Artificial intelligence (AI) can benefit professional services significantly. It allows arduous and time-consuming tasks to be completed effectively and more efficiently.
Research by Thomson Reuters explored the views of generative AI amongst professionals across legal, tax, and accounting firms in the United States, United Kingdom, and Canada. Among those surveyed, AI's potential is undeniably recognised:
- 78% of respondents believe AI tools such as ChatGPT can enhance legal or accounting work.
- Around half (52%) of all respondents believe that generative AI should be used for legal and tax work.1
But this technology is developing at a rapid pace. It’s predicted that generative language models like ChatGPT could deliver fundamental change across almost every area of our lives. This change is not without risk.
Risks and challenges
Take the field of accounting, for example. Some of the benefits AI can offer include:
- Automating repetitive tasks.
- Improving accuracy.
- Providing valuable insights.
However, there are also several risks and challenges that accountants should be aware of when it comes to adopting AI.
1. Staff resistance and new skill sets
While some tasks may become automated, the role of accountants is likely to shift towards higher-level tasks. These tasks include data analysis, strategy development, and advising clients. Accountants will need to gain new skills. This includes proficiency in using AI tools and understanding AI-driven financial analysis.2
2. Cyber security
AI systems require access to large volumes of data, and protecting sensitive financial data is crucial. There is a risk of data breaches or unauthorised access to financial information. Such incidents can have severe legal and financial consequences. Accountancy firms and their clients prepare for greater adoption of AI in cyber security. But so too are cyber criminals who can use AI to get around AI defences.2
3. Accuracy and accountability
Errors in AI models or data inputs can lead to incorrect financial statements and reports. AI systems should be correctly calibrated and validated. This helps maintain accuracy and accountability.2
4. Ethical considerations
AI in accounting raises ethical questions about the responsibility and accountability for financial decisions made by AI systems. These ethical challenges will need to be navigated carefully to ensure AI is used responsibly.
5. Regulatory compliance
The use of AI in accounting may raise regulatory concerns. Particularly regarding financial reporting and auditing standards. Keeping informed about evolving regulations related to AI in accounting practices will be essential for users.
6. Privacy concerns
AI systems may process personal and sensitive financial information, raising privacy concerns. Accountants must adhere to data protection regulations. They must also implement robust security measures to protect client and company data.
Are the risks of providing these services covered by professional indemnity insurance?
For accountancy firms that are members of The Institute of Chartered Accountants in England and Wales (ICAEW) and for law firms regulated by the Solicitors Regulation Authority (SRA), professional indemnity claims may arise from reliance on such advice. These claims are likely to be covered under the broad terms provided by the Minimum Terms and Conditions. The terms of this compulsory minimum cover are considered the broadest of any professional indemnity insurance. However, even more comprehensive cover can be negotiated.
Requirements set by professional regulators and the Information Commissioner's Office (ICO) must also be taken into account. Accounting and surveying bodies are at various stages of considering this, but the ICO has issued specific guidance in the meantime.3
AI can offer numerous benefits to accountants. However, it also comes with risks and challenges that must be carefully managed. Accountants should proactively address these issues by staying informed and upskilling. They must also ensure data security and navigate ethical and regulatory considerations to maximise the advantages of AI.
Protection with the right insurance
Enhance your business’s AI resilience and safeguard it with professional indemnity insurance. This insurance shields against financial losses due to:
- errors;
- omissions;
- or negligence in services.
Cyber insurance will strengthen your digital defences. It can cover expenses related to data breaches, cyberattacks, and data loss. This ensures comprehensive protection for your clients and provides peace of mind for you.
Our team of PI and cyber insurance experts are here to help you assess your exposure. Contact a specialist adviser today.
Sources
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