Usage widening to include accounting, financial planning and risk and tax management

• Companies have made the most progress piloting or using AI for financial planning (78%), followed closely by accounting (76%). Less than half of companies (45%) report they are piloting or using AI for tax and operations.
  
  
• While cloud technology remains the #1 priority for US companies looking to enhance financial reporting, non-generative AI has risen to #2 and is seeing fast adoption.
  
  
• With regard to financial reporting practices, progress is fastest with cloud migration and cybersecurity, where around three-quarters of companies have reached mid- or full implementation and are actively seeing results.

New York, New York--(Newsfile Corp. - December 3, 2024) - The use of AI in the finance function has reached its highest levels yet, with 62% of US companies using AI to a moderate or large degree, 58% piloting or deploying generative AI (GenAI) and 52% using AI specifically in financial reporting, according to a new report released today by KPMG LLP, the US audit, tax and advisory firm. Importantly, 92% of companies report their finance function's AI initiatives are meeting or exceeding their ROI expectations, and almost one-third plan to increase AI budgets or shift funds from other activities to drive further AI adoption.

"The use of AI and GenAI is becoming ubiquitous across accounting, financial planning, risk management and more, and companies are seeing significant returns on their digital transformation efforts as they integrate these technology capabilities into their financial reporting processes," said Scott Flynn, KPMG US Vice Chair - Audit.

The report, AI in Finance: Transforming into a New Era with the AI-Empowered Finance Function, which resulted from a survey of 2,900 companies across 23 countries, including 300 US finance leaders, builds on research conducted earlier this year which found that in the next three years, 100% of US finance leaders report they will be either piloting or using AI in financial reporting.

The research included a maturity framework created by KPMG to categorize respondents into three AI-readiness groups and identify a cohort of AI leaders that are more advanced and mature in their deployment of AI. Among the US organizations surveyed, 41% qualify as AI leaders, 48% as middle ground implementers and 11% as beginners. KPMG has also developed an AI maturity benchmarking tool designed to help organizations assess their progress in the AI transformation journey.

Key takeaways from the survey are highlighted below.

Digital transformation is progressing at different paces across the finance function.

"Tax leaders are eager to unlock the transformative potential of GenAI for their tax departments, but the complexity of the current landscape can make this path seem daunting," said Brad Brown, KPMG US Chief Technology Officer - Tax. "To navigate this challenge and unlock the full potential of AI, partnering with a third-party provider equipped with the right expertise, cutting-edge technology, and robust resources could be the key to success."

• Over the past six months, US companies have made the most progress using AI in the finance function for research and data analysis (60%), predictive analysis and planning (55%) and fraud detection and prevention (54%).
  
  
• Overall, companies have made the most progress in leveraging AI for financial planning (78% piloting or using), followed closely by accounting (76%) and treasury management (64%). This can generate better debt management, cash-flow forecasting, fraud detection, credit risk assessment and scenario analysis in the treasury and risk management functions.
  
  
• Approximately half (45%) report progress leveraging AI for tax and operations. Usage here may be lagging for a variety of reasons, including the complexity of tax regulations, a lack of up-to-date data, onerous legacy systems and the reliance on human judgment for many tax-related decisions.
  
  
• These differences are reflected in both public and private companies. 81% of private companies report that they are piloting or using AI in accounting, with similar numbers reporting use in financial planning. Among public companies, 75% are piloting or using AI in accounting, though they lag behind private companies for financial planning (77%).

As finance leaders see the returns on their AI investments, they are more inclined to shift spending priorities towards an AI-enabled financial reporting process.

"CFOs and finance teams have the opportunity to drive transformative change in their organizations through AI,” said Sanjay Sehgal, KPMG US Advisory Head of Markets. “To fully leverage AI's potential, CFOs and CIOs must collaborate to align technology with business goals, improve performance and manage risks. Together, they can bridge the gap between technology and business decisions, driving innovation.”

• Finance leaders are actively seeing the benefits of deploying these AI capabilities across their financial reporting processes. 92% of US companies report their finance function's AI initiatives are meeting or exceeding ROI expectations, and more than one-third plan to increase AI budgets or shift funds from other activities to drive further AI adoption.
  
  
• As the use of AI in finance grows, the dividends multiply. When starting out, finance teams in US companies report one to two benefits. By the time they become AI leaders, the number is almost five, including better data and data-enabled decisions, faster insights and reporting, lower costs, an increase in productivity efficiencies, improved operations and enhanced skills and talent.

AI leaders are paving the way for an AI-enabled finance function and seeing greater benefits and ROI from integrating AI into their financial reporting processes.

"AI is becoming more important than ever to enhancing quality, mitigating risks and enabling deeper, data-driven insights," said Thomas Mackenzie, KPMG US and Global Audit Chief Technology Officer. "The benefits of AI compound as firms continue to invest in new capabilities and embed AI into their financial reporting processes.

• 61% of AI leaders report higher-than-expected ROI on AI, compared with just 33% of beginners and implementers. Leaders are achieving success through two key factors:
  • Investment - AI leaders invest around 13% of their IT budgets on enterprise-wide AI activities, a third more than other companies. Over the next three years, that share of AI spend on company-wide activities will grow to more than 17% of the IT budget for leaders. As others play catch up, the gap between them and leaders will narrow.
  • Resourcing - AI leaders are building up their own internal AI resources-either a central team within finance (57%) or separate groups within each department in their group (38%). More than 40% also make greater use of external AI resources, such as technology outsourcing companies or consultants, and around two-thirds use a central team outside of finance.
• AI leaders are also more apt to pilot AI initiatives and create digital processes to keep up with regulatory and compliance changes, conduct change management and education programs and continue to increase their AI budgets to fund future AI initiatives.

While cloud technology remains the #1 priority for US companies looking to enhance financial reporting, non-generative AI has risen to #2 and its usage is accelerating.

• On average, many US companies are in the process of modernizing their technology infrastructure and deploying new technology capabilities into their financial reporting processes.
  
  
• While cloud technology is the #1 technology companies are prioritizing to enhance financial reporting, only 67% of finance leaders placed it at #1, down from 77% in May. This may be due to 31% of companies reporting that they have completely implemented cloud migration into their financial reporting processes and are seeing the results of it.
  
  
• Conversely, the prioritization of AI is steadily accelerating. In our latest report, 61% of finance leaders report non-generative AI as the technology they are prioritizing to enhance financial reporting (up from 46% in May). This is reflected in 81% of companies reporting that they have allotted up to 15% of their IT budget on AI-related activities.

Finance leaders anticipate AI will enable better and faster insights, but concerns remain around data privacy and cybersecurity.

• In the next three years, 53% of finance leaders expect AI to enable faster access to relevant information and data. However, 57% report that data security and privacy are the biggest barriers to AI adoption.
  
  
• To overcome these barriers, a majority of companies (66%) are developing corporate principles and guidelines on responsible use of AI, and more than half (52%) are involving technology leadership in systems integration discussions to promote AI enablement.

Companies are looking for third-party controls assurance over AI.

"The demand for controls assurance over AI continues a broader trend of companies perceiving technology-centric risks (cloud, cyber, AI etc.), which are increasingly complex and outside the direct control of management, to pose the biggest potential threats to the integrity of financial reporting," said Matt Johnson, KPMG US Audit National Technology Assurance Leader.

• An increasing number of companies (39%) are planning to include AI risk and associated controls in the scope of their financial reporting processes over the next year.
  
  
• When it comes to AI governance, both private (44%) and public (42%) companies have taken actions around procuring third-party controls assurance over AI, including some form of AI controls assurance.
  
  
• Perhaps surprisingly, private companies are ahead of public companies when it comes to including some form of AI controls assurance in the scope of reports for vendors or third-party processors. This is likely correlated to reliance on third-party service providers, signaling increased expectations for addressing AI assurance within the scope of their system and organization control (SOC) reports.
  
  
• Additionally, 62% of companies want their external auditor to conduct risk mitigation and internal controls on their behalf using traditional AI.

As AI becomes more commonplace, companies are increasingly relying on their external auditors to prioritize AI and GenAI in their audit approach.

• An increasing number of companies (32%) rank AI as very important to the work performed by their external auditors, up from 25% six months ago.
  
  
• More than half (54%) of finance leaders want their external auditor to use non-generative AI for predictive analysis and forecasting (up from 52% six months ago).
  
  
• Private companies are more likely to want their external auditors to use GenAI to understand economic and industry trends, while public companies are more focused on data analysis and quality management.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/232262