Digital Financial Reporting

The following is a list of five things that every student that is studying accounting should understand. 

1. Accounting, reporting, auditing, and analysis is going through what one recent accounting PhD graduate called a once in 500 year change. This change is not only inevitable, it is imminent.
2. This change is a paradigm shift and you cannot use the same mental map used to understand accounting for the past 40 years to understand what will be going on during the next 40 years.
3. There are far more people who do not understand this change than there are that do understand the change.  Neither overstating nor understating the magnitude of the change is helpful.  Your college professors and your supervisors when you start your first job will most likely not understand the change that is occurring.
4. Accounting was the world's first communications technology and change is not new to accounting.  In fact, the CPA code of ethics says that accountants are supposed to improve the profession and the institution of accountancy.  Be the accountant that changed the world.
5. Accounting is important.  Accounting is a tool.  Tools can be used in different ways.  Accounting is an excellent profession that has been around for 7,000 years will always exist and will be a lot less grueling and monotonous because automation is going to take over many repetitive tasks of humans, leaving them to perform the important tasks that computers cannot perform.

It is said that the best way to predict the future is to create it.  If you want to help create the future of accounting, reporting, auditing, and analysis then read Essence of Accounting and Financial Report Knowledge Graphs.  Follow the bread crumbs provided by the footnotes.

A lot of people say they use agile software development methodology but few actually do.  Check out the Agile Software Developement Manefesto and the principles behind the Agile Manefesto.  If you are a business professional, you should software developers to these standards.  If you are a software engineer, you should consider following these Agile principles.

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Leading Answers

Simple but wrong; or complext but right.

No code or low code is another buzz word that is being thrown around. For example, XERO is saying that they have an initiative to eliminate coding.  But what exactly does "no code" mean?  How do you get the job done if you don't have "code"?  What exactly is it that accountants will see as a benefit?

Starting with the benefits, XERO says this:

“For millions of small businesses, we can just get rid of (reconciliation). We are signalling to the accounting industry that what’s just over the horizon is already here.”

I am totally on the same page as XERO in terms of the benefits.  Getting rid of reconciliations and those sorts of things can happen.

But, this and other improvements cannot happen with machine learning alone.  As I mentioned in another blog post, you want to use the right tool for the job.  There are two approaches to implementing artificial intelligence: 

• Rules-based (deductive logic, expert systems)
• Patterns-based (inductive logic, machine learning)

The "no code accounting rules" will take both rules-based and patterns-based techniques. 

There is another thing that needs to be considered which is the type of rules: 

Imperative and declarative each has pros and cons. Declarative rules are more reusable, easier for business professionals to understand, are encouraged by the business rules manifesto, and growing in popularity.

Also, declarative rules can be represented as NFTs.  These NFTs are rules-based and declarative rules that will replace "code" created by software engineers. Auditchain is leveraging NFTs to achieve exactly that. NFTs can make it impossible to tamper with rules, helps you understand how stands behind the rules, and improve trust in the rules.

And so, it is not by just not "coding" that accounting reconciliations can be automatically performed.  There will still be code, but the code will be in the form of an "engine" that then processes the declarative rules.  This makes it so business professionals can maintain the rules rather than having to rely on IT professionals.

For more information on this topic see my blog posts Rules as Code and Logical English.

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Building Rules

The Accountant Quits has published the following podcast, Episode 15 : Jason Meyers on AuditChain Tokenomics and Timeline, which provides a good update on what Auditchain is doing and the timeline in which they will do it.  About 45 minutes long.  Worth listening to.

If you are unfamiliar with Auditchain, it is worth checking out this blog post; Auditchain To Use NFTs for Accounting and Disclosure Controls.

Here is one logical information format that can be imported by both Luca and Pacioli. Luca only supports the multiple Excel spreadsheets.  Pacioli supports the multiple Excel files, one Excel file with multiple sheets, one ZIP file containing multiple or a single Excel file, and CSV files.  Here are the formats all of which are exercised by my PROOF which instantiates all of the logical patterns that need to be supported: 

• Human readable
• Excel
• CSV
• XBRL
• Cypher (prototype)
• PROLOG (prototype)