What will be the most significant technological changes to impact the accounting profession in the next 5 to 10 years?
I think there are three big trends accountants need to consider.
The first is around mobile technology. When you look at where the world is heading with mobile devices and wearable devices and everything including your fridge being connected to the net, there is going to be all sorts of different ways that professional advisers and professional service firms will start to engage and connect and provide information to their clients. One of the interesting things will be around what applications start to emerge to provide what I call 'information snippets' to clients, helping them find out what’s happening in their business. I think there is a whole interesting trend around mobile.
The second interesting trend I think will be around big data.
One of the things about cloud computing – and if you look at Xero, MYOB, Class and BGL and all these companies, they’re essentially building enormous databases with lots of businesses’ data in the one database, and all these SMSFs and all their data in the one database. That will allow those organisations to, at some point, benchmark themselves against the other businesses or super funds. That's a whole concept of saying: we've got all this data, can we take this data and get more intelligence out of it to work out what I and my clients can do in business to be able to run a better business?
Because you're building these big databases it will enable accountants to provide that type of information to small business clients, which has historically been the domain of very big business.
The third trend is all about how accountants and their clients are going to connect. You look at the convergence between the National Broadband Network and high definition television and think to yourself: when we have broadband connections that can stream high definition TV everywhere at very high quality, why can’t an accountant sit and have a conversation with their client in very high resolution interactive modes? In other words, Skype on steroids. I think in the end, people say they’d much rather sit across the desk from somebody but when the clarity and quality of that communication is so good perhaps people will be more comfortable with it and particularly when you get to the next generation, Gen Y etc. they're going to be even more comfortable again. So will we have a circumstance where I’m an accounting firm in the back of nowhere and I’m servicing clients right around the world? I think so.
They’re three macro trends going out in the future, none of which are all that possible today in SME-land, but when you take those trends into one’s mind it seems pretty obvious that there is going to be stuff happening around those spaces.
Which accounting service line is most susceptible to the digital disruption?
I think compliance services, for the first time, are really threatened. People have been saying compliance services have been threatened since I joined this industry in the 1970s but because of the fact we've now got this technology, which is automating the processing of transactions like never before, and when you combine that and again, looking out 10 to15 years, with things like machine learning and artificial intelligence there is a real argument that a lot of compliance work, not all of it, but a lot of compliance work is going to be automated. Even some advice, it will be not completely automated, but the machines may well deliver to the accountant the key information they need to provide the advice so the accountants don’t need to go away and do the crunching of the data. I think that's going to be where the real disruption is, around all of that compliance type activity which is going to force the accountants to really work out how they can add value to the clients' businesses, which brings us back to that argument around big data and other things.
An accountant will be able to look at that, and hopefully the big data systems will be intelligent enough to be able to say: here are the key things happening in this business which are different to other businesses in that category. This business is not performing in these areas, so go out and have a discussion with your client about those things.
Do you think audits will ever become fully automated?
We’re seeing a clear indication in my mind that the accounting for SMSFs can be [automated] because of automatic data feeds and the like.
Because the transactions can be automated, I believe that in the end, systems should be able to audit those automated transactions.
I can see that ultimately audit software will be able to say, ‘I have audited all of these transactions and I think that the accounting records have integrity’. I think that’s going to be quite possible.
The next more controversial question… is can you go to the next step and automate judgement. Today, clearly you can’t, because judgement is about interpreting accounting standards, it’s about looking at transactions that might be a bit unusual, how do they get treated, all of those things which have fairly large elements of grey to them.
I’m looking at a 10-, 15-, 20-year horizon… when you look at what’s happening with machine learning and artificial intelligence, I can see a time when two things are going to happen. The first thing that I think will happen is artificial intelligence and machine learning will get to a point that it will deliver to the auditor what they think the opinion should be.
Behind that, as artificial intelligence grows and as people continue to tweak these systems, I can see a point that for, particularly for simple SMSFs which don’t have much in the way of controversial transactions associated with them, I think you could find the whole thing is completely automated.
I do think that’s going to be quite possible, but we’re talking a timeframe a fair way away.
Is that a risk for the audit industry?
I think technology is a huge risk, not just to the accounting industry but to all professions, because we’re automating away the compilation aspect of the accounting profession. The question will be how quickly do we start to automate away judgement. I can see a world when that will happen.