Over the festive season, I encountered an article on the Innovation Enterprise website written by James Ovenden which, for obvious reasons, caught my attention. Will blockchain render accountants irrelevant? The article discussed the impact blockchain technology will have on the auditing and accounting professions and how this is likely to solve trust issues that have existed between management and auditors since the ‘pre-Enron era’.
All the buzzwords we have all come to know − AI, big data, Internet of Things, blockchain, machine learning, etc – tie into the Fourth Industrial Revolution (4IR). The 4IR is upon us and we can no longer place it in the back seat. We as professionals are now being forced to embrace, adapt and adopt these changes in order to remain relevant in our ever-changing digital world. If there is one thing that the global COVID-19 pandemic has highlighted, it is just how quickly the world can transform and just how much technology is integrated into our everyday lives – both private and work life.
The pandemic has forced companies to rapidly move to remote working and often rely solely on advanced technology and digital infrastructure to keep them afloat. Professor Klaus Schwab, founder and executive chairman of the World Economic Forum, said: ‘New technologies will dramatically change the nature of work across all industries and occupations.’ This is certainly true, and the auditing and accounting profession is no exception.
To a certain extent, emerging technologies brought forth by the 4IR already exist and some are already wide-spread and fully integrated into our industry. For example, many accounting software packages now have built-in reporting solutions that produce financial statements and perform repetitive record-keeping more efficiently and accurately using robotic process automation. In the auditing profession, data analytics tools are more commonly used to extract volumes of data from the client’s records and apply advanced analytical checks to provide deeper insight into trends and patterns identified and highlight exceptions uncovered using the entire population of entries as opposed to sampling.
Blockchain technology is said to be the next incredible breakthrough that will transform the accounting and auditing profession, making financial record-keeping less costly, more reliable and more accurate. Blockchain technology is currently being used in cryptocurrencies − the most popular one being bitcoin − to record and store all transactions in a manner that is transparent to users within the network, accurate and autonomous. Thus far, the technology has proven to be impenetrable. The one appealing feature of blockchain technology is its ability to eliminate an intermediary such as a bank to verify a transaction.
Blockchain operates through a secure peer-to-peer network. When a new transaction is initiated, all participants in this network who have an identical copy and real-time access to the blockchain ledger communicate and verify the validity of the transaction before being entered into the blockchain. Once a transaction is added, it is encrypted and cannot be deleted or modified.
To bring this back to accounting, this technology is being explored to be used as a digital ledger whereby transactions from both buyer and seller can be recorded in real-time on one system and all the participants in the transaction have access to the ledger and can validate the details of the transaction before it is recorded. Think of it as one big spreadsheet that keeps track of a transaction from supply chain to consumer consumption in one ledger with minimal human intervention. Blockchain eliminates chances of human manipulation and reduces the need for reconciliation and third-party confirmation of existence and accuracy of the transaction.
In recent years, we have seen several disheartening headlines relating to corruption in the political environment and unethical conduct within our profession. With the recent corporate scandals, it is clear to see that there is a dire need for financial record transparency among stakeholders. This emerging technology has the potential to address the issue of trust and speed up auditing processes.
Is there a need for accountants and auditors in the near future?
The emerging technologies are most certainly going to replace several repetitive tasks we now do. However, the answer to the question of whether the robots will take your job is dependent on your willingness to adapt and evolve along with the technology. Although I believe companies will still need chartered accountants, the role we play will transform. As automation becomes more and more of a reality, the role of an accountant will transform into an advisory role which will require the competence to analyse, interpret and use the output produced by these technologies and feed into operational and strategic decisions.
Auditors will not be erased by the rise of AI and blockchain, but rather these technologies will generate opportunities to enhance audit execution and leave more time to analyse data and provide quality, value-adding feedback and recommendations to clients.
All these technological advances are still in the infant stage, but the impact they are expected to make cannot be ignored. What accountants and auditors need to do is prepare and equip themselves for the future. In order to remain competitive, we need to evolve and adopt an innovative mindset. We need to be alert of these technological changes and invest and commit to continuous learning to improve our digital intelligence and solutions.
AUTHOR | Lilly Mollel, Audit Manager, RSM South Africa