Question

Based on the article and additional research, discuss in detail in a real life scenario how AI and Blockchain can be used to advance the work of an accountant or an accounting function within an organisation.

Answer 1

Artificial Intelligence is the learning power of machine from its own experience i.e. data feed and the decision taken by it in the past. It is not a new concept but gains momentum for the last couple of decades due to the availability of the resources/technological advancement in the other fields of technology e.g. exponential increases in computing power.

Blockchain technology was conceived and initiated by Nakamoto Satoshi in 2008. Originally it was designed to transact the digital currency and recording of the transactions between two or more parties efficiently, without the approval of centralized agency and in a verifiable and permanent way blockchain is the mechanism that is behind the execution of bitcoin and other cryptocurrencies. Blockchain enables to generate an accounting information system that chronologically records validated transactions

The accountants are recording and verifying the historical data against set standards, providing insight to the stakeholders, and lodging the same with government agencies for tax or other purposes. The robust developments in the field of technology have automated the recording of the mundane tasks e.g. at point of sale (scanning the bar code) to its effects on the financial statements etc. that were performed by the accountants earlier. Combined with cloud computing accounting data have much more integrity e.g. when a sale is made inventory records and its effects on operational profit are updated by itself and the same records are available to each party involved in the network.  BOTKEEPER is a virtual assistant that that has the attribute to work on existing accounting software or to migrate and work on the new platform apart that it offers unlimited reporting of any aspect of bookkeeping e.g. aging payable/receivable, unit cost budgeting, etc., payroll, vendor mapping, reconciliation, collection calls, and emails and many more (Botkeeper, 2018). It is performing most of the bookkeeping functions with accuracy using different accounting software like XERO, Quickbook, etc. It retrieves and analyzed the scanned data and posts the transaction to relevant ledgers

The machines can do the repetitive tasks at super-high speeds, it will transform the way people interact with the tax function (EY, 2016). Not only it will provide transparency and real-time tax data but also will speed up the processing of tax returns. The process that is currently in place; to collate the transactions, differentiate between taxable and non-taxable transactions, prepare a return, and then file it will no longer be valid. Machine learning will be able to differentiate between taxable and non-taxable transactions at the point of scanning the barcode or incurring the actual expenditure. So real-time taxable amounts will be available to the entity and accountants or tax specialists will be deprived of this function. On the audit side, it will comparatively be easier for auditors to check the records.

Since the last couple of years, the ongoing development in the area of artificial intelligence and blockchain technology has been creating chaos about the future role of accountants and audit professionals.  Big four accounting firms are already deploying artificial intelligence in some of the areas. Lately, they have invested heavily in the research and development of these technologies with the sole objective of introducing these technologies in day to day accounting and audit operations. This paper aims to provide an overview, the implications these technologies will have on accountants, auditors, and auditors/audit process. And also to shed a light on the skills that the professionals will be required to equip with to survive in the industry. A comprehensive review is impossible and beyond the scope of this paper, due to the pace of development in the technology and limited access to the literature

Accountants and auditor work have been defined as the post mortem of the past transactions which has a little impact on the future operations of an entity. In the globalized trade, the businesses generally prefer problem-avoidance and problem-containment to problem-solving. But currently, the professionals are reactive rather than proactive. However, the latest trends in technology have the potential to automate most of the recording aspect which may lead to change in the job profile of the accountant. When technology will take over the mundane task, the professional has to be proactive to survive in the industry. These technologies could prove a helping hand to boost/maintain the confidence in the audit process which had waned since 2008 in the wake of the global financial crisis. The blockchain and artificial intelligence are forward-looking technologies that provide real-time data and can contribute to change the future course of action (Smith, 2017).

Nixon (2016) is of the view that since the introduction of the double-entry system, innovation was stalled in accounting. The only change according to him is “things that used to be done on papers, shifted to computer”. However, the new technologies have the potential to take this profession to a new level that has never witnessed before. Researchers and developers had termed it as the ‘Fourth Industrial Revolution’. The notable components of the fourth industrial revolution are ‘Artificial Intelligence’ and ‘Block Chain’ technology. The Blockchain has been labeled as the fifth pillar in the IT revolution after mainframes, personal computers, Internet, and social media

There will be various factors that will be effecting the accountants/audit professional works and will be requiring them to comply with the rules framed by various governing bodies. However, the introduction of smart technology will affect the job profile of the profession. The regulatory framework is the second key factor that may have an effect accounting professional but to the most extent, it’ll be embedded in the new technology. New technologies will transform practice and competencies requirements. Susskind has categorized the technology impact on the profession in terms of automation and innovation. Means automation will lead to innovation in the required skills. To survive in the industry professional will have to acquire a new set of skills i.e. gain more technical, social, marketing, and communication skills. To foresee the impacts on the professionals, an overview of the working of these technologies, the applicability, and impacts on current business scenarios have been discussed. Consider the cost factor the entities may prefer one technology over others so the Impacts on the profession have been discussed separately.

some problems that exist in accounting can be overcome by the introduction of block Chain ledger technology. The first problem they defined is misleading information or lack of integrity by management in providing information on the financial statement, even sometimes auditors have no choice rather than taking this information true and correct e.g. the case like Enron, Lehman Brothers, Tyco, and Toshiba proved that due to existence of vested interest management always does not act in integrity. If ledgers are kept using blockchain technology this type of situation won’t arise as every tempered record will have a timestamp and auditors could easily detect any kind of fraud. Second, the involvement of human error, which sometimes led to a big blunder.

Kokina et al. (2017) have suggested that real benefits of blockchain can be found in auditing through the establishment of a detailed audit trail, and the ability to review the exceptions generated from a population of transactions rather than a sample. Audit trails can be documented on blockchain to facilitate tracing and review in the future. Similarly, the information in electronic invoices, bills of lading, letters of credit, receipts, etc. could also be documented in the Blockchain (Ernst & Young, 2015). Accounting fraud happens when someone manipulates the accounting figures and principles. The features of blockchain combined with smart contracts will make it hard to manipulate the figures. Once a transaction is posted on the blockchain, it becomes unchangeable and irreversible and the transaction won’t be uploaded into the block unless verified by the majority. Even if the majority get succeeds in manipulating the records, it is time-stamped and generates a new log regarding the previous entry, and manipulation can easily be detected at the later stage. The system itself protects the integrity of the data and make sure that there is less space to manipulate the data. Currently, auditors are dealing with the historical information that limits their capabilities to intervene and advise the management of the right course of action. However, the features of blockchain will change their actions from reactive to proactive. Blockchain mechanism wouldn’t give rise to the situation like Anderson where they tore the audit papers, even the audited records are safe against removal so can be used as a legal aid on a forever basis