Considering that some are claiming that artificial intelligence could bring us biological immortality by 2030, it would not seem like a major leap for some to think it could independently complete an advisory engagement end to end without any human input today. While this is not actually the case, those who fervently believe this to be true may be less likely to call their human accountants when, in their mind, a chatbot would do just fine. 

Joe Woodard, head of accounting coaching and education firm Woodard, said that this is part of how AI is slowly eating into accounting advisory services. The threat is not so much that the boss replaces everyone with an AI chatbot, but that the client decides an AI chatbot is good enough for their purposes and so never calls their accountant in the first place. 

“Among ChatGPT adopters — which, let’s remember, is still a small percentage of the business community — people are asking AI first. If they have gray areas or need a judgment call, then they reach out to their CPA … . This is how AI is undercutting the value proposition of accountants. CPAs are increasingly becoming a second opinion rather than the first source of expertise,” said Woodard. 

(See our feature story, “Staying ahead of AI.”)

This is a bad idea for several reasons. One is the obvious fact that the less a client calls their accountant, the fewer opportunities there are to offer the services that keep firms running. But there is also the fact that people think AI can do things it simply cannot do today, which can lead to poor decisions that could have been averted if only they’d consulted their human advisor. Hannah Dameron, an estate attorney with ArentFox Schiff who has spoken at accounting conferences on how AI is impacting her field, noted that people who try to draft wills using AI might be very disappointed when they test it in court. 

“If you put in a ‘Draft a will for me’ type of prompt, it might not actually be appropriate for your situation and might not be up to date depending on when tax laws have changed or probate laws have changed. So I think there is still great value in working with [human professionals]. AI just might create a challenge in communicating that with the public more broadly,” she said. What is needed is, first, education on what exactly AI can and cannot do. Media portrayals have given people the impression that AI is close to fictional entities like Iron Man’s Jarvis or 2001’s HAL 9000, which simply does not match reality. And even when bringing things a little closer to Earth, people still may not realize that, as powerful as AI is today, it still comes with real limits that require human compensation. 

“Right now, all we have is narrow AI, which means AI can answer highly specific questions. For example, if I ask, ‘What should my firm’s headcount be?’ AI can generate an informed response. But it can’t yet think holistically like a human does — it can’t ask leading questions, collect relevant information beyond the prompt, or make judgment-based decisions. AI can provide an analysis, but it’s not an advisor,” said Woodard. 

David Zweighaft, a partner with RSZ Forensics, added that clients need to be aware that AI can be biased and, in the case of generative solutions clients might access via public models, extremely inconsistent. Given that generative AI works on a probabilistic basis, by necessity if you give it two different prompts you can get two different results. “We need to be able to look at AI-generated output either that we commissioned or that the client has relied on and say, ‘OK, here’s the same data set; let’s run this through a different AI platform and see if you get the same results.’ … We can use AI to do that just as a safety check for us,” he said. 

David Nelson, an estate planning specialist with Top 25 Firm Aprio, said that ensuring that accountants remain the first opinion, not the second, means being proactive. Professionals should not be waiting around for their clients to call them, and then lament that they’re using a chatbot instead. They should be taking initiative to reach out in response to changing circumstances that might affect them. 

“For example, if a client’s net worth is rising rapidly and there’s potential for increased estate tax, it’s important that our colleagues in other departments plant the idea: ‘Hey, you might want to talk to our estate planning team.’ That way, clients aren’t suddenly faced with estate planning questions and turning to the internet for answers instead of calling us. It’s about being proactive,” said Nelson. 

He said that misinformation has become a challenge, as he has had clients coming in with ideas they got from ChatGPT or other tools, which he said can have outdated information. Chatbots might bring clients a rough approximation of an answer, but it may lack nuance, and so it is on professionals like him to explain the complexities. Still, it is better for clients to come in and have this talk than to simply accept the AI answer and not come in at all.

“That said, I don’t mind if a client comes in with their own idea. I haven’t personally encountered resistance when explaining why an AI-generated response might not fully address their needs. But AI’s growing presence in society means we’ll likely see more of this,” he said. 

Lari Masten, a valuation specialist who heads Masten Valuation, raised a similar point. She talked about a client who relied on an AI’s answer, much to his own detriment. She said it’s not so much that he didn’t want to call her at all, but it was the weekend and he was under intense time pressure, so he consulted a bot instead and went with its suggestion. 

“And then later in the week, I hear from him and he’s like, ‘yeah, by the way,’ and what he did was not what I would have ever recommended. And I said, ‘I wouldn’t necessarily have recommended that because here are the other things that you weren’t considering, right?’ and it was thankfully not something that was a costly thing for him, but he was just like, ‘My gosh, I didn’t think about that,'” she said. However, while she acknowledges that hers might be an unusual position, she doesn’t mind if people refer to AI on simple matters that are easily looked up online and save the complex stuff for her. She’s not eager to spend all day answering basic questions when she could be doing higher-value work. “I don’t have any issue at all, to be honest, with a client that has a question, but they can go ask chatGPT or whoever they’re using. Because if it’s something simple and they can get the answer, that’s great. Because that frees me up; I can do better work. I can do higher-level stuff. I mean, I don’t want to be answering things like, ‘What’s the maximum amount that I can get this year?’ Go look it up. That’s easy, so I’m fine with that because then that makes my conversations with clients more meaningful,” she said. 

(Read more: “AI in advisory: What work is at risk?“)

In both Masten and Nelson’s cases, they leveraged existing relationships to prove their value proposition as human professionals. Woodard said that this is ultimately what accountants will need to do if they want to remain the first opinion, because if their idea of advisory consists of just handing people an analytics report, there’s not much of a relationship to utilize, and AI will indeed start eating into their client base. This was always a good idea, but Woodard said that now it is essential. 

“AI will not disrupt advisory that is built on relationships, strategic insight, and deep business understanding. If your advisory work is truly advisory — guiding clients through long-term decision-making — it will endure. However, if your advisory service is transactional or just financial reporting with a cover sheet, that is highly disruptable. Our thought leadership has aligned around this: Advisory must take place in the context of a relationship. It must be strategic, rather than transactional. Up until now, that was a best practice; going forward, it will be a necessity for survival,” said Woodard.

State-based job creation tax credit programs typically provide a tax credit against the state’s income tax liability. That credit may be passed through to a shareholder level in many cases, though it will be reviewed on a case-by-case basis. In other states, credits are sold or brokered if the company cannot utilize the credit. Across the country, job creation tax credits may be refundable, providing excellent value to clients, especially during a new operation or expansion phase where the company may not have tax liability in that state. Each state and each program is different.

It’s important to know how tax credits for job creation are calculated. In states like Indiana, Colorado, Ohio, New York and Illinois, job creation tax credits are calculated based on an approved percentage of the total net new wages or wage withholding generated from qualifying jobs. These credit percentages can vary from 10% to 100% and, in many cases, are negotiable based on the quality of the project. High-quality projects create a high number of jobs, high wages, high skill sets and high amounts of investment. Depending on the program parameters, many companies are eligible for these programs with as few as 10 new employees.

Understanding that these programs typically only consider net new employees, a base period calculation notes the total employees before a specific date. After that certifying date, any net new hires and their associated wages or wage withholdings can generate value through the job creation program. Cyclical hiring and furlough practices, seasonal work, temporary employees or just a replacement of existing positions often do not qualify as “net new.” In addition, many states only qualify full-time (typically 32 to 35-plus hours per week), W-2, benefitted (the employer provides health benefits) and resident (working and living in the state offering the incentive) employee positions as qualifying employees. Part-time, contract or temporary employees do not qualify in most states. Evaluating each client’s hiring practices alongside growth projects is essential.

Some states do not have an income tax. Therefore, the job creation tax credits may be applied to a similar tax the state does have, be it franchise, excise, business operations, insurance liability, worker’s compensation, gross receipts or commercial activities taxes. Each state is different and allows for various tax applications. Clients should always consult their trusted tax professional for further insight on these types of credits and their impact on state, local (and federal) taxes.

Job tax credits as a refund

Providing a tax credit for growing companies is the most common way states offer a job creation incentive. States can control how much they provide in credits on an annual basis and are often capped by a legislated budget amount. Other states allow for a cash refund of the qualifying wages. States like Kentucky, Missouri, Arkansas and Kansas have options to claim a direct cash refund from the associated state tax department for qualifying positions. Like the tax credit valuation, the refund amount may vary from state to state, and there may be some negotiation on the percentage eligible per job created.

Often, the state’s economic development body will receive annual compliance reporting from a client and review the reporting to authorize a certified amount for the refund. Clients then must navigate the state’s tax department to receive the refunds. Many forms and deadlines meet the refund payment to flow back to the client in a timely manner. This timeline can vary from a couple of weeks to several months, depending on the volume and backlog of compliance reports and refund requests. Having a dedicated incentives specialist to follow up regularly with authorizing bodies can help with this timeline.

Cash refunds are usually attractive for clients, as getting a check back from the government is always nice, unlike having to write a check to the government. However, cash reimbursements can affect a company’s tax return on an annual basis. Clients should always discuss this impact with their CPA advisor to best determine how to plan for refunds or the impact of a refund on yearly tax returns.

Grant funding for job creation

Cash upfront? This is not typical; however, some states are able to issue grants or flat payment amounts upon receipt of all required documentation that notes net new job levels have been met, or investment thresholds have been achieved. Michigan, Pennsylvania, Texas, Georgia, North Carolina, Tennessee and Wisconsin have programs allowing for flat payments to projects to achieve pre-agreed thresholds. The key is many of these programs require job threshold commitments for an extended period, say five to 10 years in many circumstances. States want to know their “investment” in a project has a long-term impact. If a client drops below required thresholds, fails to follow through on reporting, or moves out of the state within the agreement term, these activities may trigger a clawback from the state for violating the agreement terms.

When you step back, job creation incentives are beneficial for growing companies. Depending on the program, these incentives can potentially create between $500 and $2,000 in value (credits or cash) per qualifying job per year. CPAs should consistently review client portfolios for credit and incentive opportunities. By identifying clients with plans to grow, CPAs can quickly align with a trusted credit and incentive expert to maximize the potential benefits for clients.

M&A is well known for its complexity, as it involves not just dollar and cent figures but also strategy, relationships, negotiations, judgment, and a thicket of laws and regulations that can sink any deal if ignored. Many of these aspects can involve artificial intelligence-based automation, like data collection, initial analysis, and document review, but guiding a client through a transaction from start to end remains a human endeavor for the foreseeable future. (See our feature story, “Staying ahead of AI.”)

Rebecca Brokmeier, principal and group head of KPMG’s corporate finance practice, said that the M&A advisory world has enthusiastically adopted AI, citing a recent study by the Big Four firm that found 96% of dealmakers reporting that they are either currently using or planning to use AI in their M&A processes, with 77% already using it and 19% planning to adopt it soon. This 77% usage rate represents a significant increase from 54% just 12 months earlier, reflecting the rapid integration and growing reliance on AI in the industry. This rise in AI use also extends to KPMG itself, which has invested considerable resources into bringing new AI and generative AI capabilities into its deal advisory practice, especially the firm’s proprietary data and analytics solutions. 

The firm’s AI investment is apparent at every stage of the deal lifecycle. Brokmeier said KPMG professionals are using AI for search and screen, where it can efficiently filter through market data to identify high-potential acquisition targets. Once a suitable target is identified, AI is also used in the due diligence and execution workflows through data-driven insights that enhance the client experience. Once the deal closes, she said, KPMG also uses AI to accelerate “the path to value,” as the process often requires a strong integration process and post-close transformation; artificial intelligence, in addition to supporting these processes, can also examine the client’s data and identify new opportunities for further performance improvements. Finally, KPMG has made it a point to give every professional access to generative AI tools and training, and this includes partners and professionals in the deal advisory practice, so they have access to all the standard tools every firm professional has. All these efforts, she said, have produced real returns both for KPMG and for their clients. 

“At KPMG, we believe that organizations must broaden how they define the business case for ROI and instead ‘define the value of investment’ in AI to adequately account for the transformative implications of AI. For now, many are turning to important metrics like productivity gains and revenue growth. We’re working with our clients to measure these outcomes, but we’re also helping them measure and narrate a more comprehensive story, integrating other outcomes such as quality improvements, accelerated product development and better customer experience,” she said. 

She described what KPMG calls an “and” strategy when it comes to AI tools, which emphasizes augmenting professionals doing the work with generative AI technology, which allows them to apply their human skills and experiences more effectively. As time goes on, she said, workforces will need to increasingly know how to innovate with and work alongside AI and bring high-value skills that complement it. By necessity, this means humans would need to always be part of the process. 

“Clients trust KPMG because of our commitment to quality, accuracy, and integrity; human oversight of AI-enabled delivery and responsible decision-making is required to maintain that trust. AI isn’t replacing the human touch. We build deep relationships with clients that allow us to bring strategic insights and ideas, make nuanced judgments and identify creative solutions fit for their business,” she said. 

(Read more: “AI in advisory: What work is at risk?“)

Consequently, Brokmeier is not overly concerned that AI will completely disrupt the world of M&A advisory, as there are still so many human factors that need to be considered, which requires emotional intelligence that, for now, machines do not possess. 

“We believe that people and companies effectively using AI are outperforming those that don’t, and that’s why we invest in our people. KPMG has long had a culture focused on continuous learning, and today, I believe that curiosity, adaptability, and a culture that allows people the freedom to fail fast and learn is more critical than ever. We’re investing in training our teams on how to use the AI tools available to them, re-skilling and up-skilling to future-proof the way we work, and also developing training on the emotional intelligence, creativity and ethical decision-making that must come from them. Every individual also has a responsibility to adopt the tools, experiment safely, and invest the time to learn new ways of working, or even reimagine their role with AI by their side,” she said.