The CA's guide to technology
Gill Booles takes a look at some new and emerging technologies CAs need to have on their radar.
A recent report by global technology firm Atherton Research estimates that by 2020 accounting, tax, payroll, auditing and banking tasks will be fully automated using artificial intelligence-powered technologies. AI is in its early stages in the accountancy sector; however, as a new accounting tool, it will disrupt the accountancy industry in ways not seen since the creation of double-entry bookkeeping.
Forward-thinking professionals are choosing to embrace AI and harness the upside of other emerging technologies such as blockchain, data analytics, cloud computing and cyber security.
Technology is one of the three key issues highlighted in the CA Agenda – the new thought leadership and insight series from ICAS – which also incorporates Trust and Talent. Whether it’s the far-reaching consequences of technological advances in the forms of automation, AI, blockchain and robotics, or the roles that each of us can play in rebuilding trust, all CAs can help make this vision a reality.
“New technologies such as data analytics, robotic process automation and AI will help to automate a lot of knowledge gathering and repetitive tasks, freeing up our people to focus on higher-value strategic work and providing more fulfilling responsibilities,” said Hywel Ball, EY’s UK Managing Partner of Assurance and UK Head of Audit.
“These developments will, in turn, create opportunities to develop new roles and positions in the future.”
He added: “Machines are augmenting what we do. The ability to sift and sort through vast quantities of unstructured data allows us to look at a much broader range of information, such as social media. Significantly it’s providing new insights into areas that were once thought to be impossible to measure, like culture.”
Apart from AI, the other big opportunity for accounting firms is blockchain technology. Best known as the technology underpinning Bitcoin, blockchain is now being tested in a range of business and financial applications. In February, JP Morgan launched the JPM Coin, a cryptocurrency that customers can use for transactions over their banking network.
The appeal of blockchain technology lies in its use of peer-to-peer network technology combined with cryptography.
Once data enters the system, a vast decentralised network, it cannot be removed or edited, creating the potential to provide a transparent record of financial information. In theory, all business processes from recording the transaction, invoicing the customer through to processing payment, could be put through a multifunctional ledger using a blockchain system, with accurate results via a real-time dashboard.
According to Blockchain Technology and Its Potential Impact on the Audit and Assurance Profession, a report by the Chartered Professional Accountants Canada (CPA Canada) and the American Institute of CPAs (AICPA) “by giving auditors access to unalterable audit evidence, the pace of financial reporting and auditing could be improved. While the audit process may become more continuous, auditors will still have to apply professional judgement when analysing accounting estimates and other judgements made by management in the preparation of financial statements.”
In order for our profession to thrive, we need to understand what’s happening with all this new technology and start repositioning ourselves as advisers to business.
Hugh Shields CA, thought leader for ICAS in technology and artificial intelligence, said: “We’re moving towards real (or quick) time which is much faster than traditional accounting cycles. If you look at data aggregators like Bloomberg, they gather all the data points. A combination of blockchain technology, big data and AI then makes it possible to figure out the performance of a company very quickly.”
In the past, the only window into the results of a company was often the audited annual financial statement; now information is being shared in many ways.
“One thing investors value about an annual report is that it assures that an audit has been performed on all the numbers,” Hugh added. “The accountancy profession needs to move into the space of unassured data. Why? Because of fake news. If I say I value the company at X amount, how can anyone verify my claim? Assurance is valuable to investors.”
His comments echo the views in Audit and Assurance in the Future, a report of the 2017 symposium by ICAS and CPA Canada, that investors are increasingly exposed to different sources of unaudited information, which they are using to make their investment decisions. Investors are rightly concerned about the lack of transparency, comparability within industries and consistency in their reporting of these measures. Perhaps most importantly, they are not clear on what is assured or even what assurance means or should mean in this new era.
By 2020 regulators may be able to pull data in from assured and unassured sources, and audits could be conducted automatically in real time.
Are accounting standards still relevant as we move towards having a real-time picture of all data and complete transparency?
Hywel Ball believes technology is already having a big impact on the accountancy profession, and the pace of change will only continue to increase. “The challenge for regulation will be to keep up with these developments. We are expecting Sir Donald Brydon’s Review into the scope and purpose of audit to look at some of these issues, particularly in terms of how the profession and the audit product respond to the opportunities and challenges of new technology.”
Fraser Wilson CA, Assurance Transformation Leader at PwC Scotland, pointed out: “Traditional accountancy is not all about the accounting standards, it’s about broader business acumen and understanding of the environment, so it’s not an option to ignore the trend of data, cloud computing, robotics and process automation… that’s why at PwC we’re investing in upskilling everyone.”
Large accounting firms are busy securing their talent pipeline, to add more technology skills to their teams. PwC is working with a number of universities, funding degree programmes and providing placements for students: “We have significant-sized teams working with data, and the rest of us are being challenged with: ‘Can you interrogate the data? Do you understand it?’”
Firms that don’t understand how their clients are using data will be quickly left behind, warned Neil Carden, Managing Director of Merkle Aquila. The Edinburgh-based data and technology agency works with Tesco Bank and the Royal Bank of Scotland to develop analytical and data-driven strategies.
“Over the last few years, we’ve started to see increasing interest from professional services firms (particularly lawyers and accountants) in data science and data engineering. The advent of cloud computing has drastically lowered the barriers to entry and made it possible for ‘citizen data scientists’ to analyse massive volumes of unstructured data (mostly with a bit of support from experts like ourselves).”
At the moment, the focus is on applying machine learning and AI techniques to solve one particular issue e.g. predictive forecasting, scenario planning and optimisation, rather than general capabilities.
The dominance of big data will require accountants to develop a new skill set, to be able to work alongside data scientists and communicate business information to those designing the AI-powered solutions to business problems.
We are at the point where if you want to harness the power of automated technology you must be able to figure out what the algorithm is doing. There’s a lot that can go wrong with the use of large-scale opaque mathematical models, as outlined in Weapons of Math Destruction, a book about the societal impact of algorithms, written by Cathy O’Neil. The Harvard PhD and data scientist has asserted that in a variety of fields – from insurance to advertising – big data and algorithms can lead to decisions that harm the poor, reinforcing racism and amplifying inequality. The main message is that we all need to be able to understand what’s inside the black box.
More and more small firms are taking advantage of the cloud, leveraging technology to free up more time for advising and supporting clients. Rod Petrie CA and Brodie Petrie CA of Sense Accounting & Bookkeeping started off in a spare room and scaled up as the practice grew. Both previously worked for KPMG and recognise, as Rod Petrie put it, that “a firm our size won’t be able to invest in AI tools of our own, so we leverage what’s out there in the marketplace. We’ve structured our business around tools such as Receipt Bank, which is better than a shoebox full of receipts, and Xero, which seamlessly integrates with more than 700 apps. By using a cloud-based platform, we can provide as close to real-time accounting data as possible.”
Rod and Brodie have made the successful transition to adviser: “The market is still dominated by traditional firms concentrating on the compliance and regulatory role,” said Rod. “These are absolutely necessary. Where we try and differentiate ourselves is how we use technology to spend more time with clients who are looking for reassurance, and expert advice on wider business issues. Their big concerns come down to the same fundamentals; what’s the most tax-efficient way to take money out of the business.”
In an ever-changing landscape, with increasing competition from disrupters such as Sense Accounting & Bookkeeping, there are huge opportunities, but the risks need to be managed.
Cloud computing is the norm now. Everything is going on to the cloud, and everything is at risk of being hacked. So what steps can firms take to best protect themselves?
Bruce Schneier, a fellow at Harvard, and Chief Technology Officer of IBM Resilient, the company’s incident response unit, argues the need for governments to do more to protect the public from cyberhacking and to fix vulnerabilities in the Internet of Things. Bruce’s book on cyber security, Click Here to Kill Everybody, should be required reading for policymakers. It’s not a bad place to start to understand the risk of connecting to the cloud, and for making better decisions when faced with the question: “What are we doing about cyber security?”
Clients expect advisers to be familiar with a range of platforms and packages. They also want their accountant to have a good understanding of data analytics and the technology disrupting the profession. ICAS’ training partner BPP Professional Development runs a one-day course, “The Digital Revolution: What Finance Professionals Need To Know”, which covers FinTech, blockchain, cryptocurrencies such as Bitcoin, AI, big data, cyber security and the Internet of Things.
Embrace the change
It’s hard to say exactly what impact emerging technology will have on a process and systems-based industry such as the accountancy profession. But firms and accountants need to start preparing.
Fraser Wilson said: “A number of years ago we had IT teams; today everyone has to understand technology. We are moving to a position where, agnostic of your educational background and professional qualifications, you need to understand technology to be able to operate in the business environment. You need to get on board with what is changing, to refresh your skills and experiences, and be prepared to adapt and evolve.”
Hugh Shields agreed: “In order for our profession to thrive, we need to understand what’s happening with all this new technology and start repositioning ourselves as advisers to business. Either accountants are the drivers of change, or we will be watching it happen.”
Dr Daniel Susskind explores the impact of technology, particularly artificial intelligence, on work and society. He is a Fellow in Economics at Balliol College, University of Oxford, has co-written a book, The Future of the Profession, and was a keynote speaker at the ICAS Conference in 2017. He argues: “In the long run, we’ll find new and better ways of solving problems which traditionally only professionals would solve. This will lead to the dismantling of those traditional professions.”
He admits that there has been a “great deal of resistance” towards the predictions that are made in his book. However, there is one group of professionals who have been particularly receptive to his vision of the future, he says: “Some of the most open-minded institutions, of people that we’ve spoken to, are the accounting associations, who very much see themselves having a role in this transformation.”
The accounting profession understands the “need to help educate and prepare professionals for this new future”, something that Daniel hopes more professions will realise.