ACCT6007-Artificial Intelligence in Accounting

Artificial intelligence is the science that aims to create intelligent machines and intelligent computer programs. Artificial intelligence studies the problem that world presents to intelligence without studying people. AI is not about pretending the human intelligence (Nilsson, 2014). Crucially, a blockchain is defined as distributed database of public ledger of all the transactions or digital situations, which is shared among various participating parties (CPA, 2018).

1.Artificial intelligence in accounting

Practically, the threat seems clear. The relationship between artificial intelligence and blockchain seems disrupt. Both artificial intelligent and blockchain have the potential to help the accountants to boost the revenue to develop the necessary skills and change the mindset. These two emerging technologies, it has become less threat and more of opportunity to have different impact on the profession (Ovaska, 2017). Earlier large farms pay off to several firms in advance for using technology on their part because of complexity in audits and asset estimation. But now a today`s, small firms started thinking about technology to adopt advanced technology such as artificial intelligence (Pepe, 2011). However, small firms do not have equal resources as large firms, so that they can develop and fine-tune their AI products. However, experts say that technology will play wider role in future years, they expect that the fare will become reasonably standard (Andersen, 2016).

The basis for modern financial accounting is double entry system. Independent public auditors examine the company`s financial information to attain the trust of external stakeholder. Stakeholder places their trust in the hands of auditor. An obvious problem arises, even if the auditors work for managers who hire them or they work for public integrity in order to make decision. As a result, company maintain a joint register, which unlocks the process of maintaining separate account records based on transaction receipt. To resolve these problems, it necessitates starting a joint register for accounting entries. It is typically a source of trust, which is further integrated with accounting procedure (Wenger, 2014). 

Details of one case where Artificial intelligence is used in accounting

Each firm has different slightly different process in developing AI technologies. EY started aiming immediate ROI. Chris Mazzei, chief analytics officer (technology leader) at EY said that it is more important to think from business value perspective first rather than technology perspective. PwC enabled client services business that favour the use of four week long AI “sprints” that reflected Agile development method. The purpose of refining AI to higher accuracy is to demonstrate working model for its clients. Global artificial intelligence leads at PwC. Today, the company holds nearly 80% sprint every year. Each sprint is grouped in a small team (Francois, 2018).

2.Details of one case where Blockchain is used in accounting

The concept of blockchain explains how Bitcoin operates when it is linked to Bitcoin. The blockchain technology is applicable to all digital asset transaction exchange online to solve a particular problem in maintaining the order of the transaction. The Bitcoin analysed that the transaction does not come in order the way they are generated (Crosby et al., 2015). The transactions pass from node to node in Bitcoin network. However, there is a need for Bitcoin to make sure that double spending of the crypto currency should not happen. This means that there is a need to develop a process or mechanism so that whole Bitcoin network can agree to the order of transaction. The Bitcoin solved the problem by a procedure named Blockchain technology. Bitcoin solves its problem by introducing mathematical puzzle. Bitcoin system orders transaction by placing them in different groups called blocks and linking them by Blockchains. Any node in the network can collect unconfirmed transactions and create block to broadcast it to the whole network. Each block will be accepted in blockchain that solves the mathematical problem.

3.How far artificial intelligent is beneficial

Economists have identified that thinking of new technologies as a driving force to increase the ability of total factor productivity. AI is seen as capital-labour hybrid. AI has the ability to diffuse and propel innovation in economy (Chan, & Vasarhelyi, 2018).

For example- driverless vehicle, combination of laser machines, radar, computer vision, and cameras enable the machine to predict and sense its surrounding. AI yields highest economic benefits for US and will achieve its maximum growth 4.6% growth rate until 2035 (Purdy, & Daugherty, 2016). A new factor of production named artificial intelligence can drive growth in three ways- 

Intelligent Automation- Apart from automation solution, Artificial intelligence powers innovation that needs adaptability and agility. AI automates solution to complex physical tasks and AI is self-learning (Fernald, & Jones, 2014).

Labour and Capital augmentation- Existing labour and capital is used in much more effective way because AI enables workers to focus on the activity that they do best imagine (Islam, 2017).

Innovation diffusion- Although Innovation through AI is least discussed. However, AI has the ability to drive innovation (Francois, 2018).

How Blockchain is beneficial

The benefits of blockchain are popular enough to sustain its importance for the future generation. Most important benefits of blockchain prove useful in Quality assurance, Accounting, Smart contracts, supply chain management, stock exchange, and energy supply.

• Supply chain management- The technology of blockchain can offer the benefit of traceability and cost-effectiveness. Blockchain reduces risk of goods damage through traceability as blockchain is used to track the goods. Blockchain brings a new level in B2B ecosystem due to transparency. Blockchain simplifies the processes such as production process assurance and ownership (Frame, & White, 2014).
• Recording transaction with the help of blockchain eliminates human error and protects the data from hampering. In blockchain, each transaction is passed from one node to another node. The whole accounting process has become efficient on the foundational level. Businesses maintain a joint register to record the transactions through which the integrity of accounts is also maintained.
• Time-consuming contracts can hinder or slow down the growth of business. Blockchain is used by the enterprises to eliminate the need of mediators, which can save the company time and money.
• Stock exchange has considered blockchain as the next big leap forward. Australia`s stock exchange has already planned to switch to a blockchain system for the operations.
• In some part of the world, business establishments and residents can avail the advantage of blockchain for sustainable energy solution. However, renewable energy can be tracked and tradable only after issuing certificate by the government.

4.Financial reporting regulation change in the future and with advancement in technologies in accounting

Fast growing changes in the external and dynamic business environment have increased concerns whether the corporate reporting continues to fulfil objectives. As other business activity, corporate financial reporting should speed up with developing economic reality and address the needs of stakeholders. The three changes evolve in accounting profession such as emerging smart and digital technology, continuing globalisation of reporting and disclosure standards, and new forms of regulation (Francois, 2018). Technology plays an important role in the process how financial corporate reporting evolves as it brings change.

• Accountants increasingly use smart technologies to improve the traditional way of working. Smart software system which includes cloud computing. It is known to be cloud computing because it presents cloud symbol used in charts presenting the internet. It is the service provided by the internet to save and store data permanently. Cloud computing supports the trend of outsourcing services. It also enables greater use of social media to improve collaboration, engagement with stakeholders by smart technology. Social media will reveal more data than any other corporate report and stakeholders can use the tools to analyse and interpret big data (Kriz, & Blomme, 2016).
• Globalisation encourages the flow of securities from one capital market to another capital market. The accountants have strategic application software installed in the workplace system to prepare them for the future. Enterprise resource planning system (ERP) is a software program, which allows integration of different departments of the organisation. This system enables different departments to diversify and support activities by accessing data available (Leuz, & Wysocki, 2016).
• Increased regulation- The related and associated rules will have greater effect on accounting professions in years to come. Increasing strict regulations are implemented because of massive tax avoidance, money laundering, and transfer pricing. Many tax accountants effect intergovernmental tax action to limit profit shifting. IT system not only supports the organisational goals but also compliance with government regulation within IT infrastructure. IT managers must have direct alliance with every department`s executive manager. Both IT manger and executive manager together can make successful business planning and compliance management related decisions to refer business model. 

Conclusion

Continuous globalisation will give more opportunities and challenges to upcoming accounting professionals. . Artificial intelligence has not only the potential to be another driver of total factor production, but an entirely different new factor of production. AI enhances and complements traditional factors of production. AI can be physical capital such as robots and intellect machines. The concept of blockchain and artificial intelligence has become unavoidable part of modern accounting system. Bitcoin used the concept of blockchain and PWC elaborates the concept of Artificial intelligence. 

References

Andersen, N. (2016). Blockchain Technology A game-changer in accounting? Retrieved from: https://www2.deloitte.com/content/dam/Deloitte/de/Documents/Innovation/Blockchain_A%20game-changer%20in%20accounting.pdf

Chan, D. Y., & Vasarhelyi, M. A. (2018). Innovation and practice of continuous auditing. In Continuous Auditing: Theory and Application. England: Emerald Publishing Limited.

CPA, (2018). Brace Yourself for AI and Blockchain. Retrieved from: https://www.cpa.com/media-coverage/brace-yourself-ai-and-blockchain

Crosby, M., Nachiappan, Pattanayak, P.,?? Verma, S., & Kalyanaraman, V. (2015). BlockChain Technology. Retrieved from: ?https://scet.berkeley.edu/wp-content/uploads/BlockchainPaper.pdf

Fernald, J. G., & Jones, C. I. (2014). The future of US economic growth. American economic review, 104(5).

Frame, W. S., & White, L. J. (2014). Technological change, financial innovation, and diffusion in banking. The oxford handbook of banking, 271.

Francois, P. (2018). Comment on" Artificial Intelligence and Economic Growth.” Economics of Artificial Intelligence. UK: University of Chicago Press.

Islam, M. A. (2017). Future of Accounting Profession: Three Major Changes and Implications for Teaching and Research. Retrieved from: https://www.ifac.org/global-knowledge-gateway/business-reporting/discussion/future-accounting-profession-three-major

Kriz, P., & Blomme, H. (2016). The Future of Corporate Reporting—Creating the Dynamics for Change. Retrieved from: https://www.ifac.org/global-knowledge-gateway/viewpoints/future-corporate-reporting-creating-dynamics-change

Leuz, C., & Wysocki, P. D. (2016). The economics of disclosure and financial reporting regulation: Evidence and suggestions for future research. Journal of Accounting Research, 54(2).

Nilsson, N. J. (2014). Principles of artificial intelligence. USA: Morgan Kaufmann.

Ovaska, S. (2017). How artificial intelligence is changing accounting. Retrieved from: https://www.journalofaccountancy.com/newsletters/2017/oct/artificial-intelligence-changing-accounting.html

Pepe, A. A. (2011). The Evolution of Technology for the Accounting Profession. Retrieved from: https://www.cpapracticeadvisor.com/article/10263076/the-evolution-of-technology-for-the-accounting-profession

Purdy, M. & Daugherty, P. (2016).Why artificial intelligence is the future of growth. Retrieved from: https://www.accenture.com/t20170927T080049Z__w__/us-en/_acnmedia/PDF-33/Accenture-Why-AI-is-the-Future-of-Growth.PDFla=en

Wenger, E. (2014). Artificial intelligence and tutoring systems: computational and cognitive approaches to the communication of knowledge. USA: Morgan Kaufmann.