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Technology in Accounting: Drones, AI and Data Analytics

December 4, 2018

Blockchain and data analytics technology have been well-covered by the VSCPA as part of its “Drive Innovation and Vision” bold strategy from the VSCPA2025 strategic framework. But what do some less obvious technological advances mean for the CPA profession?

Drone technology was once the purview of the U.S. military and aviation hobbyists. That all changed in 2016, when the Federal Aviation Administration (FAA) changed its regulations on who could and couldn’t operate drones — rules that opened up the technology for businesses of all stripes.

Before that change, commercially operated drones had to be piloted by someone with a private pilot license, making their usage prohibitively difficult for most accounting firms. Now operators are required to take an FAA test to obtain a commercial drone license.

So what are the implications for CPA firms? They’re useful in assessing and monitoring infrastructure over large geographical areas, and some firms use them to assist with inventory counts. Simply put, they can go certain places much more easily than humans.

“The drones are about having digital technology on something that’s very small,” Deloitte audit innovation lead Will Bible said in 2016. “With a little drone aircraft that you can control, you can put a camera on it and get a feed on what the drone sees and you can send it to places where you wouldn’t send a person. So if you want to do something like looking at the reading on top of a grain silo, you could send a drone up there without having to send your staff out in the middle of the country to climb up the silo to take that measurement.

“Because the cost has come down so much, it can be a really effective way to get people to places that are difficult to get to.”

The use has trickled downward from corporate to the local Deloitte offices. At last year’s Top Firms Roundtable, VSCPA member Dan Hudgens, CPA, a partner in the firm’s Richmond office, said the firm was using drones to perform inventory at remote locations.

Another Big Four firm, PricewaterhouseCoopers, is making extensive use of drones in its overseas practices. PwC opened a drone-focused division in Poland, which completed a study that estimated the global market for commercial drone applications at $127 billion U.S. dollars based on applications like investigating the correctness of tax returns.

Artificial intelligence is another technology rapidly growing in prominence with larger firms. KPMG partnered with IBM to use its Watson supercomputer in its audit and professional services areas, helping to automate repetitive, labor-intensive tasks like reading documents.

“Cognitive technologies will machine-read those documents,” Hudgens said at the Top Firms Roundtable, “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.”

Hudgens was describing the phenomenon of machine-based learning, where computers become progressively better at analysis and decision through usage. AI is generally used to analyze large volumes of data at speeds beyond what any person or team is capable of — a souped-up version of the humble spreadsheet.

Auditors are using AI to interpret large volumes of documents, often extracting and compiling key terms and using the results to assess risk and flag outliers. AI can analyze entire populations of data instead of the random sample human auditors must use.

It’s similar to the way data analysis is being used in audits. As VSCPA member Joan Renner, CPA, said at the 48th Annual Virginia Accounting & Auditing Conference (PDF) in Roanoke in October, analytics are a tool to accomplish the goal of assessing and addressing the risk of material misstatement.

“Analytical procedures are powerful tools,” said Renner, a shareholder at Renner & Co. in Alexandria. “They support audit effectiveness because they show things that don’t look right. They support audit efficiency because when we get to a point where things look right, we’re done.”

Where do opportunities lie for CPA firms with AI poised to take over certain repetitive tasks? In using the time freed up from performing those tasks to provide truly irreplaceable services. By diversifying the services they provide, CPAs can remain vital, trusted advisers to their clients.

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