As the accountancy profession’s regulators begin to become more interested in how firms are using artificial intelligence (AI), it is imperative that they implement policies, procedures and gain an understanding of the guardrails around the technology. That was one of the key messages delivered to delegates at Mercia’s Compliance Update Conference.
Exploding numbers
Firms must understand how they are using AI and be capable of risk assessing this emerging area, Gemma Archer, Senior Manager - A&A and Compliance at Mercia, told a session on Practice Assurance Findings, which covered recent QAD and Mercia reviews.
Archer says: ‘It feels like the last 12 months at least that there has been a bit of an explosion in the number of AI tools and AI being embedded into certain existing tools.
‘Lots of firms are using things like Microsoft Copilot as an example, but also very specific tools for accountants to use on different types of assignments and to do different types of work are coming to the fore.
‘Firms are starting to use those so as an emerging area professional bodies are interested in how firms are using that to get a better picture of where they might need to deploy some support for those firms.’
Speeding up the routine
According to a survey of accountancy firms, 80% see the increased speed of routine and complex tasks as an advantage of AI. Meanwhile, almost half said it improved service of offerings to clients and a third said it offered cost savings.
However, only 29% of firms that the Institute of Chartered Accountants in England and Wales (ICAEW) has visited had developed formal policies and procedures relating to operational use of AI by staff. That means 71% have not developed policies and procedures.
Archer says: ‘That on its own is a big risk, a policy needs to be in place. When are you going to use it? Where are you going to use it? What tools are you going to use? How are you going to ringfence the cyber security element?
‘AI improves by learning, it basically sucks in information and reads it. So, if you’ve got an AI tool that is not properly ringfenced and is an environment with confidential data, what you don’t want is that data being used by the AI model for its own learning.
‘That’s a critical area that concerns a lot of people. It’s important to understand the guardrails around that AI and how it is being utilised.’
Who are you?
The conference provides an update on the current compliance issues facing accountants. Julia Penny of JS Penny explained how the changing requirements in relation to the Economic Crime and Corporate Transparency Act (ECCTA) will affect requirements relating to identity verification and accounts filing at Companies House.
Penny says: ‘Companies House wants to know who we are and it wants to make sure that it can check, verify and be totally sure as to who somebody is.
‘The really important bits from an accountant’s point of view hit last year, some of them hit this year and into next year. These required more changes, more statutory instruments or statutory guidance, so they’ve taken a lot longer to get into place.’
The Act’s objectives include preventing organised criminals, fraudsters, kleptocrats and terrorists from using companies and other corporate entities to abuse the UK’s open economy.
It is also trying to support enterprise by enabling Companies House to deliver a better service for over four million UK companies.
Penny says: ‘A lot of this was kicked off by the invasion of Ukraine and the concern with Russian kleptocrats in particular but also a significant amount of organised economic crime. Something needed to be done as the UK’s open economy was not dissuading criminals of that nature.
‘We can all say we’d like reliable data at Companies House it’s a very reliable source of information. All of you will be aware of cases where legitimate clients have had their names used illegally by somebody else or you yourself have had your name used illegally by someone else. That sort of thing undermines the whole economic system.’
Mercia’s accountancy conferences
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