Accounting
Agentic AI: The next big thing for accountants?
As the world continues to digest the rise of generative AI, agentic AI lies waiting on the bleeding edge, and while few accounting firms are using it at the moment, major players in the space have already made significant investments in what they believe to be the next step in the AI revolution.
Very broadly, an AI agent is software that is capable of at least some degree of autonomy to make decisions and interact with things outside itself in order to achieve some sort of goal—whether booking a flight, sending a bill or buying a gift—without needing constant human guidance.
The concept of an AI agent is not new, as computer scientists and software engineers have been using the term for years, and such agents are already used in commercial applications —
Antony Weerut – stock.adobe.com
Given this one might wonder why interest in
“Agents have been around but we had to program them in a logical format. But because of large language models who can understand natural language, it makes it much more flexible to create very sophisticated systems without having to know so much coding, and it’s much easier to implement on a larger scale,” he said.
He contrasted this with classic AI models.
“If you look at a machine learning thing like recommendations, those are pretty sophisticated, they’re pretty useful in today’s market in entertainment but those’re not really doing a task, they make up a menu like if you need to find Christmas movies. They don’t make a decision by themselves, you make the final decision that I am going to see this, they propose but you make the decision. [In contrast] an AI agent can accomplish a task,” he said.
Beyond this, advances in generative AI have also made AI agents themselves more effective in the field. Pascal Finette, co-founder and “chief heretic” at tech advisory firm Be Radical, contrasted this with robotic process automation. While he said RPA is not to be underestimated, even today, it tends to be very rigid in its setup, operating mostly on if/then/else principles that work very well for defined use cases but struggles in the face of unstructured data or unusual edge cases. Agents, bolstered with generative AI, become much more flexible.
“The reason I think why this is happening is we now have this superpower of an LLM which allows us to look at the world and look at data in a much more unstructured way and still get some really interest insight from it which we can then use to automate stuff, to execute on our behalf. … the beauty of LLMs and gen AI is it has the flexibility to be able to actually create meaningful interactions,” he said.
David Wood, an accounting professor at Brigham Young University whose research also heavily involves AI, noted that ‘agents’ can be thought of as a framework for applying technology; agents are programmed to do a task, and they can use other tools to accomplish that task, and so rather than being some sort of evolution from traditional RPA or generative AI, an agent can be thought of as something that will use RPA and generative AI.
“This is a different framework for how we do programming. We program an agent to do something, it could be to use generative AI, it could be to do a machine learning algorithm, it could be to simply change the color of the font. You can program an agent to do what you want and agents can work together or even compete against each other to do something, so it is not just a generative AI topic but highly valuable now because agents can use generative AI,” he said.
This increased flexibility has led to major investments in the technology from significant players. Big Four firm KPMG, for example, announced in
Around the same time, accounting solutions provider Thomson Reuters
That same month, Microsoft
Despite these high profile announcements, though, the field is very young, with many applications still in the experimental phase. Finette said it isn’t even necessarily bleeding edge so much as jagged edge. However, based on announcements like these, it appears this is the direction the AI community wants to go next.
Wood agreed, saying there are not a lot of agentic AI solutions right now that are fully production ready, but he sees great potential in the technology once it grows to maturity. For example, many accounting firms bill on how time is spent, which can be very time consuming to effectively track. Agentic AI would be able to observe an accountant work on company A for 45 minutes and company B for 60 minutes and bill accordingly. He said this might lead to people getting rid of all timekeeping because a computer can do it for them.
He also raised the idea that it could greatly increase efficiency for audits. Imagine, he said, if an agentic AI bot could automatically do most audit confirmations, send them to the humans for approval, and flag the things it couldn’t do itself, “so you could build tools for end to end processes to do full tasks together.”
Finette also saw great potential, saying it could act like a full AI worker capable of complex tasks. He said people eventually should be able to go to their AI and say they’re having a meeting in two days with someone and they need a flight and a hotel within their preferred parameters (e.g. cost, distance, etc.) The AI would then perform all the research, compare prices, maybe even generate its own spreadsheet to aggregate all the options, then make a judgment call on which flight to book and which hotel to reserve and actually do it. While an agent might struggle with novel tasks, for the most part it should be able to handle most of the routine work.
“You can translate that into a tax practice, where you have these complex workflows which a human breaks down into individual steps, each influencing the next: you take a document, extract the info from the document, put it into your accounting system, classify it, and do the booking in the system. All of this in theory agentic AI should be able to do for you,” said Finette.
Other accounting-specific applications he could envision include anything that has to do with data entry, reconciliation of accounts and classification of information in systems, as well as expense management, which he said is already semi-automated already.
“Right now it is semi-automated where you upload something into Expensify or something and it does image recognition on those expenses and pulls them in, but in the future it should do the report for me, there’s no reason why it should not take all this information and put the report together and submit it on my behalf,” he said.
However, Wood warned that agentic AI will still carry many of the risks that generative AI has today, especially the risk of making up information or being inconsistent with its outputs. While companies might promise a genie-like wish fulfillment, it will be especially important for people to understand the limitations of this technology.
“These systems interact, you wont always get a deterministic outcome like they think computers will generate, its not a calculator, so if you give an agent the ability to be creative, sometimes it might produce output A and sometimes produce output B and in accounting and business that can be a great strength, like in marketing, but when you do a tax form you don’t want that, you want income to be correct every single time. So the risk is that everyone gets hyped up and excited and applies it in the wrong place, you gotta use these tools and understand their strengths and weaknesses,” he said. “It’s sort of like gen AI right now, they think it will solve everything, but it solves these specific sets of issues and problems, so knowing where to use it and how to use it will be important.”
Finette agreed that the tendency of generative AI to make up information would still be a risk, and that there will likely be a lot of hype trying to minimize this risk as well. But he also noted that the fact that agents can actually act semi-autonomously and make decisions means the consequences of these risks can be bigger.
“In the flight booking use case, do you really trust the AI to actually book the flight for you? Will you be on the right flight at the right time? This is a silly example but a very real one,” he said. “The other [risk] is when you let AI make ‘moral’ decisions like letting AI do promotion decisions or suggesting out of 100 people here are the people who are top performers, where you get into issues like bias, which we know exists in AI. So all the issues we have with AI will be amplified with agentic AI.”
While theoretically these AI agents will be supervised by humans, Finette wondered about the degree to which people will actually do so, especially when AI can be so convincing in its reasoning even when wrong.
“These systems are so overly confident in their responses it is hard for some humans to step back and say don’t trust it. We all have experiences where you use ChatGPT and it tells you something wrong but they tell it to you in such a convincing way that if you didn’t have the knowledge you’d take it as gospel. … It is amplified if you let the system execute on this information. The human challenge is, and there are a bunch of research papers showing AIs are as convincing or even more so than humans, we need to get our workforce to understand that they should tread with caution and not let the AI bully you into a corner,” he said.
The Financial Accounting Standards Board met this week to discuss its projects on accounting for transfers of cryptocurrency assets and enhancing the disclosures around certain digital assets, such as stablecoins.
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During Wednesday’s meeting, FASB’s board made certain tentative decisions, according to a
At a future meeting, the board plans to consider clarifying the derecognition guidance for crypto transfer arrangements to assess whether the control of a crypto asset has been transferred.
FASB also began deliberations on the
The board decided to provide illustrative examples in Topic 230, Statement of Cash Flows, to clarify whether certain digital assets such as stablecoins can meet the definition of cash equivalents. It also decided to include the following concepts in the illustrative examples:
- Interpretive explanations that link to the current cash equivalents definition;
- The amount and composition of reserve assets; and,
- The nature of qualifying on-demand, contractual cash redemption rights directly with the issuer.
FASB plans to clarify that an entity should consider compliance with relevant laws and regulations when it’s creating a policy concerning which assets that satisfy the Master Glossary definition of the term “cash equivalents“ will be treated as cash equivalents.
“I agree with the staff suggestion to look at examples,” said FASB vice chair Hillary Salo. “From my perspective, I think that is going to help level the playing field. People have been making reasonable judgments. I agree with that. And I think that this is really going to help show those goalposts or guardrails of what types of stablecoins would be in the scope of cash equivalents, and which ones would not be in the scope of cash equivalents. I certainly appreciate that approach, and I think it has the least potential impact of unintended consequences, because I do agree with my fellow board members that we shouldn’t be changing the definition of cash equivalents, and it’s a high bar to get into the cash equivalent definition.”
“I’m definitely supportive of not changing the definition of cash equivalents,” said FASB chair Richard Jones. “I believe that’s settled GAAP in a way, and we’re not really seeing a call to change it for broader issues. I am supportive of the example-based approach. The challenge with examples, though, is everybody’s going to want their exact pattern, but that’s not what we’re doing.”
The examples will explain the rationale for how digital assets such as stablecoins do or do not qualify as cash equivalents and give a roadmap for other types of digital assets with varying fact patterns to be able to apply.
“We really don’t want to be as a board facing a situation where something was a cash equivalent and then no longer is at a later date,” said Jones. “That’s not good for anyone, so keeping it as a high bar with certain rigid criteria, I think, is fine.”
Stablecoins are supposed to be pegged to fiat currencies such as U.S. dollars and thus provide more stability to investors. “In my view, while a stablecoin may meet the accounting definition established for cash equivalents, not every one of those stablecoins in the cash equivalent classification represents the same level of risk,” said FASB member Joyce Joseph.
She noted that the capital markets recognize the distinctions and have established a Stablecoin Stability Assessment Framework to evaluate a stablecoin’s ability to maintain its peg to a fiat currency. Such assessments look at the legal and regulatory framework associated with the stablecoin, and provide investors with information that could enable them to do forward-looking assessments about the stability of the stablecoin.
“However, for an investor to consider and utilize such information for a company analysis the financial statement disclosures would need to include information about the stablecoin itself,” Joseph added. “In outreach, the staff learned that investors supported classifying certain stablecoins as cash equivalents when transparent information is available about the entities at which the reserve assets are held. Therefore, in my view, taking all of this into consideration a relevant and informative company disclosure would include providing investors with the name of the stablecoin and the amount of the stablecoin that is classified as a cash equivalent, so investors can independently assess the liquidity risks more meaningfully and more comprehensively by utilizing broader information that is available in the capital markets and its emerging information.”
Such information could include the issuer, reserves, governance and management, she noted, so investors would get a more holistic look at the risks that holding the stablecoin would entail for a given company.
The board decided to require all entities to disclose the significant classes and related amounts of cash equivalents on an annual basis for each period that a statement of financial position is presented.
Entities should apply the amendments related to the classification of certain digital assets as cash equivalents on a modified prospective basis as of the beginning of the annual reporting period in the year of adoption.
FASB decided that entities should apply the amendments related to the disclosure of the significant classes and amounts of cash equivalents on a prospective basis as of the date of the most recent statement of financial position presented in the period of adoption.
The board will allow early adoption in both interim and annual reporting periods in which financial statements have not been issued or made available for issuance.
FASB also decided to permit entities to adopt the amendments to be illustrated in the examples related to the classification of certain digital assets as cash equivalents without the need to perform a preferability assessment as described in Topic 250, Accounting Changes and Error Corrections.
The board directed the staff to draft a proposed accounting standards update to be voted on by written ballot. The proposed update will have a 90-day comment period.
Senators introduced several pieces of tax-related legislation this week, including measures aimed at improving customer service at the Internal Revenue Service, cracking down on tax evasion and curbing the carried interest tax break, in addition to efforts in the House to repeal the Corporate Transparency Act.
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Senators Bill Cassidy, R-Louisiana, and Mark Warner, D-Virginia, teamed up on introducing a bipartisan bill, the
The bill would establish a dashboard to inform taxpayers of backlogs and wait times; expand electronic access to information and refunds; expand callback technology and online accounts; and inform individuals facing economic hardship about collection alternatives.
“Taxpayers deserve a simple, stress-free experience when dealing with the IRS,” Cassidy said in a statement Wednesday. “This bill makes the process quicker and easier for taxpayers to get the information they need.”
He also mentioned the bill during a
“I’m happy to meet with the team … and do all I can to make it as good as you want it to be,” said Bisignano.
“My bill would equip the IRS with the legislative mandate to create an online dashboard so that taxpayers can monitor average call wait time and budget time accordingly,” said Cassidy. He noted that the bill would allow a callback for taxpayers that might need to wait longer than five minutes to speak to a representative, and establish a program to identify and support taxpayers struggling to make ends meet by providing information about alternative payment methods, such as installments, partial payments and offers in compromise.
“I know people are kind of desperate and don’t know where to turn for cash, so I think this could really ease anxiety,” he added. “This legislation is bipartisan and is likely to pass this Congress.”
Cassidy and Warner
“Taxpayers shouldn’t have to jump through hoops to get basic answers from the IRS — and in the last year, those challenges have only gotten worse,” Warner said in a statement. “I am glad to reintroduce this bipartisan legislation on Tax Day to ease some of this frustration by increasing clear communication and making IRS resources more readily available.”
Stop CHEATERS Act
Also on Tax Day, a group of Senate Democrats and an independent who usually caucuses with Democrats teamed up to introduce the Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly (Stop CHEATERS) Act.
Senate Finance Committee ranking member Ron Wyden, D-Oregon, joined with Senators Angus King, I-Maine, Elizabeth Warren, D-Massachusetts, Tim Kaine, D-Virginia, and Sheldon Whitehouse, D-Rhode Island. The bill would provide additional funding for the IRS to strengthen and expand tax collection services and systems and crack down on tax cheating by the wealthy.
“Wealthy tax cheats and scofflaw corporations are stealing billions and billions from the American people by refusing to pay what they legally owe, and far too many of them are getting a free pass because Republicans gutted the enforcement capacity of the IRS,” Wyden said in a statement. “A rich tax cheat who shelters mountains of cash among a web of shell companies and passthroughs is likelier to be struck by lightning than face an IRS audit, and Republicans want to keep it that way. This bill is about making sure the IRS has the resources it needs to go after wealthy tax cheats while improving customer service for the vast majority of American taxpayers who follow the law every year.”
Earlier this week. Wyden also
The Stop CHEATERS Act would provide the IRS with additional funding for tax enforcement focused upon high-income tax evasion, technology operations support, systems modernization, and taxpayer services like free tax-payer assistance.
“As Congress seeks ways to fund much-needed policy priorities and address our growing national debt, there is one common sense solution that should have unanimous bipartisan support: let’s enforce the tax laws already on the books,” said King in a statement. “Our legislation will make sure the IRS has the resources it needs to confront the gap between taxes owed and taxes paid – while ensuring that our tax enforcement professionals are focused on the high-income earners who account for the most tax evasion. This is a serious problem with an easy solution; let’s pass this legislation and make sure every American pays what they owe in taxes.”
Carried interest
Wyden, King and Whitehouse also teamed up on another bill Thursday to close the carried interest tax break for hedge fund managers that
Carried interest is a form of compensation received by a fund manager in exchange for investment management services, according to a
Under the bill, the
“Our tax code is rigged to favor ultra-wealthy investors who know how to game the system to dodge paying a fair share, and there is no better example of how it works in practice than the carried interest loophole,” Wyden said in a statement. “For several decades now we’ve had a tax system that rewards the accumulation of wealth by the rich while punishing middle-class wage earners, and the effect of that system has been the strangulation of prosperity and opportunity for everybody but the ultra-wealthy. There are a lot of problems to fix to restore fairness and common sense to our tax code, and closing the carried interest loophole is a great place to start.”
Repealing Corporate Transparency Act
The House Financial Services Committee is also planning to markup a bill next Tuesday that would fully repeal the Corporate Transparency Act, which has already been significantly
If enacted, the repeal would eliminate beneficial ownership reporting requirements, removing a transparency measure designed to help law enforcement and national security officials identify who is behind U.S. companies.
“This repeal would turn the United States back into one of the easiest places in the world to set up anonymous shell companies, something Congress worked for years to fix,” said Erica Hanichak, deputy director of the FACT Coalition, in a statement. “These entities are routinely used to facilitate corruption, financial crime, and abuse. Rolling back the CTA doesn’t just weaken transparency, it signals to bad actors around the world that the U.S. is once again open for illicit business.”
The Internal Revenue Service rarely penalizes taxpayers who have high balances in foreign bank accounts and fail to file the proper forms, according to a new report.
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The
Taxpayers with specified foreign financial assets that meet a certain dollar threshold are also required to report the information to the IRS by filing Form 8938. Failure to file the form can result in penalties of up to $60,000. However, TIGTA’s previous reports have demonstrated that the IRS rarely enforces these penalties.
The IRS created an Offshore Private Banking Campaign initiative to address tax noncompliance related to taxpayers’ failure to file Form 8938 and information reporting associated with offshore banking accounts, but it’s had limited success.
Even though the initiative identified hundreds of individual taxpayers with significant foreign bank account deposits who failed to file Forms 8938, the campaign only resulted in relatively few taxpayer examinations and a small number of nonfiling penalties. The campaign identified 405 taxpayers with significant foreign account balances who appeared to be noncompliant with their FATCA reporting requirements.
The IRS used two ways to address the 405 noncompliant taxpayers: referral for examinations and the issuance of letters to them.
- 164 taxpayers (who had an average unreported foreign account balance of $1.3 billion) were referred for possible examination, but only 12 of the 164 were examined, with five having $39.7 million in additional tax and $80,000 in penalties assessed.
- 241 noncompliant taxpayers (who had an average unreported account balance of $377 million) received a combination of 225 educational letters (requiring no response from the taxpayers) and 16 soft letters (requiring taxpayers to respond). None of the 241 taxpayers were assessed the initial $10,000 FATCA nonfiling penalty.
“While taxpayers can hold offshore banking accounts for a number of legitimate reasons, some taxpayers have also used them to hide income and evade taxes,” said the report.
Significant assets and income are factors considered by the IRS when assessing whether taxpayers intentionally evaded their tax responsibilities, the report noted. Given the large size of the average unreported foreign account balances, these taxpayers probably have higher levels of sophistication and an awareness of their obligation to comply with the law.
TIGTA believes the IRS needs to establish specific performance measures to determine the effectiveness of the FATCA program. “If the IRS does not plan to enforce the FATCA provisions even where obvious noncompliance is identified, it should at least quantify the enforcement impact of its efforts,” said the report. “This will ensure that IRS decision makers have the information they need to determine if the FATCA program is worth the investment and improves taxpayer compliance.
TIGTA made three recommendations in the report, including revising Campaign 896 processes to include assessing FATCA failure to file penalties; assessing the viability of using Form 1099 data to identify Form 8938 nonfilers; and implementing additional performance measures to give decision makers comprehensive information about the effectiveness of the FATCA program. The IRS disagreed with two of TIGTA’s recommendations and partially agreed with the remaining recommendation. IRS officials didn’t agree to assess penalties in Campaign 896 or with implementing performance measures to assess the effectiveness of the FATCA program.
“From our perspective, TIGTA’s conclusions regarding IRS Campaign 896 are based, in part, on a misguided premise and overgeneralizations, including the treatment of ‘potential noncompliance’ as tantamount to ‘egregious noncompliance’ that warrants a monetary penalty without contemplating the variety of justifications that may exempt a taxpayer from having to file Form 8938,” wrote Mabeline Baldwin, acting commissioner of the IRS’s Large Business and International Division, in response to the report.
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