The digital age : The power of change
Big Data, artificial intelligence (AI), cloud computing and blockchain are driving what is known as the digital revolution, a recent trend characterized by a proliferation of digital data, available anywhere and anytime.
This revolution is transforming practices and rewriting business models. In this context, expectations for CPAs are rapidly changing and evolving, and accounting professionals have no choice but to upskill if they want to remain credible and relevant in this fast-paced business environment.
The new playing field affords amazing opportunities for you to explore and innovate. You can create new structures and reposition CPAs as drivers of value in your organizations. You can develop new expertise, provide new services, propose new ways of doing things and help rebuild the foundations of the profession.
The Order has made it a priority to guide you through this transition and give you the tools you need to lead change.
As a trusted advisor and business leader, you are ideally positioned to guide organizations and find new ways to tap the immense potential of the new tech age.
Technologies that are revolutionizing the business world — and your profession
Technologies like AI, blockchain and automation can collect mountains of data, but how do we make sense of it all? Right now, there is a strong market for prospective data and non-financial information. As a CPA, you are well positioned to meet this demand. Your CPA background gives you the inside track, allowing you to be an authority on data governance, collection, processing and evaluation, and to reach the conclusions needed for decision-making.
Management data analytics
CPAs have always used data analytics to understand past trends, interpret the current situation, and, above all, plan the next steps. The difference is that a sea of data is now available, especially with the advent of the Internet of Things (IoT). Today, analyses can include once-elusive data like the exact location of a fleet of road vehicles, the source of a product component or a customer’s purchase history.
The Amazon Go stores in New York and Seattle are an example of how data analytics is used in business. Customers go to the store, take what they want and leave without going through a checkout counter or scanning product bar codes. Cameras capture and identify customers through a mobile phone app and detect the products in their cart. When the customer leaves the store, the mobile app automatically deducts the amount owed.
This is an example of how technologies can detect shopping patterns and automate the sales process. If new data can be captured and integrated into a sales process, many activities can be automated.
Audit data analytics
The age of audit data analytics (ADAs) is here, and it’s a leap forward for the profession. New technologies can add value to audit engagements through disciplined and focused analysis of large data sets. Some assurance procedures could eventually be performed faster and in near real-time, increasing the relevance and meaningfulness of these engagements. ADAs are audit procedures used to discover and analyze patterns, identify anomalies and obtain other useful information from data populations relevant to the audit. It can be:
- Descriptive: tell you what happened historically
- Diagnostic: show why something happened and how to avoid its recurrence
- Predictive: forecast the probability of future events
ADAs can be used to analyze journal entries, interpret ratios and identify trends, and even reconcile general ledger accounts. By harnessing the power of advanced analytical tools, it may be possible to apply procedures covering all available data instead of just a sample. The resulting analyses and patterns will be superior, and engagement risk management will be more accurate.
ADAs may become an imperative, as more and more Canadian businesses expect to see their external auditors use data analytics. Efficiency aside, it can transform the service offering to align it with the expectations of organizations.
ADAs are brimming with potential!
Cryptocurrency is a virtual currency operating independently of monetary policy or banks and whose implementation is based on encryption algorithms. Bitcoin is a prime example. Holdings of cryptocurrencies allow individuals and businesses to transact directly with each other without an intermediary such as a bank or other financial institution. Cryptocurrency transactions rely on blockchain technology.
Blockchain is a shared database for storing and sending secure information or transactions between users. It is like a virtual and decentralized general ledger where blocks of information are recorded one after the other on a cluster of computers. Blockchain is premised on neutrality, transparency, peer trust and privacy.
It has five defining principles:
- Distributed database: Each party on a blockchain has access to the entire database and its complete history. However, no single party controls the entire data set.
- Peer-to-peer transmission: All participants (individuals or businesses) using the shared database are nodes connected to the blockchain. Communication occurs directly between peers instead of through a central node. Each node stores and forwards information to all other nodes.
- Transparency with pseudonymity: Transactions are visible to anyone with access to the system. Users can choose to remain anonymous or identify themselves.
- Irreversibility of records: Transactions are recorded in chronological order. Algorithms ensure that the transactions cannot be altered, since each one is linked to the transaction chain that came before it.
- Computational logic: Users can set up algorithms and rules that automatically trigger transactions between nodes (participants).
In addition to financial transactions, digital records may also contain instructions, procedures and required actions. A blockchain can be used for a variety of purposes, for example, in logistics to increase product traceability and reduce fraud. Blockchain is also used to secure confidential records and invoices or to automate banking processes and securities payments.
Since transactions are permanent, auditors, regulators and others could gain unprecedented insight into the state of accounts, including a complete record of all transactions.
According to a Robert Half survey of financial leaders, “blockchain and cryptocurrency will drive the need for financial professionals to expand their skill sets and put greater focus on cross-departmental collaboration with IT,” as well as increase the need for specialized accounting (e.g. tax and forensic accounting).
Cloud computing solutions are being used increasingly in accounting. Cloud computing is used to process and store data on a remote server called the “cloud” instead of on local servers or client systems. An internet connection is all it takes to access data in real time, from anywhere and from any device (telephone, computer, tablet). With cloud computing, data is always on hand.
There is a wide range of cloud computing solutions, including software, platforms and complete infrastructure. Using these services can pay off, especially for small businesses, because it’s a flexible and affordable way to acquire the hardware, software and communication capacity they need. These tools facilitate collaboration and information sharing, are regularly updated and can be adapted to keep pace with the organization’s growth. Data is automatically synchronized, and access can be restricted to specific users.
Despite the many benefits of cloud computing, users should be aware of the risks. Where is data stored? Is it adequately protected? Does the service supplier outsource to another party who may lack the controls of the original contracting party?
Be extra cautious and only use suppliers that will ensure the security, confidentiality, availability and integrity of the information that is exchanged and stored. You’ll find some things to consider before selecting a cloud computing supplier in our CPA guide on best practices in IT use. The Order has also negotiated a turnkey cloud service solution to help you meet your professional obligations. Find out more >
Automation is set to become a game-changer for some CPAs. Part of the work will gradually be done without human intervention. Although some jobs may be threatened or need to be reinvented, this innovation also creates tremendous opportunities for CPAs to position themselves as strategic leaders and data analytics specialists, and in some cases renew their service offerings.
The cyclical nature of financial reporting will be a thing of the past, giving way to continuous accounting and eliminating insanely busy fiscal year-end deadlines. Accounting records will be updated in real time, without human input. If a sale, purchase or payment transaction has occurred, an automated process will recognize the type of entry required and change the appropriate accounts.
Artificial intelligence (AI) is the science of teaching programs and machines to complete tasks that normally require human intelligence.
How does it impact a CPA’s work?
AI creates great opportunities to innovate and enhance productivity. It can be leveraged to produce better quality work more efficiently. Systems can now perform many tasks — such as reading invoices, flagging them for payment and classifying them by expense types or account types automatically, and even reading contracts — with a high degree of accuracy.
Algorithms can spot subtle clues in data sets and flag certain elements, making it possible, for example, to pinpoint fraud or identify new business opportunities (savings, new market opportunities, etc.). All this while leveraging and making sense of a large volume of information coming from multiple sources, commonly referred to as Big Data. Big Data is an exponentially growing set of structured or unstructured data produced continuously and in real time.
You now have an opportunity to focus on AI as an enabler of innovation and increased productivity. By automating routine tasks, you will have time to work on other issues. You will be able to focus on building and analyzing reports that drive business insights and decisions, securing your role as a strategic advisor.
A nascent technology that could powerfully impact AI, quantum computing harnesses the quasi-mystical phenomena of quantum mechanics to deliver huge leaps forward in processing power. The secret to a quantum computer’s power lies in its ability to generate and manipulate quantum bits, or qubits. Quantum computers promise to outstrip even the most powerful of today’s — and tomorrow’s — supercomputers.
Although it is difficult to anticipate the full potential of quantum computers, some researchers believe that they could accelerate AI, impact data protection and backup, and more. It could take quite a few years for quantum computers to achieve their full potential. But it is a technology to watch because if these exotic new computers live up to their promise, they could transform entire industries and turbocharge global innovation.
CPAs will assume a central role in data governance, overseeing the sound management of information from initial capture to security, availability, validity, archiving and destruction. As of yet, there are very few standards and frameworks to govern the integrity, security and use of data. Due to the nature of your role, you will be sought to help develop governance initiatives for both financial and non-financial data.
What are the challenges and opportunities for the accounting profession?
Thank you to our contributors!
We wish to acknowledge the contribution of the following individuals and organizations, whose work was used in developing this guide.
- Samuel Sponem, professor at HEC Montréal and holder of the CPA International Research Chair in Management Control, and Camille Grange, professor at HEC Montréal.
- CPA Canada, particularly the Foresight: Reimagining the Profession initiative.