Converging Technologies Will Lead to ‘Continuous Auditing’

Technological advancement also promises huge strides for many industries but perhaps a dire fate for others, a futurist tells accountants and audit...
David McCannNovember 19, 2018
Converging Technologies Will Lead to ‘Continuous Auditing’

We hear all the time how technology is going to radically change our future — and in fact, that technology-driven change is in progress now and has been so for quite a long time.

But the business world still may be caught unaware by the speedy pace of change. It’s hard to get our minds around it.

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At the recent Current Financial Reporting Issues conference, hosted in New York City by Financial Executives International, futurist Jack Uldrich sped through a tip-of-the-iceberg view of how various technologies are going to fundamentally change — or eradicate — many industries and time-honored ways of doing things.

One theme Uldrich pounded home was near and dear to the hundreds of accountants and auditors in the room: technology’s coming impact on audits. An era when all of a company’s transactions and processes will be auditable, rather than just a sampling, is, relatively speaking, right around the corner.

Amazon Go will change audit expectations.

Several technologies will converge to make that happen, according to Uldrich. One set of technologies will allow the collection of massive amounts of data. No matter how much data there is, all of it will be stored in the cloud. Then, algorithms, deep learning, and machine learning will sift through the data to come to new insights. Finally, such insights will be transmitted across the internet at 5G speed — which is 100 times faster than 4G.

“The world of auditing you grew up in is going to change because of those technologies,” Uldrich said. “You’re going to be moving to continuous auditing.”

He pointed to Amazon’s recently opened Amazon Go retail stores in Seattle, San Francisco, and Chicago. There are no cash registers. You just walk in the store, grab what you want, and walk out without ever interacting with a clerk. Within three years, Amazon says, there will be 3,000 such stores.

“That’s not just going to transform the retail industry,” said Uldrich. “It’s also going to transform the expectations of customers.” And in time similar immediate-gratification experiences will be available in hotels, schools, hospitals, and other venues as well.

“Do you think people who have grown up in this world are going to be satisfied with periodic audits?” the futurist asked. “I don’t think so.”

Already, KPMG is partnering with IBM to figure how the Watson supercomputer could be able to support continuous auditing, he noted. Such efforts could render moot much of the experience accounting professionals have painstakingly acquired, Aldrich suggested.

“How often do you hear senior auditing and accounting leaders talk about their 25 or 30 years of experience? In many cases, however, they have one year of experience repeated 25 or 30 times. There are certain things we learned early in our careers and they worked and we just kept doing them. And that’s fine, in a world of linear change. But in a world of exponential change, what worked yesterday might not work moving forward.”

The changes in store for audits represent just a tiny sliver of the change business and finance professionals will have to grapple with.

Another set of changes will grow out of 3D printing. Last year, UIdrich noted, Adidas printed 5,000 shoes. It’s on track for producing about 100,000 printed shoes this year and estimates that it will print 500,000 shoes next year. Within a few years, the number may grow to 5 million.

“At that point the global supply chain becomes inverted,” he said. “Instead of producing shoes in Asia, putting them on ships, transporting them across the ocean into ports, and then putting them on trucks and delivering them to communities all across North America, we’re going to be printing very sophisticated objects right where we need them.”

Because it’s not just shoes. Ford hopes to be 3D printing virtually all components of its automobiles within five years. General Electric is moving toward printing aircraft engine parts. Uldrich showed a picture of a new house in a Paris suburb with a price tag of about $10,000. It took a little over two days to build.

Then there’s the Internet of Things. Already, an estimated 20 billion physical objects are connected to the internet. A decade from now, a trillion objects likely will be connected. That will place an almost unimaginable amount of data at companies’ disposal. “Regardless of what industry you’re in, all of you should understand that you’re in the data business,” Uldrich said.

Also think about this: this year a private citizen, Elon Musk, not only put a rocket into outer space, but he landed it safely back on Earth. That will lower the cost of putting rockets into space by 10 times, according to Uldrich. What’s the first thing Musk plans to put on his rockets? Satellites that within a few years are expected to deliver high-speed internet access to everyone on the planet.

At the same time, Google recently introduced a $159 product, Pixel, through which customers can use Google Translate to have real-time conversations in 40 languages.

“So within the next few years, we’re going to have billions more people with access to the internet, and we’re going to have the ability to communicate with those individuals in their native language,” said Uldrich. “Might that represent an extraordinary opportunity for global growth? Absolutely.”

He also mentioned the “sharing economy,” which today is most prominently associated with Uber, Lyft, and Airbnb. But that will change before long, he predicted.

“How many of you own a drill?” he asked the audience. “Many of us do, but unless you’re a builder, most of us use a drill for something like 13 minutes in our entire lives. In the sharing economy, does everyone on your block or your town need to own a drill? No, they don’t. They just need access to a drill. And this is going to happen with automobiles, lawn mowers, snow blowers — this is a big risk to certain businesses and business models, because technology is allowing customers to trade ownership for access.”

Aldrich had much more to say about the future in a similar vein, but he closed with a piece of advice for attendees: “Get yourself a reverse mentor.” In other words, a young person.

“By all means, continue to mentor younger people in your companies and organizations,” he said. “But those of us that are a little bit older should pivot. Because reverse mentors have less experience, have fresh eyes, and are more familiar with [modern technology] tools, they see the world from a different perspective. I cannot encourage you strongly enough to institute a formal reverse-mentor program at your organizations.”

Photo: SounderBruce, via Flickr, CC BY-SA 2.0