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Companies need to build the required accounting skills for digital transformation

Although the need to continually reskill and upskill finance professionals remains a challenge.
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Gartner says a majority of companies are accelerating or upgrading their digital solutions as a direct result of the Covid-19 pandemic. While this trend for good reason is being broadly welcomed by the auditing and accounting professions as reducing laborious ‘number crunching’, there remains a real risk that here in South Africa it might exacerbate an already severe skills crisis in audit.

It is a question of the skills set currently being taught to trainee auditors.

As we move forward, we see three clear trends of digital transformation through artificial intelligence (AI) or machine learning (ML) for the accountancy and finance profession: the development of processes with no human intervention, continuous audit, and active insight.

AI will enable businesses to capture business accounting in real time, perform continuous reconciliation and make adjustments such as accruals throughout the month, thereby reducing the burden at the end of the period. It will facilitate decision making and drive significant efficiencies, while freeing up the workload of accounting professionals.

Continuous audit can appreciably reduce the risk of financial fraud and minimise accounting errors, which are typically caused by human interaction.

The trend of ‘active insights’ is where South Africa may fail to enjoy the same level of benefit as other countries. In the listed space, companies can afford to pay for quality skills that in turn are able to adequately assess the financial data for such active insights. However, in the second tier of business we are increasingly seeing poor quality financial reports.

For audit and accounting professionals, there are undoubtedly many benefits of adopting AI and ML by automating tedious, manual workflows, to enhancing the value of the finance function through predictive analytics, analysing insights, and reinforcing the chartered accountant’s true role of being a strategic advisor to the business. However, there remain some challenges in execution of AI initiatives: primarily the need to continually reskill and upskill finance professionals.

Historically, the nature of audit training was a rather manual approach to every aspect of a company’s books – but which had the result of article clerks or trainees as they are nowadays known, becoming extremely familiar with every aspect of a company’s accounting. The active insight component of audit rests upon this deep basic knowledge to be able to drill down and instinctively know what a set of books ought to look like. However, this is increasingly becoming less so as each process is automated, and finance professionals are being asked to make analyses based on shaky basics and therefore shaky instincts. With ML becoming the norm, trainee accountants are learning less and less and may not even be familiar with a journal or bank statement. They will have a theoretical knowledge of them but have never worked on them. It is far easier to analyse data when you have been part of its development or processes.

Already, in South Africa the lack of basic accounting skills in small- and medium-sized businesses has been an ever-growing problem from an audit perspective, and I see digitalisation as the solution to this. By replacing the accounting people with machines, the quality will become more consistent and rules-based, which helps us as auditors as it removes the element of human error.

With real-time and accurate financial information therefore less of a problem, the challenge becomes the interpretation and reporting on that financial data. Practically speaking, in the case of a merger and acquisition of a target company, the acquirers need to be able to rely on the financial information to make their decision. If those studying the reports lack that analytical and instinctive understanding of the reports, it adds to deal risk. The same risk, for example, applies if an auditor cannot rely on the accuracy of the journals they are auditing.

For this reason the South African Institute of Chartered Accountants (Saica) has an initiative underway with universities to relook at the syllabus so that by 2025 the system is able to produce a more market-suitable qualification for those that ultimately go on to become chartered accountants. At Mazars, we too are looking at the upskilling of our people to focus more closely on their analytical abilities, and also in our recruitment strategy.

In the past, a senior person would do that analysis. Now, graduates coming into our firm have to already be trained to interpret financial reports or there will be no work for them – given the rest will be done by machines.

There is no doubt that digital transformation holds more opportunities than risks for the audit profession, by creating consistency. In the past, auditors had to first test the system and people to see if it reliably produces the required information – now we simply have to test the technology by, for example, being involved in testing models, or auditing algorithms which may require deeper knowledge of ML techniques. In short, this will become the norm in audits. The need for trainees to be technologically skilled will become far greater than in the past.

For the accounting and finance profession, the AI journey is under way, with many recognising the need to embrace new technologies.

The next stage for many finance teams will be to enhance decision making effectiveness through greater use of ML and AI adoption. We at Mazars see this trend increasing for accountants, both in corporate roles and those in public practice to respond to evolving client needs.

Guillaume Oberholster is managing partner at Mazars Bloemfontein office.

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