Cover story: How ICAEW can become leaders in the digital space
As Paul Aplin becomes ICAEW president he sets out his priorities. He talks about why digital is crucial, how technology is changing audit, how artificial intelligence is impacting businesses and how the pace of change is approaching revolution.
We have a new vocabulary: artificial intelligence (AI), blockchain, cyber security, data analytics. This is the
language of accountancy, business, finance and tax in the 21st century. Digital technology is already changing the way we audit; AI is impacting on businesses at all levels, from micros to multinationals. The pace and scale of change is closer to revolution than evolution. ICAEW and our members are – and must remain – leaders, not followers, in this digital age. The IT Faculty is the focus of all we do in this space.When I went for my interview at AC Mole & Sons in Taunton back in 1980, I was shown the firm’s new computer. It was the size of a fridge and wires ran from it to eight dumb terminals and – via a leased line – to our Castle Cary office, 35 miles away. Formatting accounts was a long-winded process and whether it saved any time is debatable, but the partners back then saw that the future was digital and believed that they either had to be early adopters or forever play catch-up. I subsequently found that the system had an up-front cost of over £40,000 and annual maintenance costs of £14,000. That was a very impressive statement of faith in technology.
Ahead of the game
That belief in staying at the cutting edge led to us filing the UK’s first electronic self-assessment tax return in 1997 and piloting just about every new digital development in tax administration since. When I look back on the effect technology has had on the firm in the 38 years I have been with it, some clear points emerge. First, you have to accept that there will always be problems if you are an early adopter, but as technology is constantly evolving, early adoption is better than waiting for perfection in something that may soon become obsolete. Second, time invested in training clients to use technology is time well spent. Third, technology enables you to up-skill: the more my firm has invested in technology, the more people we have employed and the more we have invested in training and skills. Fourth, cyber security is an issue that everyone in the firm has to understand.While Making Tax Digital (MTD) may be the catalyst for many small businesses adopting accounting software and apps, the market is changing at such a pace that increasing numbers now see a business case for going digital independent of MTD. That of course is how it should be: tax information should be a by-product of digital records, not the driver – as ICAEW has said from the outset.
Power of the cloud
Cloud-based software enables us to offer services we simply couldn’t deliver otherwise. Take the small business client who brings in a carrier bag of records in January. The set of accounts we prepare creates a picture of what happened many months earlier. The client’s only real interest is in establishing the tax bill and filing the tax return. The service is reactive. If, however, the client can be migrated to cloud-based software, perhaps linked to a feed from the business bank account, we can virtually look over their shoulder and offer advice real-time, even at the most basic level of “you need to send some bills out to avoid a cash flow problem”. That is a proactive, technology-enabled virtual-FD service. It’s easy to see which the client would prefer.While cloud-based software and apps are changing the service small practices can offer, digital technology is changing what we do at all levels of the profession.
For decades audits have depended on sample selection, testing and extrapolation of results to assess the integrity of figures in financial statements. The processing capacity and speed of modern computers opens up a whole new world of data analytics and enables us to audit vast volumes of transactions. The question then becomes “what shall we test for?” rather than “which transactions shall we test?”
AI is impacting on many areas already and is set to impact on even more. I remember some years ago listening to a programme on BBC Radio 4 about expert systems. I thought expert systems would put me (as a tax adviser) out of business within a decade. They didn’t, but I believe that AI will have a much greater impact on advisory work over the next few years – and I put special emphasis on the word “few” because the pace of change is rapid. I do not believe that AI will put us all out of business, but I do believe that it will change the way we do business.
The IT Faculty-led joint project between the Shanghai National Accounting Institute and ICAEW on big data in Chinese businesses looked at the way business models could be adapted when the power of technology is harnessed. I left the report’s launch event in January fascinated and enthused in equal measure and I am delighted that the project is continuing.
Hands on
While the IT Faculty is ICAEW’s centre of excellence and thought leadership on digital, other parts of ICAEW are also heavily committed to embracing the power of technology. The IT Faculty, for example, has worked closely with the Tax Faculty on MTD and on a project looking at the way other countries have used technology to improve tax administration. The resulting report published in 2016, Digitalisation of tax – International Perspectives, contains some fascinating insights and I am delighted that the report is currently being updated.Elsewhere, ICAEW has worked in partnership with Enterprise Nation to provide a digital platform through which the UK’s small business community can access advice from ICAEW members.
The ICAEW Practice Committee has launched a new project, ‘Tomorrow’s Digital Practice’, to help practitioners offer digital services to clients. More initiatives will follow over the course of the year.
Throughout my career I have taken a keen hands-on interest in the potential digital technology holds for our profession. In my year as ICAEW president, I look forward to seeing ICAEW and our members leading the way in the digital transformation of business at every level, wherever in the world we operate.