Boomer’s Blueprint: How CPAs and auditors will remain relevant
How will CPAs and auditors remain relevant in the future? The answer is simple: judgment. But the process is more complex and changing rapidly.
The good news is, the profession has adapted over the past 50 years, but the challenge today is the speed at which technology is disrupting all occupations, not just accounting. You cannot read a professional journal or attend a conference without reference to the disruption of robotics, artificial intelligence and machine learning.
These technologies are converging with immense impact, but let’s take a calm but urgent approach to remain relevant and increase our value proposition.
Hindsight, insight and foresight play significant roles in all innovation. The impact becomes exponential rather than incremental due to the convergence of multiple technologies.
Another fact to consider is that all innovation starts as a bad idea — especially to the incumbents it will disrupt. In my opinion, robotics, AI and machine learning are already disrupting accounting services starting at the transaction level, and moving up the continuum of value to compliance, advisory and consulting.
CPAs have always had access to valuable data, but the focus of their work has been on accuracy and compliance, instead of predictive value. According to Ajay Agrawal, Joshua Gans and Avi Goldfarb in their recent book, “Prediction Machines,” “Prediction is the process of filling in missing information.” The three authors are professors at the Rotman School of Management at the University of Toronto, which has been a thought leader in statistics and auditing for decades.
Prediction takes information you have, generally referred to as “data,” and uses it to generate information you don’t have. Machines are great at prediction if they have accurate and current data. Good examples are with finance and credit card transactions, where machines put stops on your credit card or require authorization based upon relevant data and rules. Autonomous vehicles are another great example, where the capabilities are increasing with improved sensors, more data, and enhanced bandwidth.
The authors point out that recent advances in machine learning have transformed how we use statistics to predict. One might be tempted to assume that advances in AI and machine learning are just traditional statistics on steroids, but the ultimate goal is to generate a prediction to fill in missing information.
The goal of machine learning is operational effectiveness. The real search is for a solution that tends to minimize errors.
The technology is available today to examine the entire population, rather than relying on statistical sampling. Part of the challenge has been data management from the transaction level (often in client systems) to the compliance level where firms use various workpaper and workflow systems.
Today, this usually requires data connectors or middleware to transport and analyze the transactions. The important takeaway should be that many old processes no longer have value in the workflow or audit. Firms are using Lean Six Sigma plus new technology to eliminate inefficient processes and improve audit quality.
The profession has faced similar challenges in the past with the advent of the spreadsheet and automated work papers. These replaced the 13-column pad and adding machine. Today’s challenge is much greater as the new technologies that are converging are faster, better and cheaper due to the access to and quality of the data.
The authors also state that, “Some refer to data as the new oil.” It is often costly to acquire, but machines that predict cannot operate without it. The machines require data to create, operate and improve. The development of algorithms requires training data. Predicting and feedback use input data to improve accuracy. CPAs should understand the different types of data and how to manage that data.
The human touch
Earlier, I mentioned that CPAs can remain relevant with their judgment, and their skills will increase when augmented by AI, robotics and machine learning. Give the profession some credit: Many members have used the available tools to automate processes and leverage technology to create additional value for their clients. This value often comes in the guise of advisory or consulting services, rather than compliance services.
“Prediction Machines” points out that machines are great at prediction while humans are poor. Most humans are poor statisticians, even in assessing probabilities. Much has been written about heuristics and biases. This applies to many professions, and poor expert prediction was the focus of Michael Lewis’ “Moneyball.”
Prediction machines are not perfect and need human intervention. Humans are often very good at prediction with limited data. To remain relevant, professionals must upskill and operate with the mindset of a life-long learner and member of a unique-ability team.
Much is being written about robotics and machine learning in accounting, and often writers feel the technology is failing due to the fact the machine requires human intervention.
To me, this is just part of the learning process and the division of labor between machine and professional. One is mathematical, and the other is focused on mental processes.
Machines are getting better, faster and cheaper. Is the profession getting better fast enough to add value and remain relevant?
The question presents a difficult conundrum at a time when firm partners are experiencing record incomes, yet technology is disrupting their service offerings and making it challenging to remain future-ready and sustain success.
Digitization of the workforce has consistently accelerated since the early 2000s. Leaders today should be digitally literate and understand technology in a way that can create a vision for the future. Experiment and get help to uncover new possibilities.
My advice is to explore and learn about the new tools available today. Inflo, MindBridge, Power BI and Validis are just a few of the tools we see leading firms implementing.
This is a journey that has already started, and it will be difficult to catch up with those that already have the mindsets and are experimenting and acquiring the skill sets!
Don’t let traditional success and continuity get in the way of changing the game. Challenge conceptual constraints and mindsets that hold your accounting firm back. Reimagine situations where clients have been underserviced. Think — plan — grow.