Artificial intelligence (AI) is transforming the accounting profession, and enabling organizations to automate routine tasks, enhance efficiency and support more informed decision-making. At the same time, recent incidents across industries have highlighted the importance of effective governance, as weaknesses in oversight and controls can result in operational, compliance and reputational consequences. The question is no longer whether accountants should adopt AI, but how to use it responsibly, balancing innovation with appropriate governance and control.
AI risks
As AI adoption increases, organizations must recognize that the technology is not without limitations. “Hallucinations”, where AI generates plausible but inaccurate information, can lead to flawed analyses and influence professional judgements. The “black box” nature of some AI models may also make it difficult to explain how outputs or decisions are generated, creating challenges when transparency and accountability are required. Accuracy may further degrade over time as a result of model drift, which occurs when changes in underlying data or operating conditions affect the reliability of outputs. Cybersecurity and privacy considerations also become increasingly important when sensitive information is processed through third-party platforms. Intellectual property concerns may arise where AI-generated content resembles copyrighted material, while biased outputs can create ethical and reputational challenges.
These considerations underscore the importance of robust governance. In a profession built on trust, even minor errors or lapses in oversight can have significant consequences for organizations and their stakeholders.
Regulatory response
In response to the growing use of AI, regulators around the world are strengthening their focus on AI governance. The EU AI Act introduces a risk-based framework with requirements relating to transparency, documentation and human oversight, while regulators in the United States have increased scrutiny of “AI washing”, where organizations overstate AI capabilities. Other jurisdictions, including the United Kingdom and Singapore, have also issued frameworks and guidance to promote responsible AI use.
Alongside these broader regulatory developments, accounting regulators are reinforcing that the adoption of AI does not diminish professional responsibilities. In Chinese Mainland, the Chinese Institute of CPAs has issued audit guidance that prohibits the use of public AI platforms for client data and emphasizes that AI cannot replace professional judgement. In Hong Kong, the Accounting and Financial Reporting Council has published guidance highlighting both the opportunities and risks associated with AI adoption.
These developments reinforce a clear message: AI governance is becoming an increasingly important component of organizational governance and compliance. As trusted advisors, accountants must be prepared not only to use AI responsibly, but also to help organizations navigate an evolving regulatory and professional landscape.
Building effective AI governance
Effective AI governance begins with clear accountability and oversight. AI-related risks should be integrated into the organization’s enterprise risk management framework. Boards should provide oversight of AI adoption, establish clear accountability and ensure that appropriate governance arrangements and policies are in place. Management should be responsible for implementing related controls, monitoring compliance and reporting significant developments to the board.
At the operational level, human oversight remains essential. Decisions affecting clients, financial reporting or regulatory compliance should be subject to appropriate professional review. Technical safeguards, such as Retrieval Augmented Generation (RAG), can help improve the reliability of AI-generated outputs by grounding them in verified sources. Organizations should also establish appropriate controls over third-party AI tools and the handling of sensitive information.
A strong culture is equally important to effective AI governance. Employees need to understand both the capabilities and limitations of AI tools, as well as their responsibilities when using them. The professional scepticism that has long underpinned the accounting profession should extend to AI-generated outputs. Ongoing training, clear guidance and a culture of accountability can help organizations use AI confidently and responsibly.
Accountant’s advantage
Industry research and professional bodies have highlighted that the longstanding focus of accountants on integrity, objectivity and accountability provides a strong foundation for supporting the responsible use of AI. They can help design governance frameworks and control environments, assess compliance with evolving regulatory expectations, and provide independent assurance over AI-related processes. Their expertise in risk management, internal controls and assurance also positions them to evaluate whether appropriate oversight, monitoring and accountability mechanisms are in place.
By helping organizations realize the benefits of AI while maintaining stakeholder confidence, accountants can continue to serve as trusted advisors in an increasingly digital economy.
Those who embrace AI responsibly and develop the skills to govern its use, evaluate its outputs and provide assurance will be well positioned to thrive. This is not just an opportunity for the profession, it is also a responsibility.
(Christie Fung, Associate Director, Governance, Advocacy & Research at the Institute, contributed to this article.)
