Our survey of 1,800 financial reporting executives from major economies around the world shines a new light on key issues — and finds that we are standing on the cusp of a veritable financial reporting revolution. We are moving from the “digital age” to the “AI age”, one in which nothing will ever be quite the same again.
AI is transforming financial reporting and auditing. In the past, these have stereotypically been viewed as being monotonous, time-consuming tasks requiring experts to use statistical sampling methods and manually check copious amounts of financial data. Given the volume and nature of the data and tasks involved, the speed of the humans doing the work was a major limiting factor.
AI is changing all that — helping businesses create smarter information flows that improve their ability to identify and respond to risk while also offering enhanced anomaly and outlier detection capabilities.
But how far will this go? Has the dream of an AI-powered, interconnected financial reporting ecosystem, underpinned and checked by continuous real-time auditing, offering value-added and predictive insights, nearly become reality — or is it still a far-off aspiration?
Highlights of our study
- The results show remarkable growth in the use of AI for financial reporting. Currently, 72% of companies are piloting or using AI in financial reporting. This number is expected to reach almost 100% in the next three years.
- Boards are aware of the transformative potential of AI. All the companies surveyed reported that their boards have taken strategic measures related to AI.
- Companies’ strategic and substantive investments in AI are evident – AI currently accounts for 10% of the IT budget and this is projected to increase significantly in the next year.
- The extent and pace of AI adoption vary across regions and sectors:
- When it comes to the adoption of AI for financial reporting, North America is leading at 39%, followed by Europe at 32% and the Asia-Pacific region at 29%.
- The highest rate of AI adoption is found in the telecoms and technology sector at 41%, followed by energy, natural resources and chemicals at 35%, and healthcare and life sciences at 32%.
- The level of AI governance is higher among public companies than private ones, as they face greater regulatory scrutiny. While 65% of public companies have established AI policies and governance structures, only 55% of private companies have done so.
- Companies look to their auditors to spearhead the AI transformation and drive the transformation of financial reporting. 64% of companies expect auditors to help assess their use of AI in financial reporting, provide assurance and attest their AI controls.
- Companies are shifting their focus from traditional AI techniques to generative AI (gen AI). Over half of the companies (57%) plan to implement gen AI for financial reporting in the next three years.
Characteristics of leaders in AI
Our research identifies four key characteristics that leaders adopt to achieve AI maturity:
- Leaders mitigate risk by adopting frameworks, governance structures and procuring third-party control assurance for AI.
- Leaders overcome adoption barriers by engaging technology leadership in integration efforts, incorporating AI into training and piloting initiatives to validate ROI.
- Leaders promote ethical AI by establishing ethical frameworks, conducting regular audits and ensuring human oversight.
- Leaders prepare for AI by adopting best practices (like cloud migration), enhancing cybersecurity, standardizing workflows, retiring legacy systems and implementing paperless bookkeeping.
How to get started?
1. Determine your ambition
- How important is AI to your business or financial reporting function?
- Do you want to be an AI leader in your industry?
- How do you see your business evolving based on AI?
- Which opportunities does AI open up for your company?
2. Determine your maturity level based on our assessment
- Where do you fit in KPMG’s AI Maturity assessment?
- How much progress has your company made in terms of how it uses AI for financial reporting?
- Which AI-related steps has your company already taken?
3. Align your ambition, maturity and strategy
- Are you funding AI sufficiently?
- Do you have established AI governance and frameworks?
- Are you addressing barriers to AI and financial reporting?
4. Look for support
Look to leaders for ways to enhance your financial reporting with AI. KPMG's Trusted AI approach emphasizes principles such as fairness and transparency. This option supports an ethical use of AI that adds value and benefits clients.
KPMG can also demonstrate how AI is capable of improving both corporate governance and audit quality.
KPMG’s journey to transform auditing through the use of AI
We at KPMG are at your side on this journey. We use AI to power our audits and transform the audit experience, while at the same time recognizing the inherent complexities and potential risks that accompany such advancements. Our journey is firmly rooted in a foundation of ethical conduct and responsible practices, guided by our Trusted AI approach.
This framework serves as an anchor, aligning KPMG firms’ services with a set of core values while championing principles of transparency, explainability, fairness and accountability.
We additionally invest in extensive training and support for our audit professionals, who are increasingly spending more time assessing clients’ AI processes and using an expanding array of AI tools and enablers in the audit itself. What’s more, our clients expect audits to become increasingly real-time and proactive – as opposed to reactive – since AI gives audit teams more powerful capabilities.
