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

On the one hand as I point out in this article Systems Thinking; the complexity of financial reports is increasing, the volume of financial reports is increasing (they are getting larger), and the pace of such information coming at us all is increasing.

At the same time, as pointed out by this article The Talent Dilemma Facing the Auditing Profession the work performed by accountants and auditors is not seen as fulfilling, long hours are used to deal with those increases, stress results from the longer hours, increased education requirements (in the U.S.) for the CPA because of the resulting complexity, are impacting accountants and auditors.  Further, studies are saying that artificial intelligence is going to replace most bookkeeping, accounting, and auditing jobs. This study includes accountants and bookkeepers in the top five jobs replaced by AI.  So why would anyone go into accounting?  Already, the number of accountants has gone down by 300,000 in the past two years in the United States.

Further, this article 22 years after the $63 billion Enron collapse, a key audit review board finds the industry in a ‘completely unacceptable’ state points out that audit is broken. This study shows that Deloitte botched 20% of their audits, PWC botched 23.6%, EY botched 27.3%, and KPMG botched a whopping 50%.

Add to this the impact of what Clayton Christensen calls "the innovators dilemma" and the solutions that will stop this vicious cycle are not created by the incumbents that control the markets and want to keep things as they are because the incumbents are hell bent to keep their existing revenue streams.  These incumbents are investing their resources to remove defects from and improve the speed of obsolete tools and processes.

But there are some start ups out their that recognize that what is happening is a paradigm shift and are investing the new systems that will end the vicious cycle and turn it into a virtuous cycle.

No one knows exactly how all this will play out, including me.  The vast majority of business leaders don't understand artificial intelligence correctly so what they are thinking is just flat out wrong.

The Great Transmutation of Financial Accounting, Reporting, Auditing, and Analysis explains my personal view of what is going on in the world.  What is certain is that the status quo is doomed.  What is going on is a once-in-500-year change.  These types of changes, transformations really, have occurred before.  This is the fourth industrial revolution.  That means that there have been three other such transformations.

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