Digital Transformation in Accounting

Richard Busulwa, Nina Evans

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000383263
• Edition: 1
• Topic: Business
• Subtopic: Accounting
• Index: Business

Digital Transformation in Accounting is a critical guidebook for accountancy and digital business students and practitionersto navigate the effects of digital technology advancements, digital disruption, and digital transformation on the accounting profession.

Drawing on the latest research, this book:

• Unpacks dozens of digital technology advancements, explaining what they are and how they could be used to improve accounting practice.
• Discusses the impact of digital disruption and digital transformation on different accounting functions, roles, and activities.
• Integrates traditional accounting information systems concepts and contemporary digital business and digital transformation concepts.
• Includes a rich array of real-world case studies, simulated problems, quizzes, group and individual exercises, as well as supplementary electronic resources.
• Provides a framework and a set of tools to prepare the future accounting workforce for the era of digital disruption.

This book is an invaluable resource for students on accounting, accounting information systems, and digital business courses, as well as for accountants, accounting educators, and accreditation / advocacy bodies.

Part I
Digital technology advancements, digital disruption, and digital business transformation

1
Introduction and need for this book

Introduction

Digital technology advancements such as cloud computing, the internet of things, block-chain, and artificial intelligence are driving disruptions at organization, society, and industry level¹. These digital technology-related disruptions are commonly referred to as digital disruption or digital disruptions. At organization level, digital disruption typically manifests itself as changes in competing products and services, changes in customer expectation and behaviors, changes in data availability, changes in competing business models, changes in the competitive landscape, and changes in the bases of competition (or sources of competitive advantage)². Irrespective of which of these changes are most pronounced for a particular organization or industry, digital disruption can render much of existing approaches to value creation, existing business models, existing approaches to competition, and / or existing business processes and workflows obsolete. Faced with growing obsolescence in many of their activities and workflows, organizations can deny / ignore the occurrence of digital disruption. Or they can accept the occurrence of digital disruption but not the urgent need to respond to it. Alternatively, they can accept the occurrence of digital disruption, accept the urgent need to respond to digital disruption, and undertake digital business transformation to recreate themselves in order to be able to adapt to digital disruption and to leverage digital technology advancements as a source of competitive advantage, adaptability, and agility. This process of organizations recreating themselves to adapt to digital disruption, and to leverage digital technologies for competitive advantage, adaptability, and agility is most accurately referred to as digital business transformation; even though it is more commonly referred to as digital transformation. The term digital transformation is often used as a broad reference to digitization, digitalization, and digital business transformation. Notwithstanding this loose use of the term, we hereon use both terms interchangeably, since digital transformation is a more common term to readers. But, each time we use the term digital transformation, we strictly mean digital business transformation (we clarify the exact differences and implications of the differences in chapter 4).

In disrupting organizations’ product / service offerings, as well as the underlying business processes and workflows facilitating delivery of those products / services, digital disruption, in turn, disrupts the professions. That is, it renders significant aspects of the existing roles and activities performed by particular professions obsolete – thus requiring them to perform new roles and activities in order to remain relevant. Like organizations, professions faced with growing obsolescence in existing roles and activities can deny / ignore digital disruption and the urgency of responding to it, or they can act quickly to recreate themselves in order to adapt to digital disruption in a timely manner, and to leverage digital technologies to offer new or significantly enhanced value. As one of these professions, the accounting profession is not immune to digital disruption. In fact, compelling arguments have been made that accounting tops lists of professions most at risk of digital disruption^3,4,5. And institutions, such as the International Federation of Accountants (IFAC), accounting associations, accounting professional bodies, and accounting professional service firms, are calling for changes to accounting roles, activities, and competencies in order for accountants to be able to adapt to disruption and reshape their value proposition. Notwithstanding contentions of accounting being at high risk of losing relevance due to digital disruption, researchers, governance bodies, and futurists are converging on the view that digital technology advancement and digital business transformation actually make accountants much more important than ever. This is because digital business transformation and digital business come with significant financial, technological, and strategic risks. Accountants need to play critical roles in helping organizations to safely undertake digital business transformation, to optimally leverage digital technology advancements, and to realize the full benefits of becoming a digital business. But playing these critical roles requires changes in the roles, activities, and competencies of accountants. And it requires accountants to understand key digital technologies and their implications for organizations, to understand digital transformation and digital business capabilities and practices, and to understand how digital technologies and digital business capabilities impact accounting value creation and practice.

Need for this book

Although interdisciplinary, digital transformation and digital business have strong roots in the disciplines of information systems, information technology, computer science, computer engineering, and software engineering. These disciplines are notorious for their specialized terminology, jargon, acronyms, and abbreviations – which can often get in the way of understanding critical digital technology issues and their implications. This challenge is compounded by the proliferation in digital technologies, and the pace with which innovations in these technologies are occurring. Even IT professionals can easily get overwhelmed by the slippery terminology, concepts, and issues. But while in the past accountants could get away with relegating such digital technology issues to the “techies” in order to focus on accounting specific activities, they now need to make sense of the specialized terminology, and to understand critical digital technology issues and their implications. They then need to be able to draw on this understanding to effectively leverage digital technologies to deliver on the evolving accounting value proposition. Unfortunately, in our review of more than 250 undergraduate and postgraduate accounting degrees and courses around the world, we found that, at best, most degrees and courses tended to only cover traditional information systems and IT concepts (e.g. hardware, software, networks, operating systems, ERP systems, databases, decision support systems, etc.), with little mention of emerging technologies or of digital transformation and digital business concepts and issues. In doing so, we contend that they miss opportunities to help accountants make sense of the slippery terminology related to digital transformation and digital business, to understand the different digital technologies and their implications for digital business transformation and digital business, to understand how all of this impacts accounting value creation and practice, and to build future accountants’ ability to keep up with accelerating digital technology advancements. Seizing these missed opportunities is critical to ensuring accountants are optimally positioned to effectively participate in their organizations’ digital transformation and digital business efforts. This, in turn, is critical to ensuring accountants remain invaluable to maximizing their organizations’ long-term survival.

Filling these gaps is the focus of this book. That is, the book explores digital technology advancements and digital disruption from the perspective of the accounting profession. It explains the concepts of digitalization, digital business, and digital transformation; and how these concepts interact with different digital technologies to impact the role of accountants and the accounting value proposition. As a part of this, the book unpacks more than 36 key digital technology advancements (e.g. internet of things, artificial intelligence, robotics, blockchain, augmented reality). It explains how they work, their implications for organizational strategy and operational processes, and their implication for accounting value creation. The book then explains the role accountants can play in undertaking digital business transformation and leveraging digital technology advancements to enable their organizations to simultaneously pursue efficiency, agility, and customer experience – so as to gain competitive edge today and guard against disruption tomorrow. To conclude, a framework is provided that accountants can use to effectively develop required digital technology competencies and to keep up with accelerating digital technology advancements.

Research for this book

The research for this book consisted of six stages. In stage 1, we undertook a review of the relevant and seminal information systems research on digital technology advancements, digital disruption, digital transformation, and digital business. The purpose of this stage was to understand the implications of these concepts for organizations and for the professions. In stage 2, we undertook a review of the accounting and accounting information systems research on the implications of digital technology advancements and digital business transformation for accounting. The aim of this stage was to understand accounting researchers’ perspectives on how digital technology advancements and digital business transformation were changing the accounting value proposition and, therefore, what the implications were for accounting roles and competencies. In stage 3, we reviewed research reports by key accounting professional institutions / stakeholders investigating the implications of digital transformation and digital technologies for the accounting profession. These stakeholder reports included reports by institutions such as the International Federation of Accountants, accounting associations, accounting professional bodies, accounting professional service firms, and accounting recruitment firms. The aim of this stage was to understand these different stakeholders’ perspectives on how digital technologies were changing the accounting value proposition and the required technology competencies of accountants. In stage 4, we sought out industry case studies of accountants performing the changed accounting roles and activities, of accountants leveraging emerging digital technologies to deliver enhanced value, of accountants leveraging their new or enhanced digital technology competencies, and of organizations benefiting from the new or enhanced value created by accountants. The aim of this stage was to find practical examples of accountants effectively participating in their organizations’ digital transformation and digital business capabilities. In stage 5, we reviewed relevant academic and non-academic literature on digital technology competencies required of accountants in order to play a sufficient role in digital business transformation and digital business. The aim of this stage was to identify key competencies and propose a framework for their development. Finally, in stage 6, we reviewed more than 250 accounting degrees and courses / units to explore the degree and nature of digital technology competencies embedded within those degrees and units. The aim of this stage was to understand the breadth and depth of digital technology, digital transformation, and digital business-related competencies within accounting degrees and courses / units. See Table 1.1 for a summary of the research activities undertaken at each stage of the research process.

Table 1.1 Key literatures reviewed at each research stage for this book and the focus of each literature review

Research stage	Research activity
Stage 1	Review of the information systems academic research for discussions of: The relationship between traditional information systems concepts and contemporary digital business concepts The link between digital technology advancements and digital disruption The need for digital transformation and digital business The capabilities required for digital transformation and digital business The accounting roles and competencies required for digital transformation and digital business
Stage 2	Review of the accounting and accounting information systems research discussing: Technology and info...