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The internet of things (IoT) is the interconnection between physical objects and the internet and usually refers to objects that are controlled through the use of the internet when they ordinarily would not be. This allows objects to be connected wirelessly through smart sensors so that they have the ability to interact without intervention from humans (Tang et al. 2018). The IoT can conceptually be seen as having three layers which are interconnected which can be referred to as the sensing layer,the network layer and the application layer.
The sensing layer involves the ways in which the object collects data in real time while the network layer involves transmitting the information that is collected to be processed. The application layer involves applying this usefulness to various aspects of corporate and social life (Wu et al. 2019). IoT technology can be advantageous to a number of different industries including smart energy and healthcare, and when IoT technology is combined with other technologies such as artificial intelligence, its usefulness is even more diverse.
Artificial intelligence (AI) involves replicating aspects of learning and the features of intelligence through simulation in a machine, in order to solve problems that humans generally resolve.
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A major characteristic of AI is that improvement can be achieved over time as more data is obtained (Shimamoto 2018). Since intelligence is a complex idea, made up of many different aspects, there are particular areas of AI that are better at replicating certain aspects. A common example of how artificial intelligence has been used in businesses is automated chat bots on company websites or social media that give customers advice, without the need for a human to answer repetitive questions which saves time and resources.
It does this by analysing the customer input to provide common responses and has proven to be an effective tool used in customer relationship management systems (Romney & Steinbart 2017).
A third important technology is blockchain which is a collection of records linked with each other that are strongly resistant to alteration and protected using cryptography (George 2019). Blockchain technology provides an alternative way to process online transactions using cryptocurrencies which are a form of digital currency. This technology is beneficial because cryptocurrencies are immune to counterfeiting and are protected by strong encryption algorithms. Blocks are created for each transaction and hold transaction details. Each block has a unique hash which can be used to detect changes since the blocks are linked to each other through the hash of the previous block (George 2019). This makes tampering with blocks difficult which is what makes blockchain secure. Development of blockchain has enabled IoT to become more secure, so that the benefits of IoT can be maximised and it can be used more broadly in application with less security concerns (Wu et al. 2019). This has included ensuring that data that has been sensed from IoT devices has not been tampered with and is reliable and accurate.
The IoT, AI and blockchain have all become technologies used widely within the accounting industry and have had many positive impacts on the way accountants and auditors conduct their work, saving both time and money. The uses of blockchain technology has expanded since its original use primarily for a method to record cryptocurrency into now being used for a vast array of applications including smart contracts, automated bank books and digital assets (Wu et al. 2019). Since investors are becoming increasingly more interested in companies that are providing complete transparency, accounting systems using blockchain technology have been successful because it assists with providing reliable, real-time data (Alexandris et al. 2018). Blockchain technology has also been used as a reliable third party intermediary that can be used to verify and record transactions. This combination of increased security and transparency as well as its ability to make the accounting information self-verifying is what has made blockchain technology a viable option to be even further developed within the accounting field.
The use of artificial intelligence within the accounting field has been built on AI’s ability to learn from experiences and adjust to new data when necessary which allows machines to perform tasks that humans would usually do (Lin & Hazelbaker 2019). The characteristics of AI have made it an important development in the area of auditing as it significantly reduces the amount of time auditing takes and also reduces the amount of auditors that need to be used. The IoT also offers major benefits to accountants because they are able to use the real-time data it provides to more accurately allocate resources and learn more about clients (Chandi 2017). All 3 technologies also work interconnectedly at times to solve problems faced by accountants and auditors in the industry as a whole, as well as extensively within the Big 4 accounting firms.
The Big 4 is made up of KPMG, PricewaterhouseCoopers (PwC), Deloitte and Ernst & Young (EY), all of which offer a vast array of accounting and taxation services. Since these firms are the leaders in the industry they must stay up to date with emerging technologies in order to stay competitive. All 4 of these firms have implemented various initiatives and strategies to integrate AI, blockchain and the IoT into their business models. KPMG, EY, Deloitte and PwC can be categorised as early adopters and all have many staff employed in these specific areas to constantly be researching and developing new ways to maximize their opportunities within the industry using these smart technologies (Schmitz & Leoni 2019).
AI is being used within multinational firms such as EY and Deloitte in order to detect invoices that are fraudulent and to assist with the processing of tax returns, which has allowed these firms to save considerable amounts of processing time (Moll & Yigitbasioglu 2019). The Big 4 firms have all taken slightly different approaches to how they implement their initiatives in regards to AI, with EY integrating this technology in small, thoroughly researched areas with the aim to achieve immediate return on investment. Contrastingly PwC integrates AI technology by making the idea to implementation process occur within a short time span, in order to create a full model that customers can utilise and then working on refining it later (Zhou 2017). Deloitte has created a corporate innovation team which currently dedicates 80% of its time to working with AI so that they can be introducing use-cases to clients continuously (Zhou 2017). Within all 4 of these firms including KPMG, AI technology has allowed the process of reviewing high volumes of contracts for their clients to be streamlined so that it can be done using less employees and completed in less than a month rather than half a year (Zhou 2017). This process is also now commonly used to review new legislation that is continuously impacting the accounting profession. Overall the initiatives that have been developed in response to AI by the Big 4 firms have allowed processes to be significantly streamlined.
For all 4 of the firms, developments utilising AI have been going on for decades now, but initiatives focused on blockchain technology have been more recent. Blockchain has created an opportunity for automatic confirmation of debit and credit entries, which is being referred to in the industry as triple entry accounting (Karajovic et al. 2019). This automatic verification is a valuable tool in improving reliability and transparency, which investors are demanding. PwC Australia has currently been working on developing its own multi-asset blockchain called Vulcan that develops interoperable digital assets which can be traded with popular cryptocurrencies. The eventual goal is to provide Vulcan as a subscription service and ultimately provide a service allowing customers to hold various types of cryptocurrencies (Karajovic et al. 2019). Deloitte currently has over 800 employees across about 20 countries working directly on blockchain development, as they believe it is a very important area of innovation. An initiative that KPMG has developed in regard to blockchain is Digital Ledger Services which aim to give clients information and advice on how blockchain technology can be used to improve security and digitise particular operations, whilst improving the speed of transactions in a low cost way. KPMG has also introduced blockchain nodes ‘innovation workspaces’ which simulate particular cases of blockchain use for clients (Karajovic et al. 2019). The continuing expansion of applications for blockchain technology is being well utilised by these 4 firms, who are using its benefits to positively impact their own services.
The Internet of Things also provides various avenues of development to the Big 4 accounting firms. A key advantage of IoT that all 4 firms are capitalising on is its ability to provide extensive access to real-time data, which enables budgets and forecasting to be created with greater accuracy. Ernst and Young is considered to be a leader in the area of IoT, and although they’re not involved in the actual construction of devices, they are providing extensive services to clients in this area of technology. This has included assisting them with implementing strategies for the future that integrate IoT technology and offering advanced cybersecurity services to protect their IoT devices (Catford 2018). IoT technology has also significantly assisted KPMG, PwC, Deloitte and EY with being able to detect potential fraud issues significantly earlier which has helped to minimise many losses caused through fraudulent activity. (Chandi 2017).
Since the influence of IoT, AI and Blockchain within the corporate environment and the accounting profession in particular is becoming increasingly more prominent, national professional accounting bodies are implementing a variety of initiatives to ensure that their members are evolving their skills fast enough to keep up with the impact of these technologies. To assist professionals within the accounting and finance sector to stay well-equipped to understand and work with these new technologies, the American Institute of CPAs (AICPA) has created a library of digital learning tools and cutting-edge resources relating to a broad range of important technologies including AI and blockchain (American Institute of CPAs (AICPA) 2019). These valuable learning tools include an updated version of the Chartered Global Management Accountant Competency Framework, in which digital skills has been added to the other vital knowledge areas, to fill this gap in the expertise of professionals. A collection of webcasts, courses and certificate programs has also been developed by AICPA titled the ‘Go beyond disruption’ learning series, which provides practical guidance for accountants to encourage them to adapt to these technological changes within the industry in order to thrive in their careers (American Institute of CPAs (AICPA) 2019). Additionally the Association of Chartered Certified Accountants (ACCA), another professional accounting based in England rather than the U.S, have developed other initiatives to encourage their members to expand their professional skills particularly in the area of blockchain technology. In 2017, ACCA developed a guideline titled ‘Divided we fall, distributed we stand: The professional accountant’s guide to distributed ledgers and blockchain’ which aimed to educate their members on the topic and ensure that they acquire the skills they need to adapt to these continuous changes within the corporate environment, particularly resilience and adaptability (Vaidyanathan 2017). These initiatives from national professional accounting bodies have assisted in providing their members with the skills and expertise that the Big 4 accounting firms are demanding from their employees in our modern world.
Currently industry and global standards are minimal regarding the areas of blockchain and IoT, so businesses are adapting these technologies to accommodate their particular business objectives without extensive constraint from regulatory bodies. The International Federation of Accountants (IFAC) hasn’t developed specific new standards to control the use of the IoT, blockchain and AI within the accounting and auditing sector, so currently there is still a relative amount of freedom with the ways in which accounting firms can utilise these technologies. Similarly to the national professional accounting bodies AICPA and ACCA, IFAC emphasises the importance of professional accountants being well trained in these areas of technology in order to use them to their highest potential and in the best interest of stakeholders. IFAC also aim to convey that internal auditors have an important responsibility to continuously evaluate the effectiveness of the internal controls surrounding artificial intelligence and the internet of things to minimise the risk of issues occurring in the future (Shimamoto 2018).
Artificial Intelligence and The internet of things. (2022, May 30). Retrieved from https://studymoose.com/artificial-intelligence-and-the-internet-of-things-essay
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