HKUST Business School Magazine

Challenges in AI adoption While there are many beneficial applications of AI in auditing and accounting, the adoption of this technology has not been without challenges. Notably, many accounting and auditing professionals still lack the expertise to determine which tasks are suitable for AI or to recognize the technology’s limitations. Additionally, it remains challenging for professionals to understand and identify the potential risks associated with AI, as well as to evaluate and compare AI’s performance with that of humans. Consequently, as auditing firms embrace AI, they risk the valuable insights of experienced workers and may become overly reliant on AI without proper critical assessment. Another significant barrier is employee skepticism toward AI. Experimental studies indicate that audit professionals tend to exhibit “algorithmic aversion”, underestimating the value of AI-generated advice. 10 The aversion is substantial, and these studies reveal that auditors discount AI-driven recommendations by 23% compared to human benchmarks. Another critical issue is data privacy concerns. Recent surveys on the adoption of data analytics in the audit industry show that clients are apprehensive about data leakage when proprietary information is used in analytics models. 11 Regulatory skepticism also poses a challenge to AI adoption. As a relatively new technology, guidance on the use of AI is limited, which discourages audit firms from embracing these innovations. Research indicates that regulators are more likely to second-guess estimates derived from data analytics, suggesting a perception that automated outputs are of lower quality than those produced by humans. 12 To fully unlock the potential of AI in the auditing and accounting industries, significant efforts must be made to alleviate skepticism among employees, clients, and regulators regarding AI adoption. The future of accounting work AI is enhancing the efficiency and output of professionals in auditing and accounting, but it also presents significant challenges in human capital management within the industry. A survey by Goldman Sachs in March 2023 indicates that accountants and bookkeepers are among the professions most likely to be affected by the rise of AI, highlighting its substantial impact on talent development. Recent research suggests that popular ChatGPT models can replicate many skills associated with auditors and accountants. For instance, when researchers tasked ChatGPT with accounting licensure exams (such as CPA, CMA, CIA and EA exams), the models achieved scores of 85% across all tests. 13 This staggering statistic underscores the potential disruptive impact that AI technologies may have on the auditing workforce. However, does this remarkable AI performance imply that companies no longer need professional auditors and accounting talent? We believe the answer is no. In fact, research from Deloitte shows that 93% of CFOs consider it crucial to incorporate talent with generative AI skills into their finance teams over the next two years, making this a top concern. 14 Thus, a critical question for the auditing and accounting profession at this juncture is twofold: (1) what are the essential skills needed in the era of AI? and (2) How can auditors reskill themselves to effectively integrate AI into their workflows? Insight Biz@HKUST 40