In the event that AI is used for International Financial Reporting Standards compliance, what will happen to professional accountants?
Prof. P L Joshi
To promote consistency and transparency in financial reporting, numerous nations have embraced International Financial Reporting Standards (IFRS). However, as real-time information becomes more and more important and business transactions get more complex, IFRS reporting is getting harder and harder for businesses to comply with. One of the biggest challenges is having the capacity to process enormous amounts of financial data quickly and accurately. Reconciliation, standardization, data integration, and real-time reporting are the current issues that businesses must deal with. As a result, they are relying on digital tools like AI and ML as well as automation to speed up the adoption of IFRS. They can gain a competitive edge, enhanced efficiency, lower costs, improved accuracy, fewer errors, and better decision-making from this kind of automation.
The precision and dependability of financial reports hold great importance as they impact regulatory compliance, credit evaluations, and investment choices. Financial reporting has always been a labour- intensive process prone to subjectivity, bias, and error. Requirements for financial reporting are getting more stringent and time-consuming as business transactions become more complex. Technology has unquestionably had an impact on financial reporting. The field of financial reporting is also evolving due to advances in machine learning (ML)and artificial intelligence (AI). For the purposes of data analysis and prediction, AI and ML use algorithms. To find trends, abnormalities, and patterns in financial data, for instance, businesses can use AI and ML. Making better decisions and financial forecasting are possible with the help of this information.
New and evolving standards are an ongoing and challenging reality for businesses. It is believed that the newly published IFRSs 9, 15, 16, and 17 are very complex and challenging to implement. The workload for tasks like meeting the period-end close deadline has increased overall as a result of these updates. These standards are said to be streamlined for automated compliance by using AI in conjunction with accounting expertise. Businesses and Big 4 audit firms are heavily investing in automation systems like AI and ML to ensure that financial data complies with IFRS and is accurate.
What will the IFRS experts do, one wonders, if IFRS implementation and compliance are automated using AI and ML? Will their expertise be in vain?
But it's important to realize that IFRSs are principle-based accounting standards, which means they rely more on general, high-level principles than on precise, prescriptttive regulations. They focus on results. Professional accountants use a great deal of judgment, norms, guidance, interpretations, and agreement in their compliance. Accounting is no longer mechanical under IFRS. It's possible that human error will always exist in IFRS compliance. In an online survey in 2021 by the author reveals that the majority of accountants and auditors disagreed that AI and other emerging technologies will completely replace accounting professionals because consulting, data analysis, and strategic thinking still require human intelligence. The only thing that has to change for them to function in the digital age is their skill set.
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