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AI, Cognitive Technology and the Firm of the Future

Technology was the focus of the day in an informative final session at the VSCPA’s Top Firms Roundtable, held Sept. 22 at the CPA Center in Glen Allen. VSCPA Vice President, Advocacy Emily Walker, CAE, kicked off the “Firm of the Future” session with the question, “What do we need to be focusing on to stay relevant moving forward?”, and the two session leaders from Deloitte both indicated that continued relevance stems from using technology to offer new and better advisory services.

“I think it’s a really exciting time,” said VSCPA member Dan Hudgens, CPA, a partner at Deloitte in Richmond who handled the audit side of the presentation. “A lot of the things that are available to us, whether it’s analytics, cognitive, not only allow us to do a better audit, identify where the risks are in a much more supportable way, but also develop insights.”

Hudgens focused on two main audit technologies, Tableau and Microsoft’s Power BI, that analyze data and create visualizations to help identify areas of focus. Both programs are as powerful as they are because of technological advances that allow for greater sampling than the random sampling practices of the past.

“We all grew up in random sampling, representative sampling, looking for anomalies in the population by selecting things,” he said. “With data analytics, being able to look at 100 percent populations, we’re able to focus our audits much more. We’re also, conversely, able to eliminate populations by proving with data analytics that there really isn’t risk.”

Tableau isn’t just useful when performing audits. VSCPA member Ravi Gupta, CPA, a partner at Deloitte in Tysons who specializes in tax, said his side of the building makes good use of the program as well.

“It’s so much easier to review it when they give you visualization of the components of a tax return,” he said. “You can see how your fixed assets are doing, what your state apportionment is looking like.”

The common thread is being able to identify trends and outliers within a data set, whether it’s financial statements or tax returns. That’s useful to both auditors and tax professionals, and it’s a big reason why forward-thinking members of both communities should view technological advances as opportunities to expand their services.

“The power of the visualization is that the clients can see it,” Hudgens said. “When you do a scatter plot and you’ve got a group of units within a band and you have outliers, it tells you something. It tells you a lot. These visualizations are very powerful tools.”

Of course, the impact of technology stretches beyond data visualizations. Gupta highlighted the “Internet of things” in his remarks, offering the example of shipping companies using GPS-based telemetry to track shipments. Hudgens said Deloitte is experimenting with drones as a way to perform inventory operations for clients like rock quarries.

Even small-scale process improvements, when scaled to a firm the size of Deloitte and its Big Four brethren, can add up to major man-hour savings.

“These are not multimillion-dollar investments,” Gupta said. “You can start to build small process automations through these applications. Thinking about viewing a tax return, robotics can take that data out without you clicking through multiple systems.”

Another way Deloitte is leveraging technology is through the use of “delivery centers” — hubs for specialists in numerous different practice areas that offer solutions remotely. While not a direct technological advance, the firm was able to develop this model because its auditors weren’t as tied down to client sites.

Artificial intelligence and machine learning are other major areas of emphasis. KPMG has partnered with IBM to use its Watson supercomputer in its audit and professional services areas. The partnership helps automate repetitive, labor-intensive tasks traditionally performed manually by auditors.

“We all grew up reading a lot of documents, whether they’re lease documents or contracts,” Hudgens said. “Cognitive technologies will machine-read those documents, and as they read more, they’ll learn more about them. The more you feed them, the smarter they get and the more powerful they become.”

Blockchain technology is another emerging technology with major implications for CPAs. It creates a permanent, time-stamped, immutable record of information about transactions, with complete transparency for everyone authorized to view the information.

“Think about the ledgers our clients have that contain all the transactions,” Hudgens said. “If those ledgers were distributed so they couldn’t be changed — right now, clients have the ledgers within their own four walls. They don’t send out ledgers, they send financial statements. With blockchain, the ledgers can’t be changed. Thinking about audits, if I can extract that information from the chain, that’s extremely valuable. There’s agreement between the parties.”

If applied correctly, Hudgens said, these technologies could enable the profession to make good on services only dreamed about in the past.

“We’ve talked about things like continuous audit for a long period of time. Using these technologies, we’re able to get at a lot more data than we used to, in a lot more real time,” he said. “If you think about the assurances you can provide with that data, we believe in the future, the CPA is going to do other services.

“Think about the non-GAAP reporting. A lot of firms aren’t doing that, and they might in the future. And if they don’t, others will disrupt them. We really want to broaden what we do as CPAs.”

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