Big Data and the Gen­er­a­tion Gap

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:

“What is rob­bing a bank com­pared to found­ing a bank?”

Bertolt Brecht

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.