Great article in Accounting Today by Daniel Hood (Editor) today about the accounting profession and its relationship to technology…
From Accounting Today:
Thomson Reuters’ Jon Baron … roughly a third of them (accountants) are dooming themselves to extinction by not embracing change and technological transformation.
In a keynote address to the 1,700 attendees of the company’s annual user conference, Synergy 2017, the managing director of the professional segment for Thomson Reuters’ Tax & Accounting business broke the profession down into three segments: “Roughly 30 to 35 percent of firms don’t want to change, and they’ll probably disappear. Then there’s the 60 to 65 percent that use technology to enhance existing practices, but not much more. And the rest—less than 10 percent—are aggressively transforming their firms and diving into technology, and they will thrive.”
The Accounting Today story also referenced the recent McKinsey Study which states that 86 percent of accounting tasks can be automated with current technology.
But Accountants Are the Top Occupation in Demand in the United States:
US Bureau of Statistics is saying that the accounting profession is expected to grow by 11% by 2024 — faster than any other profession in the USA with a 2016 median with a bachelor’s degree of $68,150.
What are some of the tech skills accountants of the future will need?
Data creation, data governance, data analytics and Big Data according to the Accounting Today article.
As the Accounting Today article mentioned: “The size of the data universe will double every two years, with fifty-fold growth from 2010-2020,” he said. “We’re going to get into unstructured data in the accounting profession—we’re going to see ‘fast data’ that is immediately available and actionable that accountants can supply clients. We’re a data-driven world, and the profession is in a great position for that. We understand data and analysis.”
Similarly, he highlighted the enormous potential for change represented by blockchain, a technology that Thomson Reuters is deeply engaged with. “Don’t think of blockchain as bitcoin—it’s much, much more than that. For instance, creating pools of instantly verifiable data can transform assurance functions. “We may not need audits if we can access automatically validated information,” Baron said. “The Big Four firms are hiring fewer accounting grads—we won’t need these armies of auditors.”
Assurance Services on Data Elements Reported by Accountants:
Question: Can the accounting profession make the move into digital assurance services verifying that data linked to accounting rules like US GAAP and IFRS which companies have submitted to their regulator?
Sixty percent of financial statement data is already being consumed electronically, and this figure will continue to grow, according to International Accounting Standards Board Chairman, Hans Hoogervorst. BUT the SPECIFIC data elements reported and consumed by the capital markets is not ASSURED by the auditor or the management accountant reporting this information to the CFO – the FULL paper report is ASSURED but not the specific DATA ELEMENT reported in the financial statement.
The accounting profession has not made the jump from paper to electronic reporting by assuring specific data elements in financial reports for example submitted to the regulator even though more than 60% of financial statement data is consumed electronically…
Right now these assurance services are provided in the full audit for the public company BUT not the specific data elements submitted to the US SEC. According to conversations I have had with the US SEC ... the accounting profession will need to create guidelines and protocol to offer digital reporting assurance on specific data tagged elements in the financial report. We will need to start now as we move into the future of digital reporting and assurance of data that will be required by the management accountant...
The European Securities & Markets Authority (ESMA) has mandated that approximately 14,500 public companies must use Inline XBRL and tag their primary financial statements by 2020 and submit them in Inline XBRL. Alain Deckers, with the EU Commission said the EU Commission will mandate assurance on XBRL data reported by companies because these specific data elements can be extracted and used by the capital markets for other reports.
More than 75% of the world’s capital markets are using XBRL (more than 100 regulators in 70 countries have mandated XBRL for regulatory reporting) but assurance has NOT been provided on the individual data elements contained in the disclosure filings…
Providing assurances on XBRL data available to the capital markets can significantly enhance investor confidence of disclosed data consumed by investors.
Stephanie Farewell, Ph.D and Robert Pinsker, Ph.D published a study in the IMA’s Management Accounting Quarterly in the Spring of 2015 entitled: “Does Assurance on XBRL Derived Financial Statements Impact the Decisions of Nonprofessional Investors?” The high level answer: “Overall, we find that there is a significant relationship between the type of assurance and the likelihood of investing.”
The US SEC is taking major steps to make both financial and footnote information available to the public/investors via the US EDGAR SYSTEM. The US SEC has created a new database that allows the public to extract information from the footnotes -- far more valuable that the financial data extracted from financial statements and new private sector apps are being developed to utilize this treasure-chest of detailed data helping investors make better decisions.
New areas of data assurance besides a company's financial information:
Mortgage-Backed Securities Marketplace
What about other data elements that can be tagged and assured used in the capital markets or banking communities – what about mortgage backed securities where transparency is really needed?
The $3.8 Trillion Municipal Bond Marketplace
What if the data hosted by the Municipal Securities Rule Making Board (the principal regulator of the $3.8 trillion municipal securities market) on the Electronic Municipal Market Access Website EMMA SYSTEM could be in a machine-readable format like XBRL and also have XBRL data assurance to protect both taxpayers and investors? Right now reporting is done in paper posted on PDFs that are not discoverable for data analytics – meaning not ACCOUNTABLE OR TRANSPARENT. Efforts are underway – but the “political will” to provide this transparency in the municipal; bond market does not exist. Here is a great article about the need for better transparency and accountability utilizing open, freely-available technologies to assist in this marketplace.
Distributed Ledgers, Blockchain, XBRL Data and New Assurance Services
What about distributed ledgers? Distributed ledger (also called a shared ledger, or referred to as Distributed Ledger Technology) is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions. One form of distributed ledger design is the blockchain system which can be wither public or private.
The integration of blockchain and XBRL provides a seamless data solution, with blockchain as a potential output from XBRL based reporting. Blockchain’s smart contracts might be facilitated by XBRL’s powerful, persistent data model. XBRL data elements will be contained within distributed ledgers and can be tagged and assurance services could be provided on these data elements.
XBRL US has formed a Blockchain Working Group. The goal of the working group is to establish a standardized method to represent a token across all blockchain networks in order to eliminate transactional friction and reduce processing costs; enable automation and provenance tracking; and allow interoperability of transactions on a global scale.
Non-Financial Information Disclosure
What about non-financial information that securities regulators are mandating such as sustainability information or human capital? Can accountants move into this space and offer assurance services.
All new areas of business opportunity for the management accountant.
Technology innovations are driving new exciting career opportunities into this space and the good news is that the public want and trust accountants moving into these areas.
Stay tuned – the IMA Technology Solutions & Practices Committee is following these issues. Join the community as an IMA member. Learn more about the technologies coming down the pipeline that will impact the management accountant like digital assurance services.
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