Big Data makes analyses in the tax and accounting fields possible. Digital tools, such as software, algorithms, AI and machine learning enable a variety of national legal requirements and processes to be automated. The order of the day is that everything is to become faster, simpler, more precise and efficient – both for the financial reporter as well as for the taxpayer. Is this too good to be true? How can we bridge the gap between the younger generation with their IT capabilities and the older auditors and tax consultants with their many years of experience?
Dr Caldarola, author of Big Data and Law, speaks with auditor and tax expert, Martin Boerger, on the generational conflict in the digital age.
People do not like to leave their comfort zone. Every new development creates feelings of fear and distress and can sow seeds of conflict. As we have already seen in a previous interview with Christian Klein, the digital revolution is bringing a lot of change and innovation in the field of tax consulting and accounting. Many programs and data banks are to be linked, data from a variety of sources are to be evaluated, lots of routine tasks are to be automated which are supposed to help accelerate processes, improve the quality of the results, lower the risks involved, meet compliance requirements and-last but not least- lower costs. How does an experienced auditor feel about these sorts of changes? How do the seasoned veterans and newer members of the accounting field react to these changes and do both groups communicate with one another concerning these new developments? What has been done to encourage reciprocity between the two generations of accountants?
Mr Martin Boerger: Those are a lot of questions which need to be answered. It is absolutely true that the development of digitalisation can no longer be overlooked in my profession- and I assume in other fields as well-and that this trend will continue. And, yes, I admit to being a seasoned veteran, given that I can look back on 30 years of professional experience, and I can also say that I have always had something to do with “digitalisation” in my career as a chartered accountant. In the past, digitalisation meant that bookkeeping went from being a manual process to one involving computers. Nowadays, of course, the entire profession has been digitalised. I have, however, noticed that there are two areas: digitalisation of the traditional work and digitalisation of the auditing processes of an auditor. The former is a development which greatly advances our field as well as resulting in lowered costs in terms of personnel etc. At the same, however, the costs of digitalisation are increasing because elements, such as IT infrastructure, data protection etc, are implicated. All of which means I find myself feeling rather sceptical when someone asserts that digitalisation saves on costs. After all, what I have saved in one aspect, I have to spend in another.
In the more traditional aspects of my profession, fewer staff will become necessary and certain professional segments will probably be done away, at least for a while. Nevertheless, and it seems quite ironic really, precisely in those areas is where employees are needed. I can already observe that many clients are quite advanced as far as digitalisation in that second area I mentioned is concerned, while the auditors themselves are, to a certain extent at least, lagging behind. We can already see the gap between the older professionals and the younger generation. The digital tools are being applied to varying degrees, depending on which group you belong to. In this regard, one can see that the younger generation places their faith in the various digital possibilities and is quite comfortable with digital tools and processes. Conversely, the older generation often still has a thorough knowledge of the various processes involved and knows how to shape and manage them. I suppose the main difference is the level of confidence each group has in these digital tools and processes. For me as a seasoned veteran, I am more concerned with achieving a secure level of quality, which can be reproduced using digital processes but also viewing these same digital processes critically, meaning not just placing a checkmark next to the digital tools and processes in question and not following them blindly either. I suppose I am concerned with this trend of being lulled into a false security which will certainly lead to problems, especially if there are faults in these digital tools and processes.
If we think about digitalisation from the perspective of a process maturity model, then we in the field of auditing are just at the beginning of this process. At the moment, we are using auditing tools which are descriptive and standardised to the auditing process in question but not diagnostic digital applications which are based on AI. The stages of digital prediction (predictive, that is, predicting what could happen in the future) and of digital recommendation (prescriptive, that is, a recommendation for what should happen), that is, involving artificial intelligence still have not been attained. And if we go back to our process maturity model, we can clearly see that confidence in digital tools and processes owing to their complexity rises with increasing levels of maturity just as the dependence on these tools increases and concomitantly responsibility of the employees vanishes.
In a previous Duet, Mr. Klein stated that, on average, 70% of an accountant’s time is being spent on preparing data while only 30% is devoted to original duties. Does this imply that the statutory duties and requirements of an auditor or an accountant had not properly fulfilled or are not being completely carried out, as is legally required?
I do find that digital auditing processes are being used in our field which can completely reproduce the relevant process at a digital level. However, filling out these digital aids and using them (entering data in check lists, creating standardised working documents, releasing restricted access) takes up a lot of time which is then lacking for traditional duties. What I mean to say is that not only the preparation, but also the work with digital aids in and of itself requires a serious time commitment. Of course, once the process has been established and is up and running, then our profession is bound to experience a reduction in time needed for preparing for digitalised processes and I suppose we will have more time to devote ourselves to our core work. The real question you need to ask is: How do we verify the digital processes and tools which have been installed by the client in question? More to the point, are the relevant tools performing the correct task, have the tools been properly installed and are they being properly used by the client’s employees? In this regard, one can also clearly observe that the job of an auditor is changing as a result of these digital aids coming into play which of course means that auditors will need skills which have either changed or are simply new. This new situation is also reflected in the fact that our profession now regularly offers training courses to this end. I suppose my fear is that we have come to rely increasingly on company processes having been digitalised and we have to assume that they are all functioning correctly. This of course means that the probability of some sort of damage and, in particular, the level of damage incurred will be commensurate with our dependence on digital tools and processes and is bound to increase as a function of greater levels of digitalisation. This sort of cause-and-effect can be seen when the electricity is down, viruses are detected in programs, cyber-attacks or other problems come up, to mention but a few. In this sort of situation, we would be simply lacking alternatives, in part because local security measures have been eliminated or manual files and analogue procedures no longer exist. We are heading towards a dependence on digital aids at the cost of flexibility and resilience. The best example for this is the recent hacker attack on computers of the municipal governments of Schwerin and Parchim where nothing could be put to use and the government there came to a halt.
With all manner of documentation becoming automated, corruption is supposed to be reduced or possibly eliminated. What sorts of corruption or tax evasion cases do you have to face in your profession and how likely is their reduction?
An important tool in fighting corruption is making processes transparent via digitalisation. We only have to think of land registry in Greece, for example. If applications, decisions etc. have been digitalised, then it will become more difficult for documents to disappear and for insider relationships and favours to flourish.
I am reminded of a quotation:Bertolt Brecht
“What is robbing a bank compared to founding a bank?”
So, if I really wanted to do some large-scale damage, then I have to do the unthinkable. As I have already mentioned, we are lulled by digital aids and feel secure and we are forgetting how to think critically and do not seem to even question these sorts of aids. And this holds true for the next generation to an even greater degree. Perhaps a simple example will clarify my point: How many simply assume that the Excel table they have been given is correct and simply begin using it without first considering what it is exactly, how the numbers have been generated, how the table has been structured, who did what and in what way, do the correlations make sense and so on and so forth? Viewing the material in question critically in terms of it being correct and complete is something that is happening less and less. Consequently, we leave ourselves open to corruption, forgeries, sabotage, fraud, mistakes and so on. We are now discovering the advantages but also the disadvantages of digital technology. We have to find a balance: How much digitalisation is possible and useful and how much is not? We have to identify the trouble spots and perhaps crises like the current pandemic are exactly the sort of crisis which makes us focus on the tricky areas. There has to be a weighing out between the maximum amount of possible damage and maximum level of efficiency which can be achieved as well as of the amount of monitoring needed. And exactly these sorts of delicate issues require experience. The new generation doesn’t know how to be sceptical of the digital tools they are using because they are the very product of the digital revolution.
Automation leads to standardisation and uniformity. Is that a goal we all have to achieve? If so, what is going to happen to individual solutions? What will happen to individual responsibility if all that is needed is placing a checkmark next to a box for certain processes to take place? Is having a gut feeling still appropriate or what about the instinct of a seasoned veteran? What is going to happen to individual judgement and assessment of risks? Will auditors and accountants no longer be able to pass their own judgments if everything is to be automated?
Auditing correctly is always going to be important regardless of whatever level of standardisation comes about owing to digitalisation. It is important to fill out standard screen forms and put in standard checkmarks. There are many areas in our profession where standardisation makes sense. That having been said, I must also emphasise that trouble spots are always going to require tailor-made solutions and flexibility, a point I made earlier. Whether these tricky areas can also be standardised using AI is an open question as far as I am concerned. I myself do not see it happening. But who knows? Perhaps the providers will become too powerful in the digital world and perhaps they will have to be destroyed as we have seen in the past, Standard Oil, for example. Perhaps the pendulum will swing in the other direction, if damage cases continue to rise. I do not think we are ready to yield completely to any one thing, but I do believe we will experience the dangers and when that happens, I hope we will have the ways and means to remedy the situation. It is like a sailboat listing on one side which we then steer too much in the other direction and the boat has to balance itself. The sheer speed of the changes is new but there too there are different levels of velocity. The forward direction towards digitalisation is probably faster than the backwards pace should we experience unforeseen developments or damage at the trouble spots.
Finally, we must not forget that speed is different for people compared to machines. To be sure, a machine is capable of analysing complex activities and generating a result based on that analysis within a few moments, whereas a person, in particular should s/he not have the benefit of years of experience, needs much more time to evaluate the result in question. Regardless of how quickly a result, evaluation or interpretation has been generated by a software program or by AI, a human being will always need more time to decide what needs to be done with that information. It is that time gap which ensures that the years ahead will remain challenging ‑but also exciting ‑for generations to come.
Martin, thank you for sharing your insights on the challenges on the generational conflict in the digital age
Thank you, Cristina, and I look forward to reading your upcoming interviews with recognized experts, delving even deeper into this fascinating topic.