Examining Emerging Technologies After COVID-19: Tax, Accounting, and Artificial Intelligence

Adrien Luther
Published Date:
Sep 1, 2020

As we continue to adjust to the impact of the COVID-19 crisis and rethink how business gets done, it’s important to realize how far we’ve come in this short amount time. Managing through this pandemic has allowed us to adapt and stretch our creativity to safeguard business continuity and exhibit resiliency. For many of us, technology was at the forefront of our ability to continue moving forward—or, at the very least, not move backward.

Before COVID-19, technological advancements were well understood to be a megatrend at the center of the time period we’re entering, now commonly referred to as the Fourth Industrial Revolution.

Emerging technologies such as artificial intelligence, blockchain, and mixed reality (augmented reality, virtual reality) are well past the hype cycle, with demonstrated business use cases and quantifiable return on investment. Businesses understand the importance and potential effects of these technologies, and they’re regularly included in strategic plans and budget projections.

Once the pandemic hit, however, many businesses took a momentary pause on long-term strategic planning, due to the uncertainty and challenges caused by the disruption. Instead, they focused on business continuity and survival.

Many organizations navigating through the crisis still relied heavily on technology, but with a change of scope. Technologies that enhanced current operations and furthered the ability to operate efficiently and effectively were paramount.

Now as we begin to look forward and reimagine how business will continue to evolve, it’s important to consider the risks and opportunities related to technological advancements over the next decade. The projected impact of these advancements is unparalleled speed, strength, and scope; they will be completely transformative in nature.

While there will be many opportunities for businesses to benefit from leveraging these technologies, the risk comes in not fully understanding the trends and being unprepared for the change that lies ahead.

To help facilitate the discussion, let’s explore the effects of one of the more commonly referenced emerging technologies: artificial intelligence (AI). This article will specifically look at its impact on tax and the accounting industry.

AI Overview and Definitions

AI, is a term that gets used frequently, but what does it actually mean? What do you think of when you hear the term AI?

Had this question been asked in 2004, this article’s author would’ve thought of the movie I, Robot, starring Will Smith. In it, a central artificial intelligence super computer took control of humanoid AI robots in effort to destroy the human race. Not to propagate AI stereotypes, but it highlights some of the unspoken confusion around AI technology. This can be largely attributed to its evolution and the multitude of terms and acronyms that become associated with it over time (AI, ML, DL, NLP…the list goes on).

To fully understand the impact, let’s ensure a basic foundation of some of the key principles by taking a brief look at some core AI terminology.

Artificial intelligence (AI)

Simply put, AI describes the advanced capabilities of computers to perform tasks using human-style decision making. When AI was first created in the 1950s, its systems relied on extensive libraries of hard-coded “rules”—algorithms written by experts on the problem they were attempting to solve.

A great example is computer chess. The game is programmed with the strict set of rules that are allowed by the player, and the AI opponent. You can set the difficulty level of the AI opponent, but it is still bound by a strict set of rules and situational scenarios.

Machine learning (ML)

This strict rules-based AI continued to develop into the 1990s, where ML added a powerful enhancement.

ML is another foundational aspect essential to fully understand AI. ML is the component that refers to AI’s ability to continually evolve, as it’s exposed to increasing amounts of data and information. With ML, algorithms use computational methods to “learn” information directly from data, without having to rely on predetermined equation as a model.

To stick with the computer chess example: ML would allow the AI opponent to learn your playing style by collecting and analyzing the data and trends from playing previous matches against you. This would allow it to grow and become a better, more difficult opponent.

Deep learning (DL)

In addition to ML, a third foundational component of AI is DL, commonly referred to as “machine learning on steroids.”  

DL refers to a category of much more advanced ML algorithms trained on large sets of data to find even the subtlest relationships to use towards successfully completing a task.

Natural language processing (NLP)

NLP is a related component of AI that enables the technology to understand and interpret human languages. This allows AI to receive inputs (in the form of text or speech) and make decisions on how to best respond.

As we can see in just these four definitions, thinking of AI solely in terms of lifelike robots takes away from the intricacies of the various components. Creating AI that can actually mirror human-style decision making is no small endeavor.

Effects of AI on the Accounting Industry

With a clear understanding of AI, it’s hard to not be somewhat amazed by it. There’s already an extensive list of AI technologies in use today—some modern examples include features in virtual assistants, GPS and digital maps, ride-sharing applications, and self-driving cars.

While we haven’t nearly reached the height of AI’s capabilities, we’re already tasking the technology with some of the largest and most complex challenges that we face, from pathology in the healthcare industry to global supply chain management. As AI continues to advance, there’s little doubt that it’ll have transformational impact across all industries.

When we consider the implications for the accounting industry, it’s no exception. Accounting is probably one of the industries with the least barriers to incorporate the technology into existing operations.

In 2018, the World Economic Forum released projections of the top 10 emerging and top 10 declining roles by 2022. Accountants had the unfortunate distinction of being the only group that appeared on the top 10 declining roles list, twice.

While slightly alarming at first read, these projections shouldn’t be viewed as a negative. They merely emphasize the effect of advancing technologies on the profession. Accounting is a highly skilled, highly regulated, rules-based industry; many facets are cyclical and repetitive in nature. It also operates with massive amounts of data.

These components make accounting a prime candidate for AI. Furthermore, AI already has functionality that is being deployed across many operational processes in the industry—including tax.

Tax and AI

There are clear examples of AI use cases across the tax spectrum. AI functionality can be found in everything from websites and client portals, to tax workpapers and bookkeeping, to advanced calculations and much more.

To help illustrate, consider the standard procedure of aggregating tax support into the overall tax return preparation process. Let’s assume a hypothetical process, such as the following:

Receive tax support > Manually enter tax data > Complete tax workpapers and calculations > Import data into tax software > Complete tax return in software > Print completed tax returns

Components of AI can be incorporated into each step of that process.

By leveraging AI, there are opportunities to realize benefits like—

  • reduced time to completion,
  • reduced cost of heavily manual processes, and
  • increased quality and quality control mechanisms.

On the low end of the AI spectrum, this may include automating very specific tasks. However, when we envision tax and accounting based on the future state of AI—computers actually performing human-style decision making—the possibility of complete automation of many tax and accounting functions is very likely.

This transformation of the profession will certainly result in a level of disruption. As we can imagine, the opportunities are vast; the risk is in being unprepared.

Moving Forward

It’s important to note that this doesn’t mean accountants are going away. It does, however, highlight the impact of technology on the profession and how the professional has evolved.

Accountants have transformed into trusted advisors with skillsets that now include innovation, change management, and emerging technologies, such as AI. This goes beyond the traditional tax and accounting skills of the past.

Over the past few months we’ve seen how drastically the world can shift without notice. As we rethink how we do business, it’s critical that we move forward with renewed perspective on the risks and opportunities that exist.

Technology will continue to advance, and we’ve seen how those who embrace these changes continue to thrive. Take a look at your technology plans. Do you need to rework them for this new reality? We cannot predict what the next few months will hold, let alone the next decade, but we can control how we choose to consider the possible.

Adrien Luther is a member of Withum’s tax practice with a focus on management consulting, digital transformation, and change management.  He assists businesses and individuals preparing for the global trends shaping both industry and the world economy, with an emphasis on the adoption of emerging technologies. 

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