Advanced Management Accounting

Part A

Introduction

The fourth industrial technology has emerged with rapidly developing cyber technologies. This latest industrial and technological evolution is the largest in history, with developments that humankind had not specifically anticipated. Studies distinguish the recent emergent technologies from the Third industrial revolution due to their velocity, scope and systems diversification. Accounting and management have been subject to industrial revolution developments. Incumbent digital technology systems have revolutionized accounting roles and system operations. It is a bitter-sweet scenario since improved technology has advantages and disadvantages to modern accounting. Modern-day accounting encompasses narrower and more specific roles in management and divisional accounting. This promises a more goal-oriented management setup but with a reduction in the required staff at the workplace setup. Studies, however, argue that despite reducing roles due to digital evolution, there will be a relatively increased job creation in the new roles created. Inventions such as blockchain technology, cloud computing and artificial intelligence are all significant technological advancements that have changed the accounting sphere. This literature is focused on the implementation of digital technologies in accounting. More so, it incorporates relevant case studies to illustrate the advantages, challenges and impacts of the new technologies on the operations in the industry. Finally, it identifies the current trends in the industry to predict how digital technologies will impact the future accounting environment.

The fourth industrial revolution

The fourth industrial revolution is an important development that cuts across the private, public, civil and academic sectors. Accounting may lie on either side of the sectors. Most importantly, these changes should be harnessed to minimize their negative impacts and maximize benefits. Industry 4.0, unlike the previous evolutions, is exponential, causing a change in numerous fields worldwide. Botelho et al. (2022) present findings on the changes effected by industry 4.0 on accounting culture. Ninety per cent of the respondents, who are professional accountants, attest to a change in accounting culture in their workplace practices (Tiwari et al., 2020). Financial experts believe that industrial development will cause an irreversible change in financial firms’ economic and employment trends. Artificial intelligence, cloud computing and blockchain technology are some relevant steps that have taken accounting practices to a new level (Moll and Yogibatsu, 2019). These improvements promise efficiency, productivity and security in accounting practices. Cyber-physical technology is, however, only partially beneficial. Accountants should brace to tackle the unbalanced labor markets. There is an anticipated change in the employment culture of accounting and other job industries. This will result in a low-skill/low-pay and high-skill/high-pay environment, creating severe social imbalance (Tiwari et al., 2020). Arguably, the major benefactors of this fourth industrial technology will be the innovators, shareholders and investors. The accounting firms and personnel must restructure their skill set and activities per the incumbent industry 4.0.

Artificial intelligence

Accountancy will benefit from industry 4.0 technologies such as artificial intelligence, blockchain technology and cloud computing. Artificial intelligence provides viable solutions through analytics. Modern-day accounting management has largely incorporated artificial intelligence through machine learning to achieve data analytics (Ionescu, 2019). Machine learning aids accountancy management systems in studying data and algorithms. Machine learning is set to provide a self-management system that will respond to prompts similarly to humans. Accountants utilize machine learning technologies to generate, connect and organize relevant information (Warren and Mazz, 2015). AI technology is majorly practical in bookkeeping. It has automated bookkeeping functions such as verifying and sorting accountancy information. Machine learning has improved tasks in accountancy software such as Quick Books through automation (Ionescu, 2019). It simplifies repetitive and low-skill tasks, which improves speed and efficiency. Moreso, Artificial Intelligence provides improved performance over time as the machine learning algorithms familiarize themselves with organization tasks. It is more practical than natural programming languages since it provides diverse functionalities above the alphanumerical data. Artificial intelligence will, however, take a longer time for its implementation. It has development opportunities in the audit and assurance sector. It is highly versatile and will require constant personnel training to maintain their competence.

Blockchain technology

Blockchain technology is a mechanism for recording secure information. Blockchain targets to manipulation of data as it is transferred through various channels. Blockchain also records tangible or intangible asset transactions and cuts the involved procedures’ costs. A blockchain comprises three elements; distribution ledger technology, fool-proof records and smart contracts. The distributed ledger technology is a network of parties involved in the transactions and prevents duplicated transactions for data integrity. A blockchain’s immutable record feature prevents and corrects errors in the technology. Finally, blockchain technology ensures that there is an even transaction ground. Smart contracts are rules that define corporate bond transfers to leverage required systems. A blockchain connects the asset transaction records and protects the data integrity through stringent verification actions. Accountancy management culture benefits from blockchain technology through information encryption. There is a greater trust since this technology allows for information access to permitted groups (Ionescu, 2019). Encrypted data also ensures improved security of the financial transaction data. Smart contracts are efficient through reduced time wastage record reconciliations. Elimination of third parties in financial transactions further boosts efficiency and security. Blockchain technology is, however, challenging due to its complex scalability. The technology requires numerous user’s connectivity which results in a lag. Potential solutions to the scalability technicalities, such as Corda, still need to be fully incorporated into the centralized systems (Ionescu, 2019). Blockchain technology requires an interlink between numerous computers to perform specific functions. These massive connections are energy-consuming, which affects the efficiency of the system. Blockchain security is variably dependable since the users are wholly in charge of their access (O’leary, 2013). Users who compromise their access pins might damage the whole system’s integrity. Furthermore, blockchain technology is highly costly, holding back its rapid implementation across the accounting sphere (Ionescu, 2019). Like numerous modern technology development, blockchain also faces cyber security threats. Accounting firms need more incorporation of blockchain technology since it is less mature and requires further development to solve its emergent issues.

Cloud computing

In the fourth industrial revolution, cloud computing has been instrumental in reducing the workload in accounting procedures. Abdullah and Abdullah (2017) credit cloud computing for reducing firm sizes. Cloud computing has increased the accessibility of accounting firms reducing their commitment to a specific geographical location. Reduced firm sizes have improved operational performance and accurate accountancy execution (Khaliq et al., 2021). Accounting can be time-consuming since it is inevitable inefficient budgeting and financial control. Traditional accounting procedures were remotely performed on devices within a firm. Cloud computing has revolutionized accounting by executing management tasks over a secure space on the internet (Strauss et al., 2015). Data contained on cloud computing platforms are easily accessible from servers in numerous locations. Information in cloud computing is available on an open Application Programming Interface to improve the user’s access. Industry 4.0 accounting techniques have utilized cloud computing to provide real-time information. Previous accounting procedures required time-consuming analysis of financial records to provide useful insights. Cloud computing enables accountants to perform mobile financial procedures such as approving payments, preparing statements, and entering financial data remotely (Abdullah and Abdullah, 2017). Cloud computing has simplified accounting processes by providing real-time synthesized information that will aid in making critical financial and management decisions. Accounting procedures are reliable and efficient due to the up-to-date financial software. Cloud computing is majorly executed online and thus eliminating costly and time-consuming software updates. Accounting procedures on cloud computing platforms are high safety and security guaranteed. Hardware protection is eliminated through real-time and secure access to financial information. Cloud computing has demonstrated desirable scalability and efficiency in accounting operations. Third-party service providers can customize cloud computing services to meet financial organizations’ demands. Cloud computing has provided practical solutions to the accounting industry through QuickBooks online, Zoho Books and Sage Business Cloud Accounting. Khanom (2017) criticizes cloud computing’s inefficiencies, such as limited access. Cloud computing software requires constant connectivity to the internet, which may be impractical when there is a cut in the internet connection. This will affect cloud computing’s reliability during internet disconnection. Cyber security is also a major concern in cloud computing due to breaches or loopholes through numerous accesses. Cloud computing also requires stringent security measures, such as access through an unsecured Wi-Fi network, to avoid penetration.

Analysis of the effect of digital technologies on accounting practices

This section will synthesize numerous works of literature to illustrate the effects of the industry 4.0 digital transformation of accounting practices and management. Through valuable insights, big data has significantly changed accounting management and procedures in the 21^st century. Industry 4.0 digital technologies have created a shift in the traditional accounting processes. According to Varma et al. (2021), big data is captured through automated sensing and can be characterized by a big volume, velocity and variety. Mohamed (2020) advocates for the timely intervention of big data challenges in accounting through information technology. Digital financial technologies are a remedy to conquer challenges such as inaccurate financial reports. Big data improve organizational competition through credible rational information. (Youniss, 2020) Financial institutions are depended on big data to identify cost-cutting opportunities. Accounting firms rely on digital technologies to understand customer behaviour. Mohamed (2022), however, notes that industry 4.0 technology faces rapid changes in accounting culture. Digital technologies such as big data will revert accountants to strategic roles in the near future. Accountants are set to be central to the industry 4.0 development in financial firms. Mohamed (2022) foresees accountants as an intermediate between data analysts and senior management in financial firms. Even after fully automating the accounting procedures, Mohamed (2022) suggests that accountants should acquire Big Data analytical skills to improve company performance. Researchers predict a higher remuneration for accountants who will breach the gap between It specialists and business, neither as software engineers nor data scientists. Accountancy training programs should be tweaked to ensure a robust curriculum that focuses on skills related to data creation, management, analysis, modification, creation, modification, security, and reporting (Andreassen, 2020). Digital data methods are predicted to change the traditional record-keeping methods in accounting to include video, audio and textual data.

Digital development technologies are predicted to affect management accountants’ job profiles. These reforms demand a revision in the business operating model and strategies. Management accountants are the best positioned to determine the levels of data processing that could be input since they have a general view of the operation. They are answerable to the managers on the cost and complexity of running the financial firm. Tudor and Deliu (2021) suggest that digital technologies will change the interaction patterns between management accountants and other company departments despite the diversification of technology and methods. The managerial accounting procedures have changed in the face of the new digital technologies from historical reporting to providing problem-solving-oriented solutions. Numerous personnel, such as marketing specialists, have embraced big data to undertake more prominent leadership roles in the financial domain. Researchers argue that failure to assimilate the other staff with digital skills will isolate management accountants in decision-making. Digital development in the accountancy profession is anticipated to create a divide in the centrality, authority and power aspects (Griffin and Wright, 2015). Controversially, authors argue that management accountants will shift their duties towards data science. Management accountants are focused on needing a great deal of systematic, mathematical-statistical and business analytical skills. Management accounts are also likely to cross over to information technology roles in the evolution of digital advancements. Tudor and Deliu (2021) suggest that the management account role will overlap with data management and governance, which was traditional handle by the information technology departments. The management accountants are strategically positioned for these changes due to their problem-identification capabilities on unstructured data. Some areas of the digital advancement models require in-depth technical and programming expertise, creating a divide in managerial accounting preferences. According to Tudor and Deliu (2021), managerial accountants will prefer to meet the technical requirements, while a section might opt to operate within the traditional business relations model. Management accounting is responding to external threats through internal reforms, gaining ground in new areas and changing its levels of freedom. Tudor and Deliu (2021) suggest interprofessional collaboration and learning to solve information security, privacy and storage challenges. The roles in data analysis and management are highly specialized in technical areas of statistics, analytics and programming. Accounting certification institutions such as the Chartered Institute of Certified Accountants prepare management accountants with relevant skills for the changing digital accountancy space. Management accountants will experience a shift in their obligations. Improved digital technology will relieve the management accountants of the advisory role, which will be handed over to the analysis software. Tudor and Deliu (2022) for-see a proactive and future-oriented role for the next generation of management accountants. Such changes will also affect the traditional budgeting processes. Organization budgeting will move beyond spreadsheet insights to real-time managerial control systems.

Conclusion

Industry 4.0 developments benefit accounting professionals due to the reduced workload, increased efficiency and accuracy. Artificial intelligence, blockchain technology, and cloud computing are promising ventures that will improve accounting practices as they develop. These technologies have synchronized management accounting duties by eliminating low-skill time-consuming tasks and majoring in intense functions. Increased accessibility is the key benefit of digital accountancy techniques. The improved digital accountancy methods promise to revolutionize traditional management accountancy practices. Futuristic management accountancy roles will demand increased collaboration between management accountants and their top managers to explore internal and external data insights. The future managerial accountancy role will experience considerable change in required skill sets and professional duties. The shift from traditional accounting to fully digital roles has also been received amidst much fear. Traditional accountants are hesitant about the job culture reforms, which they fear might render them irrelevant. Digital accounting techniques are very expensive to implement, which slows down their full implementation. Some literature for-sees failure in implementing digital accounting techniques due to compatibility and integration issues. Digital financial data is susceptible to cyber-attacks, a prevalent challenge to most digital accountancy techniques. Digital financial will therefore require high data quality and consistency to maintain the productivity of financial firms. Management accountants must embrace the future possibilities in their profession by acquiring in-depth big data processing skills. Management accountants are set to be less business management oriented and more data analytical and management advisors. They will be in a neutral position to oversee organization trends and performance, perform analysis of the data generated on analysis software and make informed organization decisions.

Part B

Alibaba’s Balanced Scorecard for the year ending 2024

Reference

Warren, J. and Marz, N., 2015. Big Data: Principles and best practices of scalable real-time data systems. Simon and Schuster. https://scholar.google.com/scholar?cites=8791353485549914677&as_sdt=2005&sciodt=0,5&hl=en

Vasarhelyi, M.A., Kogan, A. and Tuttle, B.M., 2015. Big data in accounting: An overview. Accounting Horizons, 29(2), pp.381-396. https://publications.aaahq.org/accounting-horizons/article-abstract/29/2/381/2184

Richins, G., Stapleton, A., Stratopoulos, T.C. and Wong, C., 2017. Big Data analytics: Opportunity or threat for the accounting profession? Journal of information systems, 31(3), pp.63-79. https://publications.aaahq.org/jis/article-abstract/31/3/63/1114

O’Leary, D.E., 2013. BIG DATA’, THE ‘INTERNET OF THINGS’AND THE ‘INTERNET OF SIGNS. Intelligent Systems in Accounting, Finance and Management, 20(1), pp.53-65. https://onlinelibrary.wiley.com/doi/abs/10.1002/isaf.1336

Moll, J. and Yigitbasioglu, O., 2019. The role of internet-related technologies in shaping the work of accountants: New directions for accounting research. The British accounting review, 51(6), p.100833. https://www.sciencedirect.com/science/article/pii/S0890838919300459

Griffin, P.A. and Wright, A.M., 2015. Commentaries on Big Data’s importance for accounting and auditing. Accounting Horizons, 29(2), pp.377-379. https://publications.aaahq.org/accounting-horizons/article/29/2/377/2182

Varma, A., Piedepalumbo, P. and Mancini, D., 2021. Big Data and Accounting: A Bibliometric Study. International Journal of Digital Accounting Research, 21. https://www.uhu.es/ijdar/10.4192/1577-8517-v21_8.pdf

Younis, N.M.M., 2020. Big Data and the Future of the Accounting Profession. Indian Journal of Science and Technology, 13(08), pp.883-892. https://sciresol.s3.us-east-2.amazonaws.com/IJST/Articles/Feb/4th%20issue/149808.pdf

Strauss, E., Kristandl, G. and Quinn, M., 2015. The effects of cloud technology on management accounting and decision-making. Management and Financial Accounting Report, 10(6). http://gala.gre.ac.uk/13340

Tiron-Tudor, A. and Deliu, D., 2021. Big data’s disruptive effect on job profiles: Management accountants’ case study. Journal of Risk and Financial Management, 14(8), p.376. https://www.mdpi.com/1911-8074/14/8/376

Andreassen, R.I., 2020. Digital technology and changing roles: a management accountant’s dream or nightmare? Journal of Management Control, 31(3), pp.209-238. https://link.springer.com/article/10.1007/s00187-020-00303-2

Khaliq, A., Umair, A., Khaniukova, R., Iqbal, S. and Abbas, A., 2021. Leadership and decision making among SMEs: management accounting information and the moderating role of cloud computing. https://essuir.sumdu.edu.ua/handle/123456789/86071

Ionescu, L., 2019. Big data, blockchain, and artificial intelligence in cloud-based accounting information systems. Analysis and Metaphysics, (18), pp.44-49. https://www.ceeol.com/search/article-detail?id=816594

Tiwari, K. and Khan, M.S., 2020. Sustainability accounting and reporting in the industry 4.0. Journal of cleaner production, 258, p.120783. https://www.sciencedirect.com/science/article/pii/S0959652620308301