Internet of Things and its Impact on Accounting
What impacts are emerging technologies such as the Internet of Things, Blockchain and Big Data having on the Accounting profession and IT departments of companies.
Internet of Things can be defined as a network of vehicles, physical devices and home appliances and many more. It is a system of computing devices, which are interrelated. The computing devices include digital and mechanical objects, people or animals that have their unique identity and have the ability to transfer data through a definite network (Al-Fuqaha, Guizani and Mohammadi, 2015). This data is transferred without any human to computer or human-to-human interaction. Big data has been used by various organizations in order to extract data and save them for further use John (Walker, 2014). Most of the data collected is unstructured as well as requires processing and storage in a different way compared to the traditional manner. This is the reason why big data has been used by organizations. A block chain is decentralized, digitalized, public ledger where data is encrypted (English, Auer and Domingue, 2016). These data are encrypted in order to secure them from attacks. IoT, block chain and Big Data have various impacts on accounting profession and the IT departments of the organizations. These impacts are mentioned below in the discussion part.
Impact of Internet of Things
Accounting profession
Internet of Things includes the interconnection of censors and devices and enables them to receive as well as send data. IoT has an important impact on areas such as retail, health, finance and manufacturing. In the field of accounting, IoT needs to mature. IoT would enable the accounting field to provide the suppliers as well as users with various updates and important data. It is found that the appropriate implementation of IoT would change sources and the data flow from resource planning, billing and accounting systems. The use of IoT would change the way audits are done. With the use of IoT the practices and methods would change. For example with the use of IoT in accounting, CPAs would receive data through digital system. The customers would not need to go to a bookkeeper in order o extract their information. With the use of IoT they would gain the access to the real-time data regarding the transactions carried out by them. The use of IoT would decrease the time consumed in the overall process and the chances of risk. It helps to quicken assessment and remediation of issues. Implementation of IoT in an appropriate manner would bring accounting closer to the IT. Some ways in which IoT affects the accounting field are as follows.
- New accounting models: the way people would consume services and IoT would affect products. This is done by using a principle called pay-for-what-you-use. In this process, the consumers pay for services or products they use. This requires new accounting and pricing models (Guthrie and Parker, 2016). IoT impacts business processes such as reporting and invoicing. It allows the business to collect necessary information in the field of buying preferences as well as stock movement. An example of this is the presence of sensors in the shelves of warehouses. These sensors detect when the inventory is comparatively low. A record request is prepared that is sent to the suppliers. IoT also affects the way audits are done. The availability of data that are received from various sources would increase the necessity of auditing.
- Deals with more data: Iot receives data from various sources that are useful for the organization (Burritt and Christ, 2016). Most of the data is supplied in real-time displayed with the help of intuitive dashboards. This helps in aiding decisions largely. It also helps in planning and executing the plans. The instant data increase the chances of using automation tools in order to help analyze as well as process the data received.
- Providing better advices to the clients: the accountant has been playing an important role in the process of accounting. Previously accountants used to provide manual services and now they provide expert advice on various financial matters suppose tax planning, financial management as well as analysis (Rifkin, 2014). Due to the roles played by accountants IoT provides them to visit more of the customer financial details and the activities carried out by the customers. This access gives them the right to provide financial advice to the customers. The advices may be on tie-in services provided to the accounts or cloud-based services. This data helps the accountant to get a better idea regarding the client and as a result provide the best advice for the client. Accountants that make the use of technologies such as IoT are allowed to incorporate such changes. They can not only incorporate the changes but also leverage it for future.It departments
Impact of IoT on IT Departments
IoT plays a vital role in the IT departments of the organizations. The inter-reliability of equipments, sensors, lines, machines, plants, processing units, buildings, transportation, containers, computer software and companies help in achieving unique results. IoT has various impacts on the IT departments of various industries these impacts are as follows:
- Collection of data: a secured storage of data collected from various sources is very important for an organization (Farooq, Waseem and Khairi, 2015). IoT provides the flexibility as well as efficiency in storing the information in such a way that it is accessible by the company whenever needed.
- Advanced maintenance: maintenance is very important for an organization in order to function smoothly. IoT helps the companies to plan outages in order to maintain and repair the damaged equipments. This helps the company to deal with emergencies in a systematic way (Sicari, Rizzardi and Grieco, 2015). Industrial IoT provides real time monitoring of the device health and machinery. This enables the companies to schedule the maintenance when machines need it and not according to the arbitrary schedule.
- Automation: Industrial IoT helps machines to communicate among themselves without any interference of humans. This process expands the scope of IoT in manufacturing. IoT has been implemented by various organizations for boosting their efficiency as well as improve the consistency and quality of the products.
- Visibility in the supply chain: visibility into the supply chain is very important and challenging for the food industries because it involves many suppliers. The implementation of IoT in manufacturing industries helps the industry to have a real time visibility of the entire manufacturing process (Holler, Tsiatsis and Mulligan, 2014). For example, the food manufacturing industries use sensors that can detect if the product was exposed to temperature and other conditions, which may render the product unsuitable for the consumption. This reduces the time as well as cost incurred in detection of the errors and rectifying them.
Impacts of Block chain
Accounting profession
Block chain provides various advantages for the accounting firms’ weather large or small. Some ways in which block chain affects the accounting firms are as follows
- Improves efficiency: block chains that are very well designed are powerful and very fast database (Dai and Vasarhelyi, 2017). Entering and extracting data from the system can be done in an efficient manner rather than interacting with the software applications.
- Reduces errors: field that include data entry as a part of their business may face various problems if it is done manually, because a small mistake in a single data effects the rest of the data as well (Fanning and Centers, 2016). With the application of block chains after the data entered is in the chain, smart contracts makes many functions automatic. This reduces human error largely.
- Reduced cost: the reduction of errors would result in reduction of reduced cost incurred in the detection and rectification of errors. Following the initial cost of adopting block chain, the companies would realize a rapid saving over heir accounting systems.
- Reduced fraud: the implementation of block chains reduces the chances of frauds in the accounting department of the organizations (Dai and Vasarhelyi, 2017). This is because if a particular record needs be modified, the modification has to be done in all the other copies of the record. This is greatly infeasible.
IT departments
Block chains are known as digitalized ledger that records the transactions that take place in organizations. The ledger is encrypted for protecting it from cybercriminals. Implementation of block chains have various impacts on the IT departments of the organizations, these impacts are as follows
- Managing contracts: Block chain is a public ledger that records as well as validates all the transactions taking place in an organization (Fein and Reijntjes, 2018). This makes the system secure and reliable. The implementation of block chains paves way for smart contracts for any sector like insurance, health, entertainment and many more.
- Sharing information: data such as IDs, Deeds and Titles can be shared on the public ledger.
- Cyber security: the data in block chains is verified as well as encrypted with the help of advanced cryptography. This reduces the chances of unauthorized hacks and changes. Centralized servers are a target for data loss, human error, hacking and corruption (Kuhn, 2018). The block chain allows the data to store in the cloud, which make it more robust, and protects it against the attacks.
- Communication: block chains enable reliable, faster and safer automated communication. This automated communication is usually asynchronous and non-critical (Kuhn, 2018). Block chains have the ability to shift the playing field in order to allow bi-directional, authorized communications as well as transactions, which occur in automated environment.
Impacts of Big Data
Accounting profession
Big data has been a trending technology that is used by various organizations including financial organizations. Impacts of Big data on accounting professions as follows
- Descriptive analysis: With the help of this analysis, accounting and finance teams can analyze the current ass well as historical data in an organization. Various decisions, activities, interactions and problems are taken care of during the functioning of a particular business (Richins, Stapleton and Stratopoulos, 2017). Big data helps to carry out these activities swiftly.
- Decisions: implementing big data in taking decisions provides more support in real time. The types of services provided by accounting professionals and their relation with the decision makers would totally vary because of the advancement of the data recovery (Cockcroft and Russell, 2018). By evaluating different sets of data, the accountants are able to extract the alternatives that the decision makers can use and the impacts of the alternatives on the organization.
IT departments
The impacts of big data on IT departments of organizations are as follows
- Disparity: before the big data was introduced the IT staff of organizations focused on collecting and storing a definite type of data (Assunção, Calheiros and Bianchi, 2015). For example, a software program in an institution may collect as well process only numerical data but big data allows organizations to collect as well as store various forms of data.
- Complexity: In traditional days, the organizations relied on a monolithic server but after the introduction of Big Data, the architecture has completely evolved (Chen, Mao and Liu, 2014). With the implementation of Big Data, hundreds of servers can replace a single server.
- Error detection: the implementation of Big Data helps in detecting errors faster. The errors are detected instantly and within the organization. This reduces the time consumed as well as the cost incurred in the detection of errors and rectifying them.
- Fraud detection: frauds can be detected whenever it takes place. The implementation of big data reduces the chances of attacks from cyber-criminals and unauthorized users (Chen, Mao and Liu, 2014). The detection of frauds helps organizations in preventing them to cause a bigger loss to the organization.
- Secured: the implementation of Big Data increases the security level of the organizations. The data regarding the functions of the organization, their working principle are safe with the application of big data into the business.
- Authenticate data: the IT department of organizations collects data from various sources; this data is used by the organization for different purposes (Chen, Mao and Liu, 2014). The application of big data in the business of the organization helps to ensure that the data collected from various sources is authentic.
Conclusion
From the above part of the assignment it can be conclude that Internet of Things, Block chains and Big Data have various individual impacts on the accounting profession such as secured transactions, providing real time data to the user and many more. They also have various impacts on IT departments of the organizations such as preventing the organization from cyber threats, securing the information regarding the organization and mat more. These impacts are mentioned in details in the discussion part.
References
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Burritt, R., & Christ, K. (2016). Industry 4.0 and environmental accounting: a new revolution?. Asian Journal of Sustainability and Social Responsibility, 1(1), 23.
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Cockcroft, S., & Russell, M. (2018). Big data opportunities for accounting and finance practice and research. Australian Accounting Review.
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Farooq, M. U., Waseem, M., Khairi, A., & Mazhar, S. (2015). A critical analysis on the security concerns of internet of things (IoT). International Journal of Computer Applications, 111(7).
Fein, J., & Reijntjes, R. (2018). The Blockchain Revolution: Adressing the rise of blockchain-based applications and their impact on emerging country market development.
Guthrie, J., & Parker, L. D. (2016). Whither the accounting profession, accountants and accounting researchers? Commentary and projections. Accounting, Auditing & Accountability Journal, 29(1), 2-10.
Holler, J., Tsiatsis, V., Mulligan, C., Karnouskos, S., & Boyle, D. (2014). From Machine-to-machine to the Internet of Things: Introduction to a New Age of Intelligence. Academic Press.
John Walker, S. (2014). Big data: A revolution that will transform how we live, work, and think.
Kuhn, B. D. (2018). The Impact of Blockchain Technology on Business, Financial Auditors, and Accounting Professionals.
Richins, G., Stapleton, A., Stratopoulos, T. C., & Wong, C. (2017). Big Data analytics: Opportunity or threat for the accounting profession?. Journal of Information Systems, 31(3), 63-79.
Rifkin, J. (2014). The zero marginal cost society: The internet of things, the collaborative commons, and the eclipse of capitalism. St. Martin’s Press.
Sicari, S., Rizzardi, A., Grieco, L. A., & Coen-Porisini, A. (2015). Security, privacy and trust in Internet of Things: The road ahead. Computer networks, 76, 146-164.
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