of Labor Statistics, which shows a nearly 16% reduction in the accounting workforce since 2019—a decline that can’t be solely attributed to retirements.
Many organizations are turning to artificial intelligence (AI) to tackle these challenges. By accelerating workflows and detecting errors or anomalies, AI is becoming a valuable tool in accounting. This shift sparks an important conversation about the implications of AI for CPAs, including its current role, how it operates, and the advantages and challenges it presents for the industry.
Understanding AI for CPAs
AI’s role in accounting spans numerous machine learning applications, such as natural language processing (NLP), generative AI models like ChatGPT, computer vision for recognizing images and text, and expert systems that enhance decision-making.
Integrating robotic process automation (RPA) and AI revolutionizes accounting by boosting efficiency and accuracy. These technologies can automatically scan invoices and documents, extracting key information without manual input. Additionally, they can detect duplicate payments in detailed, multi-page invoices, minimizing the chances of overpayment or repeated entries.
Also read: Remote Access Security Risks: What CPAs and Accountants Need to Know
Current Applications of AI in Accounting
Large Firms
The Big Four accounting firms—Deloitte, Ernst & Young (EY), PwC, and KPMG—are leading the way in integrating AI into accounting processes. These industry giants are leveraging AI to boost efficiency by automating numerous tasks. They’ve invested heavily in proprietary AI solutions and incorporated tools like ChatGPT 4.0 into their existing software and workflows.
These firms utilize AI for various functions, including:
- Auditing support: AI is crucial in examining unstructured data and identifying potential fraud.
- IT: AI enhances multiple IT operations, from development to cybersecurity.
- Document review: Analyzing extensive contracts or tax codes is labor-intensive. The Big Four have created specialized document review tools that employ natural language processing (NLP) to facilitate search and analysis, similar to ChatGPT.
- Reselling AI solutions as a service: PwC, for instance, has collaborated with OpenAI to develop an enterprise version of ChatGPT, which it then resells to its member firms.
Also read: Accounting Firm Mergers: What to Know and How to Succeed
Smaller Firms
AI levels the playing field, providing smaller firms access to tools once exclusive to larger entities. A recent report indicates that while 8% of smaller firms currently use AI, 30% are considering its implementation. The primary AI applications for these firms include:
- Bookkeeping
- Tax research and advisory
- Tax return preparation
- Document review
General Business Functions
Beyond accounting-specific tasks, AI is also employed in a range of general business activities, such as:
- Forecasting analytics
- Data analysis and visualization
- Scheduling
- Cash flow management
- Customer support and outreach
- Real-time translation
- Meeting transcription and summarization
- Coding support
- Legal document review
Benefits of AI in Accounting
Enhanced Productivity: As accountants face growing demands to accomplish more with limited resources, AI can streamline workflows by automating report generation, summarizing lengthy documents, and scanning and entering invoice data.
Invaluable Insights: AI excels at pattern detection within datasets, revealing trends and areas for potential cost savings that the human eye might miss.
Alleviating Burnout and Addressing Staffing Shortages: By managing repetitive accounting tasks such as data entry and processing, AI allows accountants to concentrate on more critical projects, which in turn empowers data analysts and helps reduce burnout.
Ongoing Audits: Traditional audits often disrupt company operations. AI can enhance client relations and expedite audit reports by continuously processing customer data in real time and updating it instantly.
Challenges and Limitations of AI for CPAs
Accuracy Concerns: A recent survey found that 70% of respondents cited accuracy as their primary concern regarding AI use in accounting.
Privacy and Security Risks: While AI’s ability to access data is beneficial, protecting customer information from exposure remains a significant challenge in the face of evolving cyber threats.
Inconsistent Responses: AI can sometimes provide different answers to the same or similar queries, leading to inconsistencies. As AI for CPAs continues to evolve, these inconsistencies can pose challenges in high-stakes financial decision-making.
Lack of Contextual Understanding: AI struggles with understanding context, which can be problematic when dealing with legal language or regulatory guidance.
Will AI Replace Accountants?
While an understandable concern, the answer is a resounding: NO.
Not anytime soon, at least—and probably not ever. The accounting field requires accuracy and critical thinking, traits AI lacks, as it can only analyze and predict. Moreover, essential soft skills, like building and maintaining long-term client relationships, are beyond the reach of machine learning.
Instead of viewing AI as a replacement, firms should adopt the mantra “augment, not replace.” AI for CPAs can improve accuracy and efficiency in routine tasks, leaving more time for critical thinking and decision-making. This means leveraging AI to enhance employee capabilities, not reduce the workforce.
Enhancing Client Service with AI
According to Stanford University, AI processing power doubles approximately every three and a half months, indicating that AI capacity and functionality will continue to improve exponentially.
Accounting firms benefit significantly from the AI revolution, provided they set realistic expectations. Identifying which AI functions offer the greatest potential benefits and developing a strategic implementation plan is crucial.
McGowan Program Administrators (MPA) has been assisting accountants and other professionals in navigating the evolving landscapes of technology and compliance for over three decades. Discover how we can support your AI implementation journey and help manage associated risks and rewards with our CPAOnePro? program, designed specifically for CPAs and accounting firms. Learn more about our Accountants Professional Liability Insurance here.
