Freemasons of the Information Age
Put a tool in the hands of 'someone' with no skill, experience, or knowledge; that 'someone' will very likely produce an output that is clumsy, ugly, and perhaps barely functional. But put that same tool in the hands of a skilled, experienced craftsmen with the know-how to use that tool; they can produce works of elegance, utility, beauty, and durability.
In very general terms, "an accounting" is simply providing the details about something usually as of a point in time or for a period of time. For example, when you go out to dinner with a group of friends and the waiter brings one check and each of your friends throw in some money to pay for your restaurant bill, 'an accounting' is performed to make sure what was contributed by your friends matches the restaurant bill including the amount of the tip the group wishes to be added to the restaurant bill.
But in more specific terms, accounting usually relates to the financial accounting of some economic entity by a professional accountant per some formal set of accounting rules. That process of accounting is performed using professional tools by skilled, experienced professionals with the objective is compliance with accounting rules. Those professional accountants use the professional tools and techniques of the universal technology of accountability available at the time.
Typically when a non-accountant performs an accounting; that non-accountant uses what can be referred to as a single entry system, basically a simple list perhaps, when that non-accountant performs an accounting. But when a professional accountant performs an accounting, double-entry bookkeeping is the tool used for performing an accounting. Why? Because professional accountants need to make certain that their accountings are free from errors and represent a true and faithful accounting of an economic entity. Further, double-entry systems allow for the creation of internal controls such as the segregation of duties.
Professional accountants use professional tools, professional techniques, understand good practices and best practices, and otherwise has the skills, experience, and know-how to get the job of an accounting done right (i.e. high quality information) because that is their responsibility. A professional accountant is subject to consequences for noncompliance with the accounting rules for performing an accounting. This is just as a plumber is responsible for following the building code.
There is a big difference in complexity between performing an accounting for a mom-and-pop size economic entity and an accounting for a large multi-national economic entity.
Arguably, there is also a big difference in performing an accounting a hundred years ago and performing an accounting today.
Today, the complexity of accounting rules, the complexity of transactions, the quantity of transactions because of the size of economic entities, and the unrelenting pace of transactions results in a very different environment than performing an accounting a hundred years ago. As the environment changes professionals performing an accounting need to adapt to the new environment in which they must then operate. Sometimes that involves learning new tools and new techniques.
There are three general approaches to detecting mistakes that lead to noncompliance. The first way is to build processes and perform tasks that assure compliance. The relative cost of this proactive approach is say $1x. The second way is to perform processes and then check the resulting outputs from the processes for noncompliance and fix any mistakes that were detected. The relative cost of this reactive approach is $10x, basically an order of magnitude more that not allowing the mistakes to occur in the first place. The third way is to deal with the fallout of noncompliance mistakes that have been detected, say a regulator sending you a nasty letter pointing out the noncompliance. The relative cost of this approach is $100x. The cost of rework (a.k.a. fixing mistakes) and damage control from the fallout if noncompliance occurs are part of total cost and need to be factored in.
The manufacture of automobiles has completely flipped from the third approach because too many "lemons" slipped through the system which was very costly and now automobile manufactures strive to follow Lean Six Sigma techniques and principles because total costs are reduced. The result is automobiles that are of significantly higher quality today than the automobiles manufactured in the 1970s.
The institution of accountancy can learn a lot from the experiences of automobile manufacturers. After all, accounting is a manufacturing process. The manufactured product of accounting is information.
A brick wall is made of exactly two things: bricks, mortar.
But a brick wall created by a master craftsman/craftswoman, or mason, and a brick wall created by a “weekend warrior” with no working knowledge of masonry and little skills or know-how will be very different. A mason is a professional builder of brick walls, a master craftsmen. Master craftsmen are created and that process takes time and effort.
The term “mason” can be further broken down in to more detailed distinctions. In the Middle Ages, the terms rough masons, row masons, stone setters, layers and freemasons were used to signify differences in skills. Freemasons who were the most skilled were paid the best.
Just like most other things, the typical professional accountant is at best average. The skills, experience, and know-how forms a standard distribution, a bell shaped curve. But just like a calculator augments an accountant's ability to do math; it will also be the case that artificial intelligence, when properly applied, will also augment the skills, experience, and know-how of professional accountants, moving the bell shaped curve.
Masons built our physical world. Knowledge engineers working with subject matter experts in the area of knowledge called accounting with the right know-how will construct how an accounting works in our digital world. As the world transitions from the industrial age to the information age, what many are referring to as the fourth industrial revolution, new tools and techniques will become increasingly important.
Remember that the map is not the territory. The mental map that you have which explains how the industrial age worked will not help you understand the information age. You need a new mental map.
Tools and techniques have changed before. Paper ledgers where commonplace a hundred years ago, now computerized accounting system are dominant. Paper spreadsheets of yesterday have been replaced by electronic spreadsheets of today. Today's electronic spreadsheets could very well be replaced by even better tools and techniques, modern spreadsheets. This will very likely result in new ways to create accounting working papers and audit schedules.
Professional accountants, some of them anyway, will be the equivalent of freemasons of the information age. These professional accounts will build the infrastructure of the information age. Proficiency needs to move beyond literacy to fluency and mastery.
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