Last November 7, 2018, I talked on the Fourth Industrial Revolution (or Industry 4.0) and its impact on the accounting and assurance professions, as a guest speaker to the 13th Washington SyCip Lecture of the University of Sto. Tomas Alfredo M. Velayo College of Accountancy.
The term Industry 4.0 was introduced at the 2011 Hannover Fair by the German government. Matteo Talmassons described it as ‘the time for cyber-physical systems (CPS’s), which are the integration of computation, networking, and physical processes, and which are promising to transform the way people interact with engineered systems, just as the internet has transformed the way people interact with information.’ The Fourth Industrial Revolution is characterized by highly intelligent connected systems that create a fully digital value chain.
In their study Readiness for Industry 4.0, Grant Thornton India identified nine components: big data, cloud computing, internet of things, simulation, autonomous robots, augmented reality, cyber security, system integration, and additive manufacturing. A Siemens Financial Services report identified six challenges in embracing this industrial revolution: digital skills, access to finance for the scale of investment, creating a culture of collaboration, data and cyber security, comprehensive access to proof points, and specialized strategic management and planning capabilities. On its readiness to reap the benefits of emerging technologies, the Philippines was ranked 77 out of 139 countries, according to The Global Information Technology Report 2016 of the World Economic Forum. Singapore came out on top, followed by Finland, Sweden, Norway, and the United States.
In addition, investments on SMAC—social, mobile, analytics, and cloud—by venture capitalists accelerate the effect of technological disruption on these accounting functions: transactional accounting processes, fiscal period-end accounting close, auditing, business process outsourcing of accounting tasks, and regulatory filings. With evolving smart and digital technologies, the continuing globalization of reporting and disclosure standards, and newer forms of regulation, the impact on professional accountants may include loss of job, downward pressure on salaries, or increase in workload or work hours.
In my lecture, I posited five assurance practices that may emerge or continue to grow.
With data collection and mining technologies advancing at a rapid pace, we have access to whole data sets using powerful technologies.
Sampling methodologies are now being replaced by comprehensive testing, bringing about high quality, deep dive audits. This deeper connectivity with client data shifts our question from ‘What could go wrong?’ to ‘What has gone wrong?’ improving focus and better judgment.
The rise of data assurance services requires adopting appropriate processes on data integrity and availability.
Using data visualization and predictive analytic technologies, auditors are now able to provide better insights and business intelligence.
For example, a shift in overall behavior of time-in data of employees from 8 a.m. to 9 a.m. may indicate the need to change time-in policies. Moreover, continuous controls monitoring (CCM) tools may evolve to continuous
transaction monitoring (CTM) systems.
The rise of knowledge assurance services required that we are able to harness data and technology to make meaningful insights and advice.
As more data and systems connect with others, either physically or in the cloud, the need to secure the privacy of data and systems has now become a regulatory requirement. Privacy assurance will ask us whether our process of creating, collecting, using, disclosing, disposing, storing, or sharing data remains robust and continuously tested.
There is a lot of discussion around blockchain technology. My simple understanding is that the entry of one transaction in one ledger-system gets replicated to various other systems.
As I imagine it, an expense entry in system one (owned by the company) may be connected-replicated in system two (owned by a regulator that may have real-time view access) and again connected-replicated in system three (probably owned by a supplier that will have real-time data on the usage of a company).
Imagine business transactions and financial statements blockchained from across the company to a bank to a regulator to the external auditor, and the efficiency this interconnectedness brings to the audit cycle or exchange of information. Technology assurance will now have to provide us comfort, quality, and integrity on data travelling across the chain.
As the level of communication intimacy shifts from face-to-face conversation to technology-enabled Twitterverse, Facebook, and other social media platforms, there is a need for the company to be mindful of its message, image and how it converses on social media. Conversation risk is important to many organizations, because someone out there is saying not-so-good things about your organization.
The Fourth Industrial Revolution has disrupted many things, processes, and relationships. As with any innovation, the speed of adapting to change will spell the difference between our organizations’ success or failure.
In today’s volatile, uncertain, complex, and ambiguous world, there is an ever-pressing need to assure that our data, knowledge, privacy, technology, and brand remain robust to contribute to the achievement of the strategies and objective of our organization.
Mhycke Gallego is a Partner for Advisory and Head of Knowledge Management. P&A Grant Thornton is one of the leading Audit, Tax, Advisory, and Outsourcing firms in the Philippines, with 21 Partners and over 900 staff members. We’d like to hear from you! Tweet us: @PAGrantThornton, like us on Facebook: P&A Grant Thornton, and email your comments to Mhycke.firstname.lastname@example.org or email@example.com. For more information, visit our Website: www.grantthornton.com.ph.
As Published in The Manila Times dated 21 November 2018