 Hello in this presentation, we will discuss the discussion question of describe accounting's role in the age of information. If we see a discussion question or an essay question related to accounting's role in the age of information, one place to start that type of question would be to define accounting. Define the normal role of accounting and then expand on that. We can expand on that and see how it relates to a changing role, a changing environment and environment that has a lot more technology, a lot more information. This is a type of essay question we're going to see it more often and it's another question that we see coming up in discussion a lot as well as computer age is advancing. There's going to be a lot of questions in terms of how much information can be done with the computer and what types of jobs will be done with the computer as opposed to types of jobs that will still need a person involved in them. And accounting is one of those areas where you got to think, well, what type of the accounting field, accounting being a huge field, what type of those accounting fields will be things that will need or can be done and automated without as much use for the individuals involved, the accountants involved, and what types of things within accounting will remain an important part in terms of a person being involved for whatever reason and what reasons are there for a person to be involved in those processes. So first of all, if we just think about what accounting is, we can think that the accounting is going to be the compilation of information, those financial transactions, that are going to be compiled in order to make relevant information often in the form of financial statements. So it identifies, records, and communicates relevant, reliable, and comparable information for business activities. So those are the key components. We want it to be relevant, reliable, and comparable. So the information has to be relevant to whatever decision-makers are out there. If we're talking about third-party decision-makers, typically the users of financial statements being investors and the bank, if we want to creditors, or those external users, the IRS, those are the people that we're looking to have the information for, it needs to be relevant to whatever decision they are making. If they're going to invest in the company, is this information relevant to their information, to their decision-making? Is it reliable? Obviously, the financial statements need to be reliable. A lot of the systems and checks are going to be put in place in order to have a reliability, including a standardized form. That's one of the reasons we have the General Accepted Accounting Principles so that people can look at these financial statements or relate to them, to other financial statements and have some idea as to, you know, how these things are put together so that they can read them and be able to rely on them. Publicly traded companies are going to have an audit process, that third-party process, in order to audit and make sure that the financial statements are reported in accordance with a set of rules. Typically, generally accepted accounting principles. And if we have, of course, all the financial statements for different companies reporting under the same standard and confidence that they are reported under that standard, then we can compare them and be more reliant on them. And that's going to be one of the components of making the financial statements. Reliability and comparability kind of go hand-in-hand in some ways. Note that one of the major things that we want to do with the financial statements is compare them to prior years and to future years. And in order to do that, we need some kind of standardization. So that standardization, those generally accepted accounting principles, help us to do that, help us to make that comparability so that we can compare the financial statements to prior years and to other companies. So that's going to be the goal of accounting in general. It's going to try to identify when these financial transactions are happening. It's going to then record those financial transactions in some way and then compile that information often in the format of financial statements, those being the end users for end users. End users typically being the external users, but also internal users in terms of management will then use that information and hopefully if it's relevant, reliable and comparable at that end point. Once we have that, the question is, well, how much of that information can be put together with people involved and what's the accountants role in that process? Clearly in the past, the accountants role might have been to do this whole thing by hand. Basically, we're going to find the financial transactions. We're going to record those transactions within a ledger. We're going to create the trial balance from that information and then we're going to use the trial balance in order to create the financial statements. When we consider, you know, when we learn accounting, we still kind of learn that process. We're learning the process of actually identifying when the transaction is happening and then recording that transaction with a journal entry in a general journal, then posting that to the general ledger and then the general ledger being used to make the trial balance and then the trial balance being used to make the financial statements. Now, as we use automation then, a lot of that process is going to be more automated, meaning just the moving of the numbers around is going to be a lot more automated, just like math would be more automated. Once we can put stuff into a calculator, if we can automate that, those processes will be more automated. So therefore, if we're talking about just the recording of data, we can look for information that could be recorded a lot faster. So that's what the new systems can record a journal entry. Of course, if we just issue an invoice, it's going to make the journal entry for us. If we enter the bill, it's going to make that journal entry for us. We still need to determine in the system when the invoice is going to happen and how, you know, set up the invoice in such a way that it will record the journal entry in the format we have. But once that process is in place, it will then be automated. So within the identification field, we need to basically, the value then from the accounting standpoint, from the people standpoint, is to set up the system. Is to set up the system and say, how are we going to set up this invoice? What's the invoice going to debit and credit? And then the actual processing of that information is something that will be more automated, meaning we need limited input data input, limited knowledge in order to input that data. And then the system, of course, will take that field and process it and make the actual journal entry. It'll post that journal entry to the general ledger and then create the financial statements from that all through that data input process. Note that the data input process, then, is something that doesn't take a lot of skill. But in order to know the system in order to set up the input process, that is going to take more skill in order to know when the invoice is going to be made. Those types of activities are going to be taking more skill. So in learning, the system is going to basically be able to take over the process of posting the journal entry to the GL, creating the trial balance, and then generating most of the financial statements. However, the analysis of those financial statements and the setting up of the system are still going to be an area where many businesses are going to differ. So many businesses, depending on how they generate revenue, when they generate revenue, you're going to have to come up with those different systems, know what the computer can do and what it can't do, and then put together a format so that the computer can do what it can do and be able to set up what it cannot do. So it's really that analysis process, both in terms of how to set up the system, how to set up the internal controls, and then how to review the financial statements, where the accountant role is still going to be relevant because those are areas where you need the analysis, not just data input. You need to actually understand what is happening within the system, analyze what's happening within the system, and then try to improve on the system. And those are types of things that the people will still typically be involved in. If we go to the audit process, the analysis process within just reviewing the financial statements, looking at that end product, we still will have to look at certain things, such as the adjusting journal entries and see what type of adjustments need to be made. It's still going to be some analytical processes in terms of checking each account, trying to see and tie out which accounts are doing what, and if there are any problems that need to be adjusted within those accounts. So really, as we go forward, the accounts need to be involved mainly more in those analysis type of transactions. But just like if we were to do some engineering or something like that in a field that has a lot of math, a field that where basically a computer can do a lot of the information, we still need to know what the computer is doing. If we put something into the computer, if we put something into a calculator, if we say 5 plus 5, and the calculator spits out a number, and we don't know what that number means, we won, we can't fix it if there's a problem, if the output is somehow giving something that's not correct, we don't know where to go to fix it if we don't understand the input process, and we don't know what to do with that number if we don't understand what it means, if we don't understand anything about the calculation or what it's doing, then it's going to be more difficult for us to take that information and make decisions on it. And of course the end product of the financial statements are, the end product of the accounting process are the financial statements. And the more we know about what the system is doing to make the financial statements, the same process is true. The better we can go back in and say, well is this actually producing the right financial statements, or is there something wrong within the computerized system that we need to basically adjust because it's spitting out financial statements that are not exactly right, and how can we do that more efficiently? And we need to be able to look at those financial statements and say, well, what do these mean? Can we analyze these financial statements from a management side? Can we look at these and make better decisions? Can we look at these and go back in each department and try to break down these numbers to help us make better decisions? Those type of analytical skills are things that people are really good at doing. Once the system is set up, the computer of course is going to be really good at just generating the data. As we get more data as well, note that the computer can just do a lot more things. So there may be more opportunities within the accounting field as every time we have the ability to do more stuff, there's always more data and that we can put into the system. And we see that with everything. If you're in the field of taxes, you may remember a time when the tax, the IRS was requiring one to two page tax return. And then taxes are a lot easier to do right now if you have the proper software because the software will allow us to put in a lot more information in a lot more time efficient way. It does that, but we can actually scan things into software and it'll start to input the fields. As that happens, what happened to the demand for more information from the IRS? It goes up. So clearly, part of the reason that the tax code is getting more complex and the tax preparations be getting more complex is due to technology. Technology is allowing us to get more complex and as things get more complex you need people to understand what is going on. So it could actually increase the job field in different areas. In different areas in terms of the accounting field, note we have more specialization and part of this again is due to the fact that we just can process more data and therefore there's just going to be more data to process. Payroll is one example, but that's basically its own field at this point. If you're in Payroll, Payroll itself might be subcategorized out into different industries and whatnot. In the future, in the near future, we could just because of the amount of data have specialists in Payroll that are specialized in per industry or per state or per multiple states, we could have different Payroll specialties. And that's just due to the fact that we just have more data now and as we have more data, there's going to need to be more specialization. So within accounts, accounts receivable, accounts payable always kind of been breaking out into their own areas. Again, as we get more information from our clients as we start to compile more data, whether that be financial and or other data, the computer is going to be able to compile all that data more, but we as the people involved are going to need to sort that data and do something with that data. So I think the accounting field will change just like it has changed before in that there's not going to be any jobs out there that are going to basically be, if you have good handwriting and you can write within a ledger and add up on a 10 key, you used to be able to find a pretty decent job doing that. If I can foot or add up a column and be able to write legibly within a spreadsheet, something I'm not very skilled at doing, then there was jobs out there for you doing that. But now, of course, Excel came along and Excel automated a lot of that type of just ledger processing, but it didn't really eliminate the accounting jobs. It eliminated some accounting jobs, but it didn't really eliminate all of accounting. It just means that now you don't really need to punch things in with a 10 key. You can sum things up within Excel or punch the numbers into Excel and that could really make things faster. What does that allow us to do as accountants? Focus on other things. Focus on decision-making process. Focus on dealing with, you know, helping the clients and creating value in that way. Of course, now we have automated systems that database programs that can help us with a lot of different areas, whether that be in tax, whether that be in audit, whether that be in just general ledger accounting. Again, I don't see that really removing a lot of the accounting processes except for just the data input process, except for just those processes that could be done automatically in terms of once we have the data input processing that data in the same way each time, those types of jobs will go away, but in the analysis jobs could increase vastly because we're just going to have a lot more information. I think the specialization could happen. We're going to get a lot more specialized in terms of different areas of accounting. We're going to have a lot of different sub-care fields, maybe more professions, maybe more certificate programs in basic different type of areas just because there's so much more information that can now be compiled, processed, analyzed, and reviewed. Obviously, within the CPA and public accounting field, the accountants are some of the more trusted advisors within that field as well. When people go to their tax person, clearly that's one of the people that ask a lot of questions. Within that process, within the public accounting, a lot more just information and advice, a lot of value can be provided, even if the software does a lot of the work, even if they simplify the tax code, which would actually be nice and let the software do more stuff, the accounting firms can make a lot of value or create a lot of value by giving that third-party advice that's kind of independent advice and be charging for that third-party advice on a lot of different things, a lot of financial type of investments, as well as the taxes, as well as the business accounting and things like that. Within the company, the same thing is typically the case. When people are looking at the numbers, it could be thought a lot of times to have an objective view or more objective or a view that's based on the data, and oftentimes they're going to be someone that can give more and more advice as they go through this stuff because you're going to need this... An analytical kind of mind is what's going to be needed as we sort through all this kind of data that's going to be involved, and obviously much of that data is kind of financial data and even if it's not in that form, the people that have worked within accounting and dealt with accounting data have a good basis for understanding how to deal with these kind of numbers, these kind of data issues and can make some judgments in terms of how to do different things with this data to make good decision-making processes. So if you got an essay question like this, describe the accounting role of the computer age. I would start first with just basically explaining what accounting is, what the role of accounting is and then go into the changes of what might be changing in terms of the computer age in terms of what a computer can do and what a computer can't do. And I think the major thing is going to be the fact that a computer can process things that are standard set. If we're just repeating the same process, if we're just recording, the computer can post to that journal entry and can create a trial balance and can create a financial statement. What the computer cannot do quite as well is really interpret how to set that system up in the first place and then how to analyze those financial statements at the end point and then try to think about how other ways we want to compile that data, especially for managerial purposes, how can we compile that data in ways to make different type decisions and analysis.