The 2016 Financial Executives International’s Current Financial Reporting Issues conference was tech-heavy. Topics such as artificial intelligence in audit, data analytics in the budgeting process, and improving audit through technologies were on the conference’s agenda.
“The next five or six years the accounting and auditing profession will change more than they have in the last fifty, certainly the last thirty since I’ve been here.” Deloitte CEO Cathy Engelbert said in the opening remarks.
The volume, velocity, and variety of data make our work hard, Engelbert said According to IBM, there are 2.5 quintillion bytes of data created every day, “so much that 90 percent of all the data in the world today has been created in the past two years.” However, data analytics and technology make processing them possible.
Today, auditors can only examine 40 to 150 loans at a time when they examine bank’s loan portfolio. “But technology allows for the extraction of larger data sets from a company’s systems and [allows for the examination of] examine the entire portfolio. Data analytics give auditors the ability to perform a more granular analysis of the underlying information.”
KPMG director Konstantin Konstantinovsky and partner Roger O’Donnell said at a morning session during the conference.
Technology may allow auditors to examine all existing evidence, therefore sampling risk won’t exist anymore, they said. Sampling risk occurs when the auditor applies the procedures to the sample to judge the entire population. It exists today because of the impractical and costly effects of examining all or 100% of a client's records or books and the audit opinion would have been different if the procedures were applied to the entire population of the data.
Understanding New Accounting Rules.
The new leasing standard could impact almost all entities to some extent. To implement the new standard, entities need to reassess which arrangements are within the scope of the new leases guidance. They also need to determine how those lease arrangements should be accounted for and classified.
“Reassessing lease arrangements and reading through lease contracts are time consuming,” said EY manager Lester Lau, and director Eileen Chan. Lau and Chan presented their tool designed for the implementation of the new leasing standard at the conference. The tool extracts terms and key words from contracts, uses algorithm to compare those terms with the millions of legal terms in the database. It thus determines the lease type, commencement date, lease term, and option to renew the lease.
“The language used in the contracts can vary a lot sometimes, however the tool is able to identify the right language using algorithm,” they said. The implementation of the new standard can take as little time as possible, without having humans reviewing and reassessing each existing and future contracts.
Is Technology Going to Steal Our Jobs?
Should we be worried that with the advance of technology, we are going to lose our jobs? Deloitte’s Engelbert said “technology can’t replace professional judgement and expertise, but will augment them.”
With that said and with the Financial Accounting Standards Board moving towards more principles-based accounting standards, we will be employed, for a while.
Continue the discussion at Bloomberg BNA Accounting LinkedIn.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)