Blockchain was in the air at the Digital CPA conference in Las Vegas this year, the fifth iteration of CPA.com’s annual conference on accounting technology – and for good reason.

The technology, first proliferated by the digital currency Bitcoin, is at the “top of the hype cycle” of technology, CPA.com’s president and CEO Erik Asgeirsson explained during his keynote. After it takes the traditional dip in popularity following the peak of hype (the “trough of disillusionment,”) blockchain will undoubtedly reach the “plateau of productivity” and change the accounting world like the cloud did.

“At CPA.com, we are trying to take these technologies, work with you, and enable the profession to increase productivity and client relationships,” Asgeirsson said. “We’re moving into the world of digital business – combining services and technology, blurring the digital and physical worlds.”

Having set the stage already with its encouragement of the profession to adopt cloud and keep pace with the rapidly advancing technology world, CPA.com aims to be at the forefront of the rise of technologies like blockchain for the accounting profession. Because the main attraction of blockchain is security and reliability, it’s critical for the profession to start thinking about its potential implications for financial reporting and auditing.

Next up: AI. Artificial intelligence will play a major role in changing the way accountants do audits, Asgeirsson said. CPA.com is working towards a dynamic audit solution that leverages all client data, including unstructured data such as blocks of text that may be found in e-mails or leases, not just structured data such as in formatted ledgers or spreadsheets.

“Leases are a classic example of unstructured data,” Asgeirsson said, and automatically mining the data from such sources and putting it in an organized format can be difficult with unsophisticated software.

This audit solution, Asgeirsson said, will be able to automate smart grouping of trial balance accounts for financial statements; eliminate lead sheets with a ledger account window; reveal all account transactional detail in a transactional detail window; and pull industry and company information from external sources to populate a risk assessment dashboard.

Finally, Asgeirsson announced from the stage that CPA.com and the and its parent, the American Institute of CPAs, have collaborated to introduce a new client accounting advisory certificate in January. Those who complete the course, which includes up to 33 hours of CPE, will receive a digital badge -- a visual “certificate” that is displayable across social media platforms, including LinkedIn. This open credential mechanism allows badge holders to show potential clients or employers that they are proficient in whatever area is denoted by that badge.

Some of the hottest fields in business call for exactly the skills that the accounting profession offers, according to IBM’s Leon Katsnelson.

In a keynote address on artificial intelligence at CPA.com’s 2017 Digital CPA conference, held in San Francisco in early December, Katsnelson, who is director and chief technology officer for strategic partnership for data science at IBM, introduced the accountants in attendance to two of the newest professionals on the block: data scientists and data engineers. Both of those jobs are only about five years old, he said, but are already in the top ranks in terms of compensation.

“To be a data scientist, you need three things,” explained Katsnelson. First are programming skills – not necessarily full coding capabilities, but a familiarity with the field. Then comes a certain facility with statistics and math. “And you need domain experience – a deep knowledge of a business.”

it’s the last part that speaks most to the accounting profession, he explained: “Domain experience is the hardest thing to find – and that’s what accountants bring to the table. Without your skill and your knowledge, there is no data science.”

He reported that he’s seeing larger accounting firms build data science teams from the ground up, and while smaller firms may not be building their own teams, he suggested that they do need to start deepening their comprehension of the field. “You need to understand the technology to be able to select the right tools and to advise clients, because they’re struggling just like you are.”

Why information matters

One of the top reasons why data, data-related tools and the ability to work with them will matter in the future is that they all surround and relate to machine learning and artificial intelligence.

“Machine learning is like a rocket engine and data is the rocket fuel,” Katsnelson explained. “In traditional programming, we’re teaching the machine how we do the job – we’re telling it, ‘Repeat what I do.’ AI is about teaching the machine to learn how we learn – to learn from data.”

The development of AI will cause major shifts in how companies process and report information - it will move from data that comes in periodically, with occasional errors, to data that flows continuously and is more trustworthy - and accountants are in a position to facilitate that transition.

The shift isn’t limited to financial information, either, Katsnelson noted. All kinds of information and processes are open to artificial intelligence, from smart electric meters that can learn usage patterns to elevators that can recognize when they’re about to need repairs.

He went on to cite a host of examples of major investments in artificial intelligence and cognitive computing, from the Big Four accounting firms to IBM and the government of China. “Google is now saying it’s an AI company, not a search company,” he explained, and quoted Kevin Kelly, founder of Wired magazine: “The business plans of the next 10,000 startups are easy to forecast: Take X and add AI.”

AI and accounting

The importance of data and AI to client businesses alone would be enough to recommend it to accountants, but it also promises to revolutionize much of what they do themselves - starting with their core services.

“Most people think audit is the first field in accounting that will benefit from AI,” Katsnelson said. “It allows auditors to dig deeper into the data by processing much larger volumes of data. Machines are much better than auditors at processing huge amounts of data.”

AI can also process, analyze and incorporate all sorts of structured and unstructured data and information that auditors can’t - and it will be able to consider all the available data, without the need for sampling. “With AI and machines, you won’t need to sample – the machine can check all the transactions, which human auditors couldn’t,” Katsnelson explained. “That’s where the power of the machine is.”

With that said, Katsnelson still sees a critical role for accountants. “I don’t believe for a second that the auditors will be replaced by machines – the human touch, and human thinking, are critical,” he said. “Human judgment is still paramount.”

To operate at its best, though, that judgment will need the sort of data science skills Katsnelson described, and accountants will want to make sure that they’re ready and able to leverage the opportunities that artificial intelligence, cognitive computing and machine learning offer.

“What can AI do? Just about anything. Where can you apply it? Just about anywhere,” he explained. “You want to be on the right side of the waves of change – the side where the innovation takes place.”

For all the disruption that technology is bringing to the accounting profession -- and the economy in general -- it’s also going to be crucial to their success, according to CPA.com president and CEO Erik Asgeirsson.

“The firms that are leveraging technologies like artificial intelligence are going to win in the end,” he told an audience of accountants during his keynote at the 2017 Digital CPA conference, held in San Francisco in early December. “You can’t fear the technology and circle the wagons -- you need to see it as an opportunity.”

Technology will disrupt and commoditize many of the profession’s traditional services, Asgeirsson acknowledged, but at the same time it will help accountants move up the value chain. “Automation is going to win on the low end,” he said, “and that’s OK because that frees you up to bring the services clients really value.”

As an example of the sort of opportunity created by new technologies, he offered client accounting services powered by cloud-based software. “If you want to see what lies ahead for tax and audit, look at what we’ve seen in client accounting services over the past decade – with the cloud, virtual CFO services are now an increasingly important driver of CPA firm revenue growth,” Asgeirsson said, noting that CAS offerings average growth of around 20 percent across the profession, while more traditional services are in the 8-10 percent range.

CAS currently accounts for approximately 10 percent of firm revenues, so there’s room for expansion. “There’s clearly a need for more planning,” Asgeirsson said. “We need to put in place more structure, and more language around describing the CAS service.”

With that in mind, CPA.com is planning a survey with the PCPS Section of the American Institute of CPAs to develop metrics and benchmarks around pricing and best practices; setting up a series of roundtable groups with firms of all sizes to share best practices; and creating advocacy and support materials to help sell the idea of CAS within accounting firms.

Looking to the future

CAS may be an area where the profession is currently learning to leverage technology, but there are other areas coming up where the impact may be even more significant.

Auditing is one area in particular where Asgeirsson and other leaders of the profession expect significant change.

“The heart of the evolution in the audit is about the advancement of new methodology with the development of new technologies,” he said. “CPA.com is working toward a vision of a dynamic audit solution methodology, leveraging big data to automate inputs and drive value-add around the financial audit.”

During the Digital CPA conference, CPA.com, the AICPA and audit and analytic software developer CaseWare announced the impending release of a dynamic preparation, compilation and review solution, with the long-term goal of creating a broad, automated audit solution.

Asgeirsson also pointed to coming changes in the tax area, where technology is allowing nontraditional providers to compete with accountants in tax prep and planning, while also allowing CPAs to change how they interact with clients.

“2018 is going to be a massive change potentially for tax. Nontraditional providers are thinking about the space, and client demands are changing,” he said, predicting, “You’re going to see a sea change in how firms have tax planning conversations with clients.”

Finally, he noted the potential for blockchain, which offers the prospect of “a new, very sophisticated database” of information that’s secure, unchangeable and validated at every step.

“Blockchain is about validated information, and when you look at it that way, it’s easy to see why accountants are interested,” he said, explaining how it may change audits significantly -- but not destroy them.

“Blockchain does not mean that the audit will go away,” he said. “There are going to be huge opportunities in private blockchains for audits. There are going to be assurance needs.”

For instance, the creators of the crypto-assets like bitcoin that are currently blockchain’s major application will need impartial assessments of the value they claim to be creating, according to Asgeirsson.

“They actually want regulators and auditors to show up,” he said. “Over the next couple of years, you’re going to see some really interesting assurance opportunities arising around blockchain.”

CPA.com, the technology subsidiary of the American Institute of CPAs, and audit software vendor CaseWare International have announced a cloud-based solution for preparation, compilation and review engagements.

Called OnPoint, the solution will be available in early 2018, and incorporates checklists, information from AICPA technical guides and more to make these engagements more efficient, and to increase collaboration between accountants and their clients.

Features include: intelligent checklists that guide practitioners step by step through the engagement process; the ability to securely share files between accountants and clients; integration with AICPA technical guides; the ability to update financial statement data and footnotes with a single click; and dedicated on-boarding support for firms through CPA.com.

“Technology is reshaping the accounting practice, and the next big area to be transformed by automation, artificial intelligence and other innovation is audit and attest services,” said CPA.com president and CEO Erik Asgeirsson, in a statement. “OnPoint is geared toward the more than 20,000 firms that provide preparation, compilation and review services. This solution, which uses dynamic checklists to structure and manage engagements, will help CPA firms deliver the highest level of service to clients.”

“The marketplace is moving toward automated services faster than most practitioners recognize,” said CaseWare CEO Dwight Wainman in a statement. “OnPoint offers all the advantages of an intelligent solution, but also has the added benefit of integrating with the AICPA’s highly regarded technical guides. That’s difficult to match.”

The companies also announced that they are working on a broader audit solution.

For more information on OnPoint, e-mail onpoint@hq.cpa.com.

Not only are more CPAs talking about ‘how’ rather than ‘why’ when discussing technology adoption for them and their clients, but now the idea of disruption is being brought up again in a big way; replacing discussions solely about ‘change.’

This was the general consensus after a full day of sessions, keynotes and chatting with CPAs at the Digital CPA conference hosted by CPA.com and the AICPA. The conference, now in its sixth year, was full of thought leaders in the profession and, predominantly, members of mid to large-sized firms with some smaller practitioners mixed in.

The idea is to learn more about the impact of various technologies and related trends on CPAs and their clients and again, clearly, this year was all about handling the massive disruption occurring once more in the profession. The term reared its head back several years ago when thought leaders warned of the potential impact cloud would have on the profession.

Those discussions then turned to the massive ‘change’ that CPAs had to contend with, supported by taking more advantage of client accounting, collaboration and ultimately taking steps to be more of an advisor. While this is still prevalent, the profession is now preparing to be disrupted by the likes of blockchain, machine learning and the growing generation of Millennial accountants, coupled with the aging out of the Baby Boomers.

To start with, in order to face the next wave of impending disruption, CPAs are being asked to take a more entrepreneurial approach to their practices. In essence, they are being urged to be the disruptors rather than having it happen to them. Such was the tone from the opening keynote speaker Marc Randolph, co-founder of Netflix.

So what does running a multi-million dollar online streaming movie service have to do with accounting and disruption? According to Randolph, it was how the company started in the first place.

“To generate ideas...look for pain, learn how to ask what's wrong in the things you do every day,” he said. “Good ideas don't always come out of nowhere. Before we came up with the idea for Netflix, it was in a big stack of bad ideas. When it comes to disruption, the rate of success is directly proportionate to the ideas you can afford to try.”

To drive the point home further, Randolph was on a panel with accounting application entrepreneurs Rene Lacerte and David Barrett. For those unaware Lacerte is the founder of Bill.com, while Barrett founded Expensify.

“Good ideas and bad ideas will initially look the same, the only way to tell them apart is the rear view mirror” said Barrett. “When I came up with Expensify I had to think of the most boring thing you could do, which was easier expense reports.”

And to the firms, particularly smaller ones, Barrett advised to be a better leader and not to fear failure.

“One key point of being a good leader is not freaking out if you don't have the answers...have a tolerance of failure.”

With regard to artificial intelligence disrupting the profession, Leon Katsnelson, a director and Chief Technology Officer at IBM, said for the most part CPAs should not fear replacement but definitely be aware of how AI will impact their work.

“When you think about AI, the human element is still absolutely vital, the auditor's job will not be entirely replaced and human thinking will still be critical,” said Katsnelson. “AI will impact every aspect of accounting, not just audit and not just expenses.”

During his opening keynote address, AICPA president Barry Melancon gave attending CPAs more confidence that they can and will weather the impending disruption to the profession, making no mistake that it is already happening.

“You may be wondering, how do you change in a successful and profitable firm and still make the right decisions at the right time,” said Melancon. “We face the challenge of making sure we're successful and finding the right things to do for the future. We do have something to lose but can't be less willing to change.”

He also went so far as to say the profession may not recognize itself in as few as five years, based on numerous factors including the aging out of Boomers, use of technology from cloud to AI and blockchain, and firm structure.

“With technology, the basic structure of CPA firms will change; different pricing and business models will happen,” said Melancon. “The most likely scenario to occur in the CPA space will be a narrower base and small ownership structure at the top.”

The AICPA and CPA.com are, of course, taking an active role in guiding CPAs through this disruptive period, again stressing how virtual CFO-type services will offer them a key advantage.

“If you want to see what lies ahead for tax and audit, look at what we’ve seen in client accounting services over the past decade – with the cloud, virtual CFO services are now an increasingly important driver of CPA firm revenue growth,” said CPA.com CEO Erik Asgeirsson. 

Specifically, CPA.com plans to:

• Set up roundtable groups of client accounting practitioners, keyed to firm size, to provide a support network and a means to exchange best practices
• Create advocacy materials for CPAs looking to get internal buy-in for their teams to build or expand client accounting services practices
• Design a comprehensive benchmarking survey, in collaboration with the AICPA’s practice management section, to set metrics for client accounting services pricing and best practices

Asgeirsson also outlined several broad initiatives already underway. These include:

• A collaboration between CPA.com, the AICPA and CaseWare, a global provider of audit and analytic software, to create a broad, automated audit solution. One piece of this collaboration – the creation of a dynamic preparation, compilation and review solution – was announced earlier this week at Digital CPA.
• Expanded uses for the RIVIO Clearinghouse, a secure hub for private company financial information jointly developed by CPA.com and Confirmation.com, such as the managed distribution of reports from System of Organization Control (SOC) engagements. Asgeirsson noted that there is growing interest in RIVIO within the credit union industry, and within the Top 20 accounting firms.
• Taking a leading role in defining the impact of blockchain on the profession through a collaboration with the AICPA and Wall Street Blockchain Alliance.
• Offering insight into emerging technology trends through CPA.com’s sponsorship of 1.) an annual executive roundtable for accounting technology CEOs, and 2.) formation of a startup accelerator with the Association of International Certified Professional Accountants.