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Kurt Fanning
Introduction
The last year has been a banner year for artificial
intelligence (AI), continuing this decade’s wave
of enthusiasm concerning the future of AI. The media
is ablaze with predictions of AI’s massive transformation
of the working place. While many of these media reports
try to s ensationalize AI with dire predictions of mass
joblessness or AI replacing the human race, the reality is
quite different. In fact, surveys of business leaders r eport
Kurt Fanning, PhD, CPA, CMA, CIA,
CISA, is a professor at Grand Valley
that AI may lead to more jobs in their companies, not
State University. Kurt has written less. Furthermore, AI is achieving a record integration
articles for publication in scholarly into software and other AI-driven technologies. People
journals such as International Journal have begun to see the impact of AI-powered applications
of Intelligent Systems in Accounting,
on their everyday digital lives. Through combining the
Finance and Management, CPA Journal,
AIS Educators Journal, Journal of best of human and AI abilities, we can look forward to
Corporate Accounting & Finance, New a more advanced future.
Review of Applied Expert Systems and Predictions of future economic value of AI exceed
Emerging Technologies, and Financial a trillion dollars. Among the many areas where AI is
Studies Journal. His primary teaching
and research interests are in artificial
proliferating are digital virtual assistants, driverless
intelligence, management fraud, and cars, medical diagnoses, and robotic data automation of
accounting information systems. financial transactions. Alexa, Siri, and other digital virtual
The next change occurred in the late When training a neural net, all of its
2000s, which was the beginning of the cur- weights and thresholds are initially set to
rent revival of interest in ANNs. The first random values. The data starts with b ottom
reason for this revival was that comput- layer and passes through the succeeding
ing power and storage capacity increased layers, until it ends at the output layer.
greatly over what was available in the While in ANN, the software manipulates
past. With this increase in computing the data with weights and thresholds by
power, ANNs could now run effectively continually adjusting them until the train-
and p roduce results in a timely manner. ing data consistently yield similar outputs.
The second reason for the current revival There are many types of ANN other than
was the improvements in ANN’s software back-propagation. Among these are simple
by researchers. These improvements help competitive networks, adaptive resonance
make ANNs more effective. For example, theory networks, Kohonen s elf-organizing
programmers created an ANN where the maps, adaptive logic networks, and Hopfield
first layer learns primitive features, and networks (Hardesty 2017). Each has some
then the next layer trains itself to recog- benefits especially in certain conditions.
nize features that are more complex. Then However, the biggest change from standard
the process repeats in successive layers back-propagation was the development of
until the system can reliably perform the self-training ANNs.
task that it is working on. This was a major
improvement over the beginning ANNs.
Neural Networks in Accounting
Several similar techniques also help to and Finance
make ANNs more effective. The third rea- With the probable increase in the a doption
son for this revival is the fact that ANNs of ANNs in the accounting profession,
could now train themselves. The extra there will be a greater need for accoun-
computing power available now has made tants with the ability to understand how
deep learning an important reason for the ANNs work. For auditors, ANNs will have
growing influence of ANN. Deep learning an impact on their looking for relationships
is the main reason for the current explo- among variables for detecting items such
sion in ANN research. as bankruptcy and fraud. Thanks to the
increase in computer power and the i mpact
How Neural Networks Work of deep learning, ANNs can now analyze
In the most popular ANN, back-propagation, entire
account populations for auditing
the program works by mapping out a set of purposes, such as looking for control risks.
virtual neurons and then assigning random The ability to work with large populations
numerical weights to connections between improves audit quality and reduces audit
them. These weights determine how each engagement risk. Tax individuals can use
simulated neuron responds with an output ANNs for fraud detection, worker classifi-
between 0 and 1. To each connection, a node cation, and other areas. Tax professionals
will assign a weight. When the network is are attempting to use ANNs to reengineer
active, the node receives a different num-
the internal revenue service (IRS) dis-
ber for each of its connections and multiplies criminate analysis used to select returns
it by the associated weight. It then adds the for audits. With deep learning, new uses
resulting products together, yielding a single for ANNs will be increasing in the coming
number. If that number is below a threshold few years. Therefore, it is highly likely that
value, the node passes no data to the next ANNs will be at the center of AI integration
layer. If the number exceeds the threshold in the accounting and finance profession.
value, the node sends the sum of the weighted Finally, the impact of ANNs on the
inputs along all its outgoing connections. workforce will be one where NNs will