Harnessing AI to Bolster Corporate Reporting Integrity

In a rapidly evolving business landscape, finance leaders worldwide are grappling with concerns over the integrity and reliability of crucial corporate reporting data. However, a glimmer of hope emerges as Artificial Intelligence (AI) emerges as a potential solution to these pressing challenges, according to the 2024 EY Global Corporate Reporting Survey.

Unlocking the Power of AI to Transform Corporate Reporting

Addressing the Integrity Crisis in Nonfinancial Data

The survey findings paint a concerning picture, with an overwhelming 96% of finance leaders expressing worries about the integrity and reliability of their organizations' nonfinancial data. This crisis of confidence extends beyond just data quality, as many respondents have reported issues with data formats (39%) and inconsistencies (35%). These concerns underscore the urgent need for finance leaders to address the fundamental flaws in their corporate reporting processes.Alarmingly, the survey reveals that half of the respondents are seriously concerned that organizations will miss vital sustainability targets in the coming years. This stark reality highlights the critical importance of ensuring the integrity and transparency of nonfinancial disclosures, as stakeholders increasingly demand accountability for environmental and social impact.

The Growing Importance of Nonfinancial Reporting

The survey findings also shed light on the intensifying focus on nonfinancial drivers of value, with more than two-thirds of finance leaders (69%) reporting that investors are asking more questions about these issues than they did two years ago. This shift in stakeholder priorities underscores the need for finance leaders to prioritize the development of robust and reliable nonfinancial reporting frameworks.Compounding these challenges, the survey reveals that more than half (55%) of respondents harbor fears that their organizations could be accused of greenwashing, further undermining the credibility of nonfinancial disclosures. This highlights the underlying doubts about the due diligence, data, and processes that support these critical sustainability-related communications.

Navigating the Regulatory Landscape

While investors remain hopeful that new reporting standards could help businesses improve their sustainability disclosures, with 78% of respondents believing that new regulations could have a positive impact, finance leaders express concerns about the potential costs and complexities of meeting these new requirements. More than half (55%) of finance leaders anticipate that the costs will be burdensome, and two-fifths (44%) believe that compliance will be highly complex.These findings underscore the need for finance leaders to proactively engage with regulatory bodies and industry stakeholders to shape the development of reporting standards that balance the need for transparency with the practical realities of implementation.

Harnessing the Potential of AI in Corporate Reporting

Amidst these challenges, there is a glimmer of hope in the form of AI technology. More than half of investors (57%) believe that AI could prove very useful in assessing the credibility and accuracy of financial and nonfinancial disclosures, while 52% think it could be used to analyze alternative data, and 51% believe it could help to identify discrepancies in company disclosures.However, finance leaders' enthusiasm for AI in corporate reporting is tempered by concerns. While 43% of respondents say they are enthusiastic about using AI, more than one-quarter (29%) are holding out until the risks of the technology are better understood. Additionally, 39% are apprehensive about the likely costs, and 36% are worried about ensuring compliance with the relevant rules and regulations.Despite these reservations, the potential of AI to transform data analytics and corporate reporting is undeniable. As Myles Corson, EY Global and Americas Strategy and Markets Leader, Financial Accounting Advisory Services, notes, "While no one can pretend there's an easy path ahead, there are certainly ways in which organizations can successfully navigate the challenges. Finance leaders who focus on creating sustained value and build confidence in reporting and harnessing technology to enrich data analytics can rest assured that they are heading in the right direction."