CFOs must lead on establishing trust in AI for financial reporting
May 3, 2024
Businesses urged to take steps to maximise the opportunities of AI and lay foundations for responsible use of new technologies
As artificial intelligence (AI) becomes increasingly integrated into accounting and financial reporting processes, chief financial officers (CFOs) are faced with the critical task of ensuring trust in these advanced technologies. Without proper governance and risk management frameworks in place, organisations risk eroding confidence in their financial data and decision-making.
The UK’s Association of Chartered Certified Accountants (ACCA) is urging CFOs to take immediate steps to maximise the opportunities presented by AI while laying the foundations for responsible use. Key actions include:
Investing in AI Literacy for Finance Teams: CFOs must prioritise education and training to enable finance professionals to critically evaluate AI outputs, communicate effectively with stakeholders, and make well-informed decisions driven by AI insights.
Fostering Cross-Functional Collaboration: Finance teams should actively engage with IT, data science, legal, and risk management departments to establish cohesive AI governance.
Developing Robust AI Governance Frameworks: Starting with critical financial applications, CFOs need to spearhead efforts to establish clear AI policies, oversight mechanisms, and best practices within their organisations.
“Introducing AI is about building trust in both the systems and the people operating them,” said Alistair Brisbourne, ACCA’s Head of Technology Research. “CFOs must focus on upskilling teams, implementing effective governance, and fostering a culture of cross-functional collaboration.”
Failure to address AI risks could lead to flawed decision-making, overdependence on AI procedures without human intervention, undetected bias or errors in fraud detection and compliance monitoring, and inaccurate outputs from virtual assistants.
“In the AI era, the role of finance professionals is to focus on the outcomes driven by technology. True value lies in understanding how AI outputs inform decisions and actions that drive business success,” said Glenn Collins, Head of Technical and Strategic Engagement at ACCA UK.
As AI continues to transform the finance function, CFOs have a pivotal role in establishing trust through robust governance, risk management, and collaborative efforts with cross-functional teams. Embracing this responsibility is crucial for unlocking the full potential of AI in financial reporting and decision-making.
ACCA will continue to explore AI’s impact on talent, risk and controls, data strategy, and sustainability applications in future issues of the AI monitor series.
Is overdependence a big risk?
As AI capabilities advance, there is a risk of finance teams becoming overly reliant on these systems, leading to a decline in human judgment and oversight. CFOs must be vigilant in striking the right balance between leveraging AI and maintaining crucial human involvement in financial processes.
The potential pitfalls of overdependence on AI include:
Eroding Professional Skepticism: AI models, no matter how sophisticated, can suffer from inherent biases or limitations. An overreliance on AI outputs could lead finance professionals to abandon the critical thinking and professional scepticism essential for effective financial reporting and auditing.
Loss of Institutional Knowledge: Overreliance on AI risks diminishing the development and transfer of institutional knowledge within finance teams. Human expertise, experience, and qualitative insights are invaluable assets that should not be overshadowed by an excessive focus on AI-driven automation.
Lack of Accountability: With AI taking on more decision-making responsibilities, there is a risk of diffusing accountability within the finance function. Clear lines of responsibility and human oversight must be maintained to ensure proper governance and adherence to reporting standards.
To mitigate these risks, CFOs should implement the following measures:
Maintain Human-in-the-Loop Processes: Establish protocols that require human review and validation of critical AI outputs, particularly in areas such as risk assessment, fraud detection, and financial forecasting.
Continuous Training and Development: Invest in ongoing training programs to ensure finance teams understand the capabilities, limitations, and potential biases of AI systems, and can effectively interpret and challenge AI-generated insights.
Robust Documentation and Explainability: Implement robust documentation practices that clearly outline the logic and assumptions behind AI models used in financial processes. Explainable AI techniques can help finance teams understand how decisions are being made, enabling more effective oversight.
Cross-Functional Governance: Collaborate with IT, data science, and risk management teams to establish clear governance frameworks that define roles, responsibilities, and accountability measures for AI use in finance.
By proactively addressing the risk of overdependence, CFOs can harness the power of AI while preserving the critical human elements that underpin trust, accountability, and integrity in financial reporting.
[The CFO]
