Financial Daily from THE HINDU group of publications
Thursday, Jul 04, 2002
The future accountant
IN RECENT years, a number of reports have been commissioned by the various accounting bodies, with the brief to examine the drivers of change that will impact on the role of accountants in the future. A study of the above reports reveals a common consensus on the drivers of change which include: the global economy; information technology; the empowered consumer; the demand for greater accountability; environmental and sustainability issues; new work patterns; new sources of competition; demands for small business; concentration of capital markets; and intellectual capital issues.
The accountant of the future will face, and is in many instances already facing, competition from tax agents, business advisers, unqualified accountants, financial planners, engineers and various consultants. Accountants need to capitalise on traditional strengths such as independence and concern for the public interest, through migrating to higher value-added activities, developing broader skills and being committed to lifelong learning.
Audit and assurance
The key in the field of auditing and assurance is to recognise that auditing can be of even greater value if it looks beyond the traditional financial issues, and focuses on issues that matter to a wider range of stakeholders and the public.
Furthermore, the KPMG International report on The Financial Statement Audit acknowledges that many auditors now believe the audit methodology that was appropriate for the industrial age may not be sufficiently broad for the information age, when assets are intangible, commerce is electronic, markets are global and the pace of change is ever-accelerating.
However, in moving to the latter assurance-based approach, auditors face credibility issues that go beyond the much discussed expectation gap. There are widespread perceptions of lack of independence. In the US, the Securities and Exchange Commission has been critical of the business activities of accounting firms and the recent Enron affair has added to the troubles of the auditing profession.
Tax advice and planning
The impact of technology is becoming increasingly evident in the traditional taxation work undertaken by accountants. The work in the tax compliance sector will increasingly be driven by technology and will need only a small number of trained staff in supervisory roles. In addition, margins will be low because of the competition from tax shops. Much of course depends on the tax regime itself, such as the future of personal tax returns, which have already been basically eliminated for many taxpayers in countries such as New Zealand. The recent introduction of the Goods and Services Tax in Australia (GST) has created considerable work for accountants, but that could all change as Business Activity Statements are simplified and electronically lodged. However, despite the attempts to reform taxation in Australia, experience to date has shown that the taxation legislation is becoming increasingly complex. This is also happening in many other countries and accountants of the future working in the taxation field may need to become increasingly specialised.
Commerce and industry
Research has found that industry chiefs around the world are increasingly worried that their company's key financial managers lack the skills necessary to adapt to a changing global environment. ACCA's Mori Report points out that the inability of finance professionals to take a broad strategic perspective, and to see the bigger picture, is the corporate chiefs' greatest fear.
Nevertheless, accountants of the future working in commerce and industry will have the opportunity to become the key source of business advice within their organisations. However, to be successful in their new challenges, they will need to diversify their skill base beyond traditional financial analysis into areas such as information technology, non-financial performance measurement and general management. Chief executives will increasingly expect their accounting and finance people to take on a strategic involvement well beyond the numbers.
The developments in e-commerce pose a big challenge to traditional business systems and the accountants that support them are worthy of separate consideration. The Internet will play an increasingly important role in the dissemination of business and financial information. It removes the international boundaries on information and conveys an expectation of up-to-date information dissemination and timely reporting.
This will be of particular importance in the future for auditors, who will need to evolve a continuous model, where assurance is given on the system rather than the data.
Business and financial reporting will become more user-friendly as companies begin to use Extensible Business Reporting Language (XBRL). XBRL will enable real-time reporting by companies to the marketplace of their financial and reporting data. Users will be able to access this information and use it for their own purposes. These developments through the use of XBRL and the Internet will have long-term implications for the accountancy profession.
Areas of work requiring expert assistance, such as translation of financial statements from one country's GAAP to another's, will be dramatically reduced in scope. The annual audit may see its impact diluted, as shareholders and investors begin to rely more on day-to-day information for decisions and a proper understanding of a company's position. Also, key elements of statutory and regulatory reporting will be automated.However, there are also opportunities for the accountant of the future. There will be increased work in other potentially more value-adding areas of business, such as more involvement in strategic decision-ma king.
Statutory auditors will need to be involved in the provision of ongoing assurance on real-time numbers being generated and relied on heavily by investors and shareholders. E-commerce will change forever the way accountants work.
As the future role of the accountant changes, there will also be changes in the role of the professional association in servicing its members. The professional association will need to identify, understand and influence the trends occurring in business and communicate these trends to its members. It will need to facilitate the development of its members to meet the new demands of the market, through the continuing development of programmes such as professional development online.
Attributes of the future accountant
The attributes of the accountant of the future will include: personal attributes, which include insight, good professional judgment, project management skills, integrity and ethics; leadership qualities of strategic thinking, planning and a cross-functional perspective; broad business perspective, which includes a good understanding of one's organisation and industry, risk management and organisational systems and processes; and functional expertise in the traditional technical skills, including financial analysis and taxation. Accordingly, the successful accountant of the future will be a strong communicator, be well versed in IT, be able to combine technical skills with strategic vision, see him or herself as a professional adviser, be committed to lifelong learning and learn from the profession's mistakes of the past.
(Edited extracts from Student Accountant, a journal of ACCA, London.)
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