A new KPMG survey reveals that Canadian companies are increasingly adopting Artificial Intelligence (AI) to enhance their financial reporting, with 87 percent of organizations piloting or using AI.
This figure surpasses the global average of 72 percent, highlighting Canada's proactive stance on leveraging technology for financial advancements. Despite this enthusiasm, regulatory compliance, skill gaps, and data security concerns keep 73 percent of Canadian firms in the pilot stage, with only 14 percent using AI selectively or widely compared to 33 percent globally.
"Canadian organizations are ready to take their financial reporting to the next level using technologies like AI, automation, and data analytics to deepen the quality of their reporting for their many stakeholders," said Kristy Carscallen, Canadian managing partner of audit and assurance at KPMG in Canada. "The future of financial reporting is here, and it's important to embrace it to enable the higher level of insights and transparency that companies and investors expect."
The report, "AI in Financial Reporting and Audit: Navigating the New Era," surveyed 1,800 companies across ten major markets, including Canada. Key findings indicate that 87 percent of Canadian organizations are piloting or using AI in financial reporting, set to rise to 100 percent in the next three years. Seventy-three percent are evaluating results, while only 14 percent are already using AI widely.
Furthermore, fifty-nine per cent are allocating over 10 per cent of their IT budget to AI, higher than the global average of 45 per cent. Virtually all (94 percent) companies expect to increase their AI investment, with 49 percent planning to boost spending by 25 percent or more next year.
AI's benefits in financial reporting include predicting trends (75 percent), better data-enabled decisions (66 percent), and increased data accuracy (61 percent). Additionally, 38 percent of companies report improved employee productivity due to AI, expected to rise to 53 percent in three years.
However, hurdles to AI adoption remain significant. Regulatory and compliance changes are the top challenge (60 percent), followed by limited skills (59 percent) and data security concerns (58 percent). Transparency and data privacy are also critical considerations for companies when implementing AI.
"The benefits of using AI are clear, but companies need to take a careful approach to building the right governance and frameworks that are values-driven, human-centric, and trustworthy to support a safe and successful transition," said Bryant Ramdoo, partner and audit innovation leader at KPMG in Canada.
Generative AI, despite being a newcomer, is rapidly gaining traction. Nearly half (45 percent) of Canadian companies are piloting generative AI technology, with 88 percent expecting it to become common practice for auditors within two years.
Companies also expect their external auditors to leverage AI capabilities. Seventy-six percent believe it is crucial for auditors to use AI, which aligns with the need for improved accuracy, proactive processes, and valuable insights. Additionally, 82 percent expect auditors to conduct detailed reviews of the control environment related to AI use in financial reporting.
Carscallen concluded, "We've long believed in the power of AI to enhance the quality of reporting and public trust by making the right investments in technology and skills to use this powerful technology responsibly. It's imperative that everyone – auditors, organizations, standard setters, regulators and educators – work closely together to advance the future of assurance and attestation in Canada with confidence."