Discuss about the Automating Financial Compliance Monitoring.
Artificial intelligence is referred to as technological intelligence that can be demonstrated by the machines. It is of a great contrast with the natural human intelligence as its function and behavior can be influenced as per the need. Therefore, it is issued by the enterprises to maximize their organizational goals (Barnett & Treleaven, 2017). If the machines can be utilized efficiently, they are capable of doing tasks that cannot be done by human beings moreover; it reduces the time and saves money. Similarly, block chain that was invented by Satoshi Nakamoto in 2008 is a technology that is devised as a digital currency or bit coin. It is a language of programming that enables the users to make sophisticatedly make contracts and creates accounts that pay themselves when share certificates and shipment arrives or, which provides their owner dividends automatically if there is an achievement of a level profits.
According to Hood (2018) the concept of artificial Intelligence is one of the most trending topics today, the practice of making machines that is capable of doing the tasks that requires intelligence. As automation and digitization, influence more business processes, the need increases to master emerging technologies. This will be key to professional success for accountants, regardless of whether they work in public practice or private industry. Two of these technologies—block chain and artificial intelligence (AI) has the potential to reshape the profession of accounting. Here is a brief overview of what exactly these tools are, followed by suggestions on how accounting departments can introduce them for smooth functioning.
Block chain is an accounting technology. It is concerned with the transfer of ownership of assets, and maintaining a ledger of accurate financial information. The accounting profession is broadly concerned with the measurement and communication of financial information, and the analysis of said information (Baron, 2017). Much of the profession is concerned with ascertaining or measuring rights and obligations over property, or planning how to best allocate financial resources. When it comes to accountants, the use of block chain gives a clear cut idea of assets ownership and existence of obligations, and could enhance efficiency.
`The business potential for the technology is broad and deep. In the accounting profession, block chain could have interesting implications for auditors. Due to block chain technology’s automated, real-time verification and enhanced security, auditors might not have to spend nearly as much time on verifications, confirmation, and analyses of specific accounts. Block chain could make audits considerably faster and less expensive to perform (Dai & Vasarhelyi, 2017)).
Organizations of all types are using AI as a tool for accounting. It can helps to research the applicable reporting codification or tax code line item. Many renowned organizations uses AI for a variety of applications and tools real-time analysis of financial and operating performance and fraud detection (Baron, 2017). AI can perform easily more routine tasks than that human accountants can, therefore, it is a threat for the accountants will lose their jobs to software.
Block chain and AI is capable of benefiting the profession of accounting by decreasing the maintenance cost, reconciling ledgers, and providing certainty of ownership and assets history (Treleaven & Batrinca, 2017). They can help accountants gain clarity over the available resources and obligations of their organizations, and also free up resources to concentrate on planning and valuation, rather than recordkeeping.
Alongside other automation trends such as machine learning, block chain will lead to more and more transactional-level accounting being done without the manual work of the accountants. Instead, successful accountants will be those that work on assessing the real economic interpretation of block chain records, combining the record to economic reality and valuation (Hong & Rong, 2018). For example, block chain might make the existence of a debtor certain, but its recoverable value and economic worth are still debatable. And an asset’s ownership might be verifiable by block chain records, but its condition, location and true worth will still need to be assured.
The way in which the block chain and the AI in the financial sector is increasing it can be said that block chain can totally be a replacement for bookkeeping and reconciliation work. As said by Hood, this could threaten the work of accountants in those areas, while adding strength to those focused on providing value elsewhere. For example, in due diligence in mergers and acquisitions, distributed consensus over key figures allows more time to be spent on judgmental areas and advice, and an overall faster process (Hong & Rong, 2018). The two technology of accounting has applications in external audit. Performing confirmations of a company’s financial status would be less necessary if some or all of the transactions that underlie that status are visible on block chains. This proposal would mean a profound change in the way that audits work.
A block chain, when joined with suitable analytics of data, could help in assertioning the transactional level involved in the process of audit, and the skills of auditor would be spent in more efficient way considering higher-level questions. Moreover the block chain offers many opportunities for the accountancy profession (Kokina, Mancha & Pachamanova, 2017). Accountants are seen as experts in record keeping, application of complex rules, business logic and standards setting. They have the opportunity to guide and influence how block chain is embedded and used in the future, and to develop block chain-led solutions and services.
Hood in his article has advised that in order to become an integral part of the financial system, block chain and the artificial intelligent machines must be developed, standardized and optimized. This process is likely to take many years, it has already been nine years since bit coin began operating and there is much work still to be done (Swan, 2015). There are many block chain applications and start-ups in this field, but there are very few that are beyond the proof of concept or pilot study stage. Accountants are already participating in the research, but there is more for the profession to do. Crafting regulation and standards to cover block chain will be no small challenge, and leading accountancy firms and bodies can bring their expertise to that work.
The reduction in the need for reconciliation and dispute management, combined with the increased certainty around rights and obligations, will allow greater focus on how to account for and consider the transactions, and enable an expansion in what areas can be accounted for. Many current-day accounting department processes can be optimized through block chain and other modern technologies, such as data analytics or machine learning; this will increase the efficiency and value of the accounting function.
As a result of the above, the spectrum of skills represented in accounting will change. Some work such as reconciliations and provenance assurance will be reduced or eliminated, while other areas such as technology, advisory, and other value-adding activities will expand. To properly audit a company with significant block chain-based transactions, the focus of the auditor will shift (Kokina, Mancha & Pachamanova 2017). There is little need to confirm the accuracy or existence of block chain transactions with external sources, but there is still plenty of attention to pay to how those transactions are recorded and recognized in the financial statements, and how judgmental elements such as valuations are decided. In the long term, more and more records could move onto block chains, and auditors and regulators with access would be able to check transactions in real time and with certainty over the provenance of those transactions.
Accountants will not need to be engineers with detailed knowledge of how block chain works. However, they will need to know how to advise on block chain adoption and consider the impact of block chain on their businesses and clients. They also need to be able to act as the bridge, having informed conversations with both technologists and business stakeholders. Accountants’ skills will need to expand to include an understanding of the principle features and functions of block chain (Karajovic, Kim & Laskowski 2017).
Another technology that is used other than the block chain is Technology of OCR that allows the accountants to alter the PDF files, images captured by a digital camera,scanned paper documents or into editable and data that is searchable (McWilliams, 2017). This mechanism of digitization of record has helped streamline the archiving process by making documents searchable, sortable, and transferable. Another added bonus to this type of technology is that now accounting firms are empowered to be nimbler with their accounting processes. Andrew Marder from Accounting Web writes that, “OCR is the technology that finally kills the hand-entered receipt…The technology has already made leaps and bounds, but there’s plenty of room for process improvement.”
Therefore, it can be said that the changes in technology can impact accounting their performance. According to the critical analysis of the article and views of various other scholars in this regard it can be said that it is both a threat and an opportunity for the accounting profession. The various accounting technology is replacing their job which is a thread at the same time the adaptation of the technology has a lot of scope for their enhancement in the field which is an opportunity.
References
Barnett, J., & Treleaven, P. (2017). Algorithmic Dispute Resolution—The Automation of Professional Dispute Resolution Using AI and Blockchain Technologies. The Computer Journal, 61(3), 399-408.
Baron, J. (2017). Blockchain, accounting and audit: What accountants need to know. Accounting Today.
Dai, J., & Vasarhelyi, M. A. (2017). Toward Blockchain-Based Accounting and Assurance. Journal of Information Systems, 31(3), 5-21.
Hong, S., & Rong, S. C. (2018). Developing a Blockchain based Accounting and Tax Information in the 4th Industrial Revolution. ?????????, 9(3), 45-51.
Hood, D., (2018), Brace yourself for AI & blockchain: There’s less threat and more opportunity in emerging technologies than many think. Accounting Today, Vol. 32 No. 1, pp.1&30-31, Database: Business Source Ultimate
Karajovic, M., Kim, H. M., & Laskowski, M. (2017). Thinking Outside the Block: Projected Phases of Blockchain Integration in the Accounting Industry.
Kokina, J., Mancha, R., & Pachamanova, D. (2017). Blockchain: Emergent Industry Adoption and Implications for Accounting. Journal of Emerging Technologies in Accounting.
McWilliams, K. (2017). Productivity in accounting services. Improving service sector productivity: the economic imperative, 118.
Swan, M. (2015). Blockchain: Blueprint for a new economy. ” O’Reilly Media, Inc.”.
Treleaven, P., & Batrinca, B. (2017). Algorithmic regulation: automating financial compliance monitoring and regulation using AI and blockchain. Journal of Financial Transformation, 45, 14-21.
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