The Great Transmutation of Financial Accounting, Reporting, Auditing, and Analysis

My document The Great Transmutation explains the "great upheaval" and "great progression" that we are living through as the world transitions from where we were to what is being referred to as the Fourth Industrial Revolution.  No one knows exactly where we will end up, but there are many clues if you are paying attention.

Part of this transitions will be humans applying artificial intelligence.  It is the combination of artificial intelligence (AI) plus human intelligence (HI) that will cause this transformation (AI + HI = Transformation).  Humans need to understand these new tools that they have at their disposal.

The transition is well underway; the status quo is doomed.  Humans need to understand these new tools, their real capabilities, and how to pick the right tool for the job.  There are different types of artificial intelligence.  There tends to be three different types of artificial intelligence that offer different "baskets" of capabilities: (if you don't understand the difference, watch this video)

Professional accountants need to understand the different approaches to artificial intelligence, be able to differentiate the capabilities of each approach, and understand that the approaches can be combined into a hybrid approach.  Professional accountants need to develop the skills and abilities to represent information digitally.

Accounting is a technology. Accounting is a universal technology of accountability that society has found important for over 7,000 years and will very likely continue to find important and valuable.  But the tools that accountants, auditors, and analysts use to practice accounting are going to change.  If one pays attention, one can predict the changes that will take place to a degree.

When I started my career as an auditor with Price Waterhouse, we used paper spreadsheets.  I personally helped to pioneer the use of electronic spreadsheets like VisiCalc, Lotus 1-2-3, and ultimately Excel for things like audit lead schedules, working trial balances, audit working papers and schedules.

Now I am helping to pioneer the use of more modern spreadsheets.  These more professional spreadsheets will not be used for everything.  But they are useful and they could end up being a universal global standard logical spreadsheets.  This does not mean that your favorite electronic spreadsheets like Excel or Google Sheets are going to go away.  Modern spreadsheets will supplement traditional spreadsheets, they are another tool with different capabilities.

If you think about it, this makes complete sense.  Spreadsheets tend to be very arbitrary because they are presentation oriented because different people have different preferences.  How exactly are you going to make something like "algorithmic regulation" work using only traditional presentation oriented spreadsheets? A new approach to creating spreadsheets is necessary.

Financial reports are only one example of complex "packages" of information.  Financial reports are knowledge graphs and methods are necessary to make certain that the information in those knowledge graphs are high quality.  The Seattle Method does exactly that.  So will the forthcoming OMG Standard Business Report Model (SBRM).  The digital general purpose financial report is only one example of what is possible.  These same ideas can be used to create digital working trial balances, accounting and auditing working papers and schedules, financial models, and other such artifacts of financial accounting, reporting, auditing, and analysis.

These same ideas that I have applied to financial accounting, reporting, auditing, and analysis are also applicable to other areas such as tax and management/cost accounting and even general business reporting.  They could even be useful to, say, create something like electronic medical records.  The common denominator is the words, numbers, and logic.

Don't think of all this in individual silos.  There are new rules at play.  A new paradigm is unfolding. You need a new map to understand this new territory.

A financial report is a knowledge graph. And so are accounting and auditing working papers, financial models, general business reports, and other such artifacts.

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