AI is the Revival of Accounting… or is it the Downfall?
The industry’s most controversial topic.
A New Normal
What do $80,000 cars, disease diagnosis, streaming services, Star Wars, ride share apps, and real estate have in common?
Honestly, not much outside of their connection to Artificial Intelligence (AI).
This short list does not come even close to encompassing the expansive world of new technology, but it serves its purpose in demonstrating just how prevalent AI is.
It also makes me certain that you — yes, you reading this story— have just as much to contribute to this discussion as I do, if not more. No matter your background or career path, you are a human being living in this dynamic world and therefore have earned a voice in this conversation.
Artificial intelligence is defined by Webster’s dictionary as “a branch of computer science dealing with the simulation of intelligent behavior in computers” and “the capability of a machine to imitate intelligent human behavior.” In recent years, nearly every industry has adopted or is planning to incorporate these clever machines to improve efficiency and create new opportunities.
Given the nature of AI, these new technologies will surely become an integral part of our lives in the near future, if they have not already.
AI in Accounting
The accounting field is seen by many as boring, boring, boring.
Perhaps this is why there is so much hype around AI, which is new, exciting, and the farthest thing from boring, being integrated into the field.
As exciting as this may seem, however, many professionals have expressed concern regarding these new technologies which will soon take the accounting field by storm.
These new technologies have been and are being created with the intention of benefiting accountants on an individual level by increasing efficiency and freeing up time to provide greater value to clients, and on an industry-wide level by reducing long-run costs and maintaining relevancy in our fast-paced, innovative society.
This being said, this topic is easily the most controversial in the world of accounting for several reasons.
Some professionals are optimistic while others are concerned, making it difficult for the industry as a whole to come to a consensus on whether the benefits of these new technologies truly outweigh the costs. And further beyond the debate about whether AI is good for or a danger to accountants lies the discussion surrounding what steps the industry needs to take.
Before coming to our own conclusions and forming potential solutions to address the topic at hand, let’s evaluate the spectrum of attitudes held by professionals today.
My boss fired me and then hired a robot!
Well, probably less like this and more like this:
But you get the point.
AI’s capability to do mundane, repetitive tasks for us is pretty much common knowledge at this point. In the context of accounting, this means that professionals will no longer bear the burden of monotonous bookkeeping, auditing, and tax preparing. This also means, however, that those who currently fulfill these lower-level roles will be replaced.
While there is some truth to the fear that AI will “replace” accountants, it is also true that AI will not take over the field entirely. In fact, it will play a part in creating new jobs for accountants. A 2017 Bureau of Labor Statistics report says that the field will grow at a rate of eleven percent over the next ten years, which suggests that more jobs for professionals will be created by than taken over by AI.
Now we know that AI is not going to completely take over accounting.
But these technologies still bring with them concerns that cannot be completely explained or refuted by the data. As determined by an Accounting Today survey, “the impact of new technologies, and accounting’s ability to adapt to the rapid pace of change” will bring “a host of subsidiary issues that accountants will need to address in the coming months and years.”
Challenges facing accounting firms
On the macro level, new technological developments are going to have major effects on both large and small accounting firms. Industry professional Joe Woodward expresses this inevitable consequence, saying that “massive shifts in technology like data automation and artificial intelligence are ushering in what some are calling the ‘Fourth Industrial Revolution’ and others… are calling ‘the Transformation Economy.”
Mark Koziel, executive vice president of the Association of International Certified Professional Accountants, poses the question, “As technology evolves by the minute, are firms and companies keeping up?” As we enter this new era, leaders acknowledge that firms will have to embrace this change and those who do not will ultimately fail.
While some firms will resist change and fail as a result, other firms will take an approach of indifference. One might assume that this approach is not as bad as the approach of full-on resistance, but perhaps this approach coined by professional Tamera Loerzel as “wait-and-see” is even more dangerous.
At the very least, firms currently resistant to change possess some level awareness of what it is they are resisting. Perhaps some of these firms will even be able leverage some of that knowledge and change their direction later on. On the other hand, this wave will hit complacent firms completely out of left field, eradicating even the possibility of a comeback.
Firms receptive to AI will have the highest rate of success, but difficulty still awaits them. Not only will they have to invest in costly but necessary technologies, but they will also have to make major changes to and, in some cases, completely replace internal business models.
The potential success of these companies starts with the leaders, who, according to CEO of the Thriveal Network Jason Blumer, must “embrace… their entrepreneurial responsibility in running their firm well.” He continues, “Many firms are structured poorly and prevent growth, team care, and proper client service… and the firm’s business model is often their greatest inhibitor toward’s healthy growth.”
President of Information Technology Alliance Stan Mork expresses that firms must “determine the most cost-effective way to implement emerging technologies and improve service delivery to clients” while Transition Advisors CEO Terry Putney points out the need for firms to “transition from the traditional hour-times-rates system of pricing services to capture the value of technology as hours are reduced.” These are just two of the many aspects firms will need to change regarding their internal models.
As one might expect, small firms will face even greater difficulty than big firms, as they have less money and resources at their disposal. “All of this change,” notes Janice Gray, vice chair of the National Association of State Boards of Accountancy, “could affect [small firms’] abilities to audit clients and thus further diminish the pool of auditors available to provide services to smaller clients in an economical manner.”
Challenges facing individuals
Accountants will have to adapt on the micro-level as well. Professionals currently in and those entering into the field will have to learn these new technologies. As mentioned earlier, accountants will not be entirely replaced by AI, but they will be working alongside these intelligent machines. In order to do so successfully, they will need to learn new skills.
“Our very existence depends on our ability to learn the skills that will let us work side-by-side with the machines and do the things they cannot do,” says Bill Sheridan, Maryland Association of CPAs chief communications officer. The real question lies in who is responsible to teach these skills.
Are firms responsible or do accountants need to undertake this individually?
Many professionals agree that the industry as a whole is not ready for the future. Today’s accountants do not possess the skills necessary for tomorrow’s success, and the pressure to learn these skills is building by the second. Obtaining these advanced skills will require a high level of commitment from young and old accountants alike, but the new and old generations of accounting will face a unique set of challenges.
“This is not your grandfather’s or your father’s accounting profession,” warns professional Janice Maiman. Unsurprisingly, older accountants who have been working in the field for years may find it especially challenging to learn new technologies.
Will firms train their accountants or leave them to fend for themselves? Even if firms do provide training, will older individuals be able to keep up with the exponential rate of change? Will older accountants be replaced by their younger counterparts even if they have been loyal to their companies for decades?
Typically, experience comes with age, but in this case, age comes with an extraordinary disadvantage.
The younger generation has an obvious advantage over the older generation in aptitude, but the education system currently used to teach young accountants is failing to prepare them for the future.
Although the curriculum teaches future professionals necessary skills for today, “the exposure of accounting students to artificial intelligence remains almost non-existent.” Mirroring the dispute between industry leaders, educators are unable to come to a consensus on whether AI should become a central part of university curriculum.
Professors and faculty have taken even less initiative than firms to adapt to new technology, and the young accountant’s advantage to the old accountant becomes futile as a result.
If schools cannot equip their students well and if firms have not clarified their role in training their employees, then what’s left? Are there any resources available to accountants who are in fact willing to adapt? Is it fair to put the burden of learning all these incredibly complex technologies on the shoulders of individuals?
Harm to the industry, and worse, to humanity
Among other professionals, Nick Chandi argues, “Discussions of a robot revolution are more sensational than factual. In the real world, technologies transforming the financial industry will in no way render the human factor redundant.” He goes on to say that “artificial intelligence and machine learning won’t make human intelligence extinct.”
Others anticipate that new technologies could in fact cause damage to human intelligence by “threaten[ing] human autonomy, agency, and capabilities… on tasks such as complex decision-making, reasoning and learning.”
AI is meant to perform lower-level tasks in order to free accountants up to better serve clients and provide value in consulting-type roles. In essence, the changing role of the accountant is not an inherent issue. On paper, technology increasing efficiency for the accountant is a wonderful thing.
But what if, when played out in reality, the very technology that was meant to solve our problems complicates things further?
In the same way that social media and the internet in general has negatively impacted society, new technologies could have profoundly detrimental effects on accountants.
CPA Trendlines CEO and former Accounting Today editor-in-chief Rick Telberg believes that “too many firms are looking for solutions from new technology, software and apps, to the detriment of skills-building and process improvements that would better serve clients with broader and deeper services.” In other words, the accountant’s reliance on technology may have the adverse effect of weakening customer relationships.
In a 2018 canvassing, 978 technology experts outlined various concerns regarding “the impact of… new tools on the essential elements of being human.” They concluded the following as being inevitable ramifications of new technology:
- “Human agency: [Individuals]…sacrifice independence, privacy and power over choice.”
- “Data abuse: …Most AI tools are and will be in the hands of companies striving for power. Values and ethics are often not baked into [these] digital systems.”
- “Job loss: …While some expect new jobs will emerge, others worry about massive job losses.”
- “Dependence lock-in: …People’s deepening dependence on machine-driven networks will erode their abilities to think for themselves, take action independent of automated systems and interact effectively with others.”
- “Mayhem”
Steps towards solving these problems
In response to their concerns, the technology experts from the canvassing proposed a set of solutions, emphasizing a focus on prioritizing the global good above all else, creating systems and policies based on values and ethics, and protecting humanity. Although these ideas are meant to help us manage the general consequences of technology, they can and should be specifically applied to the accounting field.
Within the industry, professionals are uncertain, but some have begun to think critically in response to the overwhelming problems facing the industry. Natasha Schamburger, CEP and president of the Kansas Society of CPAs, has proposed the following three-point plan:
- “Awareness: If we get in the habit of regularly looking up from the important work on our desks to evaluate the impact and opportunities these trends have, then we can quickly align our mindsets with new realities so we can continue our important work as critical advisors into the future.
- “Action: We can think forward but act now by designing a plan for our teams that responds to pertinent signals of change by evaluating where we are, where we need to go, and what daily progress looks like to get to there.”
- “Adventure: Let’s find our sense of adventure. We do not know exactly what to expect but that’s the thrill of exploring new possibilities!”
Schamburger’s plan is a promising start. The vast majority is aware (and after reading this article, you are a part of this group), but few have begun to take action in response to this awareness. There certainly is not an easy solution to any of these problems, but these issues must be tackled one way or another. It may take years or even decades to fully address these complex issues, but the quest must start today.
Firms can and must start preparing their employees now by implementing training programs in new technologies so they are better equipped for the future, rather than relying on individuals to teach themselves or waiting until later to do so. Likewise, accountants should take the initiative to learn the necessarily skills of the future by doing independent research and even taking advantage of local training programs in IT.
If firms and accountants alike are proactive and independent in their journeys of adapting to future change, this could eliminate at least some of the conflict.
The Financial Accounting Standards Board should address ethical issues regarding new technologies, such as those outlined by the experts in the canvassing above, in their accounting guidelines. It is quite likely that leaders must amend their regulatory guidelines to address the various problems at hand. With limitations in place, many unnecessary problems can be avoided and leaders of independent firms will have a general guideline to follow.
New technologies can be assets, but if the industry fails to provide potential solutions in preparation for the future, the cost of AI could ultimately outweigh the benefit. We must be proactive and creative, and the first step in doing so is having these necessary discussions.
What does this have to do with me?
Okay, so maybe accounting’s not your favorite thing, and if it’s not that’s totally fine.
Chances are that if you are reading this article you are a business professional or at least interested in the business world, but you also might not be. Nevertheless, you have a role to play in this discourse no matter who you are, as similar discussions are being held in virtually every field.
AI, machine learning, blockchain, and every other new technology comes with consequences that every person must prepare for practically, intellectually, mentally, and even emotionally.
This article only scratches the surface, and it is likely that other problems we may not have considered or ever experienced before will arise.
Ultimately, we cannot entirely predict what the outcome will be, but we can do our best to prepare by analyzing data, learning from past events, and listening to each other’s ideas. If we remain proactive and open-minded while maintaining a healthy amount of skepticism, we will set ourselves up for the best possible future.
