A new KPMG in Canada survey finds Canadian companies believe Artificial Intelligence (AI) will enhance their financial reporting, with most (87 per cent) already piloting or using AI in their reporting, compared to 72 per cent globally. While more Canadian organizations are exploring the potential of AI, regulatory compliance, skill gaps and data security concerns  have the majority still in the pilot stage (73 per cent) with only 14 per cent using it selectively or widely in their financial reporting, compared to 33 per cent globally.

"Canadian organizations are ready to take their financial reporting to the next level using technologies like AI, automation and data and analytics to deepen the quality of their reporting for their many stakeholders," says Kristy Carscallen, Canadian Managing Partner of Audit and Assurance at KPMG in Canada. "The future of financial reporting is here and it's important to embrace it to enable the higher level of insights and transparency that companies and investors expect."

Key findings:

  • 87 per cent of Canadian organizations (compared to 72 per cent globally) are piloting or using AI in financial reporting set to rise to 100 percent in next three years
    • 73 per cent are piloting and evaluating results (compared to 39 per cent globally)
    • Few (14 per cent) are already using it selectively or widely in financial reporting compared to 33 per cent globally
  • Three in five (59 per cent) are allocating more than 10 per cent of their IT budget to AI, compared less than half of global peers (45 per cent)
  • Virtually all (94 per cent) companies expect to grow their investment in AI related activities half (49 per cent) will boost spending by 25 per cent or more in the coming year
  • Use of generative AI is expected to triple in the next year, jumping from 13 per cent to 35 per cent

The KPMG report, AI in financial reporting and audit: Navigating the new era, surveyed 1,800 companies across ten major markets including Canada and found that organizations are seizing on the potential of AI to increase reporting insights, accuracy and efficiency.

Among the many benefits of using AI in financial reporting, Canadian companies put the ability to predict trends and impacts (75 per cent), better data-enabled decisions (66 per cent), and increased data accuracy and reliability (61 per cent) at the top of list. At the same time, the use of AI is translating into greater productivity combined with higher talent acquisition and skills development. Already, more than a third (38 per cent) report greater employee productivity and efficiency expected to jump to 53 per cent in three years.

While more Canadian companies are piloting the use of AI in financial reporting to test and learn, fewer have taken the step to implement the technology.  The top hurdle to adoption is keeping pace with regulatory and compliance changes, (60 per cent) notably higher than the global average at 44 per cent - followed closely by limited skills and talent (59 per cent) and concerns around data security and privacy (58 per cent).

When adopting AI, companies say transparency (17 per cent) and data privacy (17 per cent) are the most important considerations. Sustainability (45 per cent) and explainability (39 per cent) of AI applications were listed as the biggest blind spots to adoption and receive the least consideration, requiring companies to pay much higher attention when setting up AI governance mechanisms.

"The benefits of using AI are clear, but companies need to take a careful approach to building the right governance and frameworks that are values-driven, human-centric and trustworthy to support a safe and successful transition," says Bryant Ramdoo, Partner and Audit Innovation Leader at KPMG in Canada. "Businesses need to invest in AI technologies and upskill their entire organization to get ready for generative AI-powered financial reporting and auditing."

Although generative AI is a relative newcomer, the survey finds Canadian companies are hurrying to implement it in financial reporting. Nearly half (45 per cent) are already piloting generative AI technology, compared to 30 per cent globally. Further, as many as 88 per cent believe that the use of generative AI will become common practice for auditors within two years.

Auditors expected to lead the way by providing assurance and attestation to manage risks

Companies expect their external auditors to take full advantage of AI's powerful capabilities and lead the way in the transformation of financial reporting. Three-quarters (76 per cent) of companies believe it is important for their external auditors to use AI, which goes hand in hand with automation (72 per cent) and data and analytics (79 per cent). Most (80 percent) believe that their auditors are ahead of or equal with them in the adoption of AI for financial analysis.

They are looking to their auditor to deploy AI in the audit for three main purposes:

  • Improve the accuracy of audits
  • Develop more proactive, continuous and predictive processes
  • Gather data and value-added audit insights

Companies also want auditors to take it one step further to help them ensure that their use of AI is robust, safe, and compliant with rules and regulations. In the future, companies expect their auditors to play a much more important role in evaluating their use of AI in financial reporting. Majority (82 per cent) expect auditors to conduct a more detailed review of the control environment in relation to their use of AI in financial reporting. Just under one third (30 per cent) foresee them carrying out an AI governance maturity assessment, while 17 per cent expect to ask auditors to provide third-party attestation over the use of AI technology.

While businesses may want and value additional assurance and attestation to manage risks, currently this is an area where little regulation and standards exist.

"As AI adoption accelerates, there is a call to action not just for companies, but for all parties in the reporting ecosystem to move forward together to understand and carefully manage the associated risks," adds Ms. Carscallen. "We've long believed in the power of AI to enhance the quality of reporting and public trust by making the right investments in technology and skills to use this powerful technology responsibly. It's imperative that everyone – auditors, organizations, standard setters, regulators and educators – work closely together to advance the future of assurance and attestation in Canada with confidence."

About the survey

KPMG surveyed 1,800 global financial reporting executives and board members in 10 countries (Australia, Canada, France, Germany, Ireland, Japan, Netherlands, Spain, the U.K., and the U.S.) across key industry sectors, including consumer and retail, financial services, energy and natural resources, technology and media, industrial manufacturing, and healthcare. The financial reporting executives are drawn from organizations with annual revenue over US$500 million and more than 250 employees. The survey was conducted from February to March 2024.

About KPMG in Canada

KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs more than 10,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada's top employers and one of the best places to work in the country.

The firm is established under the laws of Ontario and is a member of KPMG's global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see kpmg.com/ca.

For media inquiries:

Alannah Page
National Communications and Media Relations
KPMG in Canada
(306) 934-6255