The Effect of Big Data on the CPA Profession. customers. That is because the products we use have a lot to say about us.

Transcription

1 The Effect of Big Data on the CPA Profession Businesses today have access to an astounding amount of information about their customers. That is because the products we use have a lot to say about us. In this digital age, a lot of information gets recorded and collected to form statistics. The devices we use every day, like smartphones or FitBits, collect data about our lives. That information is utilized for new developments to make our lives easier (DeVito). By using the acquired data to improve their products or services to better fit our needs, we are more inclined to agree to the terms and conditions of certain products such as Uber, or social media apps. Information pours into businesses every second of every day. But do we ever stop to think about how much data could possibly be out there? Where does it go? Who is looking at it? From an accounting standpoint, what are the possibilities that this could mean for the profession? Traditionally, companies collected data manually, entered it into a database, and assembled it into spreadsheets or charts in order to use the information to make business decisions. Today, that process is virtually obsolete ( Big Data para. 2). Companies gather an abundance of information with ease from their customers everyday. Through advanced technology, any facts, trends, or data they would ever want to know about a person, demographic, region, etc. is readily available at their fingertips. Big data is defined as a large volume of data- both structured and unstructured that inundates a business on a day to day basis ( Big Data para. 1). There are so many different kinds of data and each kind performs some sort of essential function. Doug Lany, a data industry analyst, developed a system called The Three V s that is now commonly used. The Three V s consist of Volume, Velocity, and Variety. ( Big Data

2 para. 3) Volume relates to the amount of data collected from different sources such as business transactions, social media, and sensors. New technology enables the storage of such large amounts of data. Velocity is the incredible speed at which data moves. Data must be analyzed in a timely matter in order for it to be relevant. Lastly, variety means that data can come in all types of forms. The three V s are especially important for accountants because they need to be informed of what is happening in the businesses they are working for ( Big Data para. 3-6). Data analytics has such a substantial effect on the finance industry, which in turn has an effect in accounting. How much data is out there? According to SAS Institute Inc., in 2012, the amount of information stored worldwide was greater than 2.8 zettabytes (the second largest form of measurement in regards to bytes). This number is expected to grow fifty times larger by the year 2020 (SAS). With big data, about 33% of the information gathered could be useful, if appropriately identified and analyzed. Because the volume of data stored is so high, the actual amount of it that is actually utilized is only around 0.5% (SAS). Companies use this data to make knowledgeable decisions to ensure optimal future performance of their company. The value of big data is immeasurable. It has made decision making much more efficient, effective and innovative. Almost every industry could benefit by utilizing big data analytics. It is often stressed that the importance of big data is not about how much you have, but what is done with it (SAS). The biggest advantages that directly affects managerial accountants is the significant reduction in cost and in time spent doing their job. There are big data systems that, if the results are interpreted correctly, enable you to find parts within an organization

3 that are failing or performing well (such as store branches), allocate resources better and reach a much greater performance level overall ( Big Data para. 9). Some disadvantages to consider are the complexity of information gathered and the risks that it can encounter. When data comes from so many sources and so many levels, it is difficult to accurately interpret the results it presents. Additionally, there are several risk factors to consider. Fraud risk is a prominent due to the fact that the more data there is, the easier it is to commit fraud, and the harder it is to trace it or prevent it (Bramwell para. 8). Another one of the biggest risks pertains to privacy. Accountants pride themselves for the integrity of their field and a breach of privacy can lead to severe legal issues that interfere with accountant s credibility. Some of the details that are revealed by big data analytics that companies capitalize on are too private to consumers to be outside information (DeVito). Recently, Joseph DeVito of PricewaterhouseCoopers discussed the cyber security trends and threats and how they affect accountants at an Accounting Continuing Professional Education Conference. He said that people are much more interested in cyber security now more than ever before; it has become such a prominent issue in the business world. Cyber security deals with protecting the integrity (accuracy/consistency), confidentiality (indisclosure/appropriate use of data), and availability (records/business data) of valuable information that a company may acquire. You can t have privacy without security and vice versa. Data privacy relates to the notice, use, disposal, collection, and access to information, or consumer/client consent. In the United States, there is not one common framework for privacy as opposed to Europe, where it is a

4 fundamental right (DeVito). Furthermore, the emerging foreign/international markets are showing the largest increases in data growth (SAS). These facts lead to the conclusion that international competitors have an advantage because not only are they showing more big data advancement but there are laws in place to keep their private information secure and protected. The Big Four and many other large accounting firms are international businesses that have foreign or international clients. These firms will need to provide an adequate level of information security to their clients which will cause expansion in their respective information technology departments. The big data movement may even cause legislation to pass in the United States protecting citizens information. Because there are laws to protect privacy in Europe, perhaps that is one of the factors that differentiates them from the U.S. which contributes to their countries becoming leaders in big data growth. If the same amount of protection were offered to U.S. citizens, it could potentially stimulate our economy and make the U.S. even more competitive internationally. These changes would definitely have an effect on the accounting profession because there would be even more precautions to take in order to keep confidential information secure. The Terms and Conditions agreement a company uses outlines how they plan to use a customer s information. When information is shared with a third party, there is a huge privacy risk. The recent information shift refers to the way companies formerly thought they were safe as long as they did not collect people s credit card information (DeVito). Companies now realize there is much more information that has value to be protected and they are, in fact, still at risk. It is important to note that in the digital universe, out of all the data that has been created and stored, around 50% of it is

5 unprotected (SAS). This is a serious privacy threat that provides anything but peace of mind about all of your information that s out there. Almost everyone is at risk. In the 2015 Global State of Information Security Survey, based on a balanced range of sample, there were 38% more information security incidents, especially in small companies. This increased number can be a good thing because it means we are detecting more breaches and gaining better control. The costs of incidents have also more than doubled for small organizations, with the most breaches being at the fault of employees. (DeVito) The bigger the data, the bigger the fraud risk. These facts lead to tremendous opportunities for accountants in the data analytics, auditing, forensic accounting, and valuation service fields right now. In the 2014 AICPA Survey on International Trends in Forensic and Valuation Services Big Data was the number one issue facing forensic and valuation professionals over the next two to five years. This was not even on the list of issues in 2011 and yet it jumped to number one in just three years. It is such a fast growing force that is not going to be slowed down or stopped any time soon it is here to stay. Accountants need to acquire new skills to handle the data analytics, mainly because their clients have gained a better understanding of the resource. (Bramwell para. 14) It is crucial that accountants are competent not only with spreadsheets but with databases as well. Having a background in information technology would give a competitive edge to anyone emerging into the accounting field. Internal training for existing employees on big data is also highly recommended for firms. (AICPA) In conclusion, big data is a monumental force in the modern business world. In reaction to that, cyber security is quickly becoming a pillar in the fundamental business

6 structure of companies. Big data creates an environment allowing convenient means for businesses to make decisions and improve their performance. Even though it is a valuable asset, it also provides significant risks. It is an extremely common place for fraud to occur. This caused the ongoing growth of opportunities in the forensic accounting and valuation services field. Big data evolution will only continue to expand and this will cause accountants to take further measures to ensure their client s information is as protected as possible, especially with the foreign markets offering more security which, in turn, has led to larger growth. An education in information technology is crucial for accountants whether it be through their coursework in college or through internal training in their companies. The world of accounting is continuously advancing and services are increasingly more efficient and accurate. As a result, the standards keep getting higher for the professionals in this field.

7 Works Cited "Big Data - What It Is and Why It Matters." SAS. Standards Aligned Systems, Inc., n.d. Web. 18 Mar Bramwell, Jason. "Big Data Cited as Top Issue for Some CPAs." AccountingWEB. Sift Media, 22 July Web. 18 Mar DeVito, Joseph. Cyber Security. Accounting Continuing Professional Education Conference, Duquesne University, Pittsburgh, PA. 19 Nov Conference Presentation. SAS. Big Data What It Means To You. Online video clip. SAS. Standards Aligned Systems, Inc., n.d. Web. 18 Mar The 2014 AICPA Survey on International Trends in Forensic and Valuation Services. AICPA Forensic and Valuation Services Selection.