How agentic AI is shaping the future of tax and audit
As artificial intelligence continues to rapidly evolve, a new concept is emerging that tax and accounting professionals need to be aware of: agentic AI. This type of AI advances from basic automation or content generation to developing systems capable of autonomously performing complex tasks and making decisions.
For tax and accounting firms, agentic AI has the potential to dramatically transform workflows, client services, and the nature of professional work itself. Here’s what you need to know about this game-changing technology.
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1. What is agentic AI?
Agentic AI refers to AI systems that have the capability to act independently to accomplish goals and tasks. Unlike traditional AI that follows pre-programmed rules, agentic AI represents a more advanced approach to artificial intelligence.
Agentic AI can:
- Autonomously plan and execute multi-step processes
- Access and utilize multiple data sources and tools
- Adapt its approach based on new information
- Make decisions within defined parameters
- Interact with other AI agents and systems
In essence, agentic AI combines the flexibility and language understanding of large language models with the precision of traditional programming and the ability to take concrete actions in the real world.
Modern agentic AI systems are often composed of multiple generative AI systems. This structure allows agentic AI to tackle more complex tasks by breaking them down into manageable steps. The result is a more scalable and versatile AI system capable of addressing increasingly challenging problems.
Recent developments in large language models (LLMs) have played a crucial role in the emergence of agentic AI. These advancements have paved the way for the creation of sophisticated AI personas that can engage in nuanced interactions with users.
2. How is agentic AI different from other AI?
To understand agentic AI, it’s helpful to compare it to other forms of AI.
Predictive AI
Predictive AI, which many firms already use, focuses on analyzing historical data to make forecasts and inform decisions. These tools excel at identifying patterns and trends, helping tax professionals anticipate future outcomes based on past performance. Predictive AI can:
- Analyze historical data to make forecasts
- Identify patterns and trends in financial information
- Estimate future tax liabilities based on past performance
- Assumes potential audit risk using historical data
Generative AI
Generative AI creates human-like content based on prompts. Tools like ChatGPT and Checkpoint Edge with CoCounsel fall into this category. In tax practice, GenAI can:
- Draft initial responses to client questions
- Create drafts of tax memos
- Generate explanation of complex tax concepts
- Produce content based on given prompts
- Assist in creating reports and documentation
Agentic AI
Agentic AI represents a significant leap forward in capabilities. Unlike its predecessors, agentic AI can:
- Autonomously plan and execute complex tasks: An AI agent could, for instance, not only identify a tax saving opportunity but also draft the necessary documentation and initiate the filing process.
- Access and integrate multiple data source: Agentic AI can pull information from various databases, tax codes, and real-time financial data to inform its actions.
- Adapt to new information: If tax laws change or new client information becomes available, agentic AI can adjust its approach accordingly without human intervention.
- Make decisions within defined parameters: While operating under human-set guidelines, it can make choices about the best course of action in complex tax scenarios.
- Interact with other systems: Agentic AI can communicate with other software tools, databases, or even other AI to accomplish its goals.
- Perform actions in the real world: Beyond just providing information or content, agentic AI can take concrete steps like submitting forms, updating records, or initiating transactions.
The key distinction is that while predictive AI informs decisions and generative AI creates content, agentic AI can independently carry out complex, multi-step tasks that previously required significant human involvement. This autonomy and capability to execute actions make agentic AI a potentially transformative force in tax practice.
3. How is agentic AI different from RPA?
Agentic AI and Robotic Process Automation (RPA) are both crucial in automation but serve different purposes due to their unique capabilities.
- Agentic AI: Autonomous and adaptable for complex problem solving: Agentic AI simulates human cognitive abilities, making it highly adaptive and autonomous. It uses advanced technologies to analyze data, recognize patterns, and make decisions based on real-time information. This makes it ideal for dynamic environments and complex problem-solving tasks.
- RPA: Streamlining repetitive tasks with rule-based automation: RPA excels in performing repetitive tasks by mimicking human interactions with digital systems following predefined rules. It executes tasks exactly as programmed, making it perfect for stable, repetitive processes where requirements remain constant.
The core distinction: Cognitive flexibility vs. rule-based efficiency
The fundamental difference between agentic AI and RPA lies in their adaptability and complexity.
Agentic AI systems are capable of learning and adapting to new scenarios and data, suited for tasks that require cognitive abilities and decision-making. RPA, however, is best utilized for tasks that are rule-based and repetitive, where high-speed, efficient automation of consistent processes is needed.
4. How could agentic AI impact tax and accounting professionals?
For tax and accounting professionals, agentic AI has the potential to automate and enhance a wide range of tasks and processes:
- Automated research and analysis: AI agents could autonomously research complex tax issues, analyze financial data, and prepare summary reports.
- Enhanced client interactions: Agentic AI could handle routine client communications, schedule meetings, and even conduct initial consultations.
- Streamlined compliance: AI agents could monitor regulatory changes, flag potential compliance issues, and even assist in preparing and filing tax returns.
- Audit assistance: Agentic AI could autonomously review financial records, identify anomalies, and prepare initial audit reports.
- Strategic planning: AI agents could analyze market trends, financial data, and tax implications to assist in long-term business and tax planning.
- Workflow optimization: Agentic AI could manage project timelines, allocate resources, and coordinate between team members and AI agents.
Will agentic AI replace tax professionals?
The short answer: no. As agentic AI takes over routine tasks, tax professionals will have more time to focus on providing strategic advice, building client relationships, and navigating complex ethical decisions.
After all, the integration of AI also brings new challenges that require human oversight. Ensuring AI operations align with ethical standards and regulatory requirements is a job that only humans can do. And personal connection remains crucial. Understanding client needs, managing expectations, and building trust are uniquely human skills that AI cannot replicate, regardless of its sophistication.
The integration of agentic AI in the tax industry opens up exciting possibilities for pioneering new service models. As AI handles routine tasks, tax professionals can explore innovative ways to add value, such as developing predictive tax strategies or creating customized financial ecosystems for clients. This shift may also spur the creation of new specializations, blending tax expertise with AI management.
The next chapter in tax and accounting technology
As agentic AI continues to evolve, it promises to revolutionize the tax and accounting landscape. This technology will likely introduce new efficiencies, enable more sophisticated analysis, and open up innovative approaches to complex tax issues.
To thrive in this AI-enhanced future, professionals will need to develop new skills, embracing continuous learning and adaptability. The ability to effectively collaborate with AI systems, interpret their outputs, and leverage their capabilities will become increasingly valuable.
Ready to dive deeper and strengthen your understanding of AI’s role in taxation? Download our white paper, AI and taxation: What professionals need to know.
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