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Running Head: THE IMPACT OF ARTIFICIAL INTELLIGENCE IN THE ACCOUNTING PROFESSION: CHALLENGES AND OPPORTUNITIES 1 The Impact of Artificial Intelligence in the Accounting Profession: Challenges and Opportunities Adriana E. Gutierrez Master of Accounting, Texas A&M- Commerce ACC 595: Accounting Research and Communication Dr. Chu Chen, CMA June 24, 2023

THE IMPACT OF ARTIFICIAL INTELLIGENCE IN THE ACCOUNTING PROFESSION: CHALLENGES AND OPPORTUNITIES 2 Abstract As Andrew Ng, co-founder of Landing AI, once said, 'Artificial intelligence (AI) is the electricity of our time.' More people have seen the truth in Andrew's words as time passes. AI "goes beyond humankind, this transcends humankind" (and forces us to look into the future. (Katz, Y. (2017, November 30)) However, just like the futuristic view of electricity and the changes it came with, AI will be no different. We are expected to see many impacts, but one of the main effects of this new learning software is on white-collar jobs, specifically accounting. "We are currently witnessing the beginning of something huge. This is not just another industrial revolution. This is more than all of civilization. This is a new step on the universe's path towards higher and higher complexity...This goes beyond humankind, this transcends humankind, and it's a privilege to be part of that and witness the beginning of that...We shouldn't think of us versus them...But view all of us, including human civilization and these future beings, as part of one grand scheme that allows the universe to go from simple states towards more complex states, and it's great to be a part of that." This seems to be a quote; cite the source of the quote

THE IMPACT OF ARTIFICIAL INTELLIGENCE IN THE ACCOUNTING PROFESSION: CHALLENGES AND OPPORTUNITIES 3 Due to rising regulations and consumer demands, accounting firms hire virtual assistants to help with time-consuming tasks. This new support option is available to businesses at no ongoing cost. This is because the new labor force is primarily made of artificial intelligence. AI is a game-changing innovation that unleashes the full potential of computers. Systems can learn from human behavior and make adjustments and predictions accordingly. Computers may take over many of the human-handled tasks in machine learning. A promising trend in the professional accounting sector is seeing AI's gradual replacement of human accountants. Opportunities AI will present challenges and opportunities in the accounting industry and for accountants. Since this new machine learning software uses automation and can adapt to users, it has the potential to revolutionize different aspects of accounting processes and tasks. A few exciting changes are automating repetitive tasks and enhancing data analysis accuracy in accounting. These advantages come with offset disadvantages, such as learning new skills like AI programming and losing jobs. On a day-to-day basis, an accountant oversees time-consuming tasks that can be repetitive, and with AI's automation capabilities, this can be removed from their workload. The AI's systems can proficiently handle transaction processing and data entry. It can also learn to do basic bookkeeping, reducing an accountant's time on simple tasks to allow them to focus on productivity, strategy and enhance the reporting. Eventually, "Repetitive and mundane tasks usually done by junior staff will be replaced by robots, and human expertise will be needed at a higher level for decisions that require judgment." (Gotthardt et al., 2019)

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THE IMPACT OF ARTIFICIAL INTELLIGENCE IN THE ACCOUNTING PROFESSION: CHALLENGES AND OPPORTUNITIES 4 AI increases efficiency. AI can handle tedious tasks like data entry, reconciliations, and report generation. Accountants can spend more time on strategic tasks by automating these processes. They can focus on critical thinking, problem-solving, and expertise, increasing productivity. Data entry is tedious and error-prone. AI-powered tools for data entry can extract documents, invoices, and receipts. AI uses Optical Character Recognition (OCR) to read and convert scanned documents into machine-readable data, eliminating manual data entry. AI algorithms can also compare large financial datasets, find discrepancies, and reconcile faster than humans (Ahmad et al., 2021). This helps with complex transactions and detecting fraud. Financial reports can take time, especially with large amounts of data. AI can analyze financial data, create standardized reports, and customize them to meet specific needs. AI helps accountants understand their company's finances by quickly processing and analyzing large amounts of financial data. AI algorithms can find hidden patterns, trends, and correlations in data. This helps accountants make better decisions and understand the company's finances. AI also can detect fraud. Real-time AI algorithms can identify anomalies and fraudulent patterns in financial transactions. Using AI for fraud detection, accountants can protect the company's and stakeholders' financial interests. Artificial intelligence offers improved compliance in the accounting profession. AI- powered financial transaction monitoring and analysis has transformed regulatory compliance for firms. Accountants struggle to manually identify non-compliance concerns due to massive financial data moving through firms. AI-driven systems can efficiently search large databases, discover patterns, and flag suspect activity or transactions that may break regulations. AI systems can adapt to changing regulations using machine learning algorithms, keeping organizations

THE IMPACT OF ARTIFICIAL INTELLIGENCE IN THE ACCOUNTING PROFESSION: CHALLENGES AND OPPORTUNITIES 5 compliant. These technologies can also analyze historical data to identify past transgressions and assist firms in preventing them. AI-automated compliance monitoring eliminates human error and streamlines reporting, saving time and resources. Similarly, AI can help accountants predict financial trends and outcomes. Financial planning and budgeting used previous data and assumptions. AI can analyze massive volumes of historical and real-time financial data to find patterns, correlations, and trends that would otherwise go unnoticed (Gotthardt et al., 2019). Accountants may improve financial forecasts using predictive analytics, helping organizations make budget, investment, and resource allocation choices. Precision aids strategic planning and market adaptation. Businesses may construct solid financial plans that generate growth and reduce risks by combining AI's predictive skills with human experience. AI-powered chatbots and virtual assistants have changed accountant-client interactions. These AI-powered technologies quickly respond to client queries, facilitating communication and assistance. Chatbots can answer questions regarding financial reports, taxes, and general financial advice 24/7, reducing wait times and improving customer satisfaction. Accountants can focus on higher-value work since virtual assistants can undertake regular duties and answer frequently asked queries. Client engagement improves, and accountants can build stronger client connections. These AI-driven interactions also gather client preferences and concerns, allowing accountants to provide individualized services and customized financial solutions.

THE IMPACT OF ARTIFICIAL INTELLIGENCE IN THE ACCOUNTING PROFESSION: CHALLENGES AND OPPORTUNITIES 6 Figure 1 CPA.com accounting profession megatrends, 2019 Challenges Within accounting comes a lot of reporting and data analytics, and AI can enhance these aspects of the profession. "AI-based work transformation in the accounting field is not only driven by the possibility to automatize work processes, which already happened over the last decades, but it is also largely driven by the availability of big data and the use of smart big data analytics" ( Leitner et al., 2021 ). It will be able to analyze big data files of financial data and improve analysis by detecting issues that would take a human a long time to find. This could save time and improve the reporting overall. However, a challenge accountants will face is keeping up with AI's software language to work effectively with the new technology. In China, they have realized that the courses for an accounting degree will have to change due to this

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THE IMPACT OF ARTIFICIAL INTELLIGENCE IN THE ACCOUNTING PROFESSION: CHALLENGES AND OPPORTUNITIES 7 learning curve (Luo et al., (2018) . They must learn new skills regarding AI algorithms and technology integration within reporting. Additionally, security considerations related to data privacy have been raised with AI being used for sensitive data. "However, although we live in an increasingly digital world, AI still suffers from various limitations, such as the challenge of reproducing and storing human emotions – or, in other words, the ethics of AI" (Stahl et al., 2022). To get around this, measures would have to be in place, and users would have to understand AI's limitations (FULOP, 2023) . The biggest fear that needs to be addressed is the impact on employment and job roles it will have on the accounting profession. With automation of certain responsibilities, it could potentially replace some jobs. However, with technology substituting some labor, it will raise productivity and shift jobs roles instead of eliminating them. ( Stancheva-Todorova, 2018 ) Accountants must adapt to the changes and shift their attention to what AI cannot do, like critical thinking and strategizing. AI makes lifelong learning difficult. AI and technology are changing many fields, including accounting. To stay current and improve their skills, accountants must embrace lifelong learning. This involves staying current on accounting-related AI tools and applications, learning how AI can streamline processes and improve efficiency, and using AI to provide more valuable insights to clients and organizations (Ahmad et al., 2021 ). Accountants can adapt to changing times by embracing lifelong learning. Attending AI in accounting workshops, webinars, conferences, online courses, and professional development opportunities can help you learn new skills.

THE IMPACT OF ARTIFICIAL INTELLIGENCE IN THE ACCOUNTING PROFESSION: CHALLENGES AND OPPORTUNITIES 8 Human oversight is another issue: AI can automate many accounting tasks, but human oversight is essential, especially for important financial decisions. Data and algorithms determine AI performance. Thus, human accountants must verify data inputs and ensure AI-generated outputs match the organization's goals and ethics. AI can quickly process large amounts of data but may lack context and judgment. Accountants can provide critical insights, interpret results, and apply their expertise to complex situations that AI may not understand. They can also help stakeholders understand and implement AI-generated data. Addressing Bias Bias in AI training data is a major issue. Historical financial data or other sources may bias AI predictions and decisions (FULOP, 2023). Accountants must recognize and address such biases to ensure fair and accurate results. Accountants should collaborate with data scientists and AI developers to assess and mitigate biases in AI system development and deployment. They can actively review AI algorithms and models to find and fix biases. A diverse and inclusive AI system development and implementation workforce can reduce bias and promote fairness. In conclusion, AI will impact this occupation through transformative channels. Accountants must learn to take advantage of the opportunities and endure the challenges as they shift to new roles. Accounting will be revolutionized through automation and enhanced data analytics, but a few trials must be overcome to improve accounting. Artificial intelligence has had a major impact on accounting, presenting challenges and opportunities for accountants and the industry. AI has simplified many accounting tasks, allowing professionals to focus on higher- value tasks and strategic decision-making. However, this technological shift presents challenges that must be addressed proactively. Integrating AI into accounting requires a balanced approach that leverages human expertise and technological advances. Accountants can make the digital accounting profession more efficient, insightful, and dynamic by responsibly embracing AI,

THE IMPACT OF ARTIFICIAL INTELLIGENCE IN THE ACCOUNTING PROFESSION: CHALLENGES AND OPPORTUNITIES 9 addressing challenges, and seizing opportunities. In the exciting era of artificial intelligence, accountants must be agile, adaptable, and innovative. References Leitner-Hanetseder, S., Lehner, O. M., Eisl, C., & Forstenlechner, C. (2021, January 26). A profession in transition: Actors, tasks, and roles in AI-based accounting . Journal of Applied Accounting Research. https://www.emerald.com/insight/content/doi/10.1108/JAAR-10-2020-0201/full/html Ahmad, T., Zhang, D., Huang, C., Zhang, H., Dai, N., Song, Y., & Chen, H. (2021). Artificial intelligence in the sustainable energy industry: Status Quo, challenges, and opportunities. Journal of Cleaner Production , 289 , 125834. Luo, J., Meng, Q., & Cai, Y. (2018, August 29). Analysis of the impact of artificial intelligence application on the development of the accounting industry . Open Journal of Business and Management. https://www.scirp.org/journal/paperinformation.aspx?paperid=87045 Stancheva-Todorova, E. P. (2018). How artificial intelligence is challenging the accounting profession. https://www.researchgate.net/profile/Eleonora Stancheva/publication/333728223_HOW_ARTIFICIAL_INTELLIGENCE_IS_CHALLE NGING_ACCOUNTING_PROFESSION/links/5d00ff16299bf13a38500807/HOW- ARTIFICIAL-INTELLIGENCE-IS-CHALLENGING-ACCOUNTING- PROFESSION.pdf Gotthardt, M., Koivulaakso, D., Paksoy, O., Saramo, C., Eds, M., and Lehner, O. (2019). Current State and Challenges in Implementing Robotic Process Automation and Artificial Intelligence in Accounting and Auditing. ACRN Oxford Journal of Finance and Risk Perspectives, 31-46. Katz, Y. (2017, November 30). Manufacturing an artificial intelligence revolution . SSRN. https://deliverypdf.ssrn.com/delivery.php? ID=0861030070841181010920280051001260690000310200440320700100820731120030 0407700509110003404105100105800504607510409211211900206700905403303803501 1020092080000025093003085092011074104069016026005091112092112097123105031 027121119087080123019068086125085029&EXT=pdf&INDEX=TRUE

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THE IMPACT OF ARTIFICIAL INTELLIGENCE IN THE ACCOUNTING PROFESSION: CHALLENGES AND OPPORTUNITIES 10 Stahl, B. C., Antoniou, J., Ryan, M., Macnish, K., & Jiya, T. (2022). Organizational responses to the ethical issues of artificial intelligence. AI & Society, 37 , 23–37. https://doi.org/10.1007/978-3-658-34324-8_10 FÜLÖP, M. T. (2023). ETHICAL CONCERNS ASSOCIATED WITH ARTIFICIAL INTELLIGENCE IN THE ACCOUNTING PROFESSION: A CURSE OR A BLESSING? View of ethical concerns associated with artificial intelligence in the accounting profession: A curse or a blessing? https://journals.vilniustech.lt/index.php/JBEM/article/view/19251/11759 Xing Afeng, tao xuemei, peng ruifeng . Reflections on the accounting industry in the era of artificial intelligence [J] . Accounting and accounting studies,2017(10):112-112