Companies see benefits and are making plans, but face
regulatory pressure, skills gaps and data security as barriers to
adoption
TORONTO, May 8, 2024
/CNW/ - A new KPMG in Canada
survey finds Canadian companies believe Artificial Intelligence
(AI) will enhance their financial reporting with most (87 per
cent) already piloting or using AI in their reporting, compared
to 72 per cent globally. While more Canadian organizations are
exploring the potential of AI, regulatory compliance, skills gaps
and data security concerns have the majority still in the pilot
stage (73 per cent) with only 14 per cent using
it selectively or widely in their financial reporting, compared to
33 per cent globally.
"Canadian organizations are ready to take their financial
reporting to the next level using technologies like AI, automation
and data and analytics to deepen the quality of their reporting for
their many stakeholders," says Kristy
Carscallen, Canadian Managing Partner of Audit and Assurance
at KPMG in Canada. "The future of
financial reporting is here and it's important to embrace it to
enable the higher level of insights and transparency that companies
and investors expect."
Key findings:
- 87 per cent of Canadian organizations (compared to 72
per cent globally) are piloting or using AI in financial reporting,
set to rise to 100 percent in next three years
- 73 per cent are piloting and evaluating results
compared to 39 per cent globally; while few (14 per cent)
are already using it selectively or widely in financial reporting
compared to 33 per cent globally
- Three in five (59 per cent) are allocating more than 10
per cent of their IT budget to AI, compared to less than half of
global peers (45 per cent)
- Virtually all (94 per cent) companies expect to grow
their investment in AI related activities - half (49 per
cent) will boost spending by 25 per cent or more in the coming
year
- Use of Generative AI expected to triple in the next year –
jumping from 13 per cent to 35 per cent
The KPMG report, AI in financial reporting and audit:
Navigating the new era, surveyed 1,800 companies across ten
major markets including Canada and
found that organizations are seizing on the potential of AI to
increase reporting insights, accuracy and efficiency.
Among the many benefits of using AI in financial reporting,
Canadian companies put the ability to predict trends and impacts
(75 per cent), better data-enabled decisions (66 per
cent), and increased data accuracy and reliability (61 per
cent) at the top of the list. At the same time, the use of AI
is translating into greater productivity combined with higher
talent acquisition and skills development. Already, more than a
third (38 per cent) report greater employee productivity and
efficiency – expected to jump to 53 per cent in three
years.
While more Canadian companies are piloting the use of AI in
financial reporting to test and learn, fewer have taken the
step to implement the technology. The top hurdle to adoption is
keeping pace with regulatory and compliance changes (60 per
cent) - notably higher than the global average at 44 per cent -
followed closely by limited skills and talent (59 per cent)
and concerns around data security and privacy (58 per
cent).
When adopting AI, companies say transparency (17 per
cent) and data privacy (17 per cent) are the most
important considerations. Sustainability (45 per cent) and
explainability (39 per cent) of AI applications were listed
as the biggest blind spots to adoption and receive the least
consideration, requiring companies to pay much higher attention
when setting up AI governance mechanisms.
"The benefits of using AI are clear, but companies need to take
a careful approach to building the right governance and frameworks
that are values-driven, human-centric and trustworthy to support a
safe and successful transition," says Bryant Ramdoo, Partner and Audit Innovation
Leader at KPMG in Canada.
"Businesses need to invest in AI technologies and upskill their
entire organization to get ready for Gen AI-powered financial
reporting and auditing."
Although Generative AI is a relative newcomer, the survey finds
Canadian companies are hurrying to implement it in financial
reporting. Nearly half (45 per cent) are already piloting
Gen AI technology, compared to 30 per cent globally. Further, as
many as 88 per cent believe that the use of Gen AI will
become common practice for auditors within two years.
Auditors expected to lead the way – and provide assurance and
attestation to manage risks
Companies expect their external auditors to take full advantage
of AI's powerful capabilities and lead the way in the
transformation of financial reporting. Three-quarters (76 per
cent) of companies believe it is important for their external
auditors to use AI, which goes hand in hand with automation (72
per cent) and Data and Analytics (79 per cent). Most
(80 percent) believe that their auditors are ahead of or
equal with them in the adoption of AI for financial analysis.
They are looking to their auditor to deploy AI in the audit for
three main purposes:
- Improve the accuracy of audits
- Develop more proactive, continuous and predictive
processes
- Gather data and value-added audit insights
Companies also want auditors to take it one step further to help
them ensure that their use of AI is robust, safe, and compliant
with rules and regulations. In the future, companies expect their
auditors to play a much more important role in evaluating their use
of AI in financial reporting. Majority (82 per cent) expect
auditors to conduct a more detailed review of the control
environment in relation to their use of AI in financial reporting,
just under one third (30 per cent) foresee them carrying out
an AI governance maturity assessment, while 17 per cent
expect to ask auditors to provide third-party attestation over the
use of AI technology.
While businesses may want and value additional assurance and
attestation to manage risks, currently this is an area where little
regulation and standards exist.
"As AI adoption accelerates, there is a call to action not just
for companies, but for all parties in the reporting ecosystem to
move forward together to understand and carefully manage the
associated risks," adds Ms. Carscallen. "We've long believed in the
power of AI to enhance the quality of reporting and public trust by
making the right investments in technology and skills to use
this powerful technology responsibly. It's imperative that everyone
– auditors, organizations, standard setters, regulators and
educators – work closely together to advance the future of
assurance and attestation in Canada with confidence."
About the survey
KPMG surveyed 1,800 global financial reporting executives and
board members in 10 countries (Australia, Canada, France, Germany, Ireland, Japan, Netherlands, Spain, the U.K., and the U.S.) across key
industry sectors, including consumer and retail, financial
services, energy and natural resources, technology and media,
industrial manufacturing, and healthcare. The financial reporting
executives are drawn from organizations with annual revenue over
US$500 million and more than 250
employees. The survey was conducted from February to March 2024.
About KPMG in Canada
KPMG LLP, a limited liability partnership, is a full-service
Audit, Tax and Advisory firm owned and operated by Canadians. For
over 150 years, our professionals have provided consulting,
accounting, auditing, and tax services to Canadians, inspiring
confidence, empowering change, and driving innovation. Guided by
our core values of Integrity, Excellence, Courage, Together,
For Better, KPMG employs more than 10,000 people in over 40
locations across Canada, serving
private- and public-sector clients. KPMG
is consistently ranked one of Canada's top employers and one of the best
places to work in the country.
The firm is established under the laws of Ontario and is a member of KPMG's global
organization of independent member firms affiliated with KPMG
International, a private English company limited by guarantee. Each
KPMG firm is a legally distinct and separate entity and describes
itself as such. For more information,
see kpmg.com/ca.
For media inquiries:
Katarina Lukich
National
Communications and Media Relations
KPMG in Canada
(416) 468-7729
klukich@kpmg.ca
SOURCE KPMG LLP