Modern Accountancy

Modern accountancy will be spinning up over the coming years.  The transition will take time and no one knows exactly how it will turn out; but the change is inevitable.  By accountancy I mean the professional practice of accounting, reporting, auditing, and analysis.  This includes financial accounting, management (cost) accounting, and tax accounting.

While no one knows exactly how this change to modern accountancy will turn out, there are plenty of clues that can help you make an educated guess. Here is my list of things that will change: (To effectively understand this list, you need digital literacy. Don't make the mistake of using your old mental map to try and understand.)

  • Accountancy will become less tedious.   Today, accounting can be quite tedious.  Tomorrow, many of the tediousness will be reduced by the creation of improved, smarter tools.
  • Reduced reliance on Excel, more use of semantic spreadsheets.  Excel is a great tool, except when it is not.  It is easy to see that 20% of the Excel spreadsheets being used today can be replaced by improved modern spreadsheets.
  • XBRL-based digital general purpose financial statement use will increase.  Not only public/listed companies will report using XBRL-based digital general purpose financial reports; but also state and local governments, private equity, small and medium sized entities, etc.
  • Algorithmic regulation will take off. Call it "algorithmic regulation" or "smart regulation" or "regulation 2.0" or "regulation the internet way" or "algorithmic business thinking"; 
  • Accounting and auditing working papers will be machine-readable knowledge graphs. Think semantic spreadsheet. Think standard templates that can be modified. See Case for Semantic Oriented Accounting and Audit Working Papers.
  • BI will be modernized.  Business Intelligence (BI) will be improved.  Again, think semantic spreadsheet. Think semantic BI.  Think dimensional fact model.
  • Expert systems for creating financial reports will be created.  Think of what TurboTax did for tax return preparation.  Same thing will happen for financial statements. It is already happening.
  • Accounting knowledge will be productized.  How do you think those expert systems will get their expertise? Think knowledge products/services, information products/services, decision products/services.
  • Software will be licensed and certified. Yup, machines will be licensed and certified just like humans.
  • Accounting software will be driven by business events, not accounting transactions.  As a result, accounting software will be way easier to use and will be able to do way more things.
  • Accountants will add far more value.  Accountants will be valued more because they can focus on more important work.
  • Public digital distributed ledgers will become common.  One of the primary things in those public ledgers will be machine-readable accounting rules.
  • Accounting oracle machines will be a thing. Some accountants will create metadata, other accountants will use that metadata via smart software applications. All this will be organized into the form like an accounting oracle machine.
  • Audit will become even more of a commodity.  More financial disclosures will be "ready-to-wear" and "made-to-measure"; less will be "bespoke tailoring".
  • Lean Six Sigma will contribute to making accounting processes more efficient and productive. Machine-readable financial statements and financial statement models make Lean Six Sigma techniques easier to implement.
  • Fraud will still be perpetrated. Where there are humans, there will be fraud. Humans will be human; cannot fix that.
  • Work will be transformed. Automation can streamline many of the mundane tasks performed by accountants, auditors, and analysts. Artificial intelligence will amplify, augment, and empower these subject matter experts rather than replace them. But the threat of inaccuracy is a real threat which must be mitigated when high-quality information exchanges are required, like for financial reporting.
  • Agents will perform work, teaming with accountants, auditors, and analysts. Aggregate work capabilities will increase.
  • Humans will be in control.
Systems evolve. Yes, systems can be, and should be, hard to change. This will be the biggest change in accountancy in 500 years.

Accounting rules rank among the most comprehensively and intensively harmonized areas of private law.  Accounting rules and accounting's information model play a key role for disclosure and transparency globally.

Modern accountancy is not predetermined; rather, it will be influenced by decisions made in the coming years. By making informed choices, we can avoid and prevent the undesirable outcomes.

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