IBM Computer To ‘Help’ Accountants

KPMG Australia has signed a deal with IBM Australia to use the technology firm's high-profile Watson supercomputer to do big company audits but denies this will cost jobs at the firm.

Audit accounts for a third of KPMG's domestic income - about $411 million. It also occupies a quarter of the firm's equity partners along with 1000-odd staff. The move, which extends an existing agreement between IBM and KPMG in the United States and United Kingdom, is an attempt by a Big Four firm to leapfrog its rivals as process automation, data analytics, machine learning and artificial intelligence upend the way traditional audit and compliance services are carried out.

KPMG admits it doesn't know where this IBM experiment will take it and maintains the software will help not replace staff members. But it recognises the necessity as newcomers, like legal analytics company Lex Machina, uses software to cut into the work of traditional professional services with the same speed and severity with which Uber blind-sided Cabcharge.

Rival PricewaterhouseCoopers has elevated its first chief data scientist, Matthew Kuperholz to the firm's leadership group to drive home the importance of using data techniques in and outside the firm.

At the mid-tier and smaller end of the market, Chartered Accountants Australian and New Zealand has confirmed it will begin offering a data analytics subscription service for about $200 a month from mid-August to allow members to provide data specific advisory work.

Accounting firms believe they need to move away from work that can be automated and into some form of advisory service to remain relevant to clients.

One industry player believes the net impact of the availability of sophisticated cloud-based process automation and data analytic tools will be to cause the "Uberisation" of consulting and audit. This will will slash the premium that the Big Four, and indeed firms at all levels, can charge clients.

KPMG will hold a series of workshops over the next few months with IBM Watson staff to work out how to use the artificial intelligence and machine learning capabilities to carry out this new type of audit.

"No-one knows exactly what the audit of the future will look like, but you can be sure it will involve two things - bright human beings and cognitive technology," said Duncan McLennan, the firm's national managing partner of audit.

"Cognitive enables greater collaboration between humans and systems - so while it’s a game-changer for audit in terms of depth of analysis, it will still require insights from talented people. We're being helped, not replaced."

At the very least, the IBM Watson platform will allow a huge increase in the level and type of data used in audit and compliance, and the speed of processing this data.

It is also likely that sampling transactions will be ditched in favour of processing entire databases of structured and unstructured data.

The overall aim is to generate real-time and predictive insights into a client's operations, for which KPMG can charge a tidy premium.

Deloitte already had its own deal with IBM Watson for Governance Regulatory Compliance and six active Australian projects within its robotics process automation practice, said Tim Nugent, the firm's performance practice national lead partner.

EY has given former eBay executive Jeff Wong  a license to dream up large scale products that will generate the majority of firm's revenue a decade from now.

The 'Uberisation' of Big Four audit

But one expert feels increasing automation and the use of artificial intelligence may have a disruptive impact on the accounting industry and job levels. Mohit Sharma, the director of Mindfields, a niche outsourcing and automation advisory firm, believes the Big Four will not be able to justify their pricing because subscription cloud-based data tools have now become widespread. 

"The Uberisation and disruption of the consulting model of the Big Four is here, especially in audit and assurance because this is more repetitive work," he said.

"Technology is eliminating the differentiator between the Big Four and the other firms and will force the Big Four to move towards non-headcount based business models.
"We are currently negotiating contracts with the Big Four on behalf of our clients to include automation and AI in their service offerings and accordingly reduce their 'human body' based fees and charges."

Accountants are split on the impact of automation, data analytics software and artificial intelligence on their practices.

"Some accountants have a growing compliance income, others see it declining and becoming commoditised," Chartered Accountants Australian and New Zealand general manager commercial Mark Rice said.

Nevertheless, the professional body is acutely aware of the threat to its members' core business, and has made an unprecedented move into subscription software.

CAANZ has spent hundreds of thousands of dollars developing a cloud-based business intelligence platform.  About 30 practices are using a beta version of the system, called Kairos.

Set to launch in mid-August, Kairos will be aimed initially at the 4000-odd practices with one to six partners and be priced at less than $200 a month.

Mr. Rice said he would consider the project a success if 10 per cent, or about 400, of the targeted practices took up Kairos by the end of the year.

The first component of the platform will be a suite of online practice management tools such as a document management system.

The second component will use Microsoft's cloud-based Azure product to allow CAs to do something that has previously been difficult for small practices - aggregate client data from all types of accounting software, the tax office and other sources into a single system for analysis.

"It's obvious compliance income, due to automation, is under pressure," he said. "Accountants want to use data better. Some are looking to charge money for this service, while others see it is as free value-add."

Changing workforce

One of the Kairos beta-testers is Allan McKeown of Prosperity Advisers, a Sydney-based firm with 150 staff.

He wants to become a power-user of the platform and is in the process of hiring a business intelligence specialist for about $200,000 a year who will report to him and work out how to best make use of the machine learning component of Kairos.

"I think we need somebody from that data analytics background that will focus on the predictive accounting piece and who will teach us about it," he said.

"I'm willing to pay for a lot of this stuff and I can see clients doing the same."

Automated bookkeeping

The impact has been more direct on the bookkeeping business of Annie Flannagan of Better Business Basics. She has transformed and re-branded her entire offering to data analytics and bench-marking.

Ms. Flannagan has automated the bookkeeping side of her business, using a system that downloads and cleans clients' financial data, then analyses it compared with peers and across industries.

"The death knell for data entry has been there for a long time," she said. "What small-to-medium enterprises needs is guidance."

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