In the last few years, artificial intelligence has quickly broken beyond the realm of science fiction.
Today this technology powers many things — including Google web searches, manufacturing robots and software programs that trade stocks.
In fact, IBM — the creator of the AI powerhouse Watson — predicts that the AI market will catapult to $2 trillion in the next decade.
Nearly every industry on the planet stands to benefit from AI’s increased use.
But make no mistake, few will see a larger boost than the business of corporate accounting.
Senior analyst Jonathan Rodriguez explains why below. As you’ll learn, AI could help put $3.7 trillion of “stolen” cash back into the economy…
Chief Investment Strategist, Wall Street Daily
Fraudsters Can Run, but They Can’t Hide
Around the globe, financial fraud costs businesses and governments trillions of dollars annually.
And hardworking American taxpayers often pick up the tab.
According to a 2014 study by the Association of Certified Fraud Examiners (ACFE), the typical organization loses a median of 5% of annual revenue to fraud.
The ACFE estimates the total cost adds up to $3.7 trillion per year globally.
In 1998, Waste Management — one of America’s largest waste management firms — reported $1.7 billion in fraudulent earnings over several years.
Three years later, now-defunct energy company Enron admitted to inflating earnings by $586 million. It also hid $3 billion of debt in limited partnerships.
This ultimately cost shareholders — and employees — $74 billion in wealth that evaporated when the stock plummeted.
In 2002, WorldCom — the second-largest long-distance phone company in the U.S. at the time — confessed to overstating profits by $3.8 billion.
And it’s not just private businesses….
In 2014, Medicare fraud cost taxpayers $60 billion. The IRS expects tax-refund fraud to cost taxpayers $21 billion in 2016.
And the FBI estimates insurance fraud to hit more than $40 billion per year, costing the average U.S. family up to $700 in increased premiums.
Of course, stronger auditing systems could help fix the problem. But how do we fill in the cracks?
Bring in the cyborgs…
Fraud Terminator: Rise of the Machines
Corporate structure and transactions have become more complicated than ever.
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And the more complicated transactions are, the easier it is for businesses to make mistakes — or for fraud to occur.
Auditors perform many tasks that lend themselves to automation, such as reviewing balance sheets, verifying receipts and looking over official correspondence.
The majority of auditors are good. They’re smart people with sharp eyes for detail.
But machines don’t eat. They don’t sleep. And they crunch numbers faster than any person can.
AI isn’t influenced by emotions. And unless it’s been programmed to — it doesn’t suffer bias when performing an audit.
In fact, a recent survey of over 800 executives at the World Economic Forum predicted that 30% of corporate audits will be performed via AI by 2025.
Unfortunately, people tend to focus on the number of jobs that AI could potentially eliminate, particularly in the accounting world.
But if AI can help businesses make money or save money — everybody wins.
Firms will grow, and shareholders will prosper.
More importantly, if a robot auditor can root out company-killing fraud before it’s too late, many hardworking folks will keep their jobs.
The Race to AI Superiority Is On
In fact, some of the world’s biggest accounting firms have already begun building AI systems to augment their audit procedures.
Last year, Deloitte — the world’s largest accounting firm — teamed up with Canadian AI tech firm Kira Systems to begin automating their processes.
And Holland-based firm KPMG — a member of the accounting “Big Four” — has enlisted IBM’s Watson to add artificial intelligence to its team.
While AI will likely remove the need for legions of number crunchers with green visors, however, humans will never completely disappear from audits.
After all, the numbers are just part of the auditing process. Someone has to make sense of raw data and communicate their insights to stakeholders — who are also people.
Bottom line: AI isn’t just coming. It’s already here. And using this technology in corporate accounting is not only going to save businesses money, but also save jobs. Recently, Louis Basenese told True Alpha readers that “2017 is the year of AI.” And he found the absolute best place for readers to invest in the space — an emerging field of AI technology that combines two critical operations into one. Click here to learn more.
On the hunt,
Senior Analyst, Wall Street Daily