The Digital Revolution (Big Data, business analytics, hosted applications and services, connected objects…) is a trend that is drastically changing organizations and more broadly society. According to a survey conducted by NewVantage Partners in 2016, more than 70% of large US companies perceive Big Data as a fundamental tool for success. A forum published in the journal Accounting Horizons of the American Accounting Association allows to have further insight on the effects that these revolutions will have on accounting firms(1). Are they ready to face these challenges?
Big Data is characterized by the ability to process a large volume of heterogeneous and complex data quickly. Its purpose is to improve the understanding of organizations and to facilitate decision-making processes. The majority of companies born of the technological revolution of the years 2000 has mastered Big Data to propel themselves towards success: Amazon used Big Data to maximize the efficiency of its processes while reducing costs, Facebook has used it to better guide its advertising services and finally, Google to help its users in their searches.
This Digital Revolution, caused in particular by Big Data, could improve the relevance of accounting work(2). Thus, in management accounting, it enables companies to see challenges and disruptions based on the analysis of all the data available to organizations, in order to better assess performance and facilitate the budgeting process. In internal and external audit, it helps to better identify deviations and irregularities. Finally, in financial reporting, it allows a better assessment of items to be presented in financial statements.
Big Data is thus a tool that accounting firms can use to improve their audit practices by extending representative sampling to all relevant transactions. On this point, the International Auditing and Assurance Standards Board (IAASB) issued a request for comments in order to understand the influences of Big Data on the audit; the goal is to assess the standards that should change in pursuance of the developments related to this phenomenon(3). It is also a tool that can support other advisory services, such as consulting, forensic accounting, due diligence, and others. Indeed, by understanding and properly using data, accounting firms will be able to do better diagnostics and thus draw better conclusions – to the benefit of their clients.
Opportunities exist for accounting firms. Indeed, companies often collect large amounts of data without actually exploiting them. In order to optimize the use of these data, the relationships between them must be well defined. Hence, the expertise of accounting firms is eminently suitable to guide companies to find, create, and define these relations. Accounting firms have a good understanding of companies and their operation. They can help to identify and interpret the correlations throughout the datasets. For now, the market is rather dominated by companies specializing in business intelligence(4). Traditional players, such as Microsoft, SAP, IBM or Oracle, initially slow in the waves of business analytics, have adjusted their offer and are now in a leading position. New actors such as Tableau, Qlik or TIBCO Spotfire have also emerged(4).
Large audit firms are also starting to develop expertise in this area and highlighting the potential of Big Data in their service offerings. For example, in Canada, PwC acquired Biond Consulting, a Montreal-based company, and EY acquired Calgary-based Up Consulting, to deepen their expertise in business analytics. The Canadian and Quebec CPA Order is also beginning to put this issue at the centre of its concerns, and regularly informs its members of the potential effects on the profession(5).
Like other industries and professions, accounting firms, large or small, will be impacted by the wave of innovation linked to the Digital Revolution. How will these firms respond to these changes?
For more information:
Original article published on the website of Gestion (in French): Big Data et cabinets comptables : une révolution?
(1) Vasarhelyi, Miklos A., Alexander Kogan & Brad M. Tuttle (2015). Big data in accounting: An overview. Accounting Horizons 29(2): 381-396.
(2) Warren, Donald, Kevin Moffitt & Paul Byrnes (2015). How big data will change accounting. Accounting Horizons 29(2): 397-407.
(3) IAASB. (2016). Request for input. Exploring the Growing Use of Technology in the Audit, with a Focus on Data Analytics. IAASB – IFAC (http://www.ifac.org/publications-resources/exploring-growing-use-technology-audit-focus-data-analytics).
(4) Sallam, R. L., Howson, C., Idoine, C. J., Oestreich, T. W., Richardson, J. L., & Tapadinhas, J. (2017). Magic Quadrant for Business Intelligence and Analytics Platforms (No. G00301340). Gartner (https://www.gartner.com/doc/3200317/magic-quadrant-business-intelligence-analytics).
(5) Barcelo, Y. (2016). I robot, CPA. CPA Magazine (https://www.cpacanada.ca/en/connecting-and-news/cpa-magazine/articles/2016/august/i-robot-cpa). Bragonier, D. (2015). Get on the big data bandwagon. CPA Magazine (https://www.cpacanada.ca/en/connecting-and-news/cpa-magazine/articles/2015/march/get-on-the-big-data-bandwagon).