By MIA Accountants Today Team
We live today in a world of unprecedented disruption. Like other sectors of the economy, the global accountancy profession is also expected to adapt and unleash the potentials in these disruptive risks and opportunities.
As a global voice for accountants, the International Federation of Accountants (IFAC) closely monitors the material developments that will shape the future direction and relevance of the profession.
Asmâa Resmouki, President, International Federation of Accountants (IFAC) highlighted two key frontiers for the profession in her special address at the recent MIA International Accountants Conference 2024, in line with the theme of “Navigating New Frontiers, Embracing Sustainability”. These two “frontiers” are sustainability and artificial intelligence (AI).
Sustainability – Assuring ESG Information
On the new frontier of sustainability, Asmâa discussed the evolution of assurance to include ESG — and how to go beyond it to encompass emerging assurance opportunities in technology, cybersecurity, AI, and anti-money laundering (AML).
Today, stakeholders are increasingly prioritising sustainability. Within the context of the profession, it is generally agreed that enhancing corporate reporting with high-quality sustainability disclosures is the future of corporate reporting.
At the same time, the importance of the assurance of these disclosures is growing, as evidenced by the quickly expanding market for ESG assurance services. IFAC’s “State of Play” research which is available on the IFAC website is a valuable resource for quantifying this trend, said Asmâa. “The data shows that there is a rapidly growing opportunity for accounting practices to step into sustainability assurance.” She also emphasised that “all jurisdictions need mandatory assurance; otherwise, ESG information will never be on par with financial information.”
To pave the way forward, the International Auditing and Assurance Standards Board (IAASB) has proposed the new International Standard on Sustainability Assurance or ISSA 5000, which would be a comprehensive, standalone standard suitable for any sustainability assurance engagement. “This new standard will be crucial for ensuring that sustainability assurance truly builds trust and confidence in sustainability information,” emphasised Asmâa.
Moreover, ESG assurance is emerging as a very important area for advocacy at the national level, and will definitely be pivotal to the national sustainability agenda. Professional accountancy organisations (PAOs) that are member bodies of IFAC will play a driving role in strengthening advocacy for assurance. As the regulator and developer of the profession, MIA is of course strongly advocating for sustainability assurance and upskilling members for this new role.
What’s Next – The Growing Scope for Assurance Services
Going forward, broader trends in assurance are on the horizon. IFAC predicts “the further evolution of assurance to cover much more than financial and ESG information”. Forthcoming will be assurance services in digital technology and technology services.
Regulators are poised to play a key role in driving assurance in technology. European Union and UK regulators are moving to designate as “Critical Third Parties” a wide range of companies that provide technology services — for example, the managed service providers for the information systems used by payment processors. Singapore requires that any company that performs cybersecurity monitoring be licensed and regulated. In certain jurisdictions, such as France, there are steep criminal penalties for violating data privacy laws.
“With this attention from regulators, technology service providers will want to be able to demonstrate that they have taken proper cybersecurity measures. I believe the market for assurance services is very clear here,” observed Asmâa.
Artificial intelligence is another key emerging area that is subject to intense scrutiny and hence will require assurance. Lawmakers in the UK have introduced a bill that would increase transparency in the disclosure of AI algorithms. “As with other digital technologies, firms that use AI will want to be able to show their regulators that they have done their homework about transparency and other regulatory issues,” continued Asmâa.
In addition to technology services and AI, there is growing interest in assurance in anti-money laundering as policymakers and regulators across jurisdictions redouble their efforts to fight corruption and financial crime. As AML inspections become common globally, assurance will be required to demonstrate that companies are in compliance with AML procedures. “This represents another huge potential market for assurance,” assured Asmâa.
“Fundamentally, these emerging opportunities in assurance stem from the same factors that have made ESG reporting a headline issue: regulators, investors, and other stakeholders want to understand the full picture of an organisation’s value, risks, and overall resilience. Cybersecurity, AI, and AML are just a few examples of additional areas that are expected to become integral to the corporate reporting environment, to join financial information and sustainability information,” summed up Asmâa.
Artificial Intelligence and Potential Ethics Challenges
AI poses tremendous opportunities and concomitant risks – particularly ethical issues – for the profession.
Drawing on research into emerging ethical issues related to technology published by the International Ethics Standards Board for Accountants (IESBA), Asmâa offered succinct insights into the opportunities and ethical challenges that come with AI.
While the full potential of AI is yet to be unleashed, AI is already directly applicable in the work of professional accountants. For example, accountancy professionals can utilise data analysis with AI tools to uncover new relationships in organisational data and mobilise this clarity to increase efficiencies. AI software can offer powerful predictive models for financial processes, such as sales forecasting, to improve strategic decision-making. Accountancy professionals who work with client data, including auditors, can gain significant efficiencies by using AI to more quickly discover missed disclosure requirements and identify non-compliance. “There are many, many more use cases. There is undoubtedly a relevant application of AI for the work of every professional accountant,” said Asmâa.
At the same time, there are potential pitfalls.
One considerable challenge is bias. “In a perfect world, we would be able to create AI systems that operate objectively and neutrally, and that do not inherit the flaws of the humans who create them. In reality, we almost inevitably impart bias into AI systems — even when we try hard not to,” she explained. Bias can appear even if sensitive demographic variables, such as the family background and gender of the users of a company’s products, have been removed from the data. Data sampling is also another source of bias. The over- or under-representation of one group in an AI’s training and testing data can lead the AI to treat that group differently, sometimes with harmful results in practice. Furthermore, a recent study published in Nature shows that people who interact with a biased AI are likely to reproduce its bias even after they stop interacting with it. “So, a biased AI can, in turn, bias the people who use it!”
As such, “it is extremely important for professional accountants to be aware of the extent to which bias is affecting the outputs of an AI system they are working with, and to ensure that they acquire the appropriate mindset, skills, competencies, and technological tools to be appropriately skeptical and discerning,” advised Asmâa.
Another ethical challenge with AI is the significant possibility that humans overseeing an AI system lack transparency into how it works.
To mitigate this, accountancy professionals should at least become comfortable with the inputs to the system and the control structure for monitoring the system and its outputs. In the matter of systems-supporting decisions with significant consequences, it is absolutely crucial that the professional accountant has access to one or more experts who can answer both “how does the system work?” and “why did the system do what it just did?” This is because “ethical AI is absolutely a collaborative effort, not the domain of one profession or another,” said Asmâa.
Enhancing Ethical AI – Recommended Approaches
While this is a fledgling field, accountancy professionals can adopt the following tactics to strengthen their ethical use of AI.
One, always have an inquiring mind about the potential for AI, or any unfamiliar technology, to produce ethical issues. This approach aligns very well with the IESBA Code’s existing requirement for a professional accountant to have an inquiring mind when applying the Code’s conceptual framework. “The foundation of the Code will help the individual professional accountant challenge the AI system to make sure it is operating within ethical bounds,” said Asmâa.
Two, build a strong ethical culture at the organisational level. Ensuring an ethical organisational culture is core to fostering a safe environment for data scientists and others to escalate concerns over any bias or discrimination identified in AI systems without the fear of retaliation. “Professional accountants are already expected, per the IESBA Code, to encourage and promote an ethics-based culture within their organisations, taking into account their position and seniority in the organisation. This role is becoming even more important with the rise of AI.”
Three, uphold the distinctive and valued qualities of the profession while forging strong collaboration and partnerships with stakeholders. Asmâa emphasised that on questions around AI and other aspects of digitalisation, the profession should not change just for the sake of change. “We have a wealth of skills and expertise that will remain extremely valuable in the long-term. Organisations will continue to prioritise the critical thinking and analysis, problem solving, independence, professionalism, and — most of all — the ethical integrity that define our profession.”
“The role of accountants in the digital economy is already clear on many issues — and will become even clearer with experience as well as collaboration and communication across our profession and with our stakeholders. On these issues and many others, accountants will be leaders and partners, but not the sole actors. So, I would emphasise the importance of partnership to ensure that strong ethical principles guide the use of potentially transformative technologies,” she concluded.
