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.

Additional resources:

Comments

Post a Comment

Popular posts from this blog

Relational Knowledge Graph System (RKGS)

Image
Relational Knowledge Graph System (RKGS) is an interesting idea that combines the relational paradigm and the knowledge graph paradigm.  This documentation, Why RKGS , explains the idea. This gets even more interesting with the notion of "relational AI".  RelationalAI is described as follows by the company of the same name, Relational.ai : “RelationalAI is a cloud-based relational knowledge graph management system, with state of the art probabilistic processing and declarative reasoning at scale to make developing Data Applications a superpower for your business.” This notion of knowledge graphs represented in relational databases fits into my belief that knowledge graphs have two aspects: the expression SYNTAX and the logic of what is expressed or SEMANTICS. While the LOGIC of a knowledge graph is always the same regardless of technical syntax used to express that logic; there are many, many different technical syntaxes that can be used to represent a knowledge graph. There
Read more

Graph Hairball

Image
Knowledge graph system logic, the "things" and "relations between things" that  graph theory calls "vertices" (a.k.a. nodes, points, entities, things) and "edges" (a.k.a.  links, lines, relations, associations), looks like a big graph hairball as some people call it an example of which you can see here: Why?  This common view of a graph is because there has to be some "general view" of the information provided by the graph.  This is just like a general view of the information within a relational database is a table ; a set of ROWS and COLUMNS for exactly one table at a time. So what is interesting is that with a graph database the default view is everything in the graph of knowledge.  Whereas the default view of everything in a relational database is one table at a time. Further, it does not really matter whether the information that populates your knowledge graph comes from, say, CSV files, Excel, JSON, XBRL, RDF, PROLOG or whateve
Read more

PLATINUM Business Use Cases, Test Cases, Conformance Suite

Image
A brick wall is made of exactly two things: bricks, mortar. But a brick wall created by a master craftsman, or mason, and a brick wall created by a “weekend warrior” with no knowledge of masonry will be very different. Master craftsmen are created and that process takes time and effort. This blog post is a first prototype that brings several things together into one useful resource for business professionals.  It pulls together the human readable information of the Showcase of Reports   and the machine readable information of the Conformance Suite of XBRL-based Financial Reports Prepared using the Seattle Method .  Then, I want to incorporate the information found in these PLATINUM XBRL-based Financial Report Examples . The three resources can be useful and used independently; but they are even more useful when used together.  Business professionals really could not care a less about the technical details of getting some result that they want.  But technical professionals need to under
Read more