by CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
In recent years, the rapid advancement of technology has led to significant changes in various sectors, with the accounting profession being no exception. Artificial Intelligence (AI) is one of the most transformative technologies reshaping the landscape of accounting globally. AI involves the development of computer systems capable of performing tasks that typically require human intelligence, such as learning, reasoning, problem-solving, and decision-making (Russell & Norvig, 2016). The integration of AI into accounting practices promises to enhance efficiency, accuracy, and decision-making capabilities, offering substantial benefits to both practitioners and organizations.
Accounting is as old as business itself, and its role in the survival, growth, and profitability of a business can never be over emphasized. The role of accountants in fostering trust in the quality of financial reporting cannot be overstated in the corporate world (Ezeribe, 2019). Accounting is crucial to a corporation’s performance since it aids in the tracking of financial income and expenditures. It provides measurable financial information to investors, management, and the government. It can be used to make business decisions and preserve and expand a business’s financial health. It also aids in the creation of budgets and future projections, which can make or break a company, as financial records play an important role in budgeting data. Also, the inevitability of the profession in taxation, auditing, and management can never be overemphasized. However, the advancement in technology has threatened the relevance of the profession in the 21st century. Accounting has passed through several developments over the years with the last major innovation being the creation of double-entry bookkeeping over 500 years ago. The 21st century heralds Information and Communications Technology (ICT) – based technologies that have changed ways of doing business in many industries. Accounting is transcending traditional ways of entry and preparation of accounting books to automation. The 21st century is the age of automation and accounting happens to be one of the industries at the forefront. Accounting automation addresses the total lifecycle of accounting, not just as part of a firm’s financial management department. This implies that the whole accounting process, the recording, manipulation, and interpretation of transactional data, is done by software, with minimized reliance on manual transactional entries by people. Accounting today is handled by a system called, „Robotic Process Automation (RPA)‟. According to AIIM (2018), Robotic process automation (RPA) is a term that denotes software tools that partially or fully systemize human activities that are repetitive, manual, and rule-based. Boulton (2018) sees RPA as an application of technology, directed by business logic and arranged inputs, aimed at automating business processes. Artificial intelligence covers a number of interlinked technologies including speech and image recognition, data mining, semantic analysis, and machine learning. AI is still in its very early stages of adoption for broad society changing use. This partially caused by the cost related to the adoption of the needed technologies and also lack of technical know-how within companies.
However, the huge potential rewards of using AI and RPA technologies make it all worth it for the companies. Disruptive technologies have begun to transform our world, particularly the business environment. One of the recent disruptive technologies that has made significant changes to the business world is AI. AI, or sometimes called machine intelligence, is intelligence demonstrated by machines, in contrast to the natural intelligence displayed by humans and other animals (Ziyad, 2019). There are numerous definitions available, but they can be summarised as the majority of them fall into one Systems that think like humans, act like humans, think rationally, and act rationally. Accounting functions were primarily done manually before the introduction of AI. However, the rise of intelligent machines has led to the use of machines that can do things as well as people. This has cut the time it takes to process accounting transactions by a reasonable amount when compared to manual operations (Akinadewo, 2021). Artificial intelligence is applicable to many areas of management accounting and performance management. According to Ezeribe (2019), AI is currently threatening accounting services such as invoice and receipt generation, account consolidation, and auditing. Report writing, numerical data computation, account reconciliation, funds transfer (payments), loan application assessment, and financial transaction verification were also included in the list.
AI in accounting encompasses a wide range of applications, including but not limited to, automated data entry, predictive analytics, fraud detection, financial forecasting, and the creation of more efficient audit processes. The integration of AI tools such as machine learning, natural language processing, and robotics has not only improved the accuracy and reliability of financial reporting but also reduced the time and cost associated with manual accounting tasks. Globally, accounting firms are increasingly adopting AI to enhance productivity, streamline operations, and provide more value-added services to their clients. Artificial Intelligence (AI) in accounting refers to the application of advanced computing technologies, primarily machine learning and data analytics, to perform tasks traditionally carried out by human accountants (Adelekan et al., 2024). It involves the development of algorithms and systems that can analyze financial data, make predictions, automate repetitive processes, and enhance decision-making within the realm of accounting and finance (Okem et al., 2023). AI in accounting encompasses a range of technologies, such as natural language processing, robotic process automation, and predictive analytics, collectively aiming to augment and optimize accounting practices. In essence, AI in accounting transforms the way financial information is processed, interpreted, and utilized, providing a more efficient and insightful approach to handling complex financial tasks. The integration of AI allows for the automation of routine and time-consuming activities, freeing up accountants to focus on highervalue tasks, strategic planning, and interpreting financial insights (Adelekan 2024). The historical evolution of AI in accounting can be traced back to the late 20th century when computers began to play a more significant role in financial processes. Initially, the focus was on automating manual calculations and data entry. With the advent of more sophisticated computing technologies and the growth of big data, the accounting profession witnessed a gradual shift towards incorporating AI elements. In the 21st century, the rise of machine learning algorithms and advanced analytics marked a significant milestone in the integration of AI into accounting practices (Kunwar, 2019). Software solutions started to emerge, capable of learning from historical data, identifying patterns, and making predictions. As cloud computing gained prominence, the accessibility and scalability of AI solutions increased, enabling both large enterprises and smaller accounting firms to leverage these technologies
The application of AI in accounting includes various technologies such as machine learning, natural language processing, and robotic process automation (RPA). These technologies enable the automation of routine tasks such as data entry, reconciliation, and report generation, which were traditionally done manually (Warren, Moffitt, & Byrnes, 2015). Furthermore, AI-powered tools can analyze large volumes of data at unprecedented speeds, providing deeper insights and predictive analytics that support strategic decision-making (Davenport & Kirby, 2016).
Globally, large accounting firms and multinational corporations have been early adopters of AI, using it to improve the accuracy and reliability of financial reporting, audit processes, and fraud detection (Smith, 2020). These developments have begun to influence the expectations and demands placed on accounting professionals, requiring them to develop new skills and competencies in AI and data analytics (Pan & Seow, 2016). In Nigeria, the accounting profession has traditionally been characterized by manual processes, especially among small and medium-sized enterprises (SMEs) (Owolabi & Iyoha, 2012). With the increasing globalization of business and the adoption of International Financial Reporting Standards (IFRS), there has been a gradual shift towards the use of computerized accounting systems. Despite this shift, the adoption of advanced technologies like AI remains limited due to several factors, including inadequate infrastructure, high costs, lack of technical expertise, and resistance to change (Uwuigbe, Uwuigbe, & Ben-Caleb, 2012). The Nigerian accounting sector is at a critical juncture where the integration of AI could significantly enhance the quality of financial reporting, compliance, and overall operational efficiency. However, the potential benefits are accompanied by challenges such as the displacement of jobs, ethical concerns, and the need for re-skilling and up-skilling of the workforce (Oyedele, 2019).
The adoption of AI in Nigeria’s accounting practices could lead to several positive outcomes. AI has the potential to automate routine tasks, reduce human errors, and provide more accurate and timely financial information (Agbo, 2020). This could improve decision-making processes and enhance transparency and accountability in both the private and public sectors. Additionally, AI can help in the detection and prevention of fraud, which is a significant issue in Nigeria (Okoye, Akenbor, & Obara, 2013). The implementation of AI in the accounting sector also presents challenges. One of the major concerns is the fear of job losses, as AI systems can perform tasks traditionally done by humans. This raises the need for accountants to acquire new skills to remain relevant in the evolving job market. Moreover, there are concerns about data privacy and the ethical use of AI, particularly in a developing country context where regulatory frameworks may not be fully developed.
1.2 Statement of the Problem
The rapid advancement of Artificial Intelligence (AI) is transforming industries worldwide, including accounting. AI technologies, such as machine learning, robotic process automation, and natural language processing, are increasingly being integrated into accounting systems to enhance efficiency, accuracy, and decision-making processes. Globally, accounting firms have adopted AI to automate routine tasks, analyze large datasets, and improve the overall quality of financial reporting. However, the extent of AI adoption and its impact on accounting practices in Nigeria remains underexplored.
In Nigeria, the accounting profession is predominantly characterized by manual processes and limited use of advanced technologies, particularly among small and medium-sized enterprises (SMEs). While some large organizations have begun adopting AI tools, the overall uptake within the broader accounting community appears to be slow. This slow adoption is likely due to several factors, including inadequate infrastructure, high implementation costs, lack of technical expertise, and resistance to change. As a result, many accounting practices in Nigeria remain inefficient, error-prone, and time-consuming.
