Tag Archives: accounting

Accounting Industry Gears Up for AI

Artificial Intelligence, ,

Artificial intelligence isn’t exactly a new trend – people have been dreaming about robots and automated labor since ancient times, and the phrase “AI” was actually coined as far back as 1956, at a conference at Dartmouth College in New Hampshire.

In practical terms, too, artificial intelligence has been part of our world for more than a decade, since IBMs Watson computer competed on TV’s Jeopardy! program (and defeated two ex-champions) in 2011. Since then, machine learning has come to play a role in virtually every area of modern life, from shopping to entertainment to investing and more.

By nature, however, the accounting sector is a conservative one, and accounting firms have been slow to adopt developments that rely on AI.

That trend appears to be changing. Patrick Morrell, Chief Revenue Officer at accounting software startup Anduin, says the emergence of practical AI solutions and the economic challenges of the coronavirus pandemic have forced the industry to rethink its relationship with machine learning.

“Firm leaders still may be saying: ‘But I have partners and clients married to their pen and paper. How do I bridge the gap between the old way and the new?’

“The most effective way to build AI expertise among your workforce and create a sustainable firm of the future is to focus on AI solutions that are tailored to the accounting industry and employ “mutual learning” to solve problems and support your staff,” Morrell writes in Accounting Today.

Morrell says the industry’s use of AI is actually better described as “mutual learning,” a combination of algorithm-generated information which is then reviewed and implemented (or rejected) by human analysts.

“In systems built with mutual learning, AI tools can recommend data-driven actions in response to specific problems, and then humans can either approve those moves or edit and course-correct those actions as necessary. In either case, humans learn how data can shape decision-making. The AI itself then learns from those approvals or course-corrections, applying the human input to improve the AI’s models and algorithms. This, in turn, allows the AI to make better-informed recommendations in the future that will ideally require less human input—over time, the tool and the human continually increase their individual knowledge and collaborative effectiveness, creating ongoing and compounding value together,” he adds.

Madoff: How You Could Have Known

Communications, Companies, , , ,

Before the Madoff story broke, a research and portfolio advisory firm called Aksia issued a statement warning clients to avoid doing business with his investment fund, citing several red flags which it uncovered during an investigation. A review of these indicators offers insight into due diligence as well as warning signs to look out for prior to doing business with a firm. Aksia picked up on the following patterns and inconsistencies, and the fund’s concerns were quickly validated:

  1. The firm utilized an especially volatile investment strategy, but was still able to garner stable returns of 8-10% over an entire decade.
  2. A financial advisor who claimed to have studied the firm’s operations issued a letter to the Securities and Exchange Commission in 2005 stating that Madoff was running a Ponzi scheme.
  3. The firm was run by family members, and the strategy was erratic and undocumented.
  4. The firm’s comptroller wasn’t based in the United States, but in Bermuda. The “feeder funds” were audited by reliable auditors, while the primary investments were not.
  5. Accounting statements were sent via mail, as opposed to email, as is commonly practiced in the industry.
  6. The firm had been looked into previously.