Disruptive technology: A powerful tool in the hands of today's forward-thinking, entrepreneurial CPA
The AICPA's Lisa Simpson outlines how the digital age is transforming a traditional profession and why accountants are well positioned to benefit, but only if they can adapt.
Leveraging technology for competitive advantage
Lisa Simpson, the AICPA's Associate Director for Firm Services, was one of three industry experts who featured on an industry panel at the recent 2018 North America Leadership Conference in Scottsdale, AZ.
Giving her views on where the accounting industry is going, Lisa commented that the market for accounting (and tax and audit) services is evolving very fast right now and that firms need to shift their mind set now: "To paraphrase Thomas Friedman, fast is so fast right now, and if you’re not adapting, you’re getting really, really slow."
If that wasn't a shot across the bows, Lisa went on to comment that 53% of middle market firms "do not think that disruption is going to affect them."
With most CPA firms performing well right now, it is difficult in in the current climate, according to Lisa, for firms to judge when the best time is to disrupt a market and take a risk.
The impact of disruptive technologies
Behind much of the change are technologies such as artificial intelligence (AI) and machine learning. Lisa pointed out that one of the Big Four is already using bots to read through thousands of leases and contracts: "They are analyzing those pages and extracting the key terms to find risk."
Huge efficiency and greater productivity are the results - Lisa advised that incorporating these technologies can create competitive advantage but warned that "the key is to not give that productivity away by completely discounting fees."
The automation of data entry and reporting are other areas that can create further competitive advantage by freeing accountants up to focus on 'value-add' services away from compliance and transactional processing.
The power of data analytics
Another growing trend pinpointed by Lisa is the growing trend in the accounting (and legal professions) for data analytics software that is enabling professionals to analyze masses of data to find trends, anomalies, risks and potential areas of fraud (for example in an audit or a legal contract).
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Lisa also shared the AICPA's expectation that blockchain, among other things the underlying technology of cryptocurrencies such as Bitcoin, will grow exponentially in the next five years.
As Lisa explained, blockchain is "a type of three entry system of bookkeeping – there is a third, private record keeping log that serves as the guardian of the data."
To meet the challenges and opportunities presented by blockchain, the AICPA is partnering with the Wall Street Blockchain Alliance (WSBA). This will involve, according to Lisa, working with blockchain developers to get involved in understanding the architecture behind blockchain and in translating to the profession the impact on firms.
And the impact on audit?
Technology change also means that auditing standards need to be looked at. Lisa explained that the AICPA is talking to the Auditing Standards Board about the impact of technology on not only standards but also on the quality of services provided and the reduction of risk.
Skilled needed by the profession in the future
Referencing a study carried out by The World Economic Forum, Lisa explained that "within five years, more than a third of the skills considered important today will no longer be relevant." In 2020, the top skills are predicted to be:
1. Complex problem solving
2. Critical thinking
4. People management
5. Coordinating with others
6. Emotional intelligence
7. Judgment and decision making
8. Service orientation
10. Cognitive flexibility.
The AICPA believes that accountants are naturally well positioned, particularly in terms of complex problem solving and critical thinking, and needs to develop these core skills further.
What do these changes mean for the accounting profession?
According to the AICPA’s accounting graduates supply and demand report (2017 AICPA Trends Report), since 2014, the number of new accounting graduates firms are hiring is down by 8,300 – in fact, 20% of the new hires are non-accounting grads. Lisa highlighted that the AICPA will be providing resources to help firms manage the recruiting process for these new types of hires and integrate these new skillsets into their practices.
A shift in the accounting firm's business model
The AICPA is seeing a slow shift in the typical accounting firm's business model from the traditional pyramid model (high leverage) to a model where there is a middle, but where there are fewer people at the base. The AICPA, according to Lisa, sees these workflow issues being solved by outsourcing and automation: "As the middle of the pyramid will be likely wider than the base, firms will be hiring laterally and more from industry, particularly people from IT and start-up companies who can bring in complementary skill sets such as data analytics."
The accountant of the future
Lisa also explained that successful future accountants will need to be good at:
- Data management (database applications)
- Data analysis
- Understanding how computers work.
Lisa added: "There’s a conversation going on right now regarding what you do with a 45 year old person in the firm who still has a long career ahead but may not have these skills. This person needs help to stay invested in the profession and make the changes needed."
Accountants will also need to continue doing what they are good at, specifically being professionally skeptical, understanding the business context, being curious, life-long learners, and being entrepreneurial and adaptive.
"It’s great to have an understanding of numbers, but you need to know how to make that relevant to your client, know which trends to dig into, and ask the right questions in your data analysis. This can be achieved with training and repeated coaching."
Lisa Simpson, AICPA
Big opportunities offered by cyber security risk management?
While warning that it is complex and requires investment, the AICPA sees a big opportunity, according to Lisa, for CPA firms to provide not only cyber security consulting, but also cyber security assurance services as the market develops. "You don’t need to be the expert in this area, but you at least need to have a relationship with a company that does and you need to ask clients about their concerns around exposure to risk."
The AICPA offers various resources to help firms enter this arena, including their Cybersecurity Fundamentals for Finance and Accounting Professionals Certificate and the PCPS Toolkit for Building a Cybersecurity Practice.