Chapter 18: The Development of Artificial Intelligence and Early Warning Systems in Accounting: Efficiency and Challenges of Fourth Generation Models

Artificial intelligence (AI) is fundamentally reshaping accounting, particularly through advanced Early Warning Systems (EWS). The fourth generation of EWS leverages AI-driven machine learning (ML), Big Data, and automation to enhance the detection of financial risks and support decision-making. This chapter presents a comprehensive literature review of academic research, comparing AI-powered EWS with traditional models in terms of efficiency, accuracy, and regulatory compliance. Special attention is given to the ethical, legal, and practical challenges that accompany AI adoption, as well as global and Central-Eastern European (CEE) regulatory trends, and the empirical evidence supporting AI’s transformative role. The findings confirm that while AI-based EWS offer substantial improvements in predictive capabilities and operational efficiency, significant challenges remain in model transparency, data governance, and responsible implementation.