1.the Value of Big Data in An Accounting Firm

The Value of Big Data in an
Accounting Firm
Big data has become a buzzword in the accounting profession, but like other trending
topics such as blockchain, AI and machine learning, it’s one that CPAs really need to
understand.
The definition of big data goes beyond the quantity of information. Most big data
experts think of it in terms of the four Vs.
 Volume. Quantities of data that are too big for traditional data management to
handle. For example, from Facebook’s launch in February of 2004 to November
of 2015, more than 250 billion photos were uploaded to the site.
 Velocity. Data streams in at an unprecedented speed and must be dealt with
promptly. Returning to the Facebook example, approximately 350 million new
photos are added each day. Imagine having to process, file and later be able to
retrieve that much data on a daily basis.
 Variety. Data comes in all types of formats. Of course, Facebook doesn’t just

store photographs. People also share status updates, videos, documents and
more. Much of that data is doesn’t easily fit into rows and columns of a
spreadsheet.
 Veracity: Since big data is derived from various places, the veracity or quality of
the data must be evaluated. How accurate is the data?
But the important thing to really understand about big data isn’t its enormity. As SAS
points out, “It’s what organizations do with the data that matters. It can be analyzed for
insights that lead to better decisions and strategic business moves.” That is what
makes big data relevant to the accounting profession.
Big data impacts nearly every aspect of auditing, tax, accounting and advisory
services. Accounting firms have access to a goldmine of data. The question is how
firms can tap into that unexplored value and revenue that’s right under their noses.
Data-driven audits
The Institute of Chartered Accountants in England and Wales (ICAEW) report Data
Analytics for External Auditors provides a few examples of how big data is changing
auditing. For example, audit sampling is on its way to obsolescence. Auditors are
increasingly running tests against all transactions in ledgers and focusing their
analysis on outliers or exceptions that are flagged by an automated program.
Monitor and improve business performance

With real-time reporting technology, accountants are increasingly able to aggregate
data across all clients within an industry or market to come up with meaningful
performance benchmarks. Rather than discussing lifeless ratios, accountants can
show their clients how and why the competition is outperforming them. This level of
real-time analysis can help you sell higher-value services such as budget forecasting
and cash-flow management. This is also a reason your firm should be focused on and
developing expertise in specific niches.
Risk identification and management

Companies do not operate in a bubble, so their accountants must regularly consider
the impact of external forces on their clients’ business performance. This could be
anything from regulatory changes to fraud, supply-chain risks or mergers and
acquisitions.
Big data can help accounting professionals see the bigger picture by predicting shifts
in consumer behavior, identifying red flags for fraud and anticipate economic trends.
The sooner accountants can identify these risks, the better chance they have of
helping clients mitigate risks and protect performance.
Improve the client experience

The convergence of cloud technology and big data means accountants and auditors
aren’t limited to analyzing a client’s financial records on a monthly, quarterly or annual
basis. Data is available in real time, so clients can have more regular conversations
with their accountants and receive intelligent, timely insights.
Big firms aren’t the only ones with the resources to start leveraging big data. While
they might be at the forefront of building technology and hiring data scientists, analysts
and researchers, even small firms can tap into the possibilities. Many solution
providers in the audit technology space are moving quickly toward the future of big
data, and we should see access to that technology trickling down to smaller firms over
time. In the meantime, it’s important to make sure that your talent is developing the
skills necessary to make the transition to being data-savvy advisors. A few resources
are the PwC course Data-driven Decision Making and Harvard professor Jelani
Nelson’s course Algorithms for Big Data (available on YouTube).
The availability of significantly more data and technology that can be used to analyze it can be
a differentiator for your firm. But access to new technology isn’t enough. Firms need to ensure
it gets implemented and used. That will require a shift in mindsets and skillsets. Firm culture
and a willingness to learn and change will determine whether you adopt and use new
capabilities and capitalize on the opportunities that big data will bring.
Effect of Big Data on Accounting
What is Big Data?

Also referred as data analytics or analysis, big data has been creating buzz in the business sector.
The definition of big data varies across numerous spheres. According to the Association of
Chartered Certified Accountants (ACCA), big data pertains, basically, to an extensive chunk of
data that is steadily gathered and aggregated using tools and technologies such as debit cards, the
Internet, social media, and electronic tags. A majority of the amassed data is unstructured or does
not conform to an explicit and predefined data model. Citing IBM’s report, the Pennsylvania
Institute of Certified Public Accountants (PICPA) mentioned that 2.5 quintillion bytes of data are
produced daily. The term big data’ was coined when the generation of data started to outpace the
processing capacities of the common technological tools.
Essentially, big data is typified by the four “V’s” — Volume, Variety, Velocity, and Veracity.
 Volume: The quantity of generated data is extensive compared to sources of traditional data.
 Variety: The data originates from multiple sources. Aside from machines, data is also generated by
individuals.
 Velocity: The rate at which the data is being created is very fast.
 Veracity: Since big data is derived from various places, the veracity or quality of the data must be
evaluated.
Role of Accountants on Data Analysis

A lot of entities acknowledge the importance of data gathering, may it be on the customers’ purchasing
routines or employees’ performance measures. According to Donny Shimamoto, CPA, CGMA, CITP, and a
Maximo Mukebalai awardee, accountants play a significant role in data analytics. For instance, Shimamoto
pointed out that information is in all places. However, pertinence, lucidity, and accuracy are often missing
from this information. Therefore, it is incumbent upon the accountants to help enhance the clarity of the figures
since they have the capacity to do so. Moreover, the level of assurance placed on information that originates
from accountants is very high. Shimamoto asserted that the function of accountants as stewards of truth and as
corroborators of the quality of data has become progressively significant.
Impact on Accounting
Big data can support entities in appraising their data assets by expanding vigorous assessment techniques. In
doing so, accountants and finance professionals have to determine which data is valuable, choose an
established valuation technique, and identify key suppositions. There will also be furthering of data value
through stewardship and control. The idea here is that accountants and similar professionals can assist in
turning internal data sets into more important, secure, vigorous, and in-demand.
Utilizing big data in making decisions will result to a more specific support in real-time. The nature of services
that accounting professionals provide, as well as their liaison with the decision makers of the corporate world
will totally vary due to the advancement of self-service data recovery. Furthermore, the roles that accountants
assume will not just be limited to reporting financial data. By evaluating various data-sets, they will be able to
determine the alternatives that decision makers can use.
Data sharing will result to created values. Both the internal and external movement of data can be bettered by
the accounting professionals. This will save time and money and will escalate efficiency. However, there are
certain challenges in using big data. Since more and more new data is becoming accessible, big data can
depreciate rapidly. More so, the data value diverges depending on its usage. Moreover, self-service and
automation can erode the demand for a definitive internal reporting while cultural impediments can disrupt the
internal distribution of data.
In terms of internal auditing, PICPA reported that data analytics is transforming the audit’s program by
instituting -to entities that seek ways on how to better the cost/benefit ratio of their internal audit function -the
idea of “continuous auditing.” It is a compilation of audit evidence and gauges by an internal auditor on
information technology processes, systems, controls, and transactions and integrates a continual risk
assessment process.

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The Value of Big Data in an

 Variety. Data comes in all types of formats. Of course, Facebook doesn’t just

Monitor and improve business performance

Risk identification and management

Improve the client experience

Effect of Big Data on Accounting

What is Big Data?

Essentially, big data is typified by the four “V’s” — Volume, Variety, Velocity, and Veracity.

Role of Accountants on Data Analysis

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