accountancy – Page 4 – Maverisk / Étoiles du Nord

Roboccountant

Talking about robotisation of the accountancy industry…

Automation is letting a computer do the same, or about the same, as was previously done by hand and/or mind.
This ‘doing’ is a walk-through of an algorithm. In its simplest form, and for major parts the core of accountancy / bookkeeping processing, this was even parameter-free so no switches needed to be made, no decisions at switchpoints. But sometimes, the switchboard was external e.g., in accountancy rulebooks that were but for (idiot) savants (a.k.a. ‘only some accountants’) near- or completely impossible to stuff in one’s head as part of the programming.
The Turing machines have it. But this line is only a display of wannabe Wisdom re core automation / programming knowledge.
Computers were freely programmable. And still are, mostly. Robots? Maybe not so much. But then, they’re of the industrial kind welding together your Tesla, or of the ridiculously purposeless humanoid kind. So, why talk about robotisation when it’s more about automation (of the classical label), nowadays called ANI, in the cloud or not..?
But then, there’s a lot of interpretation and shot calling and estimations up for discussion, in accountancyland. But that was what AI was supposed to solve! So far, we have only explored the either Expert System pure logic, or the ill understood neural networks deployment, but we haven’t integrated well enough the in-between (or supra) field of Fuzzy Logic. This could bring about a far more absolute truth of e.g., 60% admissibility of some estimation and at the same time a 60% inadmissibility of the same number. Then what — is determined by …? But that’s just how it is today, in the accounting industry, disguised as tough talk on admissibility but in reality styled more like cowardly firing squad pleading.
I already blogged about continuous instant report generation based on approved XBRL templates, that could draw on All data available in some organization, to deliver reports with the latest data to just whomever has access to the template/generation engine.
With assurance on the templates, and on the soundness of the base data pool generated/filled e.g. by automated verification against external sources, and on the integrity of the XBRL templates and the generation engine — nothing more needed. Initially, difficult enough, but learning effects will diminish the burden.
A second intermezzo: Of course all assurance will be delivered to your smart watch (sideline: as if such a thing would ever exist). Just strap a tablet to your wrist and you’d still be out by quite some margin, on screen size required to quickly glance over all relevant data (in one view! as is almost always required to understand the displayed, to have information from the data).
What if we find that all fuzzy logic including zero-to-somewhat fuzzyfied expert system’s translations of the hand- and rulebooks, would be implementable on rather simple neural networks, in the order of magnitude of a snail’s brain. No, not hinting at you, but the slime trail left by that Partner you know, is tell-tale.
When not if, weaving errors turn up in the rulebook algorithmic… When not if, the translation of True And Fair View into materiality criteria (NOT the other way around..!!! as it would be today but also as is complete and utter stupidity of the sackable offense and life without parole magnitude) will turn out to be faulty.
The idea that blockchain based trust will replace the value (if any(more)) of the wet signature — has that concept become sufficiently laughable ..? — of any particular person for reliance, is moot but may have to include indemnity / insurance coverage in one way or another, or is all accountancy (?) fee placed in escrow until a pool fund for expected claims is (over)filled?
But, will blockchain trust not go the same way as reliance on open source software ..? Will it not fail in light of the Bystander Effect ..? Then, exploited by the worst, first. As usual.

Well, just some touch points. The main one being: The rules are algorithmic, almost by definition. Until now, there was no good automated engine to draw on, but the inroads Watson is making in the medical field (oh how comparable!), show how close we (well…) are to being outflanked by … Hey lets have a contest about the name this first Roboccountant will have …!
As long as we don’t fall for the trappings to believe in any kind of child’s hand is easily filled expectation of a humanoid robot but rather one that has no physical existence other than its bits spread out over the global infra.

Oh hey before letting you in the dust, to clear up, herewith:

[Not evil but Ibla]

TLD: Shoo! Shoo!

Awwww was reminded today that the fallacy of Three Lines of “Defence” is a stubborn one. Debunked by a great many, among others on this blog over a year+ ago, but still much too much alive. So let me remind you with the following picture that speaks for itself (or …):

[No high-class design frenzy, just the blot-down in an angered jolt]

Yes, that’s right, still, and is until y’all ditch the TLD idea on the rubbish heap of history: the lines DO NOT stand between the threats and the vulnerabilities. And Boards et al can bypass the circus at their leisure. The lines (aren’t) of defense (aren’t) only stand between all that has gone wrong, and the regulators so the latter are placated with three rounds of white washing and window dressing.

In the past, everyone I discussed this with, agreed the whole thing’s a joke. A sour, very expensive, delusional one. Everybody reacts, nobody responds… Which will need to change or massive damage will occur.

OK, I’ll stop now before my language over the totalitarian, mind- and ethics-genocidal bureaucracy gets out of hand.

Assurance… No; continuous blockchainproofing will be

Accountants (of the certifying kind) have seen the light of continuous assurance coming. The vast majority of them reacted by being the rabbits [certainly not of the Winnebago / Native American trickster type ..!]; though assuming the headlights were and are still very distant, sitting quite still…
A select few have responded differently – embracing some change as inevitable, researching how Continuous Assurance might be, in times of proliferating XBRL and the like.

That’s OK. And laudable for the Virtue of facing the danger not ducking.

But … all of the assurance industry is still lock, stock and barrel dependent on being the Third Party in agency models.
And now, blockchain tech is around the corner, promising all sorts of unbelievable new ways of transferring trust. If only one could build some system(ic) in which any principal would be able to Read all minute transactions of an agent, and would be able to reliably (…) make sense of it – then the information quality (read: [non]uncertainty, [non] information (access, processing capability) difference) would be immediately visible and actionable. Undoing the need for a trusted third party to give a second opinion that is so beaten down to platitudes anyway that the usefulness has deteriorated way beyond what third parties themselves still believe (if they wouldn’t, who would…?). And note the italics of trusted.

Trusted – the thing that blockchain technology spreads so evenly, so extremely to the opposite of the ultimate non-spread of one person/entity.

Oh well. You know now, and this:

[Relevant if you think it through: Warped reflections. NY of course]

Where accountancy will go

Considering the progress made in the accountancy sector with ‘continuous’ assurance, it struck me that until now, process (read: mere procedures) was driven by technology, at least up till now. Because the idea of ‘transactions’ in that, now quickly antiquating, ERP system we all know, was based like it was and is in all the other comparable systems or less, on the ideas before that. And procedures just had to adapt to the software. No, not the other way around; that’s pure marketing babble!
So, now we (hopefully soon) have XML and XBRL to take some work off our hands (?). But also … qua big d analysis (tired of writing / pronouncing that at full length..!) we’re moving ahead. To be able, would be able, to just dump all ‘transactions’ or primitives into a big db and then run ad hoc queries on them, possibly with some AI in the mix. Who needs separate bookkeepers’ accounts when all source data is available in blobs or whatever ..?

Which may require a leapfrog of assurance. But hey, the world wasn’t invented to service that, but the other way around.
Any thoughts ..?

Thought so. hence:

[Oh, the Great Outdoors! … Central Park, NY, NY]

Pro-nun-ciation

OK.
We already had the CGEIT ~~title~~ certification. Which is pronounced in Dutch as ‘See goat’.
Now let’s add CSX. Pronounced by all as ‘See sex’.

Oh jolly! One is ignorant, XOR one is prepubescent.
Either way, #fail – big time. Let alone for content. This, if you’re still a believer.

You still deserve?

[To be in your stroller; Nancy city park]

Risk of being Duds

Wow, the new year starts of with … failure. I mean, apart from your inability to keep your New Year’s resolutions (already – if you need such a specific date like Jan 1 and the motivation of a ‘fresh start’ which, on the whole, it isn’t since calendars were invented as easy shorthands not life (so exactly) defined turning points) to change habits, … why didn’t you just change when the need arose ..? You’d be much further with it – the year is really off to a traditional start when failures of the past, are repeated ad nauseam… [As interlude: No, writing shorter sentences isn’t and wasn’t on any of my resolutions’ lists…]

Which one might expect from less-clear thinking professions. Though this post isn’t meant to address the precious few, the exceptions to the rule, I do mean ‘accountants’ and ‘IT-auditors’ (IS auditors that don’t understand) to be among those. That, apart from the slew of other vices you can easily sum up, tend to instruct others to do risk analysis this way:
R6 model
Yeah that’s in Dutch but you probably can make out the (actual) content and meaning. Being that the risk analysis is (to be) carried out top-down indeed, analyzing how lower layers of the model will (have to) protect against risks in the layers above, after the controls at any layer may have failed to ‘control’ the risks… [About that ‘control’ quod NON: See this here post of old.]

See? This just perpetuates the toxic myth of top-down analysis. The more one would follow this model, the more deluded one’s risk estimates would become… And this is proposed to lead the way in financial audits…
If you think this limits the Spectre of errors – this thinking permeates, and will permeate, the audit / inspection environment, leading to ‘Sony’. Yes, this erroneous thinking is at, or near, the root cause of that mess-up. [Anyone has seen proof that the NK actually did it, I mean, not the ‘proof’ trumped up by the most biased party ..?]

Whereas a bottom-up approach would show all the weaknesses that would create logically impossible effectiveness of higher-up ‘controls’. Controls just aren’t put in place to build a somewhat reliable platform to build higher-order controls on… Controls are put in place to try (in vein) to protect same-level risks throughout, as well, and higher-level controls were (are; hopefully not too much anymore) put in place to try to protect against all the lower-level controls failures not remediatable there… [‘Mitigation’ as the newspeak champion]
Hence, the distribution of error ranges (outside the acceptable sliver in the middle of the distribution of, e.g., transaction flows – hopefully that sliver is the intentional one) is ever wider the higher one goes in the ‘model’.

Rightfully wrecking your approach to financial audits, where not the risks of misrepresented true and fair views are managed, but the risks that the auditor is caught and found guilty of malpractice by not doing the slightest bit of the checking promised. ‘Assurance’ hence beginning with the right first three letters. Risk management to cut down the enormous workload (due to the overwhelming risks percolating up the model, as in reality they do..! hence having to check almost everything) to nicely within the commercial cutthroat race-to-the-bottom budget which is supplanted with ridiculously attractive (by bordering(!?)-on-the-fraudulent hourly rates) consulting business.

Now, the only hope we have is that the R6 model will not spread beyond … oh hey, googling it returns zero results – let’s keep it that way! Let’s not follow BAD guidance…

Jeez… And that’s only two of 124 pages of this…

I’ll leave you with …
20141101_155144[1]
At the door to
20141101_160525[1]
– if you know what these are, you know why they’re here…

Continuous AssuMining

… Where the process mining for overall assurance, as e.g., @ConeyDataDriven do so well, may spill over into straightforward data point assurance. Of sorts.
Because, when one has visual petri nets (well… sort of) at the transactions level(s) all through the systems, wouldn’t it be dead easy to have tallies at stores and flows, that can be reported on – and when audited in real time, given assurance on! – in all their shining minute detail as compared to the late, very late after-the-fact yes even after-the-full-year-has-ran-its-course annual figures.

This would of course require auditors to sit by all the information flows as they go, and have controllers at hand to correct any single transactions (and reporting) that go unwarranted ways. But hey, there’s tons of fees there, right? So it will happen. In one form or another.
More importantly: No need to keep on dwelling in XML/XBRL quagmires; that level of operational capability would need to be stable or one would lose out. Hence one can from some stage on assume that all transactions are indeed captured and passed through the systems interfaces at all (lower) levels OR some balances will fail – that’s what balances are for. Having established that, the bliss of control room overview will come to administrative(!!)-information flows:
[Just plucked off the search results, for a refinery. But you get the idea…]

Would there be any roadblocks to this development? Your call.

From Sedlacek to accountancy

While going through Sedláček’s seminal Economics of Good and Evil – which should be a mandatory read for all economics, business, and audit (-of-all-sorts) students, I came across one part that struck me as possibly relevant for direct application in accountancy.
Oh but of course, there’s so great a many more parts that should be applied, the sooner the better. I’ll return one day, in the next couple of months, with probably a series of Book by Quote posts on the book, including some analysis and comments maybe this time. And by ‘direct application’ I meant application as useful underpinning undercurrent, root cause, in tha analysis, of what’s wrong with latter-day accountancy, helping as pointers towards possible improvement(s) there. The kicker is in the tail of this post …

First, this:
[According to legend, the exact spot (flag) where St. George slew the dragon, at the St. Jordi (of course) gate, Montblanc, Catalunya. Somewhat fittingly a bus stop 2 yards away, if you could make this post a similar exact slaying spot of accountancy’s woes ;-]

OK. To start. Sedláček has this chapter where a number of Value systems are lined up. On the far left is Kant, with the good-ness of a man’s actions being everything, regardless of the results. Next from the left towards the middle are Christian and Judean thought, and on with Aristoteles, Epicurists (which I think he interprets, and places, incorrectly), Hedonists and finally on the far Right flank, Utilitarians and Mandeville – Greed is Good or rather: only (!?) vice is good (for progress – and we all need that, right?). When reading this (and, as said, I don’t agree with everything there even taking into account Sedláček’s clear statement that the abbreviation may bend the correctness of content), something struck me:

What if, when, the utilitarians have kidnapped the meek of the middle-to-left; have made them believe that they could remain true to themselves in this hostile world, while at the same time the villains have isolated them from the real world and just harvest their proceeds?

[From here on, it gets contentious. Don’t be put off by what you might interpret as rebellious bluntness. I just have not sufficient time to write it all out in a diplomatic, friendly fashion – a diplomat is someone who tells you to go to heck in such a way that you look forward to the journey]
This, e.g., in the wider society where Jaron Lanier’s siren servers harvest all the data production that consumers do; promising benefits but keeping all the humongous moneys to themselves. And, as said, in accountancy, where the individual accountant (partner) is still allowed to believe (s)he works for the greater good of society, to be a really important cog in (economic) society’s good behavior machine. Where in the mean time, the leading partners (or the jump from individual to collective!) roam off all the vast margins and don’t care less about quality. The latter may sound coarse but considering the pressure on productivity levels and budgets, and considering the declared Holy goal of profit increase (second derivative!) …

Such kidnapping points at the improvements required in accountancy today, in particular re the ‘Big’ 4 their handywork for large organisations i.e. just signing off and caring less (proven) about the quality of investigative work done. The horror to think one would dig deep enough for root causes, that would only cost mo-ney…! and could set us up for confrontation with the client, even by causing the hassle or having to amend (processes – cumbersome and costly, and books – the same).

As stated, this may help in the current discussions about the ‘business model’ in accountancy in particular re the ‘Big’ 4. Where talk is of what the client is that should be served, and how to align payment accordingly. As now, in practice the Board, the very auditee, pays. Officially, the Board of Supervisors (Raad van Commissarissen) does, that in an ideal world would represent not only stockholders’ interests but also other stakeholders’; we live in not quite an ideal world where the RvC has to deal with Regulatory Capture if (not when) they’d be aware of that and would even be aware of the need to break the old boys’ networks. And even then, the client could be the RvC but paying the (external) accountant out of profits comes down to the Board registering that in the organization’s books after the best placed to understand and estimate, the Board, would negotiate the budget. In the end, the auditee pays. Who pays, stays. ‘Whose bread one eats, his words one speaks’ (Dutch). Despite the Good ones trying to maintain their independence, in appearance and practice; this shouldn’t be a struggle but an easy stable starting point not having to depart from or returned back to. Certainly not in public opinion..! But now, is troublesome.
Another option, to hire accountants via the insurance companies that insure the auditee organisations qua malpractice, may work but makes accountants dependent in other ways; insurance co’s aren’t philanthropic institutions and would have their own ways of setting budgets, not ex ante aligned with accountants’ societal interests first.

Thirdly, nationalization of accountants also pops up here and there again and again. Where all accountants – not; only the ones to audit organisations of societal interest – would then be allocated in some way or another to auditees. Regulatory capture and other distortions may readily start off in this mode as well; is this studied well enough? Though in this model, accountants with their legally protected task would earn much capped incomes in line with all (?) other civil servants like street cleaners and PMs.

And, of course, there’s the BOHICA approach.
Which might not even be that bad, if, IF paired with an introspection plus real change where the profit seekers are ousted (and not allowed to re-enter, through changed promotion paths) and the kidnapped are released. So that they can again do their best work, as virtuous (wo)men.

So, this above reasoning all the way from Sedláček to current accountancy business models, leads to the distinction of two different sorts of ‘Big’ 4 partners. Which in turn leads to the kidnap interpretation. Which, in turn, leads to changed promotion paths as way forward.

Aren’t we lucky that accountants know everything about true transparency … because that’s what will be needed when progressing with this. So that no lip service will be paid to these changed business principles.

But wait … all the above should not be news. And appears to be insufficient since, as accountants, the very few who actually do, discussed: shouting for ‘cultural change’ is just window dressing that in itself will not result in said change and may not prove to be doable, as goal. To put it very mildly. We may need more. Along the lines of Mandeville, where the Bad are allowed to exist, are required to exist but don’t tell them (no need), in order for the whole of virtuous society to benefit from them; if there were only virtuous citizens, society would come to a standstill until destroyed (from the outside, mostly).
What if we can devise a (business) model that would actually kidnap the despicable, the money grabbers, and turn them into the nible thrifty termites that we the virtuous ants could live off ..?
[Edited to add: This may require Piketty-style progressive taxes on specific professions, but would that be impossible ..? ‘t Might be done in-house in some way, e.g., by setting limits on the income range, the top 10% earning a max per person of … whatever, times the earning per person of the lower 20%]

I’ll leave you now. A much more extensive analysis may be in order of this subject. Which may or may not follow. In particular re the jump from (sum of) individuals to collective à la Ortega y Gasset and Brian (and followers); an oft overlooked but still Very Hard Problem. But your comments are welcomed already…:

Clustering the future

Was clustering my themes for the future of this blog. Came up with:
[Sizes, colours, or text sizes not very reflective of the attention the various subjects will get]
Low sophistication tool, eh? Never mind. Do mind, to comment. On the various things that would need to be added. As yes I know, I have left much out of the picture, for brevity purposes. But will want to hear whether I missed major things before I miss them, in next year’s posts. Thank you!
And, for the latter,
[Bah-t’yó! indeed]

Diversified Reporting Assurance

Yes, let’s call it DRA. The new wave of “accountants’ statements” in the wings.
[Warning: for those not interested in accountancy, the rest will be boring. Or, let me restate that: very boring. Or even deadly boring.]
Continue reading “Diversified Reporting Assurance”