A few days ago, I received a forward on WhatsApp,which predicted that machines will soon start replacing humans wherein artificial intelligence (AI) will bring about changes faster than we can imagine and functions such as accounting and HR will become extinct.

People have been predicting the end game for accountants and HR folks for the last 20 years, but they continue to thrive, working alongside technology instead of being replaced. So, what is different this time?

We just need to look around us; from smartphones to home-cleaning robots, technology is replacing humans and is invading our lives. Self-driving cars are a reality; Siri and Alexa talk to us. Is an iRobot just around the corner?

Recent tweets by maverick entrepreneur and founder of Tesla Elon Musk that AI is a bigger threat to humanity than North Korea, following his twitter spat with Mark Zuckerberg, only increases the fear of the unknown. Ignoring their corporate/personal interests in propagating such views, is AI such a big threat? The impact on accounting and audit can be viewed from three dimensions:

Existential threat: Can the work of accountants be automated? Can a machine decide which expenditure goes into which head? Yes. Is someone working on developing such tools? Startups such as SMACC and Xero could be trying to do something like that. But what these startups have as on date is closer to automation than replacement of an accountant.

A know-all AI tool for accounting would have to be something that can either replace all existing accounting software / ERPs (enterprise resource planning) or is able to run on top of them. This a challenging proposition. We have thousands of ERP platforms and custom-built software across the world, each with different standards, highly customised for geographies, industries and tax and accounting regulations; information exchange is not as easy as it seems.

People often wonder if machines can take over the stock markets with algorithmic trading why not accounting? But then, these algorithms run on standardised data sets of stock prices, interest rates, unemployment rates etc., that are available in an organized form. They run on equations built on historical data and linked to variables available in homogeneous forms. Accounting information, as it exists today across various entities, is not in a standardised form.

Accounting as well as auditing involve a lot of judgement. A lot of data scanning / data entry is being done by machines, but we are still far away from being able to speak to “Jarvis” than can pass accounting entries without human intervention. (Applications such as “Wave” or “Shoeboxed” only reduce burden, as a human is still required to prepare data in standardized sets and upload).

We are yet to see a machine that has ability to understand dis-organised data sets, make judgement calls and take decisions.

Adequacy of skills: The skills that today’s accountants possess and pride themselves with may not be relevant in near future. Only those who constantly update their skills (not just knowledge) and can apply those skills towards analysis and decision-making will be able to survive this technological onslaught.

Accounting graduates with minimal skills face the highest risk from automation. In fact, the threat to an accounting undergrad from technology is no different from what a factory worker faces from a robot. However, demand for qualified professionals like CAs / CPAs will continue to increase for the next few decades, given the plethora of regulations and economic progress of hitherto under-developed countries. These professionals will be mostly employed in roles that have a business or regulatory impact, a good distance away from basic accounting.

The big audit firms have been using technology to improve audit procedures for several decades. Most of their work today is based on analytical procedures and computer aided audit tools. They employ thousands of specialists. Audit profession will move further in this direction.

Audit firms will employ more specialists in statistics, risk management, technology, data analytics, etc. Accountants who used to dominate the auditing profession will no longer be able to. This will be a large change and not everyone is ready for it.

Impact across Industries and geographies: There are millions of small businesses operating in different regulatory environments across the world; not all of them can invest in high end automation.

Advanced automation and AI will work only on a connected grid. Imagining a world where all accounting systems talk to each other, across sectors and geographies is still a dream. Especially given that even after spending billions of dollars in developing ERP systems, I doubt, if there exists, even one multi-billion-dollar corporation in the world today, that can print its financial statements straight out of its ERP without the involvement of a human. What we are seeing is automation, true AI is still far away.

Preparation of Financial Statements involves several estimates, provisions, their verification, judgement calls on multiple aspect. These cannot be taken over by a machine overnight. The impact of technological changes on the accounting and auditing professions has been quick and it will pick up pace further; but we are not looking at any overnight catastrophic event for accountants. However, they will have to embrace technology and re-invent themselves to remain relevant.

When will AI replace CAs?

As a friend said, most of us would be vary of flying in pilotless planes, or get a surgery done by robots without human intervention. We still have faith in human judgement.

There will be a generation of kids brought up robotic nannies; they will not think twice before flying in pilotless planes or get a surgery done by robots or approaching a robotic court. The generation which will trust machines to make judgements (not necessarily always based on a set of rules) is the one that will see Autobots replacing accountants.

The writer is co-founder and CEO of IndigoLearn