PETALING JAYA, July 17 (Bernama) -- A global survey by KPMG International reveals that 10 percent of companies have widely adopted artificial intelligence (AI) in financial reporting, while nearly three-quarters (72 percent) are piloting or using it selectively. In three years, 99 percent of organizations will be adopting AI into their financial reporting processes. 
 

Published in the AI in financial reporting and audit: Navigating the new era report, this survey underscores AI's transformative potential across business models, particularly in financial reporting and auditing. Drawing insights from financial reporting executives and board members across 1,800 companies in six industries and 10 countries, the survey explores the progress of AI adoption in finance functions, its impact on internal finance teams, and companies’ expectations for external auditors. Notably, companies in the Asia-Pacific region have recorded the slowest pace of AI adoption in financial reporting (29 percent) compared to North America (39 percent) and Europe (32 percent).

As AI development gains pace, the survey discovered that 64 percent of companies expect auditors to conduct a more detailed review of the control environment in relation to their use of AI in financial reporting.

KPMG’s survey further found that more than half (52 percent) of businesses want their auditors to prioritize predictive analysis. Additionally, 47 percent desire faster speed of delivery, and 45 percent seek real-time auditing throughout the year.

Foong Mun Kong, Head of Audit at KPMG in Malaysia, commented, “The growing adoption of AI in financial reporting signifies a transformative shift beyond mere technological advancements. The roles of auditors are being redefined as businesses are looking to their auditors to lead the AI transformation due to their deep understanding of financial reporting processes and their abilities to pinpoint areas where AI can add most value. As a result, audits are shifting towards being more real-time and predictive, significantly transforming how insights are delivered.”

As AI is set to expand widely and quickly over the near future, this enables a wide range of benefits in financial reporting. For starters, the survey found that use of AI translates into greater productivity for the financial reporting team, combined with higher talent acquisition and skills development. Currently, over 4 out of 10 companies already reported greater employee productivity and efficiency, and this figure is expected to rise to 6 out of 10 within three years.

In addition, early adopters of AI in financial reporting report enjoying more benefits than other companies. These include the ability to predict trends and impacts (65 percent), real-time insights into risks (60 percent), better data-enabled decisions and increased data accuracy (both 57 percent).

AI adoption also came with major challenges during the early stages, including data privacy concerns (59 percent), limited AI skills and talents (56 percent), poor organizational knowledge of AI (51 percent), uncertainty about best use cases to prioritize (41 percent) and difficulties with integrating with existing tools (38 percent). However, these hurdles diminish to some extent as organizations become more proficient in using AI.

KPMG’s study outlines four key approaches that organizations can adopt to achieve AI maturity expeditiously: 

1.  Construct frameworks to mitigate and manage potential risks. This involves adopting AI frameworks and governance structures, and procuring third-party controls assurance.

2.  Find ways to overcome barriers to adoption. This includes ensuring that technology leadership is involved in systems integration discussions, incorporating the impact of AI into training programs, and piloting AI initiatives to validate ROI.

3.  Recognize the importance of ethical AI. They put ethical frameworks in place, emphasize the need for regular audits to identify and address ethical issues, and ensure human oversight of AI.

4.  Implement best practices for AI-readiness. This involves implementing essential best practices in financial reporting that pave the way for AI adoption, such as cloud migration, high-quality cybersecurity, standardization of workflows, discontinuation of legacy systems, and paperless bookkeeping.

Foong concluded, “AI advancements in financial reporting represent a triple win for companies, auditors, and information users by enhancing quality, boosting efficiency, and supporting more informed business decision-making. The survey uncovered that a majority of companies expect auditors to evaluate their use of AI in financial reporting, providing assurance over AI governance and controls. At present, no jurisdiction, including Malaysia, explicitly requires auditors to perform assurance reviews of AI governance. However, I am confident that regulators and standard setters will keep pace with market expectations.”
 

KPMG International’s AI in financial reporting and audit report can be downloaded from www.kpmg.com/navigatingAIinaudit