Since generative AI rolled out to the public in November 2023, there has been much debate about its usefulness in business. Although some form of artificial intelligence has been available through technology platforms for many years, like spellcheck in word processing applications or design assistance in presentation creation software, AI can now be found in everything from nonprofit accounting platforms to government accounting. Is it hype? Is it helpful? Let’s examine the use of artificial intelligence in accounting and how it may be helpful to CFOs.
What Is Artificial Intelligence?
Artificial intelligence uses machine learning and large language models to generate responses to inquiries. The new generative AI models can ingest images as well as text and produce what appear to be innovative responses. However, for the most part, AI generates a synthesis or amalgamation of what it has learned. It cannot create fresh information on its own but must rely upon previous input to form seemingly new thoughts.
Potential Uses of AI in Accounting
All AI-based systems are great at taking in vast amounts of data and analyzing it faster than humans can perform the same task. While people are better at creating something new, AI is better at spotting patterns and detecting anomalies within patterns—and that’s where it can become the CFO’s best friend.
Several possible uses for AI in accounting include:
- Fraud detection: Because AI is good at understanding rules and applying rules to large amounts of data, it can apply accounting rules to data and help detect possible fraud. Although an AI detection system shouldn’t be used solely to determine fraud, such a system could potentially flag possible fraud for a human accountant to review and investigate.
- Audit testing: Certain types of audits include testing random samples of things such as contracts. Because neither the contract form nor the language is standard, random samples are taken for review. Improved optical character recognition (OCR), a type of artificial intelligence, could scan all forms and input them for an accountant to review.
- Outlines and drafts of documents: While AI cannot create new text, it can take existing text and build an outline or even a rough draft of a new document.
Dangers of AI in Accounting
With all new technologies comes possible dangers. Many of the potential dangers of AI in accounting can be offset by clear governance around the use of AI in organizations and monitoring its use for potential problems.
The possible dangers include:
- Disclosure of confidential information: Platforms such as Microsoft CoPilot and ChatGPT are open AI systems, meaning they use the data inputted into their platforms to increase the entire bank of knowledge. Inputting anything into their systems means it goes into the public repository of information. If you do not wish confidential information shared, it should not be used in an AI tool that taps into public AI-based systems.
- Hallucinations: AI can and does hallucinate. This means it makes up answers. Some of these answers are incorrect or even nonsensical. A famous example is the AI platform that insisted there is no country in Africa beginning with the letter K. When the questioner informed the AI that Kenya begins with K, it returned an absurd answer. Such stories are legion. For accountants, hallucinations or inaccuracies can be dangerous. Accountants using AI-based tools should ensure human review and oversight of AI-generated answers to spot potential hallucinations.
- Infringement: The courts have only begun reviewing cases related to AI-generated materials. In certain cases, AI may repeat copyrighted information verbatim. This could lead to potential infringement violations.
Responsible and Ethical AI Use
AI is here to stay. You can’t put the genie back into the bottle. How can you use AI safely and ensure your organization is following best practices and ethics for AI use?
- Develop a set of governance standards on the acceptable use of AI in your organization. Don’t leave it to chance. Work with cross-department teams to develop guidelines on the appropriate use of AI.
- Ensure that your team understands that proprietary materials should never be shared with AI.
- Do not use outputs from AI verbatim. Use them as drafts and rework them. Or use AI to develop summaries and outlines and write your own materials based on these outlines.
Embracing AI
AI has its place in business. It can help with many tasks, but it can never replace people. If AI can help, and you can develop responsible and ethical guidelines for its use, it may be worth incorporating it into your systems.
Welter Consulting
Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.
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