AI in Accounting: What is the Future of CPA Firms?

Onyema Donald

There is more to accounting than just calculating financial statements and preparing taxes. With the introduction of Artificial Intelligence in accounting services, accounts will do more than just number crushing.

Over time, the way accountants do their work has changed a lot. Instead of writing everything by hand, they now use computers and special software because of advancements in Artificial Intelligence (AI).

The AI in accounting market is getting bigger. It's estimated to be worth around $1.56 billion in 2024, and experts think it could grow to about $6.62 billion by 2029. That's a really fast growth rate of 33.5% each year during this time.

The Importance of AI for CPA firms

Artificial Intelligence is definitely here to stay, and there is no going back to it. There's this research saying that technology might end up replacing 94% of accountants. However, if you think that AI will take accounting jobs away from accountants, then the accountant is not valuable to the organization.

Rather, with the combination of AI and accounting skills, there is so much that the accountant can do to help the company and render the best services to clients.

With AI in accounting, there's been a big change in how much time accountants spend on boring, repetitive tasks like entering data and making reports. According to research, on average, there's been a 72% reduction in the time it takes to do these accounting tasks. That means accountants can focus more on important stuff instead of getting bogged down in the same old routine.

Another area in which accounting firms have benefited from AI is accuracy. AI has made a significant improvement in the accuracy of financial statements and analysis. On average, there's been a 65% boost in accuracy. So basically, it means that there are fewer chances of errors, and the accountant will present a clearer view of the company's financial statements, which will be crucial during decision-making periods.

Other benefits of AI for CPA firms include the following:

Increased audit accuracy with AI
Effective risk management solutions
Personalized client services through AI
Compliance monitoring and regulatory analysis
Cost reduction through AI implementation
Competitive edge via AI adoption
Scalable solutions for growing demands
Future-proofing through AI integration

AI vs. Traditional accounting practices

Inasmuch as Artificial Intelligence is taking over the accounting and finance industries with the introduction of accounting software and other cloud-based tools, some accountants still prefer the traditional method of accounting.

Some cite data security as one of their major concerns. Although they are right to some extent, there are several benefits that accounting firms can enjoy from using AI that outweigh the negative impact.

Pros and Cons of using traditional accounting practices

Let's break down the advantages and disadvantages of using traditional accounting methods:

Pros:

Many accountants are familiar with the traditional method: Traditional accounting practices have been around for a long time, so many people, especially non-tech savvy accountants, are familiar with them.
Traditional methods offer stability: They provide a stable framework for managing finances and are often trusted by stakeholders.
Businesses have total control over their data: With traditional methods, businesses have more control over their accounting processes and data.

Cons:

Rigorous manual labor: Traditional practices often involve a lot of manual data entry and calculations, which can be time-consuming and prone to errors.
Limited Insights: They may not provide as much detailed analysis or real-time information compared to modern accounting software.
It is expensive to maintain: It is more expensive to maintain traditional accounting systems than to use accounting software, especially since there will be a need for physical storage and documentation.

Pros and Cons of using AI in accounting

Here are the pros and cons of using AI in accounting for CPA firms:

Pros:

It is an efficient accounting process: AI can automate repetitive tasks, such as data entry and reconciliation, saving time and reducing errors.
It is more accurate than the traditional method: AI algorithms can analyze vast amounts of data quickly and accurately, leading to more precise financial reporting and analysis.
It can be more insightful: AI can give insights via patterns and trends in financial data, which, in turn, helps businesses make decisions that can improve profitability and reduce unnecessary expenses.

Cons:

Cost of the initial investment: Implementing AI technology can be costly, requiring investment in software, hardware, and training.
Dependence on data quality: AI's effectiveness relies heavily on the quality of the input data. If the data is inaccurate or incomplete, AI outputs may be compromised.
It could cause job displacement: Some people worry that the rise of AI in the accounting profession might replace traditional accountants' jobs. However, AI could also create new opportunities for roles in managing and interpreting AI-generated insights.

Future Trends in AI for CPA Firms

Watch out for these three future trends in AI for CPA firms:

1. Adoption of AI-powered software

CPA firms in the USA have realized the invaluable transformative potential of AI-powered software in making their jobs easier.

These AI software use machine learning algorithms to automate tasks like data entry, reconciliation, and financial analysis that were traditionally performed by accountants.

With AI, CPA firms can cut down on the time and effort needed for regular tasks. This means that it will free up time for accountants who are employees of the firm to concentrate on more important business activities.

Furthermore, AI-powered software can increase accuracy in accounting by reducing human errors, which means more dependable financial reporting and decisions, unlike the manual system.

2. Shift in job roles and skill requirements

So, more and more CPA firms are using AI, and it's changing up the kinds of jobs and skills accountants need to have to stay competitive. Since AI is taking over repetitive and rule-based jobs, accountants are moving towards more strategic and analytical functions.

Nowadays, professionals are expected to know both accounting and be good at AI, data analytics, and coding languages like Python and R.

On top of that, accountants need critical thinking, problem-solving, and communication skills since they will collaborate with AI systems to interpret insights and provide value-added services to clients.

3. Integration of AI with blockchain technology

The rise of blockchain technology came along with both new opportunities and challenges for CPA firms, especially in auditing, meeting regulations, and financial reporting.

The rise of blockchain technology came along with both new opportunities and challenges for CPA firms. It's like a blessing and a curse too, especially in auditing, meeting regulations, and financial reporting.

Artificial Intelligence is leaving no stone unturned in its effort to make blockchain better. When we integrate AI and blockchain, CPA firms can audit better, detect more fraud, and make sure they comply with rules and regulations when dealing with blockchain transactions.

AI as an Opportunities for Growth and Efficiency

In the past, small businesses couldn't afford CPA services because they were too expensive. But with AI, like automated accounting software and expert systems, those costs will drop, and small businesses will get better accounting help.

Expert systems can analyze and interpret performance and finances almost as well as human experts. Also, they're flexible and can handle big tasks easily.

While a human expert can only help one client at a time, an expert system can assist thousands all at once. AI speeds up accounting services and opens the door to new types of help for clients.

With more efficient accounting thanks to AI, there will be more jobs, better pay, and higher demand for all kinds of accountants. It's possible that CPA services could even compete with cheaper offshore accounting services.

Challenges in Adoption and Implementation of AI in Accounting Firms

Implementing AI in accounting firms can face several challenges, including:

Data quality and accessibility challenges
Regulatory compliance requirements and standards
Integration complexity with existing systems
Change management in the workflow transition
Ethical considerations in AI adoption
Cost analysis and return on investment
Skills gap in required expertise
Security concerns in data handling

Conclusion: What is the Future of CPA Firms?

There is no doubt that Artificial Intelligence in accounting firms is here to stay due to the numerous benefits that come with it. While some people are scared that there might be a loss of jobs as a result of the increasing use of AI, accountants should up their game by learning new skills that will make them invaluable.

While there are pros and cons to using Artificial Intelligence vs. traditional accounting methods, accounting firms should look at the gains that are associated with AI and use it to their advantage to make them more efficient.