Public Accounting, Professional Accounting and Digital Accounting are different professional responses to different needs of society and markets.
Confusing them means eroding credibility and professional effectiveness, as was the case with the CTCP’s action to ask IFAC to replace the term ‘professional accountant’ in the Colombian version of the Code of Ethics for Professional Accountants for use the expresión ‘public accountant’ because they are the same and international standards must conform to local expressions.
Digital accounting is emerging strongly, generating disruption in professional practices.
Like Uber without vehicles or Airbnb without hotels, digital accounting works without traditional accountants, including accounting firms.
The alarms are on and those who are aware of it have started to act accordingly, but not in consonance.
Here I offer some details about four of these alarms: (1) Current solutions are required, that do not repeat the past; (2) Preparation for the change must be given already; (3) Professional scepticism is not a solution; and (4) Digital assets require digital accounting.
First alarm: Current solutions are required, that do not repeat the past
The rise of artificial intelligence: a critical inflection point for the accounting profession, from CPA.com, exaggerates a bit when referring to ‘the age of artificial intelligence’ but it is right when asking the question What does this mean for the accounting profession?
This question solve it by referring to ‘current accounting solutions’ among which includes data capabilities, augmentation, real-time monitoring, and evolving the audit.
It concludes that the firms have to be prepared. Right on this because the disruption is of a professional nature and this includes, mainly, the audit and accountants firms.
Second alarm: Preparation for the change must be given already
Mark J. Masson, published in Accounting Today A revolution for accounting firms who are ready for change, where he emphatically says:
“There is a revolution underway in major accounting firms, at least for the ones who take up the challenge to meet the shifts occurring beneath their feet.”
He adds that meeting those demands will require leaders and firms to solve four critical, integrated and evasive challenges:
- Putting continual innovation at the center of strategy
- Transforming to an “advisory-first” firm leveraging AI and client data
- Reshaping the audit profession around technology
- Taking advantage of the global workforce and new ways of working
According to my understanding, perhaps the most important thing in this analysis is the warning it makes:
“Small and specialty firms can and are winning; major firms should take notice”
Because the key is to provide value and perspective for the client, not in compliance with the regulatory / tax. Those who do not understand this will have nothing to do in a digital context. Size is no longer competitive advantage or disadvantage for large and small firms, respectively.
Did you take note?
Third alarm: Professional scepticism is not a solution
In this context, professional scepticism is NOT a solution, so certain “powerful” sectors of the profession, together with standards-setters and regulators, remain committed to it.
Such is the case of “Scepticism: the practitioners’take” developed by the Audit and Assurance Faculty (ICAEW/ACCA) together whit International Standards. Promoted as thought leadership report, insists that:
“Professional scepticism is central to the work of auditors and yet audit regulators and others continue to express concerns that auditors are not sufficiently sceptical.”
Since antiquity and until today, professional scepticism has been a philosophical stance, with many nuances, generally negative and against (See, e.g., “Todos los caminos llevan al escepticismo profesional”).
Professional scepticism is not automatable, but neither is it a basic human skill. So, what future does it have?
Could one speak of digital professional scepticism? Of course, yes, but it would not stop being an unbelievable story by those who really know about digital accounting.
Fourth alarm: Digital assets require digital accounting
So, it’s worth revisiting the US-SEC document that I mentioned in my previous post titled “Digital assets, investment contracts and securities”. In addition to the legal clarifications it makes around the terms ‘investment contract’ and ‘security’ is the technical precision it makes regarding the digital asset:
“The term “digital asset,” as used in this framework, refers to an asset that is issued and transferred using distributed ledger or blockchain technology, including, but not limited to, so-called “virtual currencies,” “coins,” and “tokens.” [Framework for “Investment Contract” Analysis of Digital Assets].
The future is open
Unfortunately in Colombia these things are not being understood in the right direction because they keep confusing things thinking that:
- Independent audit is the same as fiscal review
- Norms is the same as standards
- Fiscal / tax matters are the same as financial
- Public accountant is the same as professional accountant
Now they will say that digital is already in the Colombian norms related to commercial books and that the fiscal review does that and much more.
The future is open for those who want to participate in its construction.Digital-accounting-April-2019