What are the key challenges of GenAI in accounting

The rapid adoption of artificial intelligence (AI) technologies, including generative AI (GenAI), has brought both excitement and concern within the accounting profession. While AI offers the ability to transform workflows, increase productivity, and unlock new opportunities for revenue generation, it also brings challenges that require a thoughtful and strategic approach.

While many fear that AI will ultimately replace human accountants, the reality is that, when leveraged effectively, it has the potential to significantly enhance the work accountants do rather than render it obsolete. But, to take full advantage of AI's opportunities, it’s important to understand its challenges.

Roadblocks to AI integration at accounting firms

The integration of AI in accounting firms presents both unprecedented opportunities and notable challenges. While AI can enhance productivity and streamline workflows, addressing the hurdles that come with its adoption is crucial to fully realize the potential benefits.

Let’s look at some top challenges or roadblocks to integrating AI in accounting firms.

The idea that AI will replace human accountants

One of the most significant barriers to adopting AI is the fear that it will ultimately replace human accountants. Many tax and accounting professionals worry that the increased automation AI offers will reduce the need for their expertise.

This misconception stems from a misunderstanding of AI’s capabilities. While it can automate repetitive and data-heavy tasks, it does not possess the nuanced judgment, ethical considerations, complex problem-solving abilities, or personal relationships that human accountants bring to the table.

That said, the accounting industry’s attitude toward AI is evolving. Early concerns about job displacement are giving way to a broader understanding of AI as a complement to human skills. While some accountants remain cautious, many are now open to the idea that AI can streamline repetitive tasks and provide more bandwidth for higher-value, strategic work.

According to the 2024 generative AI in professional services report from the Thomson Reuters Institute, about one-quarter of professionals say their organizations have already begun to update how they work by incorporating GenAI. The key is to view AI not as a disruptive force but as an enabler. When leveraged correctly, AI and GenAI can boost operational efficiency, enhance client service, and engage staff.

Accounting firms should lean into using AI for time-consuming tasks such as data entry, reconciliation, and basic financial analysis so you can free up your team to focus on more complex, strategic, and high-value tasks. With deeper insights from AI-powered tax research, you can build stronger client relationships and focus on more personalized advisory services, which are increasingly in demand.

Ethical, accuracy, and security concerns

Despite its clear advantages, AI adoption also raises accuracy, security, and ethical concerns — as well as the need for standards to ensure responsible use.

According to the GenAI report, more than half of respondents identified the following primary concerns for adopting GenAI:

• Inaccurate responses (70%)
• Data security (68%)
• Privacy and confidentiality of data (62%)
• Complying with laws and regulations (60%)
• Ethical and responsible usage (57%)

While a large portion of respondents (44%) said they were hopeful or excited about GenAI, more than one-third (35%) said they were hesitant, and 18% said they were concerned or fearful.

Of the portion that said they were hesitant, 20% said they felt that way due to accuracy concerns, 18% said they were skeptical GenAI could deliver promised results, and 16% were concerned about over-reliance.

This reluctance is warranted. While traditional AI analyzes data and tells you what it sees, GenAI uses that same data to create something entirely new. To accomplish this, GenAI employs large-language models (LLMs), which refer to the size of the dataset used for training. Typically, trainers use datasets that are large enough to encompass nearly everything written on the internet over a significant period of time.

Publicly available LLMs don’t typically disclose the data they used for training. This data could have been confidential or proprietary — or inaccurate . It’s also challenging for the models to pinpoint the sources of responses, given the vastness of the data used. This lack of transparency and traceability brings about concerns about accuracy, security, and privacy, as users cannot verify the origins or reliability of the information provided.

Additionally, any question you ask can become part of the model training data. Therefore, accountants must be careful when inputting information into a publicly available LLM — including any proprietary or client data — which should be off limits.

Addressing these concerns with a professional-grade solution

To address these concerns, proactive accountants opt for AI-driven tax research solutions grounded in data from trusted experts and reliable sources, steering clear of public options that draw information from the vast expanse of the internet. A professional-grade, AI-powered tax research platform tailored to the industry enables firms to use AI responsibly, addressing concerns over accuracy, ethical use, and data security.

Take, for example, Checkpoint Edge with CoCounsel, the generative AI tax research assistant built on Checkpoint’s legacy of authoritative guidance and award-winning editorial expertise. By synthesizing expertly written guidance and analysis, it draws on thousands of primary sources and expert commentary to quickly surface relevant summaries. By searching solely reliable and vetted sources, staff at every level can confidently find accurate and easy-to-understand answers on their own.

So, how does it work?

The system employs an approach called retrieval-augmented generation (RAG) to ensure AI-generated responses use trusted Checkpoint content. When you enter a query, it initiates the discovery phase of RAG.

The goal of the discovery phase is to identify the Checkpoint content for LLM to use as the basis for its response. Discovery involves running a set of searches against a defined corpus of Checkpoint content from which we identify the best documents for addressing your query, followed by the specific passages within those documents that are best suited to address it.

After identifying the most relevant passages, the system ranks them, and problematic content — such as prior or expired law — is filtered out. Then, it sends the LLM a set of instructions on how to formulate its response.

The process reduces the risk of hallucinations, also known as confabulation, that can occur when an LLM perceives patterns or objects that aren't there, thus producing outputs that are inaccurate, nonsensical, or illogical.

Additionally, the LLM response from Checkpoint Edge with CoCounsel includes citations indicating what Checkpoint content it used as the basis for various statements in the response — so you can rest assured that the response you receive is thoroughly validated and undeniably reliable.

Reshaping responsibilities and upskilling staff

AI adoption presents a learning curve for many accounting professionals. AI technologies, especially those based on machine learning and automation, require a certain level of technical understanding.

The integration of AI into accounting workflows also means accounting firms must rethink traditional processes. With new efficiencies that can disrupt established ways of working, firms must redesign their workflows to ensure they use AI tools in the most effective way. For example, AI can automate much of the data gathering and processing that accountants traditionally handle manually, freeing up that time for higher-value work.

A primary challenge here is to ensure that AI-powered automation doesn’t lead to over-reliance on technology. While AI can handle many tasks, human oversight is still critical. Firms must strike a balance between automation and human input, where AI takes on repetitive tasks, and staff provides value through deeper analysis, judgment, and client relationship building.

Another critical aspect of training is ensuring that accountants can interpret AI-generated insights. AI can process massive amounts of data and identify patterns that might not be immediately obvious to humans, but interpreting and applying these insights requires human expertise. For example, AI might flag a potential anomaly in a statement, but it’s up to the accountant to determine the significance of that anomaly and how it affects the overall financial health of the client.

Another aspect of reshaping workflows is the need for increased collaboration between accountants and software providers. That’s why choosing a software provider that supports you during implementation and with ongoing support is important to ensure you are making the most of your investment.

Turning AI hesitancy into opportunity

While integrating AI in accounting may pose several challenges, the industry can reframe those challenges as unique opportunities for growth and innovation within the industry. By embracing these obstacles, firms can transform their workflows, enhance their services, and, ultimately, drive greater value for their clients and stakeholders.

So, how can AI unlock opportunities for accounting firms, even amidst the challenges it presents?

Unlocking operational efficiencies

Perhaps the most transformative change AI brings to the tax and accounting profession is unlocking unprecedented operational efficiencies. According to the Future of Professionals Report, respondents anticipate AI could save up to four hours per week over the next year — equivalent to an extra 200 hours annually.

AI’s ability to process large volumes of data, enhance response times, and minimize human error plays a vital role in freeing up this valuable time. By integrating AI into your firm’s daily operations, AI-enabled tax software can analyze extensive financial data far faster than human accountants, effortlessly spotting patterns, anomalies, and trends.

Moreover, AI-powered tax research helps staff find precise results more efficiently. It delivers professionally summarized answers, complete with citation links to relevant editorial and source materials, allowing even junior team members to confidently tackle complex client questions in less time.

Here’s a look at just some of the ways AI can unlock operational efficiencies for accounting firms:

• Data entry automation. Generative AI systems can automate data entry tasks by extracting information from various documents, such as invoices and receipts. This ability can reduce the manual effort required for data input while minimizing errors.
• Document generation and summarization. GenAI models have the potential to automatically generate financial reports, invoices, or other accounting documents. They could also assist in summarizing lengthy financial statements or reports for quick insights.
• Fraud detection. AI, including generative models, can identify patterns and anomalies in financial data that may indicate fraudulent activities. AI systems can help auditors and accountants detect irregularities by analyzing large datasets.
• Forecasting and predictive analytics. Professionals can apply generative AI models for predictive analysis by analyzing historical financial data, which can help accountants forecast future trends and make more informed decisions.
• Natural-language processing (NLP) for client communication. NLP, a subset of AI, can integrate into communication tools to enhance client interactions, create automated responses to common queries, or even assist in drafting emails and reports.
• Tax research and compliance. Generative AI can assist in keeping track of evolving regulatory requirements and ensuring that financial practices comply with the latest standards. This capability helps in reducing the risk of non-compliance.

Supporting recruitment and retention of staff

As evidenced in the 2024 State of the Tax Professionals Report, recruiting and retaining new professionals is a top priority, given the shortage of tax and accounting talent and a shrinking labor pool. That's why many accounting firms are now directing more of their energies toward hiring, training, and engaging high-performing staff, as well as cultivating an AI-savvy work culture.

AI's role in automating routine tasks can make the accounting profession more attractive to potential recruits. Today's workforce, especially younger generations, seeks roles offering meaningful work, personal growth, and opportunities to make an impact. By leveraging AI to eliminate mundane, repetitive tasks, firms can provide employees with more fulfilling, high-value work, such as financial advising, strategic planning, and client consulting.

This shift in job focus can also improve retention rates. Employees who feel that their work is meaningful and making a significant contribution are more likely to stay with the firm. Additionally, in a competitive labor market where talent is in high demand, AI can be a tool to attract and retain top talent by offering a more engaging and intellectually stimulating work environment.

As AI automates more technical tasks, there will be a growing need for accountants with strong communication skills, business acumen, and expertise in areas such as data analysis and strategic advisory services. Firms that invest in training their staff to develop these skills can position themselves as leaders in the industry, offering more comprehensive and sophisticated services to clients.

While the benefits of AI are clear, putting these technologies into practice requires a holistic approach. Fostering a workplace environment that embraces continuous learning and integration of new technologies ensures that your staff is prepared to leverage AI tools effectively. It's equally important to invest time and resources into upskilling your staff with AI-related training programs, webinars, and workshops to improve their understanding of AI tools and their applications.

Not only is culture important, but AI must align with your accounting firm's business goals. Firms should not adopt AI for its own sake but with clear objectives like improving efficiency, enhancing client service, and driving growth, all of which contribute to making your firm an attractive place to work and grow professionally.

Offering a significantly elevated client experience

Contrary to fears that AI might replace accountants, it actually presents a significant opportunity for professionals to enhance their value and expand their services. By embracing AI, accountants can elevate their roles and lean into high-value advisory services.

AI excels at automating repetitive tasks and processing large volumes of data. Still, it cannot replicate the nuanced judgment, ethical considerations, and complex problem-solving abilities that human accountants bring to the table. Instead of replacing accountants, AI is a powerful tool that complements and enhances human expertise.

One of the most significant opportunities AI presents to accounting firms is the ability to expand into advisory services. As AI takes over the more mechanical aspects of accounting work, accountants can leverage their freed-up time and AI-generated insights to shift their focus to providing higher-value services in growing demand. These include:

• Strategic financial planning
• Business consulting
• Risk management advisory services

By utilizing AI for time-consuming tasks such as data entry, reconciliation, and basic financial analysis, accountants can dedicate more time to developing and delivering these advisory services. This shift makes the work more engaging for professionals and adds significant value for clients.

Advisory services tend to command higher fees than traditional accounting work, which can help firms increase their overall revenue. By positioning your firm as trusted advisors rather than simply number crunchers, you can differentiate yourself in a competitive market and attract clients willing to pay a premium for expert guidance.

AI can also enhance the quality and depth of advisory services by providing accountants with advanced data analysis capabilities. Accountants can harness AI tools to sift through vast amounts of financial data to identify trends, forecast future performance, and provide actionable insights to help clients make informed decisions. This level of analysis would be impossible to achieve manually, and it gives firms a competitive edge in delivering more sophisticated services.

Furthermore, AI’s ability to continuously learn and improve means that firms can offer ongoing advisory services that evolve with the needs of their clients. For example, professionals can use AI to monitor changes in tax regulations, market conditions, or business performance and provide real-time updates and recommendations to clients. This proactive approach increases the value of the services offered and strengthens client relationships and loyalty.

By embracing AI as a tool for enhancement rather than replacement, accounting professionals can seize the opportunity to evolve their roles, develop new skills, and provide more valuable advisory services to clients. This approach fortifies careers against industry changes and positions firms at the forefront of the industry’s transformation.

Embracing AI for a brighter future

As the accounting industry continues to evolve, it’s clear that AI is a tool that can empower accountants. Understanding the common roadblocks of AI adoption reveals that the long-term benefits often outweigh the initial challenges.

AI and GenAI will not replace humans; rather, they will enhance your work by taking over routine tasks and providing powerful analytical capabilities. The real value lies in how your firm leverages these technologies to unlock new opportunities for growth and build stronger relationships with clients.

By adjusting your strategy and mindset, your firm will not only keep pace with technological change but will lead it. Firms that adopt a forward-thinking approach to AI can offer their employees more fulfilling and higher-value work, improve employee engagement and well-being, and provide clients with personalized services.

Ultimately, the future of AI in accounting is about collaboration between humans and machines. With the right mindset and tools, your firm will thrive in this new era of innovation.

Now is the time for your firm to take full advantage of AI technologies and incorporate them into your practice.

Recommended solutions from Thomson Reuters

Built on Checkpoint’s legacy of authoritative guidance and award-winning editorial expertise, Checkpoint Edge with CoCounsel is an industry-specific, professional-grade, generative AI tax research assistant built specifically for tax and accounting professionals. Its conversational interface delivers straightforward answers to even your most challenging questions — just as if you were speaking directly to a subject-matter expert or trusted advisor. Learn more about how integrating Checkpoint Edge with CoCounsel can give your firm a strategic advantage in an increasingly competitive landscape.