Technology: Risks and opportunities
Marie Gardner CA looks at ICAS research which considers the perceived threats and opportunities of technological advances on the profession.
Against the backdrop of the CA Agenda, our thought leadership series focussed on Technology, Trust and Talent, and our programme of research on Technology launched in August 2019, ICAS conducted nineteen interviews in early 2020. This project sought to gather the views of accountants on the challenges and opportunities presented by Technology on the Accountancy profession. Interviewees also offered insights into the larger societal impacts of technological advancement.
The majority of the interviewees were accountants from different sizes of firms and businesses, augmented by three non-accountant technology specialists, for balance.
Interestingly, some of the later interviews were carried out in the context of an increasing COVID-19 lockdown in the UK, when the discussions became underpinned by the need for technology to help provide business continuity.
It should be noted that the views from this research do not necessarily represent those of ICAS.
High profile examples of cyber-security incidents in recent years have shown that the damage can be significant not only in terms of operational disruption and actual cost, but also reputational harm for the businesses involved. It is no surprise therefore that cyber security, particularly in the context of increasing usage of cloud computing, was one of the top three concerns identified, irrespective of the type or size of firm or business.
The other two were:
- insufficient basic knowledge and awareness about technology across business owners and decision-makers; and
- the difficulty of keeping up with the pace of technological change.
When categorising the responses further into business types, the following key points emerged:
Significant investment is being made on technology and data analytics to enable the provision of technology services, internally and for clients, and the application of data analytics for audit. Against sometimes unrealistic stakeholders’ expectations, the latter appears to continue to be limited to very specific client data populations even in the largest of audits, given the wide variety of data formats in existence, and the varying compatibility with firms’ software packages or platforms. It is also becoming evident that a considerable competitive advantage is to be gained by firms thatcommoditise and digitise their advisory services, the spectre of data-driven third-party organisations from other sectors entering the market being a very real concern.
Technology is also a competitive field for smaller firms, allowing greater focus on value-added advisory services to clients. Making Tax Digital (MTD) has been instrumental in forcing clients to move to cloud-based technology (such as Xero), providing the opportunity for greater integration, automation and real-time client servicing. Many smaller clients, facing this new challenge, often turn to firms for support and advice, hereby requiring those firms to upskill staff accordingly. Small firms’ strategies often focus on the short to medium-term, and, whilst many are accommodating clients on a variety of software packages, a drive to increase efficiency seeks most of them to specialise on a smaller number of packages. New-start spin-off firms drive competition by keeping the cost-base low through using a very specific suite of software packages.
Speed of technological change, cyber-threats and the lack of basic technology knowledge and awareness are affecting all businesses, although these impact differently in each sector. Certainly, for technology-driven businesses, the lack of client knowledge and awareness and the need to keep up with the pace of change are particularly acute.
The research found that a strong belief is held that technological advances open up tremendous opportunities for the profession and society in general.
Although the timing and likely breadth of impact of the development of AI, Robotics and Blockchain remains unclear, considerable effort is being made on RPA (Robotic Process Automation), the benefits of which are positively correlated to the level of standardised processes in an organisation.
The initial fear of automation and software packages leading to clients undertaking their own accounting work have proved unfounded, and firms’ strategies are being developed to sometimes include the requirement for clients to hold their data in the cloud and to operate designated accounting software. This move to cloud accounting and automation enables a reduction in time spent on compliance matters to the benefit of judgement and value-add services.
As far as audit in particular is concerned, and as echoed in ICAS’ recent response to the FRC discussion paper ‘Technological resources: using technology to enhance audit quality’, the use of AI and other advanced technological tools has the capability of enhancing audit quality, beyond efficiency gains.
Prescient of the COVID-19 lockdown, interviewees also highlighted the ability for staff to increasingly work remotely, and to be able to access files at any time regardless of how geographically-dispersed they may be.
Issues to address
The concerns previously identified require addressing in order to meet future expectations and utilise the opportunities offered by the advancement of technology.
The issues to be addressed include:
- securing the appropriate technological skill-base, internally or outsourced;
- training staff to mitigate security threats, and to ensure proficiency in technology tools;
- establishing the right digital infrastructure to capitalise on the existing technology experience and expertise of specialist staff or consultants;
- keeping abreast of developments and selecting appropriate software solutions, hitting the right balance between riskier early adoption and ‘missing the boat’, and ensuring compatibilities of various packages;
- addressing how to best regulate technology – without stifling innovation – to act in the interest of customers, and in an ethical and transparent manner;
- establishing an organisational culture which embraces, operationally and intellectually, innovation and disruption.
Besides business and practice considerations, this ICAS project also shone the light on the societal impacts of technology. Consideration needs to be given to the establishment of adequate safeguards for technology to be a force for good, around areas such as:
- data privacy and protection;
- critical dependence on technology and the internet, particularly in the context of public services and utilities;
- personal behavioural issues, including shorter concentration span and impact of ‘always-connected’ and home-working on mental health;
- automation and human employment – for example, the risk of marginalisation of businesses and individuals being ‘left behind’ by technological advancement.
It is clear that the potential benefits and opportunities offered by the advancement of technology are plentiful and potentially very powerful. Harnessing those, within acceptable risk levels, will have the potential to deliver exponentially on the aspirations of the profession, and the needs and wants of stakeholders and the wider public. Ethics will continue to have a central role to play to ensure that technology does not dehumanise our work and that we continue to live up to the highest moral obligations that fall upon our profession. An appropriate balance of actions between members, firms, regulators and professional bodies to address this and ensure technology serves our ultimate purpose will need to be found.