When they look out over the next five years, the leaders of the country’s leading accounting firms see technology reshaping their practices more than any other factor.

As part of Accounting Today’s annual Top 100 Firms study, managing partners and other senior firm leaders were asked to name the biggest changes they expect in their firms and the profession over the next five years — and their answers overwhelmingly involved some form or aspect of the digital.

In fact, most of the MPs and senior executives surveyed would broadly agree with the assessment of Jim Powers, chief executive officer of Chicago-based national firm Crowe. “Technology is going to reshape the professional services industry over the next five years,” he said. “The need for traditional accounting and consulting services will continue, but how they are delivered will change dramatically. In addition, there are tremendous opportunities for creating new services and solutions by leveraging many of the exciting advances in technology.”

Beyond that, though, firm leaders differed widely on which aspect of technology was most important — for some it was the specifics of artificial intelligence and blockchain; for others, the expansion of remote work or the new skill sets that accountants will have to develop to adapt; and for still others, the impact of all these and more on service areas both traditional and new — nor did all agree on whether these changes would be good or bad for the profession.

One of the most commonly cited drivers of change in accounting firms was actually a trio of individual technologies: artificial intelligence, robotic process automation and blockchain.

“All three of these challenges will have a profound effect on the firm,” wrote Mary Elliott, CEO of Alabama’s Warren Averett. “Many would argue that artificial intelligence is already here and affecting us. Due to the complex nature of coding related to AI, we are currently looking at vendor products that include components of AI to create efficiencies for internal processes and boost value-added insight for our clients.”

“Robotic process automation will affect our internal processes drastically. We are exploring our various data entry and repetitive tasks to determine whether a portion or an entire task can be automated using RPA,” she continued. “Blockchain technology will certainly affect both our internal processes and our clients’ business models. We believe blockchain will change the entire business ecosystem, and we have already begun educating our employees on what blockchain is and what it may mean for our industry and operations in the future.”

Blockchain will be a major focus for the firm’s director of innovation, and they have also hired a consultant to help their innovation team in keeping up with developments around the technology and educating their employees.

Others focused on the practice areas that will be impacted.

“We believe new technologies will have a profound effect on our firm and the broader profession as a whole in the next five years,” reported Matt Snow, CEO of North Carolina-based Dixon Hughes Goodman. “We are focused on adapting the strategy for all three of our major service lines of our firm: assurance, tax and advisory. For our assurance practice, we developed and implemented a new audit methodology and accompanying technology to support our assurance practice. We are also investing in the AICPA’s Dynamic Audit Solution, both as an investor and by offering firm resources to the project. Additionally, we are a member of a joint venture with three other firms to develop tools for our assurance practice incorporating the technologies referenced above.”

For tax, DHG is structuring its service line to leverage the opportunities offered by new technologies (as well as by tax reform), including more virtual assignment of engagement teams, and adding resources for deploying innovative solutions in clients’ compliance and reporting processes, while for advisory services, the firm continues to develop new and relevant service offerings for client industries as they evolve in the new digital marketplace, including cybersecurity, IT advisory services, data analytics services, and more.

“Adapting our workforce, skill sets and leverage model to new technology solutions that will come with these changes will be an evolving challenge,” Snow noted, and DHG has created a framework for change management in response, “recognizing that change adaptability is as critical as acquiring the new resources and technologies themselves.”

Making the most of technology was on the minds of many firm leaders, who often had specific applications in mind.

“Data analytics will play an increasingly important role in firms our size as we look to streamline processes to gain efficiencies to combat the continued pressure on fees,” said Philip Holthouse, MP of California’s Holthouse, Carlin & Van Trigt.

At Armanino, another California-based Top 100 Firm, meanwhile, CEO and MP Matt Armanino said, “The implementation of AI and machine learning presents opportunity. With more automated solutions, the firm can focus on being a strategic partner focused on future-proofing for clients, rather than investing human capital on the heavy lifting of audit examinations.”

The impact on people

The leaders of the Top 100 Firms don’t generally share the common concern that technology will automate away many traditional services or lead to fewer jobs for accountants.

“We expect to leverage technology in new ways that will allow us to maximize efficiency,” said Dayton Benway, managing principal of Maine’s Baker Newman Noyes. “However, we do not expect this will reduce the need for highly qualified professionals to provide client service.”

However, many of them think that all the different layers of the ongoing digital revolution will require significant adaptation on the part of their employees.

“The most impactful changes over the coming few years will come through leveraging new technologies to automate portions of our work,” said Brian Kreischer, managing partner of Frank, Rimerman & Co., in California. “This will also create an opportunity to radically re-think how we learn many core skills. Employees will be challenged to master new skills and acquire knowledge not through repetition, but through greater comprehension of context, concepts and business judgment.”

Similarly, the CEO of New York-based CohnReznick, Frank Longobardi, said, “Our people will need to learn and employ new competencies to work effectively, while many day-to-day manual accounting and auditing procedures will be automated. This frees our people to focus their skills on strategic analysis — interpreting rather than processing data.”

The new skills required by new technologies have a number of the Top 100 Firms rethinking how they train their staff.

“Advances in technology will continue to put pressure on us as we need to continue to make significant additional investments in both technology and talent to adapt to the changing profession,” noted John Litchfield, the COO and CFO of Tennessee-based LBMC. “We added a director of learning and development a couple of years ago, which has been a great add. We have to continue to train our professionals and equip them for new skill sets that will be required and effectively upskill all of the team members we have today so they will be prepared for the future.”

At RSM US, the firm has a number of programs in place to develop the skills necessary to turn its employees into “first-choice” advisors, which include, but definitely aren’t limited to, being more technology-savvy.

In fact, the Top 5 Firm saw reasons beyond technology to focus on training and staff development. “Over the next five years, we expect to see a continued influx of high-performing individuals from increasingly diverse backgrounds to reflect the growing global nature of our middle-market clients,” explained national public relations director Terri Andrews. “In addition to an increasingly diverse workforce, we expect the skill sets needed of our people to continue to evolve as technology reshapes our industry.”

And at New York-based Freed Maxick, technologies like RPA and AI have chairman and managing director Henry Koziol anticipating a new staffing model: “We will need to attract associates with new and nontraditional talent sets. This will then have an effect and ultimately change the staffing model in regards to available jobs and hiring.”

Other change agents

While technology was by far the most commonly cited change agent for the next five years, it wasn’t the only one.

Chris Olson, the COO of Blue & Co., expects that change at her Indiana-headquartered firm will focus in part on “integrating the recruitment of nontraditional majors or backgrounds that will enable the firm to better serve clients in the evolving CPA environment.”

Other firms are looking at major changes to internal functions over the next few years.

“We will completely move away from the chargeable hour revenue model and tracking time,” said Joey Havens, executive partner at Mississippi-based Horne. “This will free our team up to be more innovative and to focus on executing our client promises, leading to a distinctive client experience.”

Colorado-headquartered K-Coe Isom has a similar goal: “Getting rid of timesheets,” said CEO Jeff Wald. “Ditching the timesheets will change the value we place on the services we provide and create a different service delivery model that focuses on value creation versus time input.”

If you were asked to name an occupation that soon will be transformed by artificial intelligence, accounting probably isn’t the first one that comes to mind.

Nonetheless, CPAs and accounting professors say that AI — combined with other technologies such as blockchain — may radically change the profession’s procedures within the next decade.

“The accountant of today is going to be different from the accountant of tomorrow — and far, far different from the accountant of yesterday,” says J.K. Aier, an associate professor and area chair of accounting at George Mason University. “Things are changing as we’re trying to understand it. … It’s very difficult to predict what an accountant will be doing 10 years from today.”

Global accounting firms such as Deloitte, Pricewaterhouse­Coopers and KPMG already use machine-learning software to handle some auditing tasks that entry-level employees typically handled, such as reviewing lease contracts.

These firms also are investing hundreds of millions of dollars in proprietary artificial intelligence technologies that will be used in the 2020s, says Gary Thomson, Richmond-based regional managing partner for Dixon Hughes Goodman, the largest accounting firm in the South.

Because of these trends, a national professional association, the American Institute of Certified Public Accountants (AICPA), announced in October that it’s developing an AI-based auditing platform, Dynamic Audit Solution (DAS), which will be available to all of its 14,000-plus member firms. Funded with $50 million from AICPA members, the DAS initiative aims to level the playing field so that AI technology won’t be out of reach for small firms.

“There’s [almost] 15,000 firms in America that do audits, and a lot of them are small- and mid-sized, and we wanted to make sure that they also had the opportunity to leverage these new capabilities,” says Erik Asgeirsson, president and CEO of CPA.com, AI­CPA’s technology subsidiary. “It’s an exciting time for the accounting profession due to how technology is really allowing them to enhance their value proposition.”

AI technology, Asgeirsson says, will allow accountants to examine all of a client’s financial records during an audit — no matter how large the data — instead of just reviewing sample sets.

“You’re going to determine things that you weren’t able to determine in audits that weren’t leveraging these platforms,” he says. “The modern audit is going to allow the auditor to tell the client that they’ve looked at the full data set … [and] found such things as double-billing errors, payments that weren’t being done correctly … and they’ll basically be giving the client much more assurance around the integrity of their data.”

Blockchain, too

In discussing the potential impact of AI on accounting, industry experts often mention blockchain in the same breath. Developed in 2008 for the cryptocurrency bitcoin, blockchain is a system for encrypting a secure ledger of transactions that — in theory — cannot be altered.

Used as an accounting tool, blockchain could allow tamper-proof, real-time access to a company’s financial transactions at any time. Combined with the ability of advanced AI to review all records, blockchain could be a game-changer for corporate financial auditing.

“I’ve been quite nervous about [blockchain],” says Ashley Austin, an assistant professor of accounting at the University of Richmond. “It’s supposed to be this perfect ledger. And if you have a perfect ledger, why do you need an auditor to come audit it? Why do you need accounting majors to go work there and a professor to teach them, etc.?”

Thomson has heard similar concerns about blockchain “and rightfully so on the part of practitioners about: Does this in some way potentially inhibit growth in the CPA world, particularly in the auditing world?”

Nonetheless, Thomson and Austin say regulators probably will need to review blockchain and some AI technologies to ensure they can be used safely and securely for auditing. Such a delay may give the industry more time to adjust.

Fewer data-entry jobs?

A greater likelihood in the short term, experts say, is that artificial-intelligence technologies may result in bigger accounting firms hiring fewer employees for jobs such as doing data entry, reviewing leases and providing third-party verifications of a client’s financial transactions. These rote tasks can be handled by AI and optical-character recognition software.

“You probably can eliminate the data-entry people. You can eliminate probably the first line of supervision. Whereas before you may have had several accounts-payable supervisors, now you may only have one [person] running automated accounts payable,” says Douglas E. Ziegenfuss, chair and professor of accounting at Old Dominion University.

Some large accounting firms now are recruiting tech-savvy accounting majors with dual majors in information technology or business analytics. These recruits can utilize the latest AI tools and analyze the findings.

“They need to be thinking a little more like a scientist than accounting majors have in the past, coming up with hypotheses,” Austin says.

In some cases, Ziegenfuss says, CPA firms are hiring tech workers and training them in accounting. “They’re sending them back to schools that cater to nontraditional students like ODU to pick up the accounting,” he says. “They feel it’s easier to do that than to take an accountant and make an IT or business-analytics person out of them.”

Schools adjust

Driven by this hiring pattern, many universities are adjusting their accounting curriculums to include an increased emphasis on data science and analytics.

GMU, for instance, now offers a graduate certificate in accounting analytics aimed at professionals wanting to upgrade their skills. Likewise, Virginia Tech began a partnership with KPMG last fall to offer a one-year master’s degree in accounting that includes training in data and analytics. One of nine universities nationwide working with the firm on such a program, Tech receives training from KPMG and access to its proprietary machine-learning analytics software. That software also is used in a senior-level, undergraduate accounting analytics course.

Students use KPMG’s software “to work with big data in terms of dealing with hundreds of thousands and millions of records of observations and being able to get comfortable in working with that. And then also being able to display the results so that it makes sense to decision makers,” says John J. “Jack” Maher, head of the Department of Accounting and Information Systems at Virginia Tech’s Pamplin College of Business.

Anticipating the big technological changes to come, everyone in the profession “needs to up-skill,” Asgeirsson says. “We’re all going to have to put in 100 hours of learning, 100 days of learning, over the next four or five years. ... You just can’t rest on what you’ve learned because [the accounting] business and operations are changing.”

Small business (SMB) adoption of technology can be a process filled with growing pains and friction points, thanks to the cost and disruption associated with integrating a new technology. Those challenges have made SMBs notoriously technology-adverse, though it may be an unfair characterization, particularly considering the influx of small business FinTech innovation in recent years.

One of the most popular targets for innovators is the accounting space, where business processes touch on various aspects of an overall company, from accounts receivable and payable to cash forecasting and financial strategy development. Accounting is at the center of some of the most cutting-edge technologies, including robotics process automation (RPA), artificial intelligence (AI), machine learning and more, said Erik Asgeirsson, president and chief executive officer of CPA.com, and Lawson Carmichael, chief operating officer of the Association of International Certified Professional Accountants (AICPA).

Positioning themselves at the center of small business accounting innovation, the CPA.com and AICPA recently sponsored their second annual startup accelerator, choosing three startups in the SMB accounting market that address particular pain points through technology. The winners include bot-enabled accounting automation firm Gappify, accounting communications platform Client Hub and cash flow forecasting firm Dryrun. According to Asgeirsson and Carmichael, the companies illustrate the broader environment of innovation that the SMB accounting space enjoys today.

“Technology is changing the practice of accounting and finance,” Asgeirsson said in an interview with PYMNTS. “And a lot of the innovation is coming at the early stage.”

Startups are often well-positioned to use technology to tackle the biggest issues of small business accounting because they are small businesses themselves, he noted, experiencing these pain points firsthand.

“The wealth of talent and innovation that’s going on at all edges of the profession is really quite extraordinary,” added Carmichael. “The smaller-business side of innovation is healthy and alive.”

Adoption of cloud accounting is, indeed, on the rise, with FloQast data recently finding that 79 percent of accountants have adopted at least one kind of cloud-based financial application. This has introduced a new dynamic for the small business accountant.

While the industry has shifted from concern that automation and technology will replace human talent, to concern about the ability among accountants to step up to a new role for SMBs, Asgeirsson said the paradigm shift is an opportunity. Today, technology allows CPAs the chance to step into the role of “trusted advisor,” he said, and it’s a change that could not have occurred without the migration of accounting to the cloud.

“There is a collaboration between the business and [its] trusted advisor through the cloud,” he said. “That was impossible when all information resided in a small business’ server room or on [its] laptop.”

Crossing The Chasm

According to Asgeirsson, the cloud’s ability to solidify itself as a new standard in small business accounting has enabled SMBs overall to cross the chasm from technology adoption struggles to technology adoption opportunities — all thanks to the cloud.

“In America, we have millions of businesses using cloud accounting, using cloud-based payroll systems, cloud-based bill payment systems, so they have made that first big step,” he said. “Now, adopting the next solution that integrates into [cloud platforms] is becoming much easier.”

The cloud has reduced barriers to link multiple platforms together, and for developers to introduce new features and functionality into cloud accounting tools, he continued. For small businesses, the challenge now is designing and understanding a business strategy to decide what functionality they need — and, in many cases, collaborate with a third party to act on that strategy.

Small business FinTech innovation continues to accelerate, making it easier than it was a decade ago for entrepreneurs to adopt sophisticated solutions once reserved for the largest enterprises. Yet, that does not guarantee actual adoption and penetration of the new solutions coming into the market.

Carmichael explained that the industry must focus on what he called “practical innovation” to address key challenges that can be solved for business owners. For the business owners themselves, there must be a strategic plan established to identify which solutions are needed, and to implement that tool. He described that process as the “three I’s: isolate, incubate and integrate.”

“Technology isn’t the solution in and of itself, but technology is enabling [and] empowering these firms to evolve the business model, and evolve the operating model,” he said.

Even in the last two to three years, Carmichael added, the small business accounting space has seen a “tipping point” that is driving more dramatic change. It’s not only promoting further innovation among accounting technology developers, but it’s changed the way small business owners think about technology.

At a recent industry panel, Carmichael recalled, one CEO participant said the topic of adopting technology was one of his top-five priorities.

“It’s not a question of ‘do I need to change?'” he explained. “It’s ‘how fast? Am I moving too slow? How can I move faster?'”

The acceleration of small business FinTech innovation, particularly in the accounting sphere, is empowering that shift in mindset for business leaders, he added.

A church administrator in southwestern Pennsylvania allegedly skimmed more than $1.2 million in funds from his employer over the past seven years, in part by creating fake auditor reports to hoodwink the church’s board of trustees. That kind of fraud could have been prevented if the church or its financial institutions used RIVIO Clearinghouse, a secure online exchange for private company financial information.

David Reiter, 50, had been employed by Westminster Presbyterian Church in Upper St. Clair, Pa., for 17 years, a job that paid $69,000 in 2018. Yet the Allegheny County (Pa.) District Attorney’s office calculates that Reiter and his wife, Connie, managed to steal $1,227,423 from church accounts – including the organization’s nursery school and child care programs – from 2011 to late 2018. Those spoils allegedly paid for trips to Walt Disney World and Hershey Park, Pittsburgh Pirates tickets, music lessons for the Reiters’ children, medical expenses, and a host of other items ranging from Starbucks visits to Sirius XM radio fees, the district attorney’s office contends.

The alleged scheme unraveled when the church board’s treasurer grew impatient with David Reiter when a face-to-face meeting kept being delayed with the church auditor, identified by Reiter as “Drew Harrison” in a Pittsburgh accounting firm. The treasurer called the firm and was told no one by that name worked there.

Reiter instead offered a cell phone number to contact the auditor, according to the district attorney’s office. But it was for a prepaid phone paid out of the skimmed funds, and Reiter impersonated “Harrison” on a subsequent call with the treasurer. With questions mounting, Reiter confessed to the church’s head pastor that he had done “bad things” and needed to resign, the district attorney's office said.

Investigators later discovered the church had never been a client of the Pittsburgh CPA firm, and that Reiter had fabricated an audit report from it, as well as an earlier audit report from another firm that hadn’t been involved with the church for years.

RIVIO Clearinghouse, jointly developed by CPA.com and Confirmation, is an online financial document clearinghouse that enables private businesses to exchange key financial information with their investors and lenders, as well as retrieve information from their CPA firm, ensuring data is submitted from an authenticated source. It provides a validation process to verify that CPA firms leveraging the clearinghouse are appropriately following the stringent professional requirements to upload attested financial information.

“One of RIVIO’s key features is its ability to prevent bad actors from passing off bogus auditor reports as legitimate,” said Erik Asgeirsson, president and CEO of CPA.com. ” It takes the guesswork out of the sourcing and delivery of critical documents. In the Westminster Presbyterian Church case, the administrator wouldn’t have been able to cover his tracks so easily if RIVIO had been in use by the church or its financial institutions.”

Last month, I received a special invite to an executive roundtable in New York City hosted by the American Institute of CPAs. The AICPA’s event invited 41 technology companies that develop software for the accounting profession.

The roundtable had representation from well-known names Microsoft, QuickBooks, Bill.com and Thomson Reuters. There also was participation from up-and-comer Expensify, a paperless expense management firm, as well as other Silicon Valley technology companies.

Organizers also invited 10 certified public accountants from firms of all sizes. I received my invitation to represent the perspective of some 39,000 small firms across the United States. The objective of the roundtable is for each of the tech companies to present on current product developments and roadmaps for the future. The CPAs are invited to provide the tech companies their perspectives on the needs of the accounting profession.

The presentations of the tech companies made me enthusiastic about the work I do. There has never been a better time to be a CPA because of the work being done with technology.

In with the new
“AI is the new electricity.” That statement was made by Stanford professor and computer scientist Andrew Ng.

For the past many years, artificial intelligence has been presented as a concept that will transform our daily lives – including how we do business.

Ng was staking a claim that AI is no longer futurist, geek speak. Instead, it is real. It is here. And it already is a bare essential for our daily lives – such as electricity.

AI is the technology that makes self-driving vehicles a possibility. Self-driving vehicles are no longer futurist, geek speak either. The innovation is here. Now, it’s just a matter of governmental regulation catching up with the technology. So, while most of the world is still grappling with understanding the depths of AI in general, innovators of tech companies are moving on to the next big thing: voice-activated AI.

Voice assistants in business
Voice assistants are becoming common household items. Apple’s Siri, Amazon’s Alexa and Google Home are part of our daily lives.

“Hey Google, add milk to the grocery list.” Or, “Alexa, set my alarm for 6 a.m.” If these voice assistants can help us master our personal lives, why can’t they help us master our work lives? They can, and they’ve already started.

As a business owner or entrepreneur, can you imagine a day when you come into the office, sit down at your desk with no keyboard and have this type of conversation with your accounting system: “Hey QuickBooks, show me all the bills I need to pay this week.”

“OK QuickBooks, pay the rent and utilities with an ACH transfer on Friday.”

Of the 41 tech companies represented at the event, the overwhelming majority of the companies’ roadmaps for future products included a form of voice-activated AI. In fact, at the end of the event, there is an award presented for Most Compelling Presentation as voted on by the attendees. This year, it went to Chata.AI, a tech-company laser focused on integrating voice-activated AI into our accounting systems.

Why speech?
Am I the only one who is challenged by a constantly growing to-do list? Do you feel it’s a vicious cycle of whack-a-mole for you?

As quick as you mark through items at the top of the list, do twice as many items fill up the bottom of the list? In these days of constantly wearing our busy badges and crowded to-do lists, where is the life-preserver?

The roundtable event helped me understand that voice-activated AI could be that life-preserver for all of us in accounting. Why? A simple presentation slide from the event helped me gain this understanding. A person with average typing skills can type 39 words per minute, but can speak 130 words per minute. That’s 233 percent faster. Even a slow-talker like me can win a race against the fastest typing.

This should give us hope for gaining more productivity in our daily lives.

New horizons
Have you ever observed a child using voice-activated tech? For example, asking Siri to call a family member on FaceTime or play a song? Search it on YouTube for a laugh. And the next time you see this, pay attention to the pure joy on the child’s face when the tech does what it asks. It’s fascinating.

As a CPA, I am joyful about this technology; same as those children experimenting with the technology. I welcome it to the accounting profession with open arms. AI and VA-AI are not about job replacement for CPAs and accountants; it’s about embracing and leveraging the tech so we can provide greater service for our clients. It allows us to truly become a trusted business adviser.