How artificial intelligence will impact accounting
Artificial intelligence is no longer the stuff of science fiction and Hollywood movies. Oliver Griffin asks whether this new technology is cause for concern, or a new avenue for accountants and the profession
So many works of film and fiction are hooked on the rise of artificial intelligence (AI) and what it might mean for humanity. They are often apocalyptic tales – Blade Runner, Alien, Terminator – where mankind comes off badly. But now that AI is being spearheaded by internet giants such as Google, Microsoft and Amazon, and our daily lives are increasingly affected by AI systems – chat bots, purchase prediction, news generation – what will really happen?
In 2015 the UK media widely picked up on American media organisation NPR’s calculator that could predict which jobs are susceptible to computerisation. The calculator, using research by the University of Oxford, said accountants have a 95% chance of losing their jobs as machines take over the number crunching and data analysis.
But as a recent report from Deloitte highlighted, technology advances have historically eliminated some jobs and created others. There’s no reason to suppose that this trend will not continue, says Deloitte: “We cannot forecast the jobs of the future, but we believe that jobs will continue to be created, enhanced and destroyed much as they have in the last 150 years.”
Till Leopold, project lead on WEF’s employment, skills and human capital initiative
We expect around 35% of skills will be different in the near future
“Will AI reduce the need for accountants? I think the answer is probably yes,” says Richard Anning, head of ICAEW’s IT Faculty. “But you have to define what an accountant is. If you’re looking at some of the more repetitive bookkeeping or process-driven tasks, those are more likely to be subject to automation than the higher value tasks,” he says.
Michael Whitmire, CEO and co-founder of FloQast, an accountancy software startup based in Los Angeles, agrees: “Accounting departments overall will be trimmed down and the employees left will be able to focus on more strategic initiatives, like process improvement, cost control, and capital optimisation. AI is already beginning to automate tedious tasks such as data entry. Automation is occurring at the staff level, but it will creep up the corporate ladder and begin to automate higher level accounting jobs,” he says.
The Future of Jobs report, published earlier this year by the World Economic Forum (WEF), predicts substantial changes to jobs and employment for white-collar workers as technological advances continue to gain momentum. Its statistics on the changing nature of work, across all industries, are astonishing. Many of the most in-demand jobs did not exist 10 years ago; 65% of children entering primary school now are expected to end up working in roles that currently do not exist. The WEF report also warns that while previous incidents of technological advancement have led to increased prosperity, productivity and job creation, these changes were not “free of risk or difficulty”.
In the coming years, disruptive changes to business models will profoundly impact the employment landscape. It is no surprise, then, that the era has been dubbed the fourth industrial revolution. As with its namesake, this new wave of change could lead to workers – this time in white-collar jobs – disenfranchised by new tech in the short term, a phenomenon now known as technological unemployment.
“We expect around 35% of skills will be different in the near future,” says Till Leopold, the project lead on WEF’s employment, skills and human capital initiative. “We need people who are in university now to be ready to re-skill the moment they graduate. The skills people need will be quite different in a few years. Their day-to-day jobs will be quite different.”
For Anning, this raises serious questions over junior accountants and how they will learn the necessary skills they need to develop their careers. “If a lot of the lower level, process type junior work might be automated, it’s a bit of an issue for people to get experience,” Anning explains. “We will need to find them opportunities so they can get that experience and become more strategic. They can be business partners and business coaches to clients and businesses.”
But on the economic and social disruption, how much is hype, and how much is genuinely possible? According to Leopold, AI will lead to a net reduction in jobs. But Anning says: “There are a number of click-bait articles out there that talk about how AI is going to get rid of accountancy. But a lot of what is happening now is more mundane, for example OCR (Optical Character Recognition); that’s just about scanning invoices. There is an element of fear, an element of education, but there is also opportunity.”
This idea is supported by Leopold, who also argues that any reduction in jobs would likely be short term. “If you look at the broader picture, the impact could be much more benign. It’s important to keep other areas in mind as well.” Leopold hopes that the rise in AI will lead first and foremost to increasingly well rounded education in schools and universities.
Shamus Rae, a partner at KPMG
With more data available, the case load for judgement work is just going to increase
He says: “AI will increase our audit quality, as it begins to allow us to ask a lot more questions. It will improve efficiency in what we do and it will provide more insight. More than whole jobs disappearing, we will more likely see an impact on skill sets and we will still need humanities. We want this to lead to a more holistic education for all.”
According to the WEF report, very few people in professional services jobs believe that AI will have a profound impact on the way they work, at least until 2020. In total, only 7% of professional services respondents said that advances in AI and machine learning (ML) are making it possible to automate knowledge-worker tasks that have long been regarded as impossible or impractical for machines to perform.
Elsewhere, just 5% said that these factors were “drivers of change”, a minuscule number when compared to the 63% who predict flexibility and the changing nature of work will drive change, followed by big data processing (40%) and mobile internet and cloud technology (38%). But who knows if these predictions are wildly off the mark?
“Paralegals in law firms are an example of where AI could – and will – take over some of those jobs in the future,” Leopold says. “However, there will be a need for a lot of data analysts. There will be a new war for talent in those skill sets. After a while, we will also likely see an increase in computer science hiring and similar skills as work becomes more digitised.”
According to the WEF, the biggest expected drivers of employment creation are demographic and socio-economic in nature. This is particularly true of the opportunities currently offered by young demographics and rising middle classes in emerging markets, as well as the growing economic power and aspirations of women.
The biggest threats to job creation, the organisation said, include increased geo-political instability, as demonstrated by war in the Middle East; the UK’s decision to leave the EU; and the potential for a President Trump.
Leopold says that both government and employers will need to take active roles in ensuring workforces are ready to adapt to more regular demands for change. “We believe that as the new technologies come out, they will have a fundamental impact on many of the systems that we have in place. This will require a lot more life learning and re-skilling. We need employers and governments to be more proactive in helping this than they currently are.”
However, for Whitmire, the changes won’t be too drastic for accountants. “Accountants will still need to have an understanding of technical accounting guidance, whether it’s GAAP, IFRS or both. One area of change will be the addition of IT-focused employees directly to accounting departments, who will specialise in implementing and maintaining various pieces of software.”
For some firms, the new war for talent is being planned for, if not already underway. “Maybe we will start to look at hiring technology graduates,” explains Shamus Rae, a partner at KPMG and the Big Four firm’s lead for innovations and investment. “We have got quite reasonable growth plans and we do plan to increase the number of staff that we have got. But we will reduce the number of repetitive jobs and amount of receptive work we do; we see this as an opportunity for rebalance.
Nick Frost, KPMG’s audit technology partner
AI will increase our audit quality, as it begins to allow us to ask a lot more questions
“With more data available, the case load for judgement work is just going to increase,” Rae continues. “Do we expect repetitive work and
jobs to go? We absolutely do. But an increase in artificial intelligence and consulting work can help our clients to improve their businesses, too.”
For Rae and Nick Frost, KPMG’s audit technology partner, the predicted decimation of accountancy jobs at the hands of AI is grossly overestimated. “Until we know exactly how the land lies, I wouldn’t give a statistic like Steve Varley did,” says Frost. (Steve Varley, chairman and managing partner of rival Big Four firm EY, claimed earlier this year that graduate hiring would fall 50% across the firm by the year 2020.)
But there is an expectation of rising demand for accounting businesses data analysts and business consultants in accountancy firms. “There are huge opportunities for making sense of data, whether that’s corporate data or sustainability reporting,” explains Anning.
However, there could be a need to help accountants develop more soft skills on top of those that are traditionally prized within the profession. “The most important skill is communication, so that you can actually explain what you want to know,” he says.
It is important that distinct lines are drawn between how the Big Four firms make use of AI and what smaller practices do. While Anning acknowledges that “the big ticket work” will largely involve the Big Four, Whitmire warns that smaller practices must be ready to adapt to developing technology too. “If small firms do not adapt to the changing times there is a huge danger of being left behind,” he says. “Technology has finally caught up with accounting and firms of all sizes must keep up with technology trends to remain relevant in the marketplace.”
For Frost, artificial intelligence platforms will be a major boon for accountants in audit teams across the world. “AI will increase our audit quality,” he explains, “as it begins to allow us to ask a lot more questions. It will improve efficiency in what we do and it will provide more insight.”
In February this year, KPMG announced that it had been working with IBM Watson, one of the most advanced artificial intelligence technology platforms available. It works by using natural language processing and machine learning to reveal insights and information from huge quantities of unstructured data.
“We have artificial intelligence engines up and running,” Rae says.
“We couldn’t be more prepared. Now, we can start to inspect and use our data in more depth. If you look at our ability to audit, with regards to looking at a bank, for example, then we can look at them much faster. We think adopting artificial intelligence will be challenging but wholly positive.”
Remote working could also benefit, says Leopold. “The gig economy and the digitisation of work will have an effect on jobs,” Leopold adds. “A lot of this work could become freelance, which will see professional services workers engaged in project-based teams.”
Overall, the profession – and its client base – appears to be moving to embrace AI. “Having our clients on board is a big part of adopting artificial intelligence,” says Rae. “Currently they are embracing it and this is one of those moments where we as a firm are working globally.”
AI is what you make it, adds Anning. “If you are working in a practice that does a lot of bookkeeping and compliance work then you do need to realise that automation is coming. For some it might be that they are of an age where it doesn’t particularly matter; they have enough clients and work to carry them forward.
“If you are a younger accountant coming into the profession you need to understand what’s going on and what’s available to help you work alongside artificial intelligence.”
Originally published in Economia on 6 October 2019.