By A global survey by KPMG International highlights the increasing adoption of artificial intelligence (AI) in financial reporting. According to the AI in Financial Reporting and Audit: Navigating the New Era report, 10% of companies have widely adopted AI in their financial reporting, while nearly three-quarters (72%) are piloting or using it selectively. In the next three years, 99% of organizations are expected to integrate AI into their financial reporting processes.
The survey, drawing insights from financial reporting executives and board members across 1,800 companies in six industries and 10 countries, underscores AI’s transformative potential in business models, particularly in financial reporting and auditing. Notably, companies in the Asia-Pacific region have the slowest pace of AI adoption in financial reporting (29%) compared to North America (39%) and Europe (32%).
As AI development progresses, 64% of companies expect auditors to conduct a more detailed review of the control environment concerning their use of AI in financial reporting. Additionally, 52% of businesses want their auditors to prioritize predictive analysis, 47% desire faster delivery, and 45% seek real-time auditing throughout the year.
Foong Mun Kong, Head of Audit at KPMG in Malaysia, commented, “The growing adoption of AI in financial reporting signifies a transformative shift beyond mere technological advancements. The roles of auditors are being redefined as businesses are looking to their auditors to lead the AI transformation due to their deep understanding of financial reporting processes and their abilities to pinpoint areas where AI can add most value. As a result, audits are shifting towards being more real-time and predictive, significantly transforming how insights are delivered.”
The survey found that AI adoption leads to greater productivity for financial reporting teams, combined with higher talent acquisition and skills development. Over 40% of companies already report greater employee productivity and efficiency, a figure expected to rise to 60% within three years. Early adopters of AI in financial reporting report enjoying more benefits, such as the ability to predict trends and impacts (65%), real-time insights into risks (60%), better data-enabled decisions, and increased data accuracy (both 57%).
However, AI adoption comes with challenges, including data privacy concerns (59%), limited AI skills and talents (56%), poor organizational knowledge of AI (51%), uncertainty about best use cases to prioritize (41%), and difficulties integrating with existing tools (38%). These hurdles diminish as organizations become more proficient in using AI.
KPMG’s study outlines four key approaches to achieve AI maturity:
- Construct frameworks to mitigate and manage potential risks, including adopting AI frameworks and governance structures.
- Overcome barriers to adoption by involving technology leadership in systems integration, incorporating AI impact into training programs, and piloting AI initiatives to validate ROI.
- Recognize the importance of ethical AI by implementing ethical frameworks, conducting regular audits to address ethical issues, and ensuring human oversight of AI.
- Implement best practices for AI-readiness, such as cloud migration, high-quality cybersecurity, standardization of workflows, discontinuation of legacy systems, and paperless bookkeeping.
Foong concluded, “AI advancements in financial reporting represent a triple win for companies, auditors, and information users by enhancing quality, boosting efficiency, and supporting more informed business decision-making. The survey uncovered that a majority of companies expect auditors to evaluate their use of AI in financial reporting, providing assurance over AI governance and controls. At present, no jurisdiction, including Malaysia, explicitly requires auditors to perform assurance reviews of AI governance. However, I am confident that regulators and standard setters will keep pace with market expectations.”
KPMG International’s AI in Financial Reporting and Audit report can be downloaded from KPMG International.
