Is AI a Threat or Helper? Let’s Chat about It

Introduction

The prospects of artificial intelligence (AI) have been with us for about a decade, but it has been in the spotlight of late because of OpenAI’s creation, ChatGPT (Generative Pre-Trained Transformer). ChatGPT has been trained on a diverse range of text data, including books, articles, and internet pages, so that it can process a wide range of prompts or questions and generate coherent responses. This article explores what ChatGPT is and how it may impact forensic accounting.

What is ChatGPT? 

ChatGPT should not be confused with the virtual assistants on our phones and home devices such as Siri and Alexa. Siri, Alexa, and similar devices are designed to perform specific tasks, including setting reminders, playing music, and turning on lights. Virtual assistants can also answer questions, but they respond with essentially preprogrammed answers. ChatGPT is a language model designed to create a natural language response that does not use preprogrammed or predefined answers. 

ChatGPT can be accessed online. When you log in to ChatGPT, there is a series of prompts, ranging from “Got any creative ideas for a 10-year-old’s birthday” to “Explain quantum computing in simple terms.” I asked ChatGPT, “Are you able to find anomalies in data?” It responded that, yes, it has been trained on various machine learning and statistical techniques. This could be useful for those who manage large troves of data or who need daily tasks automated. 

In my opening, I stated how computer science has been integrating AI into our lives for about a decade. It should be noted that while AI and ChatGPT are related, they are not exactly the same thing.

AI is a broad field that includes creating programs that can perform tasks that would normally require a human touch. This can include decision-making algorithms, natural language processing (similar to ChatGPT), and image recognition, among other things. ChatGPT is a specific function within AI that has been trained on massive amounts of material to generate human-like responses. 

Accounting and ChatGPT

ChatGPT and AI pretrained systems have the potential to improve the efficiency and accuracy of accountants, auditors, tax professionals, and forensic accountants. For example, the bookkeeping process would benefit from the automatic recording of financial transactions, generation of invoices, and other tasks. Regarding forensic accounting, the automating of certain tasks and use of algorithms to analyze large volumes of financial data can help forensic accountants sort through data and identify patterns within minutes. [2] Use of AI can save significant amounts of time and resources when compared with traditional methods of analysis. 

Here are some of the benefits of AI and ChatGPT for forensic accountants: 

• Speed and efficiency – AI can process vast amounts of data and analyze it quickly, which can save time and increase efficiency. [3]
• Accuracy – AI and ChatGPT can identify patterns and anomalies in financial data that humans may miss, increasing the accuracy of forensic accounting investigations. [4]
• Automation – AI can automate many repetitive and time-consuming tasks, freeing up human resources to focus on more complex analysis. [5]

Now, remember – and this is a very important reminder – AI is a tool and not a solution. Here are a few areas of concern with AI and ChatGPT that forensic accountants must consider:

• Dependence on technology – Accountants who rely too heavily on AI and ChatGPT may become dependent, losing or diminishing the critical thinking skills necessary to identify potential issues. 
• Limited understanding – AI and ChatGPT will not have contextual understanding. They likely will not be able to recognize nuances in financial data that human forensic accountants can. 
• Limited transparency – The inner workings of algorithms are unique and highly specialized. This makes it difficult for accountants to understand how they arrive at their conclusions.
• Data quality – AI and ChatGPT require high-quality data to function properly. If the input data is incorrect or incomplete, the output may be inaccurate. 
• Security risks – The use of AI and ChatGPT could increase the risk of cyberattacks and data breaches, potentially exposing sensitive financial information. [6]

Real-World Uses

One potential use of ChatGPT may be in financial statement analysis. [7] Financial statements contain key information for forensic accountants regarding a company’s financial performance. For larger and more complex companies, a financial statement analysis can be time consuming. Specifically, ChatGPT can generate in-depth reports by pulling in information from balance sheets, income statements, and other financial statements. [8] However, it is important to note that while ChatGPT-3.5 (the current version available for free) is extraordinary in its capabilities, it is still in the development stages and not without errors. [9] ChatGPT is advancing quickly, though. ChatGPT-4.0, which can be accessed with a subscription, is already significantly more advanced than the prior version. [10]

AI can be used to analyze financial data and identify potential issues, such as inconsistent financial ratios or potentially fraudulent activity, but it is not limited to financial information. Algorithms can be trained to pick up data used in managers’ reports, emails, correspondence, and other textual forms. While ChatGPT can perform the aforementioned tasks, it should not be blindly relied upon.

Conclusion

While ChatGPT can assist with certain aspects of accounting, it cannot fully replace the CPA’s expertise and judgement. Accounting requires a deep understanding of accounting principles, standards, legal frameworks and techniques, as well as critical thinking and analytical skills. 

AI and ChatGPT are great tools for automating accounting tasks, but technologies are only as effective as the data they are trained on. There is no guarantee they will be able to capture all of the information correctly. Complex transactions involving human interference, such as deception or manipulation, can hinder the technologies’ ability to capture data. 

Forensic accounting involves interpreting complex financial data and analyzing information in the context of legal or regulatory requirements. This level of knowledge and response requires human expertise and judgement, including the ability to communicate complex financial information in a way that can be understood. 

Forensic accountants must also remember that they may ultimately be called to testify on their findings. Your work and the underlying methods used will still have to stand up to scrutiny in a court of law. AI may be of assistance but cannot replace the manner in which you conduct your work.

Acknowledgements

We would like to thank Jacob R. Hough, CFE, for providing insights and expertise that greatly assisted this research.

Jacob R. Hough, CFE, is a Senior Consultant in J.S. Held’s Economic Damages & Valuations practice. Jake joined J.S. Held in January of 2024 as part of J.S. Held's acquisition of Forensic Resolutions, Inc. Jake has nearly a decade of experience quantifying economic claims in dispute. He has extensive experience analyzing financial and nonfinancial data, conducting thorough analyses, and assessing economic damages in personal injury, wrongful death, and commercial damages, among other areas. He has comprehensive experience determining economic damages in numerous jurisdictions throughout the United States.

Jacob can be reached at [email protected] or +1 856 433 6433.