Creating a New Tool for Accounting and Audit

As Steve Jobs pointed out in the video Product Development from Idea to Product; there is a tremendous amount of craftsmanship in between having a great idea and creating a great product.  Designing a product is keeping 5,000 things in your brain and fitting them all together in new and different ways to get what you want.  That process is the magic.

Yet, if you do the work and you put the pieces together brick by brick then you might come up with something better, faster, and/or cheaper than the contemporary tools that currently exist.

Today, accountants and auditors tend to be overwhelmed because the contemporary tools of professional accountants and auditors are using are not up to the task.  One example of being overwhelmed is the PCAOB pointing out the completely unacceptable state of audit quality.

The problem is that tools have not kept up with the increasing complexity of economic entities such as the multinational corporation, the increased complexity of information, the increased volume of information, and the increased speed of information that accountants and auditors have to work with.  As a result, something has to give.  Audit quality has dropped.  Accountants and auditors are throwing more and more of their time at the problem to try and solve it.

The territory has changed.  Accountants and auditors no longer work in the industrial age; we work in the information age.  We are going through the fourth industrial revolution. We are transitioning from one territory to another territory.  A great transmutation is taking place. The system is transitioning. The universal technology of accountability is changing to adapt to this new paradigm.  Accountants and auditors need to refactor their mental map.  Trying to use old mental maps to understand this new territory is like trying to find your way in New York City using a map of Chicago.

A new more modern approach to creating electronic spreadsheets is possible.  The presentation oriented electronic spreadsheet was a good stepping stone.  But more modern technologies offer new approaches to creating accounting schedules and audit working papers.

It is becoming increasingly obvious that the status quo is doomed.  

Contrary to popular belief, this transition is less about technology and more about people.  The transition will be enabled by a combination of human intelligence and the appropriate artificial intelligence. Transition = Human Intelligence + Artificial Intelligence.

Where will all this end up?  No one knows for certain; but there are signs that what will exist is configurable knowledge graph systems that are driven by logic, not code.  Software will be radically more powerful yet radically more approachable to business professionals and simple to use.  Why? Terminology and schemas of the knowledge graph system will be radically simplified, the technology burred deep, deep, deep within software tools.  Logical models help bridge the gap between business professionals and information technology professionals.

As I point out in the Essence of Accounting, tools such as the double entry bookkeeping mathematical model, the accounting equation, conceptual frameworks of base financial reporting schemes such as US GAAP and IFRS should be thought of just a little bit differently. Complexity should be embraced.  Accountants and auditors should undertake light house projects to help show them the way.  Accountants and auditors need to develop the skills to represent things digitally.  It is all about knowledge.

Other knowledge sharing areas of knowledge have effective made this transition such as how architects transitioned to the digital blueprint which let to CAD/CAM and ultimately to BIM. Other areas of knowledge such as electronic health records (EHR) and cross border trade are still working to transition.

Coming up with the idea was relatively easy.  Making it work and coming up with useful products is much harder. Who will be the first to succeed?  Who will create better tools for accounting and audit professionals that is as elegant as Steve Job's iPhone?

Evolution is not new for accounting; it has evolved before during it's long 7,000 year life and it will evolve again,

Time will reveal the answer.

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