Fourth Industrial Revolution (4IR): An understanding of the impact of technology on the accountancy profession
The term “Industrie 4.0” was first coined in 2011 at the Hannover Trade Fair in Germany and describes the 4th Industrial Revolution, which we are currently experiencing. The Fourth Industrial Revolution is characterised by the continuous automation of traditionally manual processes and involves aspects such as AI, big data, Internet of Things, Blockchain and machine learning. 4IR is a hot topic, which is, on the one hand, thrilling because of the possibilities it offers, but simultaneously causes concern for many fearing changes in the future demand for many traditional careers. What exactly does the 4th industrial revolution entail, and what does it mean for the accountancy industry?
What is the Fourth Industrial Revolution?
Historically each industrial revolution was spurred on by the discovery and eventual mass application of certain new technologies. While the first industrial revolution of the 18th century began with a move away from handmade to mechanised production using steam and water power, the second was driven by the innovation of electricity and assembly line production. The third industrial revolution is known as the digital revolution based on the development of the computer. The fourth revolution builds on these digital advancements, but moves at a much more rapid pace and involves fields such as robotics, artificial intelligence, biotechnology, the Internet of Things (devices that connect to the internet), machine learning and more.
4IR is changing the accountancy landscape
The Fourth Industrial Revolution is affecting many areas of business and changing the role of professionals within their fields of expertise. While the potential of these advancements is truly exciting, the efficiency and accuracy of many of these technologies also lead to some anxiety in terms of job security. As the technology develops, the type of human input required for many industries changes and there are predictions of professions becoming redundant. This also applies to the fields of accountancy and auditing, where there are speculations about the viability of tax, bookkeeping and accounting jobs within the next five to 10 years.
Types of technology being used in the accountancy professions
For accounting firms, 4IR means there are more sophisticated systems becoming available for various tasks. While some technologies are already being applied and enjoying widespread usage in the accountancy and auditing fields, others are still being explored and not used to their full potential yet.
Accounting software packages offer reporting options, generate financial statements, and perform repetitive record keeping more efficiently and accurately using robotic process automation. With auditing, data analytics tools are used to extract large amounts of data from a client’s financial records and to use this information to detect patterns and pick up irregularities using the entire range of entries, rather than just a sample. There are several accounting tasks which “machines” can do effectively, from bank reconciliation and monthly processing responding to queries from (AI chatbots).
Blockchain technology is expected to be the next revolutionary development to affect accounting and auditing processes. The benefit of this would be to make financial record-keeping more affordable, reliable, precise and secure. How it works: Blockchain technology eliminates the need for an intermediary, such as a bank, to verify a transaction and operates through a secure peer-to-peer network. In terms of accounting, this technology could be used as a kind of incorruptible digital ledger where transactions from buyers and sellers can be recorded instantly and simultaneously. All parties involved in the transaction have access and are able to confirm the details of the transaction before it is recorded. Once a transaction is added, it is encrypted and cannot be deleted or changed. Blockchain technology removes the chances of human error and fraud and offers a high degree of accountability.
How 4IR is changing how accounting and auditing companies operate:
The benefits of these new technologies for the accounting professional are many and can actually improve client relations in several ways:
- The number of repetitive tasks done by employees are reduced, meaning more time for other valuable work and interaction with clients.
- Instead of manually dealing with traditional bookkeeping and auditing tasks, accounting professionals learn to become experts at using new software and other technologies at their disposal.
- Cloud-based accounting systems mean that files can be accessed and edited from anywhere.
- Client data can be managed with much greater ease, speed and accuracy.
- Security and compliance measures to protect clients are greatly enhanced.
- Accountants are better equipped to answer client questions or provide feedback/ give advice instantly.
- There is greater transparency around a client’s financial insights.
A positive view of the future of the accountancy professions
Instead of seeing the onward march of 4IR as a threat to the accountancy professions, the new technologies should be seen as a helpful tool to improve service to customers. While this may mean that traditional “number crunching” accounting skills are less important, it is up to individuals and companies to adapt and focus on other types of expertise. Greater digital literacy is required, the ability to interpret insights generated by various systems and apply these to important business decisions, but also a greater emphasis on management and interpersonal skills. This new era of accounting, like in other business fields, should be seen as a positive change and an opportunity for growth. The key is a willingness to adapt in concert with the evolving technology.
New technologies incorporated at Exceed
At Exceed we have embraced this revolution by adopting cloud-based accounting software like Xero and upgrading our audit software to cloud-based too. Technology has also changed the way we share information for audit and accounting purposes between us and our clients, allowing us to utilise digital signatures and thereby supporting our drive to become paperless. The additional biggest benefit is that we now have more time to connect with you, our clients, and to offer our advice and financial insight when needed.
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