Artificial Intelligence (AI) has made more inroads into the legal profession than the accountancy field. Forward-thinking lawyers are using AI to speed up due diligence work, predict the chance of winning a case and even to obtain expert legal guidance. So what lessons can we draw from our learned friends?
In a recent article I looked at the core elements of AI, how they work and why they’re so useful. Below we look at how this technology is being used by lawyers, and whether these same applications could help accountants.
Document review and research
Legal work involves tomes of written information, whether it’s legislation, case law or documents and contracts held by clients. While databases and traditional search techniques help, ultimately there’s no substitute for a human reading through papers with a highlighter pen.
AI technology can automate, or at least speed up, this process. A program can scan through documents and use Natural Language Processing (NLP) to distil documents down to the most relevant keywords, based not only on the words themselves but also on the context in which they’re used. This information can then be used to find documents relevant to the current case.
Accountants may not be buried under quite so much paperwork, but there are still areas where we could use this technology. Tax tribunal or court cases could be searched instantly to find those with the same characteristics as a current problem, without having to spend time wading through textbooks and a legal database.
The technology could also help in tax investigations and forensic accountancy by searching through piles of documents. And it could also help HMRC sort through the text-based information they receive from taxpayers, such as white space entries or notes in company accounts.
Lawyers spend a lot of time exploring background information ahead of court hearings or company takeovers. This includes time-consuming and tedious tasks such as trawling through thousands of contracts. Only a sample may be looked at, and bored junior lawyers may miss some important points.
AI technology is speeding up this process and making it more accurate. NLP programs can analyse documents and highlight relevant or problematic areas for human review. Rather than examining a sample, all contracts or documents can be analysed en masse.
This technology could be useful to audit firms. Auditors currently place people on site to examine a sample of transactions to ensure proper accounting procedures are being followed. AI programs could examine all the data, and AI models can be trained to spot anomalies or problems. Auditors could also expand their oversight by scanning emails and social media posts for patterns associated with crisis or dishonesty.
Historically, the only way to know whether a court case was likely to succeed was to ask an experienced lawyer. But AI software can scan through previous cases and model the link between key characteristics and the final outcome, learning and improving as more data becomes available.
One such model was tested on the results of past US Supreme Court cases. It forecast the correct outcome over 70% of the time, a success rate matching that of legal experts.
Can these AI models be used in accountancy? They could certainly be used to predict the outcome of tribunal or court cases to determine whether to proceed. And, given enough data, they could calculate the risks of a tax return being investigated, and suggest possible changes to make an HMRC enquiry less likely.
The ultimate aim of AI developers is to develop software that can answer technical questions just like a human. This field is still in its infancy, and early-stage software exists but requires help and input from lawyers to produce sensible responses.
This software will mature and have implications for accountancy in the long run. But while an AI-powered virtual accountant is many years off, current technology could be used to analyse a question, search through the available information and respond with links to relevant laws, cases, guidance and training materials. This may not answer the question directly, but it would instantly give you access to the information needed to produce an expert response.
So how will AI affect accountancy?
Accountants won’t be abolished any time soon. But work in the profession will evolve, with administrative and repetitive tasks continuing to be displaced by technology and automation. New AI services will make it far easier to access relevant information, making it less necessary to build up a large internal bank of technical knowledge and experience.
Instead, accountants will take on a “project manager” role, using human time and technology to complete work in the most accurate and efficient way possible. If they do this well, they will be able to work more quickly, produce more accurate advice and service more clients. And they may even get a pay rise.
About Matt Bailey
Founder of Azura Cloud Systems (Gbooks), the leading cloud-based tax and accounts system.