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We are officially in the era of digital transformation where technology has greatly impacted audit processes. This has ushered changes that were hard to imagine as possible about a decade back. While the accounting profession has by and large embraced technology in various processes, it was restricted to the documentation, calculation, stor age and retrieval process. However, this is all set to change as cutting-edge technology dons a greater role in auditing. The clamour for different reporting and financial statements has been growing, and technology has all the right answersv. Taking a leaf out of fintech companies for development of intelligent software Bookkeeping outsourcing company in uk. Processes that will be touched by technology will include those areas where it may be necessary for a machine to understand and use that knowledge to identify complex information. Fintech companies have been able to deploy automated solutions by leveraging the power of AI and machine learning. Auditing will similarly find a greater role for technology, beyond the present functions. For instance, technology has developed to a level where it is possible for AI powered systems to look at all the data of a company that is being audited and identify anything that is amiss. This will help auditors to turn their focus to flagged areas that need more of their attention. Evolving reporting requirements Bookkeeping outsourcing company Present audit reporting helps investors and shareholders understand the financial health of businesses. However, in the context of a data driven world with more and more information available, there is an increasing chorus for auditors to share additional information. Stakeholders are of the opinion that auditors possess more information, than what is actually reflected in the reports. And the demand is for more contextual information from auditors about how a specific conclusion was made or arrive at. Readers want to know how the auditors arrived at a conclusion. This open the floodgates of confusion. Auditors crunch numbers and make conclusions, expecting a reader to do the same is an invitation to chaos. However, technology has the ability to present relevant information in the right form for dissemination, that is in alignment with the overall findings/conclusion. Impact of revisions and penalties corporate secretarial services in ukThe Financial Reporting Council released revisions to International Standards on Auditing (UK)[1], which had more to do with the Code of Ethics. This has great significance for auditors and by extension the companies that are being audited. The changed standards, despite being limited in scope can have implications for stakeholders. This needs to be read in the context of the fines levied by the FRC, on some of the top global auditing firms for misconduct. Even as the dust began to settle over the fines and the circumstances surrounding it, most of the iconic and respected auditing firms commenced an overhaul of their systems and processes, bringing in more technology driven processes to strengthen existing processes. This will be the order of the future, as auditors look towards technology for greater compliance. Moving from sample testing to testing of all transactions In the future, auditors will harness technology to carry out checks of all transactions, and not just rely on a sampling or random check of transactions. While the certainly humungous volumes of transactions may have come in the way of checking out all the transactions in the past or the present, this is all set to change. With the use of the right technology, not only will all transactions be checked, they will be completed at high speed, which means that the process of checking will not add to the time element. And this aspect of checking all the transactions will help auditors to gain more insights about the financial health and other inputs about the organization and the domain it operates. This will be invaluable to investors and shareholders who will now be able to understand reports on the basis of checking all transactions and not just a sample. Sampling has a probability of error, which will be corrected in the future. The need for speed The new techno-social order has turned time on its head. Processes that once took a specific period of time has now been shortened drastically. As a consequence, all other allied processes and procedures are also expected to commence/conclude at proportionate speed. Effectively, this has led to a cascading effect. Audit, resultantly, requires to be concluded faster than ever before. Manual processes do not stand a chance of delivering results at speed or with the accuracy and precision required. While it is impossible for technology, as it stands now, to replace the power of human intuition in tasks as complicated as auditing, many of the tasks that are repetitive or rote in nature need to be entrusted to technology and automated processes to be able to meet the deadlines. Leveraging the power of blockchain for cost effective audit processes Blockchain is the buzzword that will continue to hold sway over businesses well into the near future. And by virtue of being a distributed ledger, blockchain is the natural bedfellow for auditing processes. Auditors need not seek information or wait for clients or third parties to furnish statements, or any documents for verification and cross-verification. Auditors can simply carry out the verifications from blockchain ledgers. With the power of offering verifiable and immutable transactional information, these ledgers will save a lot of time and money, in addition to the assurance of offering information that is accurate and free from errors. This is basically, because the transactions themselves would have been carried out only after fulfilling the criteria or conditions of all –parties involved in the transaction. Analytics only as good as the data that is fed Analytics can be only as good as the data that is fed, which means that standards also need to improve so as to offer data that is of the right standard. While systems will be powered to detect anomalies over entire transaction history, the advantage of perception that is available to the human mind and the logic of perspective will be unavailable to technology driven systems. This will make it mandatory for records to conform to certain standards. The quality of the data and the processes or technology that is available to bring in the data from many sources needs to be advanced so as to prevent gaps in data capture and its use. The need for more regulations and standards Past processes had stakeholders trying to catch up with the regulations and standards. For instance, auditors and organisations had to fulfill or meet the standards and regulations as laid down and the need of the hour used to be a scramble to meet the standards. However, with changes in the way business is conducted, there are multiple issues which cannot be met or fulfilled by existing standards. This turns the whole equation of regulations and standards on its head. Regulations and standards are now expected to keep pace with the developments and evolving changes in the world of business. Till the regulations and changes are in place, auditors and businesses will have to work within the contours of existing regulations which may not be very easy considering the inherent differences among domains. Conclusion: Auditing is a proven facilitator for growth, in addition to meeting the requirements of accounting and financial reporting. While nations have their own set of policies about the size of businesses that need to be audited or not audited, it is a proven fact that auditing is one of the pillars of growth of a business. Technological innovations will assist the acumen of humans to bring about greater accuracy, improved reporting and faster conclusion. Auditing will not be limited to random checks but will encompass the whole history of transactions for specific periods. Contrary to popular belief, technology will not take the place of humans, but will help humans in their deliverables.

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How Blockchain Technology will disrupt the role of Accounting as we know it today 

10:23 am 11 July 2018

How Blockchain Technology will disrupt the role of Accounting as we know it today 

 

The blockchain technology has been making rounds of the global market for quite some time now. When you first heard of the blockchain technology, it must have been in relation to cryptocurrencies, especially the Bitcoin. Blockchain gained momentum as the underlying technology behind Bitcoin. If we were to look at the basics, blockchain is essentially a financial technology. The technology basically concerns itself with the maintenance of a distributed accounting ledger that is openly available and can be shared with many individuals, but it cannot be duplicated, thereby ensuring more security. 

Digitalization of the accounting business function is still in its stage of infancy, which can be attributed to the extremely strict regulatory mandates and compliances in the global market. The existing accounting system is built in a way that ensures forgery or fraud of any sort does not take place. For achieving this, it depends on stringent checks and mutual control mechanisms that involve labor-intensive manual tasks. The use of blockchain is expected to ease this process, right from simplifying compliance with government regulations to improving the existing double entry bookkeeping system. 

If there is an industry that should expect to be completely disrupted by the blockchain technology, and we are not talking in terms of a deleterious disruption, then it should be the accounting industry. 

Blockchain is essentially an accounting-based technology. It resembles an impenetrable and incorruptible ledger that offers accountants a new way of storing and sharing data, with both the processes being simultaneously interoperable. This reduces the necessity of storing data in disparate locations. The technology has taken the accounting industry by such storm that accounting outsourced bookkeeping services professionals are now pursuing blockchain-specific certification courses to get well-versed in the field of blockchain cryptocurrency. From auditing to bookkeeping, the blockchain technology has the power to completely transform day-to-day accounting tasks by improving reporting, efficiency and information access in ways never imagined before. Let us see how blockchain can help accountants save resources and make more from what they already have. 

  

Near-real time transactions: 
 

One of the biggest benefits blockchain will bring is speedy transactions. Every accountant, in the beginning of the month, gets busy with book closing, which involves closing transactions from the previous month. This entire process can take anything between one to two weeks, depending on the volume of transactions. However, with the advent of new financial systems that are replete with advanced technologies, the book closing time is shrinking significantly. With blockchain, transactions from the previous month won’t be dangling in limbo. The time consumed by delays in processing will be eliminated, as near-real time transactions will not need separate closing in the month end. For the matter of fact, the entire month-end book closing ritual will become obsolete with financial transactions being made instantly. With the blockchain technology, accountants will not have to worry about verifying that transactions are sorted and included in the correct month, as transaction reporting will be done automatically when the month ends, and once all transactions will become complete, they will be recorded and saved forever. 

  

Secured information and reduced errors: 

The entire blockchain technology is based on encryption which secures every transaction and record on the blockchain. Each transaction using the blockchain technology is encrypted, and every individual participant in the transaction is assigned a unique string of characters for easy recognition. After some time, all the transactions become a part of a larger block, and when this block is finalized, everyone in the concerned network/block is notified about the same. If any record on the block is altered or changed, reviewers can identify when the change was made, due to the time stamp feature available on the block. This type of encryption will not only secure critical business data but also transform the way audits are conducted. Moreover, since every transaction identifies its participants and also has a time stamp, the chances of errors decrease considerably. Reduced mistakes not only during the auditing process but also in ongoing operations, adds more business value in a quantifiable way. 

  

Trackable assets: 

Blockchain can greatly help companies that have to manage large volumes of assets, such as stocks, funds, bonds, deeds and inventory. The disturbed ledger technology can track these assets in a secure manner. With blockchain, transactions are recorded in a ledger and then shared so that multiple copies of the same ledger are stored in the computers of all the involved participants. Every time an asset transaction is carried out, details are shared with the multiple ledger copies on the blockchain. With such a system in place, each participant has the same copy of the ledger, along with complete history of the assets. If shares are bought or sold, records are created for the same, and their origin can be tracked down to the beginning of their existence on the blockchain. This helps drastically reduce asset frauds and thefts and simplifies the entire process of auditing, as all historical records and entries are readily available on the blockchain. 

  

Automated reconciliation and reporting: 
 

With blockchain’s automatic update feature, reporting and reconciliation become extremely hassle-free and convenient. As and when transactions are made, all the related details are automatically recorded on the blockchain, which makes it easier to automatically sort and register journal entries. Details and information can be viewed in the real-time as transactions are conducted, and every detail is simultaneously recorded or updated across all the live copies of the ledger. Whenever any new blockchain is developed, its information can be stored in the transaction details. Enterprises can also develop unique frameworks to make the blockchain technology work seamlessly as per their specific business requirements. The accounting and auditing teams will reap maximum benefits from these detailed and thorough fraud-resilient transaction records. 

  

Cost-effective auditing and compliance: 
 

Auditing professionals should expect to benefit the most from the blockchain technology. With blockchain-powered data, companies can conduct audits in a faster, more precise and better automated manner. Projects that earlier required weeks and months for completion, with the help of blockchain can be completed in a few days. While conducting audits, officials can find complete details of transactions right on the blockchains, which will make it really hassle-free to confirm and verify the financial status of the companies being audited. This will have a profound impact on the way audits have been done till date. Blockchain solutions can also be integrated with data analytics to help auditors with transactional-level assertions, so that more time is available for higher-level inspections. 

  

Should accountants be worried? 

One of the biggest misconceptions about the blockchain technology is that the accountant’s role will become obsolete, which is not going to happen anytime soon. Blockchain is in no way going to replace human accounting, it will only assist it. The distributed ledger technology will significantly impact all accounting functions, right from auditing to security, and help companies store, retrieve and interpret data in a systematic and an automated manner. Its role will be more of a support assistant rather than the mission pilot, and accountants corporate payroll services in uk do not have anything to worry about. 

Accountants should consider blockchain to be a wave of change that will only offer better opportunities. They should leverage these opportunities to realize and understand how blockchain will impact and can be used in future applications to create blockchain-powered accounting solutions and services. Accountants, basically, are experts in records management, and all the blockchain technology does is facilitate a simple and an interoperable record keeping system, which can be easily accessed by auditors and other authorized officials. Blockchain, therefore, will only reduce the burden for accountants by offering a helping help. 

The main thing to consider here is how accountants respond to the blockchain wave, and yes, it is not going to be easy, in fact it may also seem very intimidating. Accountants should be willing to update their knowledge as per the nuances of the blockchain technology. They will have to gain a complete understanding of what blockchain is and how the technology works, which is why various accounting firms and even educational institutes, these days, are offering specialised courses on the blockchain technology. This is also because the market demand is growing, slowly but surely, and companies are increasingly incorporating the blockchain technology in the development of their products and services. 

  

Conclusion 

It actually isn’t surprising that claims are being made about the blockchain technology replacing accountants because that is usually the first thing everyone says about any new technology that hits the market. We need to realize that technology in no way can replace human reasoning and comprehension. Sure, processes will become automated, but that doesn’t mean monitoring will not be required. Even these automated processes will need close monitoring, which cannot be done without human involvement. The blockchain technology, therefore, will surely change the way accounting has been done till date, but we don’t foresee this distributed ledger technology to completely eliminate human involvement anytime in the near future. 

In the world of outsourcing bookkeeping and accountancy services  introduction of Blockchain will be a huge boon, as it will help establish trust and track all assets between the accounting firm and an outsourced accounting firm like Outbooks. 

 BY: AMIT AGARWAL 

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