When you hear the words “artificial intelligence,” do you think of Arnold Schwarzenegger in the Terminator? What would you think if your CPA wore leather pants, rode a Harley and constantly told you “I’ll be back”? Allow me to explain why CPAs are training and adjusting to the future of accounting technology. We must become the next T-800 Model 101 if we want to survive.
Blockchain technology is essentially a digital ledger that is designed to securely keep track of transactions that users make with anyone else in the world. As transactions are made, data is collected and grouped into “blocks.” These blocks of data are timestamped and then kept in chronological order to form a chain. Once a block is verified and is part of the chain it becomes permanent and cannot be altered. The system is implemented using thousands of computers to interact within a single network. Each computer has a copy of the blockchain and each are updated in real-time. This is how the system gains trust. Since each computer has the same update copy of the digital ledger, they all must agree with one another. If anyone attempts to falsify a transaction, the other ledgers will disagree with the false transaction and reject it. Think of it like a digital notary checking all the world’s ledgers and approving each acceptable transaction. While Blockchain technology is still very much in its infancy, it has already gathered a lot of attention.
Another common question is what can this technology be used for? Blockchain actually started out as the software that started the idea of “cryptocurrency.” The name that is becoming more and more well-known is the cryptocurrency called Bitcoin. This form of currency is unique in the sense that it does not have a physical form like a traditional currency. There is no centralized bank that handles the money or facilitates any of the transactions. This means there is no wait time for the transaction to be accepted.
The security in the system relies on the database verifying user’s identities and their claim to the assets that they are requesting to exchange. This is another practical use for the blockchain technology. It deters fraud in multiple ways. Since each computer has a copy of the updated ledger, it makes counterfeit currency impossible to create since money cannot be created out of thin air.
Blockchain has the potential to flip entire industries on their sides. The accounting profession is one that can expect to see changes in the very near future. Firms across the world are hired to audit client’s financial statements as a major source of revenue and have been doing so for many years. The purpose of conducting an audit is for the independent accounting firm to provide an unbiased opinion on a company’s financials with regards to their presentation and accuracy. The public relies on the trust in the CPA firm’s detailed findings for investing and credit decisions. With Blockchain, this could essentially eliminate the need for an auditing department, altogether. The transactions that the company engaged in for any given fiscal year are already verified, so anyone who has access will be able to trust the information that is being presented.
In 1984, Arnold Schwarzenegger fought diligently against the Skynet Terminators and ultimately saved the world from being taken over by artificial intelligence. I don’t believe that the world is in jeopardy of being taken over by accounting professionals, but it is important to recognize that technology is changing the way our world works every day.
The future is here, as Arnold would say, “Come with me if you want to live.”
Adam Rasmussen is a CPA at Opsahl Dawson, a local accounting firm with offices in Longview and Vancouver. He can be reached at email@example.com.