After a nearly two-hour discussion with one of my great teachers on a Sunday afternoon, I returned to my laptop with a substantial amount of homework, seemingly enough for an entire academic term. The reluctant student in me began to sift through the materials he suggested, the recommended books, and created a multi-gigabyte folder as instructed. The outcome of this effort led me to understand the prevailing perception among researchers: the advent of AI will significantly impact current accounting, auditing, and regulatory practices, enhancing the overall efficiency of the ecosystem. They believe that areas requiring professional judgment will remain within the realm of human professional intelligence. Furthermore, they foresee no significant disruptive impact requiring the profession to drastically adapt beyond upskilling.
I posed the question to Gemini, “Can AI and the latest technologies disrupt the accounting and auditing profession?” Interestingly, Gemini echoed a similar sentiment, stating, “AI and technology are transforming the accounting and auditing profession in many ways. By embracing these advancements, accountants and auditors can improve their efficiency, accuracy, and decision-making capabilities while also creating new opportunities for innovation and growth. However, it is important to address the challenges and considerations associated with the use of AI, such as data quality, ethical concerns, and the need for ongoing professional development. By doing so, the accounting and auditing profession can continue to evolve and thrive in the digital age.”
Regarding job displacement, Gemini suggested, “While AI can automate routine tasks, it is unlikely to completely replace human accountants and auditors. However, the nature of their roles may change, requiring them to develop new skills and adapt to new technologies.”
For the record, I completed my limited research before consulting Gemini. I suspect it draws from similar sources.
However, I strongly disagree with both Gemini and the prevailing perception. I have a detailed rationale to support my belief that current technological advancements can collectively disrupt accounting, auditing, accountability, and related regulatory areas. This disruption, I believe, could reach a magnitude exceeding 9.5 on the Richter scale. The subsequent evolution, after the stumbling, will lead to a new, constantly evolving ecosystem of intelligent accounting, auditing, accountability, and regulatory systems, where machines and Artificial Intelligence (or its newer versions) dominate. Present-day accountants and auditors might be termed as “accounting historians”. Those transitioning to technology on time will remain relevant and be redesignated as “Accounting Science” Engineers (I am not talking about accounting analytics, data science, integration, remote accounting, or data security – these are traditional).
Accounting and accountability will coexist within an electronically organic ecosystem, requiring continuous nurturing by these engineers. Auditing and Accounting regulations will be concurrent and on autopilot, managed predominantly by machines and supported by these technicians. Regulators will be required to build a solid data aggregation system to proactively and concurrently run intelligence over the data, manuring dynamic economies. The buzz around self and independent regulations will give way to “inherent regulation”.
The professional accounting and related bodies will be consolidated with technical institutions, and accountancy will become one of the subjects in accounting science education. The governments will be well-reasoned to change regulations that protect some of the outdated practices. Consequently, all branches and forms of accounting, governance and accountability will see consolidation and re-modelling of institutional setups.
Financial reporting and MIS will become spontaneous, “electronically organic”, and personalised for individual user needs. The concept of ‘primary users of financial statements’ will become irrelevant, and the financial information can meet the requirements of any user.
Accounting and auditing standard setters will be required to remould their competencies by adding skills around prompt engineering, deep learning, data mining and AI (or their newer versions). The standards will (need to) be predominantly logical, apart from textual. Auditing will be concurrent, uneditable, machine driven and supervised by a handful of Auditing Professionals, centralised for an “economic unit”.
The initial evolutionary phase will be characterized by Internal Process Reengineering and Accountability Mapping to the “Accounting Intelligence Neural Network”, to be developed by tech giants of the world and managed by Accounting Science Engineers. Present-day accounting by accountants and accounting applications, as we know it, will transform to alpha-numerical code-driven “smart bucketing” by the AI Engine.
Accounting, Financial Reporting and related domains will become fields emphasising technology and analytics and be more appealing to the newer generations who have grown up with digital advancements. The cry that youngsters are not choosing the accountancy profession will stop.
Accountability will become “Electronic Body Fluid” for organisations, capable of being tracked, traced, tested and tried by anyone authorised.
Moreover, the world will not require millions of Accounting Science Engineers. A few thousand of them (excluding developers) will suffice to manage the ecosystem after the advanced evolutionary stage, which I estimate will unfold and mature over the next fifteen years, provided the Accounting Profession does not artificially delay the inevitable changes. Traditional accounting expertise will be required only of a limited set of core accounting professionals, with adequate technological acumen, who hold key central positions at the “Accounting Technology Control Centres”.
Since I'm not a technology expert, there could be a more efficient or simpler way to achieve all the above and more, which I cannot foresee. Nevertheless, change is inevitable, and we can't avoid it. I observe the rapid advancements in AI, including multimodality, improvements in common sense reasoning and logical inference, NLP models with a deeper understanding of language nuances like intent, emotion, and context, greater autonomy, continual learning, explainable AI, and sustainable AI. Given this, I see no reason why accounting and auditing should resist these advancements. We don't need to wait for technologies like quantum computing, neurotechnology, or advanced robotics. Accounting and auditing aren't currently sophisticated enough to require them.
The basic design or the “Grand Design of Future Accounting” is simple to imagine, but maybe hard to digest. There could be other designs as well. At present, transactions are recorded, grouped into financial information, and the grouped financial information is presented to users. They then dissect, break it down using analytics and form insights. However, it is very much possible to embalm all transactions with the required information as per the accounting, financial and management information needs at the time of occurrence itself. Then record each transaction (or logical group) with all that information embedded. The final outcome will be an alphanumeric string of less than 256 characters, which will go into the respective buckets on autopilot. The rest of the story is what I explained above. It could be much more as well.
The driving force for these changes will be the millions of young people who are immersed in technology, dream of it, and live for it. They see disruptions as opportunities for improvement and a better quality of life; they embrace change rather than ignoring it. The focus of this revamped profession will be on 'TREE': Technology, Re-engineering, and Ethics."
Good or bad news for any, let me explain how all these, and more, are possible – the Big Bang moment for Accountancy.
Accounting
Brain
This AI-enabled
engine controls and manages all the accounting literature. When a transaction
is identified (through feeds to the Accounting Engine), the Intelligent Brain
analyses the transactions and puts them into the appropriate ledger codes to
record the transaction in the accounting language. This is made possible by
codifying the applicable accounting framework into machine-readable logic. The
AI engine is then trained on these logics so that any transactions can be
recognised, measured and recorded as per the framework. This involves initial
breaking down of the accounting framework into rules, equations, reasoning and
judgements. Each of these will be appropriately codified (using programming as
well as AI, as appropriate) into the accounting engine, so that it can address
all possible scenarios posed by a transaction feed. The transaction will first
be processed by a dedicated AI transaction processing module and then fed into
the core accounting engine for its analysis and placement at the appropriate
ledger codes. The final output will be an alphanumeric string of less than 256
characters, which will go into the respective buckets on autopilot.
Please feel free to discuss this, work on this and dream for this. Even thinking of it will be ecstatic.
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