AI Can Draft a Technical Accounting Memo. It Cannot Replace Professional Judgment.

Artificial intelligence is rapidly changing the way finance and accounting professionals perform research, analyze contracts, and prepare technical accounting documentation. Today, emerging AI tools can search accounting guidance, summarize literature, identify potentially relevant accounting models, and even generate first drafts of technical accounting memoranda in a matter of minutes.

For many organizations, this capability is compelling. Technical accounting memos often require substantial time and resources to assemble, particularly when addressing complex areas such as revenue recognition, business combinations, lease accounting, debt and equity classification, variable interest entities, or SEC reporting matters. The ability to accelerate research and draft preparation creates an obvious opportunity for finance teams seeking greater efficiency.

However, as adoption increases, companies are discovering an important reality:

While AI can dramatically accelerate memo preparation, it cannot replace the professional judgment, analytical rigor, and quality review required to support an accounting conclusion.

The most effective organizations are not asking whether AI can replace technical accountants. Instead, they are determining how to combine AI with professional experience from human specialists to boost efficiency and produce higher-quality accounting analyses.

The Promise of AI in Technical Accounting

The benefits of AI are real.

Modern AI platforms can rapidly:

• Review contracts and agreements
• Summarize accounting guidance
• Compare interpretive positions across accounting firms
• Identify potentially relevant ASC topics
• Draft technical accounting memoranda
• Generate preliminary disclosure language
• Organize supporting documentation

Activities that once required days of research can often be completed in hours. For routine analyses and initial research efforts, AI can significantly improve efficiency and enable finance teams to spend less time searching for information and more time evaluating it.

In many ways, AI platforms are becoming the next generation of technical accounting research tools.

However, generating a memo is not the same as reaching a supportable accounting conclusion.

Where AI Falls Short

Technical accounting is fundamentally a discipline of judgment.

Accounting conclusions often depend on subtle facts, business purpose, legal structure, transaction economics, industry-specific considerations, and regulatory expectations. Even when the underlying guidance is clear, applying that guidance frequently requires experienced professionals to evaluate alternatives, challenge assumptions, and determine which facts are most relevant.

Several challenges emerge when AI-generated memoranda are used without appropriate human oversight.

Incomplete Fact Patterns

AI generally evaluates only the information presented to it.

An experienced technical accountant, by contrast, often spends a significant portion of an engagement identifying facts that are missing.

Questions such as:

• Is there a side agreement?
• Are there substantive participating rights?
• Does management have unilateral decision-making authority?
• Could a modification change the accounting outcome?
• Is there evidence of intent that conflicts with legal form?

All of these factors can materially impact the accounting conclusion.

If critical facts are omitted from the original prompt or source materials, even the most sophisticated AI tool may arrive at an incomplete or incorrect conclusion.

Additionally, AI lacks the ability to interpret an individual accounting firm’s policies on a particular topic or piece of literature that specialists often reference to support the basis of their conclusions.

Lack of Professional Skepticism

A high-quality technical accounting memo should not simply explain a conclusion.

It should also address alternative views, contradictory evidence, potential counterarguments, and areas of uncertainty.

Auditors routinely challenge accounting positions by asking:

• What alternatives were considered?
• Why was this accounting model selected over competing models?
• What evidence supports management’s conclusion?
• What assumptions drive the analysis?

AI may generate a convincing narrative, but it does not naturally exercise professional skepticism in the same way that experienced practitioners do.

Audit Defensibility

Perhaps the most significant limitation is audit readiness.

External auditors are not evaluating whether a memo sounds professional. They are evaluating whether the analysis is complete, supported, and capable of withstanding scrutiny.

A well-supported technical accounting memo typically requires:

• Detailed fact gathering
• Evaluation of alternative accounting treatments
• Assessment of significant judgments
• Consideration of interpretive guidance
• References to supporting evidence
• Documentation of management’s rationale

These elements frequently distinguish a draft memo from an auditor-ready memo.

Illustrative Case Study: From AI Draft to Auditor-Ready Analysis

This study focuses on a technology company evaluating the accounting treatment for a complex financing arrangement that included multiple equity-linked instruments.

The company’s finance team leveraged an AI tool to generate a technical accounting memo. The draft included summaries of relevant accounting guidance, cited applicable accounting standards, and presented an initial conclusion regarding classification.

At first glance, the memo appeared comprehensive.

However, during auditor review, several concerns emerged:

• Certain contractual provisions were not evaluated.
• Alternative accounting models had not been fully assessed.
• The memo lacked discussion of relevant judgment areas.
• Supporting evidence for key assumptions was limited.
• Auditor-focused documentation of the conclusion was incomplete.

The company subsequently engaged technical accounting specialists to perform a quality review.

The review did not require rebuilding the memo from scratch. Instead, the focus was on “topping off” the analysis:

• Verifying the completeness of the fact pattern
• Testing the appropriateness of the accounting model
• Evaluating alternative conclusions
• Expanding critical judgment discussions
• Strengthening supporting documentation
• Enhancing audit-defensible rationale

The result was a significantly more robust memorandum that incorporated both the efficiency of AI-generated drafting and the rigor of experienced technical accounting review.

The lesson was clear:

AI produced the first draft. Professional expertise transformed it into an auditor-ready deliverable.

The Emerging Model: AI Plus Expert Overlay

As AI adoption continues to accelerate, we believe the future state of technical accounting will not be fully automated analysis.

Instead, it will be a hybrid model.

AI will increasingly handle:

• Research acceleration
• Initial contract analysis
• Literature summaries
• First-draft memo generation

Experienced professionals will continue to provide:

• Judgment
• Interpretation
• Quality review
• Alternative view analysis
• Auditor engagement support
• Final conclusion validation

This expert overlay is where the greatest value often resides.

How Centri Can Help

Centri can assist organizations that have already leveraged AI to prepare technical accounting analyses by providing an independent quality control review and enhancement process.

Our professionals can:

• Review AI-generated technical accounting memoranda
• Validate relevant accounting literature and guidance
• Identify omitted facts or considerations
• Assess alternative accounting conclusions
• Evaluate consistency with current market practice
• Strengthen support for management judgments
• Incorporate SEC reporting and disclosure considerations
• Enhance audit-defensible documentation
• Prepare memoranda for auditor review and regulatory scrutiny
• In many cases, companies do not need a memo rewritten from scratch. Instead, they need experienced professionals to review, challenge, validate, and strengthen the analysis before it is presented to auditors.

Final Thoughts

AI is undoubtedly changing the technical accounting profession. It is helping organizations research faster, draft quicker, and process information more efficiently than ever before.

Yet, final conclusions on accounting analysis remain a matter of professional judgement.

The companies that realize the greatest benefit from AI will not be those that attempt to eliminate experts from the process. They will be those that leverage AI to eliminate administrative effort while empowering experienced professionals to focus on what matters most: critical thinking, technical judgment, and audit-defensible conclusions.

AI can draft a technical accounting memo. It cannot replicate professional judgment.

And in technical accounting, judgment remains the most valuable part of the analysis.