Revolutionizing Finance: How AI is Transforming Reporting and Audits

By October 2, 2024Accounting, Nonprofit
person using laptop with overlay screen of virtual financial reports

AI is transforming all areas of business. One area where it holds great promise is in financial reporting and audits. AI brings several strengths to financial reporting and audits, including the ability to review and synthesize vast amounts of data. It is also quite good at pattern recognition and can spot anomalies in financial data. Instead of the CFO gathering reports and data manually, data can be ingested into an AI-enabled system to help prepare for audits. Here, we take a look at the state of how AI is transforming reporting and audits, and how it may impact your organization.

The State of AI Adoption in Finance and Accounting

The latest McKinsey report on AI adoption states that 65% of respondents regularly use GenAI. This represents an increase over the response to the 2023 survey. A KPMG report focused solely on AI and financial reporting and audits clarifies further how financial leaders plan to use AI. Among those responding to the KPMG report, 100% stated they plan to use GenAI for financial reporting in the next three years as compared to 71% who answered yes to the same question in 2023. Clearly, there is growing acceptance of the use of AI in finance. Financial leaders are seeing the benefits and exploring its many uses.

According to the KPMG report, financial leaders see the following benefits and uses of AI in reports and audits. (Note: respondents could choose more than one answer.)

  1. Real-time insights into risks, fraud, and control weaknesses: AI can continuously monitor financial data, identifying anomalies and potential issues as they arise, which 70% of surveyed leaders found valuable.
  2. Lower costs: Automating repetitive tasks and improving efficiency helps reduce operational costs, a benefit noted by 58% of respondents.
  3. Ability to predict trends and impacts: AI’s predictive analytics can forecast financial trends and potential impacts, aiding strategic planning. This was highlighted by 57% of those surveyed.
  4. Increased data accuracy and reliability: AI enhances the accuracy and reliability of financial data by minimizing human error and ensuring consistent data processing, appreciated by 57% of participants.
  5. Better data-enabled decisions: With more accurate and timely data, decision-making processes improve, benefiting 53% of the surveyed leaders.

Getting Started with AI in Financial Reporting

Given these benefits, how can you get started with using AI in financial reporting?

There are many, many considerations.

  1. Assess AI readiness: Is your organization ready for AI? It’s more than a matter of updating your accounting and finance software so that the new features are enabled. It’s ensuring that your organization has a sound data policy in place, including security, privacy, governance, and standards. Smart use of AI begins with good data policies. AI requires copious amounts of clean data to work well. How is your data? If you aren’t sure, speak with a consultant who specializes in nonprofit accounting to better understand your organization’s data, how it may be used, and what safeguards may be needed to utilize it in an AI platform.
  2. Don’t reinvent the wheel: Before searching for an AI-enabled financial tool, explore the platforms you are already using. Most, if not all, software vendors have added AI features over the past year or are planning them for upcoming releases. Check with your software consultant or vendor to learn what’s available within your current platform before buying a new one. You may be able to use the one you have quite well for the tasks you need automated with AI.
  3. Create AI policies for your organization: AI consists of public AI platforms (Microsoft CoPilot, ChatGPT, and others) as well as private AI (those used within a specifically licensed, proprietary platform, such as a finance or accounting platform.) When using publicly available tools like the search function in Microsoft Copilot or ChatGPT, be aware that anything you put into these tools becomes part of its immense data set. Nothing proprietary or confidential, like financial statements, reports, or personal information, should ever be added to such tools. You may wish to add an AI use policy to your existing policy manual and add a session on AI use to any cyber security training you run for your team now.

Adding AI to financial and auditing reports and processes can improve efficiency. It can enhance accuracy, spot problems, and provide draft documents faster than you may be able to do on your own. However, as with anything produced using AI, outputs must be reviewed and fact-checked by humans before sharing it with coworkers, boards, directors, constituents, and others.

AI is a powerful tool that offers excellent potential. When used correctly, it can transform your financial and audit reporting.

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.