Corporate boards need to step up as audit committees take on more responsibility.
Artificial intelligence seems to be a two-edged sword when it comes to company audit committees and the corporate boards that oversee audit activities.
According to a recent survey by corporate finance management services company OneStream, 80% of company finance executives say artificial intelligence should trigger a big productivity boost inside companies that invest in AI.
Yet corporate finance managers also say that AI brings a set of new problems to the table, with employee training, data privacy regulations, and human intervention challenges at the top of the list.
“With the backdrop of a looming shortage of accounting and finance talent in the labor market, as well as volatile global economic conditions, our survey results highlight the increasing interest in the use of AI to increase productivity and forecasting accuracy in accounting and finance teams and the value this can bring to organizations,” said Tiffany Ma, senior product marketing manager for OneStream AI Services.
Ma believes corporate finance executives should keep their guard up as AI rushes headlong into the finance and accounting realm.
“The interest in AI is certainly high, and there’s a lot of positive feedback from finance leaders in terms of what they think AI can bring for them, but there have been a few challenges,” Ma said in an interview with CFO Dive.
Audit Committees Facing Their Own Unique AI Challenges
Company audit committees are taking on a stacked workload in 2024, including the increased use of artificial intelligence inside their companies.
In doing so, C-suite financial executives and corporate boards need to be especially careful in the use of AI, or face problems that only 10 years ago few financial decision-makers could have imagined.
“Artificial intelligence and machine learning (AI/ML) have climbed to the top of the strategic agenda for many boards,” said EY in a recent white paper titled “What Audit Committees Should Prioritize in 2024”.
According to EY, Fraud detection, automating operational tasks, identifying possible cyber attacks, and regulatory compliance are some of the use cases that organizations are exploring to enhance their risk management and compliance-related efforts.
“However, AI/ML early adopters may face increased risks, such as lawsuits arising from the use of web-based copyrighted material in AI outputs, concerns about bias, lack of traceability due to the “black box” nature of AI applications, reliability of the outputs and threats to data privacy and cybersecurity,” the paper notes. “As a result, many organizations are opting for a cautious approach to AI/ML.”
One area of concern (and opportunity) for the finance department figuring out the best way to use AI to gain optimal results and remain in compliance, which is yet another gray area for senior executives in early 2024.
“Organizations are initially implementing applications in non-customer-facing processes or to aid customer-facing employees where the primary goals are improving operational efficiency and augmenting employee intelligence by offering insights, recommendations, and decision-making support,” EY reported. “In the future, we expect to see risk teams using AI to scan and review regulations and for process, risk and control diagnostics.”
“Over time, AI-enabled scenario modeling is also expected to be used for market simulation and portfolio optimization, the report noted.
What are the best processes and workarounds for audit committees as AI emerges dominant in corporate finance? Have a battle plan, EY advised.
“With AI usage increasingly democratized, robust and agile governance has become an urgent board priority,” the report stated. “Audit committees should inquire with management and internal audit regarding risk assessments around AI and related AI governance, including how risks around the ethical use of AI, accuracy of outputs, plagiarism, copyright, trademark violations, and protections of company IP were considered.”
“Additionally, audit committees should ask management whether and how AI is used within the financial reporting processes, including related internal control impacts,” EY added.
Brian O’Connell, a former Wall Street bond trader and best-selling author, is a prominent figure in the finance industry. With a substantial background as an ex-Wall Street trader, he has authored two best-selling books: ‘The 401k Millionaire’ and ‘CNBC’s Creating Wealth’, demonstrating his profound knowledge of finance and investing.
Brian is also a finance and business writer for esteemed national platforms and publications, including CNN, TheStreet.com, CBS News, The Wall Street Journal, U.S. News & World Report, Forbes, and Fox News.
