Seemingly, the AI train is unstoppable – although that was also the general sense about the metaverse only a couple years ago and today that is a faded memory. Results of a new survey from KPMG on predictions about AI uptake in U.S. business probably won’t surprise many people. Although the report focuses on financial reporting, it holds valuable insights in the ESG, sustainability and climate contexts as well. A couple relevant statistics from the report:
- Survey finds the top five benefits of AI in financial reporting are real-time insights into risks, fraud, and control weaknesses (70%); lower costs (58%), ability to predict trends and impacts (57%), increased data accuracy and reliability (57%), and better data-enabled decisions (53%).
- In 2023, 61% of financial reporting leaders said that it was important for auditors to utilize AI in performing their analyses; today that number is 83%. Businesses expect their auditors to conduct a more detailed review of the control environment (66%) and assess their AI governance maturity (61%).
Both of those points are directly relevant to ESG, sustainability and climate as well, but caution is warranted: ESG and sustainability are notoriously ambiguous – defining appropriate algorithm parameters and finding relevant/credible teaching data for identifying fraud and control weaknesses will be a major challenge. Without a valid ESG foundation, AI results will be suspect at the least and erroneous/misleading at worst. I can’t shake this nagging concern about an AI fox watching over the AI henhouse – especially in fraud detection.
KPMG highlights the continuing importance of auditors in using AI …
“Auditors need to help guide and shape the financial reporting transformation, including through the development of AI-enabled auditing platforms that integrate with companies’ systems and help bring the power of AI into the reporting ecosystem — analyzing entire datasets, identifying outliers or risks, and joining up financial and non-financial reporting to create a seamless, coherent reporting landscape.”
… while also paying attention to other guardrails and unintended consequences:
“[T]he evidence suggests that companies are not giving other important attributes enough attention. For example, the sustainability of AI application (its impact on carbon footprint) is a very important attribute for 31 percent of companies, but also a blind spot for 29 percent.”
Increasingly, as ESG/sustainability is integrated into “the business” – including reporting – practitioners would do well to closely track (and align their practices with) developments, risks and trends in financial management and reporting. Of course, there will be more about AI: I’ll be back (I just had to…)
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