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Professional obligations and due care
One of the fundamental principles in the Malaysian Institute of Accountants (MIA) By-Laws is to exercise professional or business judgement without being compromised by influence and reliance on individuals, organisations, technology or other factors. The Code of Ethics for Tax Agents released by the Inland Revenue Board of Malaysia (IRBM) requires tax agents to ensure their knowledge in taxation is updated according to the latest changes and developments in taxation law and regulations to provide the best advice to their clients. It is important that tax and legal professionals are equipped with the best solutions and tools to help their clients navigate the complex regulatory compliance and legal obligations.
Risks of relying on free or low-cost AI technology
Researching using AI solutions is part and parcel of the professional’s daily activities. Usage of AI tools, while mostly free, does not come risk-free. Professionals expose themselves to various business risks when relying on free or low-cost solutions, which may result in providing wrong advice or completing compliance tasks with inaccurate information. It is crucial that the research materials used as the basis when advising on or performing compliance activities are accurate, comprehensive and up to date.
Misleading content
AI tools have been found to provide misleading outputs that appear authentic. Known as “hallucinations”, these factual inaccuracies may be harmful to professionals by exposing them to financial and reputational risk. The Australian Tax Office has warned both taxpayers and tax advisers against relying on answers provided by AI. AI may even create fictitious court cases to support the client’s position. Lawyers in Victoria and NSW have been reprimanded for using AI technology that invented fictitious cases that they relied on in court proceedings. Similarly, a New York attorney relied on ChatGPT to conduct legal research. The chatbot not only made up the citations and quotes, but also stipulated that these were available in legal databases. In Malaysia, the Bar Council has expressed its reservations on the judiciary’s decision to introduce a sentencing guideline using AI technology to determine and recommend sentences applicable in the lower courts.
Data privacy and cybersecurity threats
AI can collect, process and analyse vast datasets that enable analytical insights and solutions. However, this also introduces significant data privacy and cybersecurity concerns as some AI solutions store data for an extended period so that they can continue to reference, analyse and compare as part of their machine learning capabilities.
Tax and legal professionals must seek their clients’ permission before disclosing any of their information to third parties, including AI tools. The information entered may seem vague and anonymous, but when combined with other data, the AI may be able to create a profile of the client and thus, potentially expose them. The exposure of sensitive information could lead to privacy violations and legal repercussions.
Free or low-cost AI solutions may also trigger data protection issues under the Personal Data Protection Act 2010. Maintaining clients’ confidentiality and trust is an integral part of a tax or legal professional’s code of ethics. The principle of confidentiality is so important that the MIA By-Laws have a dedicated subsection on confidentiality.
Output based on obsolete data
AI output depends on the quality of data used to produce the content. Free or low-cost AI solutions may use static data that result in unreliable output. Chatbots that solely have access to historical data may create problems for professionals who rely on the output. For example, a minor change in tax rate or threshold may lead to a significant impact on the client. Professionals may not be aware or understand that the wrong advice has been given. This would lead to incorrect advice or compliance tasks being incorrectly done. AI tools must be constantly provided with data that is up to date and checked for accuracy.
Delicate balance of costs and benefits
It is a game changer when professional practices invest in AI technology. However, it is a business decision that should not be taken lightly as it is a challenge balancing the costs and returns of the investment made.
While short-term cost savings may improve the bottom line, financials and reputation may be significantly impacted if it is found that incorrect advice was given or statutory requirements were not complied with.
The IRBM may impose penalties under s 113 of the Income Tax Act 1967 (ITA) for submission of incorrect returns by omitting or understating income, or under s 114 of the ITA for wilfully and with intent evading or assisting other persons to evade taxes. While the omission or under declaration may be unintentional due to the output from AI solutions, it does not take away the onus of accountability from the professionals. Professionals may be sued by their clients for breach of contract or negligence for incorrect advice, resulting in costly financial and reputational damages.
When accuracy matters, trust isn’t optional
Wolters Kluwer has a global division of expert engineers and developers dedicated to creating the best AI solution in the market for tax and legal professionals, complying with world-standard protocols around privacy and security. Your data and your clients’ information are safe with us. Extensive work has been done to reduce the risk of hallucination in AI-generated answers, reinforcing the trust factor.
Already in use in North America, our AI solution will soon be deployed across our award-winning CCH iKnowConnect research platform in the Asia Pacific. This AI tool will generate results you can rely on as they are sourced from the extensive content set curated and updated by the subject matter experts at Wolters Kluwer. AI-generated answers contain links back to our content set so that you can validate the results, apply the law to your clients’ circumstances and be confident in the advice you are giving. Our content set is updated daily by our experts, capturing the latest changes to ensure that you and your clients are always up to date. This is Authoritative AI, built on decades of editorial integrity and expertise, not just on algorithms.
Read more about our Authoritative AI.
[The author has used Microsoft Copilot to assist with research for this article. However, the article is the original work of the author.]
