Extending the role of CPAs
         . . . the accounting system should be a clear channel


The long-anticipated wipeout of clerical workers in accounting will probably occur within 3-5 years. There are literally millions of people, esp. in small business still processing AP, AR etc. manually.

EBPP is taking off. Billers will find you no matter whether you're at your Bank, or on Quicken, Money, Web GLs or what. Banks, Checkfree (new owners of Transpoint) will find you and make it easy to pay electronically. Bill consolidators will solicit small businesses to provide invoice delivery service, present your bills to your clients, and collect them. If you don't use EBPP your paper bills will get paid last. 

When your payments and receipts are electronic, you bank account will be automatically reconciled. When your purchasing is done online, your payables and receivables will equal your trading partners'. Books will always be in balance. Invoices will arrive in XML and neatly increment your items in inventory.

A general ravenous horde of accountants, mostly quite competent, will join with a similar horde of accounting and e-commerce software people to chase a dwindling amount of semantic translation and accounting cleanup work. Lets face it, the data has gotten much cleaner already, compared to the 1980s or early 1990s.  There will be much less manual processing now that a machine-readable framework is being established on internet.  

Owners and stakeholders will drilldown into financial statements on the internet all the way to the last dollar, drill across regions, product lines, etc. The financial reporting franchise itself has already been partially usurped by OLAP and RDBMS technologists.

The CPA's historic role was basically a semantic role, of putting a summary page on whatever diverse and complex transactions had been executed.  Since the 1930s we have been mapping god's diversity into a static template called GAAP, and in the process masking what really happened in some respects. We are literally destroying the native information (and creating liability for ourselves). 

Into the Detail: Drill-down

Future CPAs will extend their semantic franchise to greater levels of detail.  Working together with the XML community and legal community, AICPA is developing within XBRL, succinct definitions for each material reporting classification in the balance sheet, income statement and cash flow statements.  Definitions of cash, trade receivables, etc will be agreed upon. These tags will be built into all accounting systems. Better accuracy and functionality will result.  Basically, the user will be able to see the definitions of the accounts for the first time, because CPAs will have already been there to install them in the form of XBRL specs.

Into the Past: Drill-down

CPAs will also likely extend their roles back in time towards the source of the data, to the point in time when transactions were originally recorded.  In the past, the parties to any transaction (e.g. buyers and sellers) created simple printed  documents with isolated accounting systems.  The terms and conditions of the sales contract have never existed in the software or in printed purchase orders or invoices.  Conducting business with digital signatures over the internet will change this practice bigtime.  Parties will agree explicitly to the entire terms of the contract, and the meanings and classifications (tags) at the contract inception.   The competent practice of accounting will require referring to the source contracts, and reviewing  authenticity and validity with appropriate tools.

Into accountability: Drill-up

The burden of precise semantics must be transferred back to the parties to the contract. The intrinsic liability exposure for CPAs arises from our recharacterization of the acts and records of clients into GAAP.  This will be reduced. Universally accepted semantic terminology at the user interface, and digital signatures, will make transactions binding at face value, when executed into the computer.

OK, I'll admit it: Drill-up is my own term. What it means is the businessman or woman entering the transaction into the accounting system should be able to "Drill-Up" to their readers just as those readers can "Drill-down" to the transaction.  The user should be confronted by the other party to the contract, and stakeholders in the business, in the form of help screens, text of the contracts, financial statement screens, disclaimers, and all other information necessary to securely attach responsibility for the entry to the person making the entry in the computer. It would be trivially easy to require users to read such documentation and record their agreement before using any particular account code in an accounting system.

In fact, future Drill-up functions may include an opportunity for realtime, face to face communication with the particular vendor or customer, and/or the user's supervisor or stockholders.  Every account in an accounting system has an interested 3rd party. Drill-up is not something that could have been invented within an isolated accounting system, but is easy within the context of a WebLedger hosted on internet.

It goes without saying, the identity of the author should be securely determined by passwords, and his or her digital signature or other marker attached to transaction itself.

This will be a GOOD THING but it will be the end of the CPA business as we know it today, as semantic intepreters and policemen of historical transactions.

The coming debates over GAAP XML definitions offers an opportunity for CPAs, working with the legal community, to create a more accountable commercial environment and spare CPAs from certain risks they cannot control.

Todd Boyle http://www.gldialtone.com