AI Challenges for Accounting Firms

Many people believe that artificial intelligence (AI) can perform tasks currently done by professionals just as well as humans can, and much faster. This, however, is a serious misconception. It is important that you, as a Pennsylvania accountant, CPA, or tax professional, educate your clients on the dangers of depending on AI for their financial needs, while at the same time educating yourself and your team in the ways that AI can legitimately and accurately help you in your practice.

When most people hear “artificial intelligence,” they think that AI is like a human brain, only in a tech form. But in fact, AI is merely a mathematical algorithm that scours the internet to find content that may fill the user’s request, following the programming it has received. AI has limited capabilities, is prone to bias, amplifies errors available online, and has been found in many cases to completely make things up. Share with your clients these important facts:

• There is no privacy protection for AI. Any questions you ask, any financial information you submit, is recorded somewhere, becomes part of AI’s library of resources from which to draw, and could potentially be accessed by criminal interests, fraudsters, or marketers.

• AI is only as accurate as its bias, which can come in a variety of forms: bias can begin in the training process, using incomplete or inaccurate data; biases or imbalances may be built into the algorithms by developers, intentionally or unintentionally; and biases can develop in the process once implemented.

• AI does not know the difference between truth and fiction. It will utilize information that it finds, without the capacity to analyze the source and its accuracy, as a human brain would.

• AI is unable to understand nuance, which is critical in professional situations such as financial reporting and law.

• AI has been known to offer wrong advice, including breaking the law or making bad financial decisions. In one case, AI informed restaurants in New York City that they could break the law and serve rat-chewed cheese. Another prompted landlords to discriminate based on source of income. In another case, a Chevrolet customer service chatbot agreed to sell a user a new car for one dollar and make it legally binding.

• AI can completely make up information. This phenomenon is known as “hallucination,” and developers don’t know why it happens. In one example, a law firm used OpenAI to find legal precedent to support its case, then used this information in a court briefing. However, at least six of the cases did not exist. ChatGPT had fabricated the cases, docket numbers, and internal citations. Every aspect of these cases was bogus. The law firm was fined, and the case was dismissed.

• Zillow, the real estate website, had to close its Zillow Offers operations and cut 25% of its workforce because its AI algorithm misjudged price resale values, resulting in a $304 million inventory write-down in one quarter alone.

It is critical that you take proactive steps to inform all your clients of the dangers of using AI for any private or sensitive matters. This includes all financial or legal research or advice, as well as any emotional support. There are many examples of AI platforms being manipulative or verbally abusive, actually claiming to be in love with the human, and causing significant harm to emotionally vulnerable people.

With all those examples of considerable problems with AI, you may wonder if you should risk utilizing AI at all. While AI should not be trusted to make decisions and all data it generates should be verified by a member of your team, AI can save time and help you increase your efficiency. The Big 4 accounting firms have adopted AI constructively, and many smaller firms have also jumped on board. Here are a few ways AI can be used in accounting:

• AI can be used in initial audit reviews and can make suggestions for clarity and consistency in documentation.

• AI-powered tax research tools can help provide accurate, authoritative answers from human-edited sources quickly and efficiently.

• AI can automate the extraction of data from financial documents, find deductions and tax credits, ensure compliance, and offer initial financial analysis—followed by human review—significantly increasing the speed and efficiency of the completion of tax returns.

• AI can help provide predictive insights regarding future tax implications, aiding you in developing strategic plans for your client’s future success. (However, let Zillow’s experience be a cautionary tale.)

• AI-generated software can reconcile accounts, generate reports, and aid in bookkeeping by automatically categorizing expenses. 

• AI can provide brief summaries for documents such as contracts and highlight anomalies or possible errors.

Again, we would like to emphasize the importance of developing procedures in the use of AI that include human oversight and authentication of any information AI generates. Nonetheless, AI is a powerful tool if used carefully and not as a replacement for human intelligence.

At PSTAP, we are dedicated to helping accountants, CPAs, and tax professionals succeed. Our members are happy to answer your questions through our member portal. We support each other as professionals and often collaborate in mutually beneficial ways. If you’re not yet a PSTAP member, click here to learn about the benefits of membership.