Semantic Accounting and Auditing Working Papers

In 1982 when I started work as an auditor for Price Waterhouse we used paper audit working papers. I was quite impressed with the fold out 18 column ledger paper.  The day I started at Price Waterhouse, they also pointed at two shinny new IBM PCs sitting in a room, they told me and all the other new staff accountants, "Make those IBM PCs do something."

Shortly after starting with PW, I took a class in VisiCalc which was installed on the IBM PCs. Shortly after learning VisiCalc, Lotus 1-2-3 was introduced and I transitioned to that electronic spreadsheet. I experimented creating audit lead schedules.  It was interesting trying to help managers and partners understand the capabilities of linking lead schedules together electronically.

To make a much longer story shorter, I worked with Excel 4.0, learning VBA, also picked up Microsoft Access beginning with version 2.0. I had made a big investment in learning Rbase which was a relational database that worked on the PC.  I was considering transitioning to UNIX operating systems for a number of reasons, but I did not make that switch (for which I am glad).

Ah, the good ole days.

Today, pretty much all audit working papers and accounting work papers and schedules are created electronically. And those electronic spreadsheets are quite helpful in may ways.  But they also have their pitfalls.

Another transition is about to take place I predict.  There will be a transition from electronic spreadsheets to "semantic spreadsheets". Other terms used to describe what I am referring to are deductive spreadsheet, logical spreadsheet.

Think modern spreadsheet or what I am now referring to as logical digital twins.

This introduction to logical spreadsheets makes the following statement, 

"Logical spreadsheets remain an interesting and fruitful area of research and development. Much work remains in making logical spreadsheets easy to use; in particular, writing and debugging complex logical rules can be a daunting task for the non-expert. Nonetheless, the systems detailed in this special issue show much promise in this regard, and if coupled with an appropriate level of marketing and business sophistication should find their ‘killer app’ soon."

The book The Deductive Spreadsheet, provides this synopsis

"This book describes recent multidisciplinary research at the confluence of the fields of logic programming, database theory and human-computer interaction. The goal of this effort was to develop the basis of a deductive spreadsheet, a user productivity application that allows users without formal training in computer science to make decisions about generic data in the same simple way they currently use spreadsheets to make decisions about numerical data. The result is an elegant design supported by the most recent developments in the above disciplines."

Three key observations here.  First, obviously people are trying to figure out how to make deductive spreadsheets and logical spreadsheets work.  Second, they refer to "research" as contrast to actual practical working software.  Third, there is a focus on making these applications easy for business professionals that would use them.

And so how do you make something like the deductive or logical spreadsheet actually approachable to business professionals?

Well, there are two things as I see it.  First, the complexity needs to be buried in the software, hidden from the user of the software.  That takes hard work.  Second, while most people seem to be trying to create "general tools", in my view the way to go is to create "specialized tools".  (This is my approach.)

I could be wrong, but as I see it Auditchain's Luca is a specialized deductive spreadsheet for business reporting. (a.k.a. logical spreadsheet, semantic spreadsheet; not sure what term will be the winner).  Luca is supplemented by the power of Pacioli, which is a logic engine.  In fact, it is more finely tuned to the needs of financial reporting.  Plus, Luca can generate financial reports created consistent with the global standard XBRL technical syntax.  Both Luca and Pacioli are purpose built for financial reporting, but they also work for general business reporting because a financial report is a type of business report.

With Luca, I was able to create provably high quality financial reports, accounting worksheets, audit workpapers, financial models, and even represent transactions.

I also created prototypes testing the capability to express a chart of accounts, lead schedules, working trial balance, debt details, and other such worksheets/schedules used for compilations, reviews, and audits.

What makes the quality so high and the complexity so low is a high level logical conceptualization of a business report provided now by the Seattle Method which I created which will hopefully be replaced by OMG's forthcoming Standard Business Report Model (SBRM).  Further, the Seattle Method and/or SBRM can be, and I believe will be, enhanced by digital distributed ledger technology.

Time will reveal whether I am seeing this correctly.

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