Generative AI enables small accounting firms to challenge big ones: AICPA

Dive Brief:

Generative artificial intelligence will enable small accounting firms to compete with larger ones by boosting efficiency, upgrading data analysis and reducing the drag from staffing shortages, according to the American Institute of Certified Public Accountants.
AI “is as groundbreaking as the internet or the smartphone, but with a much faster adoption rate and greater ease of use,” the AICPA said in a report co-written with CPA.com. The technology “makes it possible to create new and better business models and more precisely match value to cost.”
Financial executives believe they can best use AI for nine types of tasks such as synthesizing content; summarizing earnings transcripts and question and answer sessions; and forecasting sales outcomes, especially for companies with run rates of $100 billion or higher, the AICPA said.

Dive Insight:

In light of the rapid pace of generative AI adoption, accounting firms and company finance teams should embrace generative AI and experiment with it, the AICPA said.

“Generative AI can level the playing field between smaller and larger firms by providing smaller firms with tools that traditionally required significant investment in human resources and technology,” Jennifer Wood, a partner at Bonadio Group, said Tuesday in an email response to questions.

“Smaller firms can leverage AI to offer services comparable in quality to those of larger firms, but at a lower cost and with greater efficiency,” she said. “For example, by using AI-driven insights, a small firm can provide customized, high-value consulting services that could traditionally be offered only by larger firms with extensive data analytics departments.”

Ramping up generative AI may also offer a competitive edge, the AICPA said. The technology can boost smaller accounting firms, “not only because of the ease of use, but because it’s the early adopters that win, not the ones with the most resources,” the association said, quoting Digits CEO Jeff Seibert.

The AICPA viewpoint is not necessarily universal.

It is not clear that “AI tech alone will be an equalizer for the smaller firms,” Earnest & Associates CFO Thomas Fitzgerald said.

“Larger firms — because of their scale and resources compared to smaller firms — will be the early adopters and have the scale to deploy and be on the cutting edge of such AI tech,” he said in an email response to questions.

Still, generative AI offers several appealing uses, including in forensic accounting and auditing, and help in forecasting sales, buyer behavior and the future availability of production materials and potential supply chain disruptions, according to Fitzgerald, a CPA.

In addition, accountants will find that generative AI speeds the review of documents, emails and contracts; the gathering of supplemental material data; the research of trends; the drafting of accounting policies; and in finding ways to streamline budget reallocations based on order data and spending trends, the AICPA said.

AI is “dramatically increasing worker productivity, especially for knowledge workers, cutting down on administrative work,” the association said.

Also, “AI can help minimize the impact of the staffing shortage in accounting and beyond by taking on routine, manual work and allowing people to transition to higher-value activities,” the AICPA said.

Customers using AI-powered invoice processing from Sage reported improving productivity as much as three times, “giving them more capacity to focus on strategic tasks,” Sage Chief Technology Officer Aaron Harris said in an email response to questions.

Yet using generative AI in accounting and auditing poses risks, several accountants and business consultants said.

“There’s always the risk that firms become too reliant on AI systems, resulting in ethical concerns or liabilities,” Wood said. “Because the use of AI requires handling vast amounts of sensitive data, there is a risk of data breaches or unauthorized access, which could compromise client confidentiality.”

Also, “because AI systems are not perfect, their outputs and recommendations must be critically evaluated by the professionals using them,” she said. Finally, AI applications must align with ethical standards and accounting regulations.