Generative AI in Financial Reporting and Accounting | Deloitte US has been saved
By Brian Cassidy, Audit & Assurance partner, Deloitte & Touche LLP, and Ryan Hittner, Audit & Assurance principal, Deloitte & Touche LLP
Talking points
- Generative AI (GenAI) technology has the power to transform accounting and financial reporting.
- GenAI can help professionals be more effective in executing tasks such as planning, research, and product development.
- GenAI does not replace human judgment and experience, but it can enable professionals to improve quality and provide strategic insights.
Exploring the possibilities of Generative AI in accounting and finance
Seasoned accounting professionals will easily recall the type of work we did early in our careers: data collection, research, and writing, as well as presentation and summary. Now, it’s possible for GenAI to create faster, more comprehensive ways of performing these tasks, so junior analysts can be more effective, focus on gaining relevant professional experience, and generate more value-additive insights from their work.
Large language model (LLM) technology has led to rapid advances in GenAI—a software that can write coherent text and create images and code at sophisticated, near-conversational levels. The potential implications for accounting and financial reporting are nothing short of remarkable. GenAI can accelerate the way accountants prepare and process documents and complete tasks. Despite emerging regulation and risk considerations, one thing is clear: GenAI is moving full speed ahead. Well-prepared accounting functions can harness its financial reporting capabilities to improve their accounting research, competitor analysis processes, and documentation.
A day in the life of a GenAI user
Let’s consider a potential use case—how GenAI might help a junior analyst (Lee) in the financial research and accounting department of a multinational company, during a typical workday.
First thing in the morning, Lee checks her phone’s GenAI-aggregated news feed to catch up on overnight markets and industry news.
Accounting research
When Lee gets into the office, her manager reminds her that she owes a draft accounting position paper to support the company’s proposed accounting treatment for research and development (R&D) costs associated with new products under development. Luckily, the company recently launched an internal GenAI tool to assist professionals with research. Lee uses the tool to research and summarize the company’s previous R&D position papers and generate a draft. While evaluating the cited accounting guidance, she notices that certain SEC guidance was omitted. Lee instructs the tool to add considerations for relevant SEC guidance. While GenAI helps Lee perform these tasks in a day rather than potentially weeks, she still must verify accuracy and completeness of facts, confirm the relevance of cited guidance, and evaluate judgments before submitting it.
Competitor analysis
Later, Lee’s manager asks her to research competitors to analyze their sentiment toward future earnings. Lee uploads the certain sections of MD&A from the latest 10-Q or 10-K for the company and an expanded number of competitors, selected based on Lee’s judgment, into the tool and asks it to analyze information regarding future financial performance. She then prompts the tool to conduct an analysis of sentiment and common themes to determine which company feels more positively about its earnings outlook. The tool evaluates transcript statements based on terms from Lee’s prompt including “CAGR,” “growth strategies,” and “investment strategies,” and then summarizes each company’s outlook.
With an expanded number of companies and a dynamic analysis, Lee can formulate more holistic observations and recommendations based on deeper data analysis than under the previous process.
Business impact
GenAI can be a powerful tool for professionals to more efficiently prepare effective analysis or documentation and enhance their judgments in a variety of areas, including financial planning and research. However, while GenAI can jump-start accounting and financial reporting processes, it still requires a driver at the wheel. Since GenAI can be inaccurate and miss nuance, experienced professionals must oversee and evaluate outcomes. Professionals may also require training to formulate effective GenAI prompts and guide it to perform a task.
Deloitte is exploring these GenAI capabilities through labs with our clients. Reach out if you’re interested in learning more. Read our recently published report, Demystifying algorithms and artificial intelligence, to explore how algorithms are affecting the finance and accounting world. Look out for our upcoming perspective on the “Impact of AI in financial reporting and internal controls,” and read about how your company can keep up in this rapidly growing field.
Blog images generated using Adobe Firefly.
Get in touch
Brian Cassidy
Partner | Deloitte & Touche
Brian is the US Audit & Assurance Trustworthy AI leader with diverse experience providing audit and advisory services to Fortune 500 companies. A leader who brings strong technical, risk management, communication, and organizational skills, he focuses on providing audit, accounting, and advisory services to public and private companies in the financial services sector. Brian’s experience crosses a wide range of industries in the financial services sector, including banking (brokers/dealers), investment companies, business development companies, and alternative funds, including private equity, hedge, and real estate. Brian is also leading Deloitte’s efforts in the Algo/AI assurance area as emerging technologies continue to impact clients and the marketplace. Brian is a member of The American Institute of Certified Public Accountants (AICPA), The Pennsylvania Institute of Certified Public Accountants (PICPA), and The New York State Society of CPAs (NYSSCPA), and serves on the board of Business Leadership Organized for Catholic Schools (BLOCS), an organization focused on improving education for K-12 students in the Philadelphia area. Brian received a BS in Accountancy and BS in Business Administration from Villanova University.
Ryan Hittner
Audit & Assurance Principal
Ryan is an Audit & Assurance principal with more than 15 years of management consulting experience, specializing in strategic advisory to global financial institutions focusing on banking and capital markets. Ryan co-leads Deloitte's Artificial Intelligence & Algorithmic practice which is dedicated to advising clients in developing and deploying responsible AI including risk frameworks, governance, and controls related to Artificial Intelligence (“AI”) and advanced algorithms. Ryan also serves as deputy leader of Deloitte's Valuation & Analytics practice, a global network of seasoned industry professionals with experience encompassing a wide range of traded financial instruments, data analytics and modeling. In his role, Ryan leads Deloitte's Omnia DNAV Derivatives technologies, which incorporate automation, machine learning, and large datasets. Ryan previously served as a leader in Deloitte’s Model Risk Management (“MRM”) practice and has extensive experience providing a wide range of model risk management services to financial services institutions, including model development, model validation, technology, and quantitative risk management. He specializes in quantitative advisory focusing on various asset class and risk domains such as AI and algorithmic risk, model risk management, liquidity risk, interest rate risk, market risk and credit risk. He serves his clients as a trusted service provider to the CEO, CFO, and CRO in solving problems related to risk management and financial risk management issues. Additionally, Ryan has worked with several of the top 10 US financial institutions leading quantitative teams that address complex risk management programs, typically involving process reengineering. Ryan also leads Deloitte’s initiatives focusing on ModelOps and cloud-based solutions, driving automation and efficiency within the model / algorithm lifecycle. Ryan received a BA in Computer Science and a BA in Mathematics & Economics from Lafayette College. Media highlights and perspectives First Bias Audit Law Starts to Set Stage for Trustworthy AI, August 11, 2023 – In this article, Ryan was interviewed by the Wall Street Journal, Risk and Compliance Journal about the New York City Law 144-21 that went into effect on July 5, 2023. Perspective on New York City local law 144-21 and preparation for bias audits, June 2023 – In this article, Ryan and other contributors share the new rules that are coming for use of AI and other algorithms for hiring and other employment decisions in New York City. Road to Next, June 13, 2023 – In the June edition, Ryan sat down with Pitchbook to discuss the current state of AI in business and the factors shaping the next wave of workforce innovation.
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