Financial reporting set for AI overhaul, suggests KPMG study

A new international study by KPMG has predicted a significant transformation in financial reporting and auditing through Artificial Intelligence (AI) advancements. The survey reveals that 75% of large Australian companies are currently piloting or using AI technology in their financial reporting, a figure which is expected to reach 100% within three years.

Amongst various AI applications, Generative AI (GenAI) presents an exciting prospective leap. At present, only 9% of Australian companies employ this technology, however, this number is set to skyrocket as 52% of respondents marked GenAI as their top priority in financial reporting over upcoming years. KPMG's research, which garners responses from 1800 leaders across 10 countries, positions Australia favourably as a pioneer in AI utilisation.

Investment in AI is also on the rise, with over half (51%) of Australian companies allocating 10-20% of their IT budgets towards AI technology, a trend that outpaces the global average. In the next year, 29% of companies expect their AI expenditure to increase by up to 50%, and a further 9% predict a rise of over 50%. Telecommunications, technology, and finance sectors are leading the charge in AI investment to enhance productivity, customer experiences, and to build new products and services.

Shane O’Connor, KPMG Global Audit Head of AI and Partner, notes, “Our research shows that globally, companies are making significant investments in AI, with Australia at the forefront. GenAI is now being prioritised for use in financial reporting, enabling companies to identify anomalies in financial data, generate customised financial reports assess the efficacy of internal controls, pinpoint inefficiencies in core processes, and benchmark disclosures across their organisations”.

The study also forecasts a transformation in the role of auditors with the introduction of AI. Around 85% of business leaders agreed their auditors had a good understanding of their company’s use of AI in financial reporting. There is a growing anticipation for audits to move towards more predictive, pro-active systems with real-time auditing throughout the year.

However, AI's expansion into financial reporting is not without challenges. Concerns grow with the advancement of GenAI, particularly in areas of copyright, data organisation, management and sovereignty. A significant number of respondents also expressed worries about bias, hallucinations and cyber-security when dealing with GenAI.

In light of these concerns, O’Connor highlights the crucial role of AI governance and supervision in maintaining the long-term trustworthiness of AI systems. He concludes, “Given these emerging and dynamic risks, the role of robust AI governance becomes central to an organisation's success... But these are all issues that can be overcome. Our survey shows that generative AI is the imminent next step for many companies, both here in Australia and globally. GenAI will take financial reporting to the next level of analytical excellence as it can not only evaluate massive data sets and every transaction, highlighting anomalies, but can create audit reports from its analysis of data and tailor them to the needs of different stakeholders.”