March 19, 2025 l Business Mirror
So much has been written and discussed about Artificial Intelligence (AI) that I don’t want to join in the “bandwagon” anymore, since people have become wary and insensitive on this topic already.
But with the many innovations going on around using AI, one cannot help but learn more about it. Let me focus this time on one area where we are most busy with these days: taxes and audit. I was wondering when there would come a time when preparations for tax reports and financial statements; even audits, will be done in less time than what we have now.
The past days when we had business meetings in Zoom, I was pleasantly surprised that when I used an AI companion, the summaries of the meetings were more précised and even better written than when a human did the job of writing the minutes of the meeting! I told myself, these are exciting times.
However, we should be reminded that generative AI like ChatGPT is different from the traditional AI which is used for audit and taxation purposes to analyze data.
One area where AI can be a supportive tool in taxation is as a virtual assistant to answer questions about tax matters. It used to be that it took a lot of time researching and browsing through the internet for tax questions. And if no answer is found, we usually turn to the phone by calling the tax experts or meeting with them. Singapore uses AI for instance, and has this virtual assistant which answers tax questions in multiple languages and has shortened the time for call-center inquiries by half. In Korea, an AI guide was deployed to help citizens file and pay taxes (imf.org; February 25, 2025).
But the big question is: Will AI make the life of the regulatory agencies and the taxpayer easier and more harmonious? There are now available AI systems that can analyze large data. The taxpayer and auditors for instance, can evaluate its past tax reports and tax declarations to see there are no possible areas which could be subject to tax penalties or even possible fraud. The analysis can also be used as a comparison, as they prepare their existing and future financial reports and returns. The same is true not only for taxpayers but more with the tax collectors—the AI can help them detect through the evaluation, possible high risk scores to indicate possible fraud or errors.
In audit, although smaller firms may not be using it yet, the use of AI can be a big support. It enables auditor to use a data-driven approach rather than what is being used now which is transaction-based orientation. It enables auditors to understand client processes from transaction initiation right through the general ledger. Furthermore, it minimizes the risk of over-testing since AI can you give you 100 percent of the population instead of just a random sampling test and which makes AI more reliable if based on proper parameters set by the auditors. (“Journal of Accountancy,” Dennis, Anita. 2024).
However, there is still a need for human intervention to use AI successfully. With the vast information, constantly evolving regulations, and files being scattered with even incomplete digitization, AI still needs human brain to determine the accuracy and relevance of the documents.
And as with any technology, AI carries with it some risks. One risk is that data might integrate human historical biases so that it cannot be fully relied upon since AI algorithms are trained on data. There is also the risks that some jobs might be taken over such as repetitive and clerical tasks like data and transaction entry and classification, and even reconciliation tasks such as bank reconciliation, accounts payable and accounts receivable reconciliation, matching of receipts against deposits and such other tasks that a human usually performs. Although this could free up humans who perform such tasks to focus more on strategic work, their jobs can also be at risk and be taken over by the system.
In the end, since machines are made by people, there should be ethical considerations. And it is important its development and use should be done responsibly ensuring fairness and accuracy.
***The views expressed herein are her own and do not necessarily reflect the opinion of her office as well as FINEX. For comments, email wimiranda@inventormiranda.com. Photo is from Pinterest.