Deming points out that the typical way of solving problems is to break a system into pieces or subsystems and get each subsystem to run optimally. But that is not systems thinking. Systems thinking is about working together as opposed to working apart separately.
Here is an abstract view of the system I am concerned with: accounting, reporting, auditing, analysis.
(Click image for larger view and more details)(This image is a more tangible view of the reporting part of that system.)
So I would like to provide as good as a composite view of the entire system from pulling together pieces of this system that exist. This view also helps you see gaps within the individual silos. I have shown that the entire record to report process can be automated. Have a look, you might find this useful:
- Accounting: PWC provides an AI assisted bookkeeping system which they call InsightsOfficer. This seems promising, and I don't know for sure, but I would speculate that their bookkeeping system is not aware of XBRL and machine-readable stuff offered by XBRL. For example, it would make a lot of sense to be able to map the bookkeeping system chart of accounts to XBRL taxonomy concepts within the system. For example, here is how I did exactly what I am describing for the Not for Profit Financial Reporting Scheme prototype I created. Here are microservices that tie processing tasks and steps together. A little additional information needs to be added to the accounting system.
- Reporting: PWC does not seem to offer a reporting product per se. There might be a report writer within the bookkeeping product they offer. But, I speculate that bookkeeping product does not leverage XBRL or support outputting XBRL-based financial reports. But what if it did? For example, here is an autogenerated Inline XBRL financial report prototype. An example of a report creation tool is cloud-based Luca.
- Auditing: PWC does offer financial statement audit. However, does the PWC financial statement audit process leverage anything related to XBRL? Doubtful. I hope I am wrong. Does the PWC financial audit process include logic engine capabilities such as what Pacioli offers? Doubt it. Mindbridge says they have artificial intelligence assisted audit capabilities. But, does Mindbridge leverage XBRL-based machine readable information? Nope; I have talked to Mindbridge, they agree that it is a good idea, but they are not there yet.
- Analysis: Auditors, such as PWC do analytical review procedures as part of their audits. They compare a current report with prior year reports, look for variances, and then analyze those variances. Does PWC leverage XBRL-based reports for this variance analysis? Doubt it, particularly if they don't output reports into XBRL. Auditors and companies also benchmark their financial information with their peers. Investors, regulators, and creditors analyze financial report information. So here is an interface to the EDGAR repository of public company financial reports provided by XBRL Cloud. Does XBRL Cloud leverage the financial reporting scheme machine-readable information for effectively extracting information from reports? Some, but not enough. Does XBRL Cloud put all the reporting information into a database to make analysis faster? Nope. Here is a database provided by Reportix that would work nicely. Pesseract is a decent report analysis tool, but it has a lot of missing pieces.
All of the pieces are there, but the pieces have not been put together effectively yet. Note the word "yet". Auditchain holds itself out as the worlds first continuous accounting, reporting, auditing, and analysis platform. They don't have all the pieces in place yet. But, they have at least articulated the possibility of putting all those pieces together.
Yes, there are gaps in functionality. The gaps will be filled. Yes, companies will build proprietary pieces to the full system. But others will build standard pieces that fit together like modules or Legos. So WHEN will these gaps be filled? I don't think all the gaps will be filled by the end of 2022. But it will not take longer than 2025. My prediction would be sometime in 2023, 2024, or 2025.
There is already more software and pieces in place then you might think. I have been working on figuring all this out for about 20 years. This is science and math. This is not even rocket science; all you need to understand is undergratuate algebra to see THAT this can work. You do need a lot of accounting knowledge and the ability to communicate with good technical professionals.
Folks, this is inevitable. Not only is it inevitable, it is imminent. This is not a question of "if", it is a question of "when". Then you will see why I believe that this will be the biggest change in the institution of accountancy in 500 years.
Anyone care to bet against this? Let me know and tell my why and/or where I am seeing this incorrectly.