For the Dutch version, click here. Disclaimer: This article does not contain investment advice and aims only to entertain and
The accountancy profession is subject to change.
The changing profession of the accountant is subject to the event Accounting Insight 2013. The event is titled ‘Adapt to survive’ and will take place in October. The topics discussed below will be the guideline for the discussion during the event in October. If you want to discuss the topics with people from the field or you want to know more about the subject, you can scan the QR-code, visit the website of Accounting Insight and subscribe for the event.
Various developments put pressure on the traditional business model of the accounting firm. Both technological developments and changing needs of clients and society, require a cultural change within the accounting firms. Technology is changing the world around us. Accounting firms should anticipate on these developments to be competitive. Where financial records become more digitized, automated and standardized, the work of the accountant will dramatically change. Accountants sifting through boxes full of clients’ physical receipts was a known phenomenon, however these days of manual labor will be gone.
From the perspective of the client, the developments make it possible for businesses to perform standardized bookkeeping services themselves. Because clients can do more themselves, they want more from their accountant. A sparring-partner with a proactive attitude is asked for. Also the needs from society have an impact on the role of the accountant. We expect the accountant to be more transparent, where they should give a more extensive opinion about the firm they audit.
Finally, with respect to these aspects, the consequences for the education of accountants will be discussed. But first, the three most prevalent technological developments will be discussed in detail.
XBRL (eXtensible Business Reporting Language) is an open standard for automatically collecting, publishing and exchanging financial information via the internet. With this standard, different computer systems can communicate with each other in a uniform language. Numbers and text are tagged, which makes these data unequivocally interpretable and workable for different users. So, XBRL standardizes the definition of business data. In this way, data do not have to be transformed first, in order to be used for different purposes. The users of the financial statements can distill the necessary information itself from the datasets underlying the financial statements.
XBRL is a development that causes the work of the accountant to change. The accountant should give a different type of assurance than merely the “true and fair view” of the financial statements. In the future, accountants should give an opinion about the quality of the underlying processes of the firm which have led to the digital XBRL statements or they should give an opinion about the underlying data.
The purpose of an audit is to give assurance about the information in the financial statements of the client. For information to be useful for users of the financial statements, it should be timely and free from material misstatements, omissions, and fraud. The development of Enterprise Resource Planning systems have enabled the timely generation of financial information. Although the timeliness of financial reports increases, the level of assurance decreases. Monthly and daily reports are not audited, which causes inappropriate decisions by stakeholders who increasingly depend on real-time information. In this perspective, it is more relevant to have reliable up to date information than reliable information from the previous year. And this causes continuous auditing to be more prevalent in the future.
Nowadays the audit consists of an interim audit and a year-end audit. The traditional audit is both labor and time intensive because of manual audit procedures. However, the automation within firms causes accountants to rely on internal controls. Which makes it possible to have manual audit procedures to be replaced by automated audit procedures. With continuous auditing, the accountant can perform an automated audit several times a year or on a real-time basis. Enclosed with this form of auditing is the accountants’ opinion about the automated internal controls within the firm and the exceptions that will be detected by the software. At the end, the accountant will be the external supervisor of the internal system of the client. However a possible danger for the independence of the accountant with this development, is the risk of self-assessment because the accountant will be too much involved with the client.
Cloud computing is another important technological development that will have implications for the future of the accountancy profession. Cloud computing is a network of computers that makes software, hardware and data available on request via the internet. Cloud computing is a radical form of outsourcing. In this way, the user has been no longer the owner of the hard- and software used and is not responsible for maintenance. Because of cost savings, cloud computing will be used more and more by firms. In the future, more financial systems of firms will go to the cloud. With this development of outsourcing systems to the cloud, the traditional audit of the firm should be focused on guarantees and certifications from the products and services in the cloud. This is a so-called one-to-many principle: one audit should be performed with respect to one service provider with many clients. Instead of one audit for every client, one general audit of the service provider is needed which automatically encompasses all the different clients. In the end, the work of the audit is more complicated and an IT-expert will be necessary. This has a decreasing effect in the workload of the accountant.
Besides the changes in technology, there are other changes to be made in the profession of the accountant. After the financial crisis the confidence in the financial institutions is gone and so is the confidence in the profession of the accountant. It is not obvious anymore that what the accountant does is right. Because of this decreasing confidence, the accountant nowadays has to convince and satisfy his customers and outreach their expectations. Especially now, due to the changes in society, there is an opportunity for the accountants to strengthen their relevance.
Because of the extensive automation, the administrative- and compiling services of accountants are under pressure. Clients can perform these services themselves or other players in the market can perform these services less costly. As a result, the automation will ease the accountants’ burden. However, the automation provides a new opportunity for accountants to prove their value. The automation increases the real-time availability of financial numbers. This allows accountants to present themselves as an advisor for the entrepreneur. Advice will be more important in the future for these accountants that heavily rely on administrative- and compiling services. This development coincides with the changed expectations of the clients. Clients are expecting more from their accountant. Accountants are expected to be more proactive instead of the traditional reactive attitude. They will be the sparring partner of the entrepreneur and they have to think along with the entrepreneur about issues like strategic opportunities.
A profession with more content
As a matter of social responsibility, the accountant should not bound his proceedings only to controlling. The auditors’ statement does not include risks detected and handled in a company, so the profession of the accountant should include more than just controlling. The accountant should not only ask the audit committee what they are worried about, but the accountant should be part of that discussion. More than ever, the accountant has to give his opinion on the behavior of the management, the business risks and the financial stability of a company. This is also what external stakeholders expect from the accountant. The International Auditing and Assurance Standards Board (IAASB) recently proposed to give more content to the profession of the accountant, but the question will be if the accountant has to change their profession like this.
Against what is said before, there are still many people saying the accountant should stick to his job and restrict his work to the core business, monitor and assess the figures. The accountant itself thinks the responsibility of reporting to the external stakeholders belongs to the management and supervisory.
This year, the core of the policy of the board of the association of Dutch professional accountants (NBA) focuses on the relevance of the profession of the accountant. The quality of controlling is highly dependent on the environment in which the accountant operates and that is why the accountant should issue clear signals if there is any defect in governance control. The training package consists of improving professional skepticism and particularly focuses on improving oral and written communication.
Changing the study of the accountant
Due to the developments, a change in the study and training of the accountant is necessary. The current educational model matches not sufficiently to the needs of the market and society. Accountants have to focus more on risks and the way they communicate the risks. Therefore, the traditional accountancy subjects should contain more technological insights, governance and social responsibility. Soft skills should become hard skills and ethics will be of greater value.
Technological developments are changing the assurance work of the accountant. Within the assurance engagements, more IT knowledge is required. There is a widespread consensus that the study of accountants should contain more IT. However, does the accountant have to be an IT-auditor next to being a financial accountant? The other option is to let the IT-auditor and the accountant work together, to get the best of the two competitive worlds.
“Take hold of the future or the future will take hold of you”
In conclusion, the services of accountants are changing due to the technological developments and the increasing expectations of clients and the society in general. Technological developments will change the work of the accountant dramatically. Understanding the internal controls of the client and a system-based audit will be more important. Therefore a change in the study of the accountant is necessary. In addition, traditional administrative- and compiling services will disappear thanks to the automation. However, this automation paves the way for accountants to strengthen their advisory services. Which in turn, satisfies the needs of the client. On the other side of the relation, to strengthen their social role, the accountant should overcome the information gap between the accountant and the stakeholders. More content should be given to the opinion of the accountant to satisfy the users. So, the demand for traditional services decreases because of the various developments. However, to have their relevance, there are opportunities for the accountancy profession to provide new services. In the end, it is important to take hold of the future or the future will take hold of you.