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The Impact of the Fourth Industrial Revolution

Updated February 6, 2021
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The Impact of the Fourth Industrial Revolution essay

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Introduction

Technology forms an integral part of our daily lives. Since the beginning of time the world has seen constant technological advancement driven by the need to make complex and time-consuming tasks easier. In recent years more emphasis has been placed on integrating technological systems in order to improve task-efficiency and reduce dependency on humans. The aforementioned has become known as the fourth industrial revolution (4IR). The latter refers to the development, implementation and integration of smart technologies in society. Schwab (as cited by Hirschi, 2018:192) describes it as the digitisation and automation of tasks and processes. Computers are capable of sorting and computing data faster and more accurately than humans.

A significant part of the accounting profession revolves around calculating, tracing and classifying transactions. It can therefore be argued that the future of the accounting and auditing profession is affected by the advances in technology. However, it is the opinion of this report that technology would not be able to eliminate humans in the profession, due to the profession’s high reliance on human judgement. This report aims to analyse the impact of the fourth industrial revolution on the role and relevance of an accountant, as well as the benefits and risks it poses for the profession. Furthermore, the report will consider the skills that accountants and auditors would need to acquire to adapt to the changes in technology.

Impact of the Fourth Industrial Revolution on the Role and Relevance of an Accountant and Auditor

Technology is capable of improving and simplifying tasks. By simply inputting data and parameters, a computer would be able to sort and process the input data more accurately and quicker than a human would be able to. However, a computer does not have the capacity to interpret the results of the processed data. Human judgement is required to make sense of the information provided by the computer. According to Hirschi (2017:193) it is unlikely that technology would eliminate a profession. This argument is supported by Rogozea (2009:511) who is of the opinion that artificial intelligence would never be able to replace human experts, such as accountants and auditors, due to the fact that human judgement cannot be replaced or replicated by technology.

Technology would be able to alleviate accountants of certain computational tasks but would still require their knowledge and professional judgement to interpret and analyse the information generated. At the present point in history, computation is considered to be a more significant part of an accountant’s duties. The introduction of technology and artificial intelligence will see a shift in the role of accountants from computation to interpretation.

In addition to the aforementioned argument, Xu et al. (2018:94) is of the opinion that technology also lacks another essential feature – moral reasoning. Technology is not able to discern between what is morally right and wrong. Therefore, an accountant would also fulfil an imperative role in providing advice for ethical dilemmas. Accountants would not be able to be replaced by technology, due to the fact that only humans have moral reasoning capabilities.

From the aforementioned it is clear that technology would result in the primary role of accountants changing to advisory, interpretation and impartation of business and financial knowledge. Reckoning and data collection would mostly be performed by computer systems, instead of accountants. The benefits that technology will offer the auditing and accounting profession will now be discussed.

Benefits of the Fourth Industrial Revolution for the Accounting and Auditing Profession

As mentioned earlier in this report, technology is capable of performing time-consuming tasks in a more efficient way. The use of technology would improve the quality of data through higher accuracy and greater timeliness (Burritt & Christ, 2016:33). The use of computer programs to sort data and perform computational tasks also eliminates the possibility of human errors. Computerized accounting systems are able to check that the amounts and details of all transactions have been recorded correctly and that it has been posted to the correct ledger accounts. Currently it is impossible for auditors to provide absolute assurance that the financial statements of a company as a whole are free from material misstatements.

However, the introduction of smart accounting systems would make the provision of absolute assurances possible, seeing that a computer would be able to trace the postings of each transaction back to the original source document. Integrated technology systems would ensure that all transactions which occurred are recorded, by accessing a universal data cloud to link each of the recorded transactions with the source documents issued by other companies. In addition to this, algorithms can be used to detect any irregular transactions.

Computers can process data considerably faster than humans can. Ghasemi et al. (2011:114) is of the opinion that computerized accounting systems will enable accountants to process large amounts of financial data in a substantially shorter period of time. This will reduce the amount of time accountants and auditors spend on preparing and auditing financial statements, subsequently increasing an accounting firm’s overall efficiency. Higher efficiency will decrease audit fees, increase client satisfaction and attract new clients.

Ghasemi et al. (2011:113) further argues that information technology would also improve the functionality of financial departments in companies, subsequently ensuring that auditors timeously receive financial information from their clients.

The aforementioned accuracy and timing benefits will result in an overall improvement in the credibility of financial statements.

According to SAICA (2018) cloud-based technology will enable accountants and auditors to access data in real time. This will enable accountants and auditors to access the database of a client anywhere and anytime, subsequently increasing their efficiency and flexibility in the tasks they have to perform.

Due to the complexity of technological systems and the fact that technology mostly functions independently from humans, smart accounting systems would make the manipulation of financial information more difficult. According to Ghasemi et al. (2013:114) the use of technology will limit the number of individuals who have access to financial records, thus ensuring that only experienced supervisors can alter financial information.

The complexity of the South African tax system has significantly increased over the past decade, due to the constant addition and revision of tax legislation (Steyn & Stiglingh, 2016:157). The everchanging and intricate tax system makes it difficult and time-consuming for auditors to scrutinize the tax compliance of a client. The fourth industrial revolution could bring forth the existence of smart accounting systems that are linked with tax legislation. This will ensure that all the taxes relevant to a transaction are accounted for, subsequently reducing the amount of human effort needed to inspect tax compliance.

It has been established that the fourth industrial revolution will offer the accounting profession many benefits. However, it also poses the profession with several risks. This will be discussed hereafter.

Challenges and Risks for the Accounting and Auditing Profession

Technology is constantly evolving and becoming more integrated. In order to efficiently use technology, one first needs to learn how to use it. As accounting systems are computerised, it is imperative for accountants to acquire the necessary skills to effectively utilize its capacity (Ghasemi et al., 2011:115). The need to obtain computer and programming skills may be challenging for accountants, especially because their expertise is vastly different from that of IT specialists. Some individuals might find it more difficult than others to learn how to operate the new accounting technology. This can be explained by the fact that each individual differs in terms of age, knowledge, training and experience. Inadequate understanding of how to operate smart technology will impede accountants in the performance of their duties. It could also negatively impact on the quality of the work done by them.

As mentioned earlier in this report, it is unlikely that the accounting profession would cease to exist, seeing that accountants and auditors possess valuable commercial knowledge. However, accountants who are not able to adapt to the changing technology would likely lose their jobs, contributing to unemployment.

Cybersecurity and hacking might also present a serious risk to the accounting profession. According to Xu et al. (2018:93) the biggest challenge accountants will face in the fourth industrial revolution is the risk that hackers might gain unwarranted access to confidential financial information. This would not only bring the accounting and auditing profession into disrepute, but also adversely affect the stakeholders of the affected clients. It is vital that the aforementioned issues are addressed. Possible solutions to these challenges will now be discussed.

 Solutions for the Challenges Facing the Auditing and Accounting Profession

In order to ensure that accountants are equipped to work with technology, it is of paramount importance that they are regularly trained to use it. Accounting firms should establish internal departments that are responsible for teaching, improving and maintaining IT skills. This will ensure that accountants are kept up to date with the latest advancements in technology, subsequently enabling them to efficiently perform their duties. The management of accounting firms should create a working environment which encourages and supports learning. In addition to the aforementioned, management should also promote a culture of teamwork in the workplace, to encourage individuals who have a good understanding of technology to aid those who struggle with it.

Furthermore, it is important that accounting students are taught programming and IT skills at university level. This will prepare them for the workplace and ensure that they are Industry 4.0 ready.

Skilton and Hovsepian (2018:23) have suggested the creation of an online database to identify the skills which the fourth industrial revolution requires of the employees in each profession, to ensure that they timeously receive training. This database would be updated regularly to notify employees in affected professions of the skills they would need to acquire. Such a database would not only prevent job losses, but also ensure that accountants remain efficient in the tasks they perform.

In order to address the risk of hacking and data loss, accounting firms would need to invest in proper cybersecurity systems and ensure that these systems are regularly updated. Xu et al. (2018:93) suggests that accounting firms conduct a proper risk assessment to identify and address risks to the IT system of the firm. Management should also educate its employees about the importance of data safety and provide them with procedures to follow to ensure they treat data responsibly.

Skills Accountants and Auditors would Need to Acquire to Adapt to 4IR

In order to survive as professionals in the fourth industrial revolution, accountants and auditors would need to possess several pivotal skills. As mentioned earlier in this report, it is imperative that accountants have exceptional technology skills to enable them to efficiently perform their tasks. Programming and IT skills would benefit accountants over the long-term, seeing that it would provide them opportunities to utilize their accounting and business knowledge to design, improve and maintain smart technology systems.

Earlier it was established that the auditing and accounting profession would witness a role shift from computation to interpretation due to the fourth industrial revolution. It is therefore important that accountants develop and maintain their analytical and evaluation skills. This will enable them to provide clients with quality insight and advice.

It was also previously established that computers do not have moral reasoning skills. Therefore, clients will approach accountants and auditors for advice on moral issues. Integrity and honesty would therefore be vital values an accountant and auditor would need to possess. In addition to the aforementioned limitation of technology, computers also do not have the capability of leading decision-making. Although technology will perform a majority of an accountant’s tasks relating to computation, accountants would need to lead in decision-making and have strong leadership skills.

The fourth industrial revolution has the capability of radically transforming the structure of the global economy and how society operates (Schwab, 2017:8). Accountants and auditors would need to be dynamic to adjust to the radical changes effected by the fourth industrial revolution. Apart from flexibility skills, they would also need to have lifelong learning skills and an appetite to constantly improve themselves.

Conclusion

This report has established that the fourth industrial revolution would offer the auditing and accounting profession significant benefits. Technology would not only improve the quality of financial reporting, but also simplify the work of accountants and auditors. However, the array of advantages is shared with several risks and challenges which could hinder the successful integration of technologies with the auditing and accounting profession. Smart technologies will shift the main role of accountants from computation to interpretation but will never be able to eliminate humans in the profession, seeing that technology would not be able to replace or replicate human judgement. If accountants become well versed in new technologies, they are likely to remain high in demand.

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