Rise of the Accounting Machines

April 18, 2019
Blockchain and AI: The Changing Face of the Profession

By Damien B.M. English

The news is rife with versions of artificial intelligence (AI), new algorithms and constantly evolving technology claiming to change the face of how we conduct our day-to-day work. And accounting is no different. The idea of AI taking over certain roles in the accounting world is not a new one, and technologies like Blockchain are trying to reinvent practices that have been around for years. However, are they succeeding? And when is the right time to consider these technologies in your own firms? 

Taking the Leap
Some firms have already started integrating Blockchain into the fold of their business. Armanino LLP recently announced the launch of its Blockchain practice

“Blockchain technology and crypto assets have the potential to become a high-impact innovation that brings value and security to businesses, and with a growing number of our clients currently in the space, it made sense to assemble a team well-versed in this new technology,” says Andries Verschelden, partner at Armanino and Blockchain practice leader. 

Ernst & Young LLP also recently announced the launch of the EY Crypto-Asset Accounting and Tax (CAAT) tool as part of its strategy to lead the industry with blockchain-related capabilities and services worldwide. 

“EY professionals and clients alike are eager to leverage this technology,” says Michael Meisler, partner and EY Global Blockchain Tax leader. “EY CAAT is the hallmark of our efforts in crypto-assets and Blockchain from a Tax perspective globally, and we will continue to work hard to make it the product of choice for EY clients.” 

These are bold steps forward in a brave new world, but as with any new technology, there are things to be wary of before jumping in. 

“First and foremost, firms should avoid jumping on the Blockchain train right away until they understand what Blockchain is and how it is—or will be—used in accounting and finance roles,” says Brad J. Monterio, managing director at Colcomgroup, Inc. “There’s always a tendency when a shiny new technology toy comes onto the market that we all follow the ‘me too’ approach.” 

For example, after Blockchain popped up on Gartner’s Hype Cycle, “it became a self-fulfilling prophecy that it was bound to be over-hyped. Over-hype led to rash decisions and eagerness to join Blockchain consortia, implement Blockchain projects and more,” Monterio says. 

“Today I often hear about organizations getting burned from pouring resources into Blockchain with the hopes that it would be the magic pill for trustworthy, incorruptible digital information, only to find out they were too early to the game, not focused on the right outcomes or just off base on what it could do.” Keeping the above in mind, it might be advisable to take a “look before you leap” approach to Blockchain. 

“Blockchain technology has the potential to evolve our profession more quickly into the future of accounting. As a managing partner, and someone who is passionate about innovation and technology, I’m watching closely how it can automate compliance processes and create efficiencies,” says Tom Barry of Green Hasson Janks. “Our client experience does not yet demand we convert to a Blockchain system, but we’re gearing up in advance to keep pace with the security and risk issues that can be managed with next-stage technology platforms. The more we can automate compliance tasks, the more it allows us to instead focus on challenging problems our clients need help solving. In the future, Blockchain technology has the potential to shift the way we all do business.”

One reason for this wait-and-see approach is quite simply what you’d expect related to something new: the kinks need to be ironed out before it can be integrated into the profession with enough saturation to be effective. 

“Blockchain has the potential to offer several benefits, including nonrepudiation of transaction data, cost savings through disintermediation and a verifiable chain of custody,” says Harsh Jadhav, CPA, CISA, CITP, CISM, CRISC, CFE and chief audit executive at the Alameda County Employees Retirement Association. “However other concerns, such as end-user security, the recoverability of lost keys and the inability to correct or undo a transaction, makes it difficult to fully commercialize this technology.”

Blake Oliver, senior product marketing manager at FloQast, thinks it’ll take some time before Blockchain makes any kind of big splash in accounting.

“Blockchain is nifty, but I don’t see it revolutionizing accounting any time soon. Lots of people are talking about how Blockchain will automate the audit, but if you ask me, it just creates more to audit: the Blockchain technology itself. And most audit firms lack the expertise to do that. 

“There’s also the fact that a substantial amount of transactions have to be on the Blockchain to gain any efficiencies. And now you’ve also got to worry about reconciling something that’s not quite a currency and not quite an asset. It’s super confusing from a guidance standpoint. If anything, Blockchain will just create more work in the short term.”

Time will tell if these concerns will be addressed and, until then, keeping you and your firms educated before considering adoption may be the best bet for now.

“Get educated and trained on what Blockchain is, how it can be used for accounting and finance data streams,” advises Monterio. “Deloitte recently declared that Blockchain would fully automate the audit in the next couple of years. That may be true, and firms will need to understand how that will be possible. They also can look to software providers and other technology solution providers to see how they are embedding Blockchain capabilities into various accounting technologies.”

AI, on the other hand, is a bigger fish to fry, and may be a bit farther off in the future—but on the horizon nonetheless.

Do Androids Dream of Electric Profit & Loss Statements?
“We’re not doing anything with Blockchain right now; all of our energy is focused on AI because that’s where we see the greatest potential to transform the accounting profession in the near term,” says Oliver, whose firm is leveraging AI to automate what he dubs “the most tedious part of accounting:” reconciliations.

“One of our accountant beta testers was able to automate 97 percent of his deferred revenue account reconciliation using our solution,” says Oliver. “That’s a task that previously took him a solid day or two each month. Now it takes him about 10 minutes.”

Sound appealing? Frightening? For some, it can be hard to comprehend a literal robot taking over a job that was typically done by a human, but the writing is on the wall. And with AI, that’s merely scratching the surface.

“Artificial intelligence is such a broad topic and can mean slightly different things to different people. I truly believe there are endless possibilities in how the profession can innovate around AI and leverage advanced analytics (e.g., prescriptive analytics, data science, data visualizations and cognitive machine learning) to understand their businesses in ways they never could before,” says Monterio. 

“AI will help accountants find correlations and patterns in their data that legacy solutions couldn’t have identified previously. New insights into their data will hopefully lead to new and better business strategy. AI is already transforming the profession—I would even say disrupting it—with advancements like RPA and automating lower level decision-making, transaction processing, fraud detection and so much more.”

Jadhav, a member of the CalCPA Technology Committee, sees a couple of areas where AI will impact accounting.

“First, CPAs will now need to include—as part of their risk assessment—how clients are implementing AI solutions to optimize their business processes and improve decision making. Second, for accounting students to be better equipped to understand how AI, cloud computing and cybersecurity are impacting business, I would expect to see more colleges offering technology-based courses to supplement their accounting curriculum.”

Again, the signs say AI is still on the horizon, but it’s something that you and your firms need to be aware of and consider as you look to establishing your business firmly in the future.

“The profession needs to embrace AI, not be scared of it,” says Monterio. “Those who worry it will replace them are already somewhat out of the picture anyway. Accountants have to evolve into more strategic roles and use the insight from their AI tools and ‘cobots’ (robot co-workers) to make judgment calls about their business strategy, not bury their heads in the sand or think someone else will take care of it.”
Damien English is CalCPA’s managing editor.

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