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.
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