Building a Mindful Machine for Accountancy

Burroughs build the first accounting machine in about 1928. That has since been improved upon.  It is time for another improvement.

In another blog post I described the notion of what some people refer to as a "mindful machine". People use other terms to describe what I am talking about, but I like "mindful machine" which "smartens you up" and I am particularly interested in accountancy.

By "accountancy" I mean accounting, reporting, auditing, and analysis; external compliance reporting, internal management and cost reporting, tax reporting, and special purpose reporting; for profit, not-for-profit, state and local government reporting, federal financial reporting.  Basically, the full meal deal.

Imagine a knowledge based mindful machine specific to accountancy.  That machine is easy to use because complexity has been carefully managed.  Imagine a human accountant and an computer-based "artificial mind" interacting within a single common ecosystem. That common ecosystem provides a shared conceptualization and has theories, knowledge, reasoning, governance (i.e. curation, checks and balances, scrutiny).  The knowledge in that common ecosystem is discernable because it is clearly specified. Knowledge is testable so that agreement can be confirmed by the subject matter experts (SMEs) in that community of practice. 

The knowledge is extensible, elastic; the ecosystem is flexible where it needs to be flexible. There are guardrails or "bumpers" associated with that extensibility/elasticity/flexibility that keep both the machine and human within boundaries; preventing wild behavior.  Knowledge is represented in a global open standards based form that is understandable by a machine-based process but then from that computer-based representation, a human understandable representation can also be generated.  Why?  Humans need to confirm that the global open standards machine-based representation is complete, consistent (e.g. free from contradictions), precise and accurate (e.g. properly reflects the beliefs of the community).  Having two different representations (one for machines, a different one for humans) can result in inconsistencies.

This common ecosystem can result in a virtuous cycle. Unprecedented reductions in system friction caused by rekeying of information, multiple versions of information which could be different, copying/pasting of information is minimized or even perhaps eliminated.

There are others that make suggestions on how one might go about building something like a "mindful machine".  Here are some suggestions that I am aware of: (in no particular order)

  1. Jessica Talisman has the notion of the "ontology pipeline" which points out that librarians have a lot of experience with metadata management and that building out all the metadata you might need is a process and that there are a number of different forms that the metadata can take.
  2. Semantic Arts in general and Dave McComb in particular and their open source GIST upper ontology helps one understand the role of upper level or top level ontologies.
  3. Giancarlo Guizzardi has a lot of ideas related to "carving up reality" and how to guarantee intra-worldview consistency and inter-worldview interoperability. 
  4. John Sowa and his work with common logic which has become an ISO standard logic framework.
  5. Ora Lassila and all his work related to making the Semantic Web work.
  6. Mike Dillinger and all his work related to understanding knowledge graphs.
  7. Bill McCarthy and all his work related to REA and the notion of the "business event".
  8. Dave McComb and Cheryl Dunn for taking REA to the next level with their Data Centric Accounting (DCA) and their notion of the "core event".
  9. Willi Brammertz and his work to create ACTUS and his insights related to Luca Pacioli's Venetian Method of double entry bookkeeping.
  10. XBRL International's and in particular Campbell Pryde and his work related to the Open Information Model (OIM) and XBRL Rule and Query Language 3.0.
  11. The Object Management Group, and in particular Pete Rivet, and their efforts to create the Standard Business Report Model (SBRM).
  12. The work of HL7 FHIR. Excellent example of what is possible.
  13. The U.S. Securities and Exchange Commission (SEC) for making all those XBRL-based public company financial reports available and for taking a chance on XBRL; excellent test cases, very helpful in understanding those reports.
  14. The European Single Market Authority (ESMA) and their European Single Electronic Format (ESEF) used by listed companies.
  15. The FASB, and in particular Louis Matherne and all their work to create the US GAAP XBRL Taxonomy which is important financial reporting metadata.
  16. The IFRS Foundation and IASB for their work with digital financial reporting and creating the IFRS XBRL Taxonomies.
  17. Last but not least, Wayne Harding and all the others on the AICPA High Tech Task Force that got this show on the road; Barry Melancon and the AICPA for taking the risk to create what became XBRL; and all the members of XBRL International during the "cowboy days" when we turned this idea into reality. Extensible Business Reporting Language (XBRL) 2.1
If you want to study XBRL-based digital financial reporting I would encourage you to start small and then build, and build, and build.  Here are working proof of concepts: (Seattle Method Resources)




Additional Information:

 

Comments

Post a Comment

Popular posts from this blog

Big Idea for 2025: Semantic Accounting and Audit Working Papers

Image
I began my career in accounting in 1982 as an auditor with Price Waterhouse when accounting and audit working papers and schedules were 100% paper.  But within three months, I was creating many of those same working papers and schedules first in VisiCalc and then Lotus 1-2-3.  I would create those schedules and working papers electronically, then print them out, and tape them into the bundle of paper that supported our audits. The Compaq luggable computer was invented and electronic spreadsheets where even more compelling. Today, accounting and audit working papers tend to be 100% electronic proxies for those paper documents created in Excel or some other electronic spreadsheet, Word or some other word processing document, PDF generated from some word processing document, and maybe HTML.  All of these are presentation oriented proxies for documents and none of them is truly understandable by a computer based process. The next step in the evolution of accounting and audi...
Read more

Microsoft CEO: "AI Agents will Replace All Software"

Image
We have entered the "agentic era"; the era of the agent or intelligent software agent . Others refer to this as the "algorithmic economy".  Maybe think many very intelligent  microservices  exchanging information with each other and can work globally. In an interview with BG2, Microsoft CEO Satya Nadella predicts that (paraphrasing) SaaS (software as a service) is dead and that AI agents will replace all software. The entire interview is the first link in "Additional Information" below.  These three videos provide a focused look at this statement: LinkedIn post including short video AI Insights Explorer video  (Microsoft CEO Predicts: "AI Agents Will Replace ALL Software") Microsoft CEO's Shocking Prediction: "Agents will replace ALL software" Here is my personal interpretation of what Satya Nadella is saying and what it means.  First, Nadella says that we are "on the brink of a monumental shift".  I agree with that statem...
Read more

Professional Study Group for Digital Financial Reporting

Image
Digital financial reporting is a thing.  The IFRS Foundation explains digital financial reporting  in an article, Digital Financial Reporting - Facilitating digital comparability and analysis of financial reports . OFFICIAL VERSION : The IFRS Foundation publishes an XBRL taxonomy for IFRS for SMEs (2024).  You can find official information about that XBRL taxonomy here on this web page, IFRS for SMEs as Published by IFRS Foundation (2024) . (Also see this PDF, IFRS Taxonomy Illustrated .) Since that official XBRL taxonomy is effectively a "pick list" created from the perspective of standards setters (i.e. not very practical, easy to use, and intended for ease of use by reporting economic entities);  ENHANCED VERSION : I have created an enhanced version of that same XBRL taxonomy, see  IFRS for SMEs 2024) - ENHANCED (Work in Progress) . The enhancements make the IFRS for SMEs XBRL taxonomy more useful in many different ways.  The enhancements are driven...
Read more