Technology

Technology in the TRS exam

As an ACCA Accounting Technician apprentice, you are expected to be aware of the impact of technology in finance (known as 'FinTech') and on business more generally.

Technology is relevant to the following areas of the syllabus:

This article is intended to draw attention to the main aspects of technology that an ACCA Accounting Technician Apprentice is expected to be aware of when preparing to sit the technician role simulation (TRS) exam as part of their end point assessment.

Exam context

The TRS exam will contain information and questions that cover the matters included in this article. The pre-seen material provided prior to the TRS exam will include reference to the use of technology by the business in the given scenario which should indicate the type and extent of technology used by the business. You should use the information provided in the pre-seen material, knowledge brought forward from your FIA Business and Technology studies and this article when preparing to answer part(s) of a question relating to technology as part of your TRS exam. You should be prepared to answer questions around technology that are both knowledge-based and applied to the particular business and scenario.

Cloud computing and cloud accounting

Cloud computing is a service provided to a business for use by the business in its day-to-day activities. Resources such as the software used by the business and system information are provided to the business' computers via the internet as a utility, in a similar way to electricity being supplied over the electricity network. This is a change to the prior model in which a business would purchase a computing package which would then require to be maintained and updated. The users of a cloud computing system log in from their computer, which can be in any location as long as it can connect to the internet and access the business's systems and information. The software and storage exist within the cloud, not on the individual users’ computer.

A cloud can be private or public. A public cloud sells services to anyone on the internet. A private cloud is a proprietary network or a data centre that supplies hosted services to a limited number of people. Cloud computing services are sold according to the users' needs and the cost will depend on the services provided. There is likely to be a flat fee, plus costs for processing of transactions and storage. The user of the cloud service can use as much or as little of the service as they require and can be flexible according to their changing needs.

The main benefits of a cloud computing system over a traditional system are:

• It reduces the responsibility of the user to upgrade software, maintain regular backups and store and protect the security of the data.
• Information in the system is available to multiple users simultaneously. Information should therefore be able to flow more quickly and accurately throughout the business, reducing the risk of duplication and inconsistencies.
• There is no need to transmit the data between users by email, file sharing accounts or removable storage which improves data security and integrity.
• It should help to improve customer service because the service provider can access the user’s information held by the system in a timely way and the information is available on demand.

In the TRS exam, you should assume that the business uses cloud computing unless you are told otherwise. If the business does not currently use cloud computing, it is likely that you can demonstrate commercial awareness and add value to the business by recommending, if appropriate, that it does move to a cloud-based platform.

Cloud accounting is an application of cloud computing. Accountancy software is provided via the cloud by a service provider. The user accesses this software to process their accounting transactions, prepare management reports, identify exceptions and prepare the financial statements for the business, just as they would if the accountancy software was installed on their own computer. The advantages of cloud accounting are consistent with those identified for cloud computing in general.

Cyber risk and cyber security

Cyber risk is an organisational risk that arises due to the failure of an organisation's information technology (IT). IT may fail because it has not been well designed, there is a lack of systems integrity or because the system has been subject to a cyber attack. The risk to the organisation could be financial loss, either through assets being misappropriated or the cost of having to repair any damage, disruption to its systems and processes which may mean it cannot carry out its business operations in the normal way or damage to its reputation, particularly where cyber attacks compromise the security of customer data.

A cyber attack is a planned operation that involves one computer system attacking another computer system or network. Cyber attacks can generally be categorised as those that intend to damage the targets’ systems, either taking them offline or blocking their normal processes, or those that intend to gain access to the data held by a system with a view to gaining benefits from that data. Some of the most common types of cyber attack that you should be aware of are:

• Malware such as viruses, worms and trojans. Their aim is to cause damage to a computer system or network, normally by rendering a system inoperable.
• Ransomware is a type a malware that encrypts a users' files. The cyber criminals then demand a fee (the ransom) to provide a password to allow the files to be unencrypted. The fee is often payable in cryptocurrency which cannot be readily traced by the authorities.
• Denial of service involves overloading a system, by means of an exceptionally high volume of traffic, to such an extent that the system cannot function as expected.
• Phishing normally involves the use of email to trick the recipient into downloading software that allows a cyber criminal to access sensitive information. Phishing is normally carried out with a view to gaining financial benefit.

Like any risk a business faces, cyber risk must be assessed, and controls implemented to mitigate the risk to the lowest possible level. Organisations need to have well designed cyber security in place to protect their hardware and systems from the risks faced. You should be aware of the following forms of cyber-security:

• Malware and virus protection software that is intended to prevent against and detect malicious software.
• Firewalls that prevent data that does not meet predetermined security 'rules' from entering or leaving a computer system.
• Restricted access to both hardware and software using physical controls and password controls.
• Policies and procedures such as IT policies that all staff should be familiar with and must adhere to.

Like any risk, cyber risk cannot be eliminated and organisations must learn to adapt and manage the risks as part of their business control procedures.

Artificial intelligence and robotic process automation

Artificial intelligence (AI) can be described as the use of computers to do tasks which are thought to require human intelligence. Computers are increasingly adept at learning, knowing, sensing, reasoning, creating, problem-solving, and generating and understanding language. You are likely to be aware of the use of AI in everyday life - if you use social media, the content you see has been determined by AI or if you open your phone using face ID, the technology that enables this is AI or if Netflix makes recommendations about what you might like to watch, it's due to AI. From these examples, it is clear to see that AI is becoming increasingly normal for consumers, and the same is true of its use in business. Businesses of all sizes use AI in their transactions with customers, in inventory management and in managing their supply chain. Consider the following examples:

• Customers - AI can determine the products that a business presents to users of its website. Consider an online florist - if a customer searches for 'red flowers', the website is trained to show the customer all flowers that are red in colour, but increasingly customers can expect the system to 'promote' certain flowers such as roses in February or poinsettia in December or for returning customers to be reminded of anniversaries or family birthdays based on information already provided to the system.
• Inventory management - supermarkets are increasingly using AI to detect when inventory levels are running low on the shelves which can then alert the stockroom of the need to refill shelves and create automatic orders for the most popular items. Several supermarkets have scanners and detectors on shelves and fridges that detect when inventory is removed and sends alerts to the stockroom that a restock is needed. This can help to reduce waste and minimise the risk of stocks outs, both of which are key concerns for retail-based businesses.
• Supply chain management - AI is fairly common-place in streamlining procurement related tasks. Bots (AI software application) can be used to raise orders, set and send actions regarding governance and compliance or automatically check invoices to orders and goods received notes to speed up the payments process.

Robotic Process Automation (RPA) is the application of technology in order to control and monitor the production and delivery of goods and services, performing tasks that were previously decided on and performed by humans.

One of the most common uses of RPA by companies of all sizes is in the automatic matching of bank receipts and payments recorded in external online banking software to known transactions of a business, thus avoiding the need for human accounts clerks to perform the matching process and record transactions. RPA and the use of internet banking in recent years has meant that the traditional bank reconciliation process which was once a key part of a company's monthly internal controls is now almost entirely automated and can be performed on a daily basis, or perhaps even more frequently.

Big data and data analysis

Big data is now common-place and is used by companies of all sizes. Big data is commonly described as 'datasets whose size is beyond the ability of typical database software to capture, store, manage and analyse' (McKinsey). The data sets can be both internal and external to the organisation. The data alone does not derive value. Instead, the data needs to be extracted, processed and analysed by data scientists to be useful.

There are two types of big data:

• Structured - which is data obtained with a particular purpose in mind. Because the collection of this data is well defined, it is normally stored in databases that are highly formatted to make them easily filtered and readily searchable. Structured data is often more expensive to collect but much easier to analyse. Companies have collected and analysed structured data for a number of years and the technology used in its analysis is mature.
• Unstructured - which is data obtained without a particular objective. It is often thought of as 'everything else', i.e. all data that is not structured. There has been a huge increase in unstructured data in recent years which is potentially of significant value to companies, however analysing the data to find insights that may give a company competitive advantage can be time consuming and expensive.

Big data is generally accepted to have the following characteristics, known as the 'four v's:

Value is often added as a fifth characteristic. This refers to the ability to turn the available data into value for the business.

As the characteristic of variety describes, there are several sources of big data:

• Processed data - from databases held by companies and other organisations which will traditionally contain information about customers, target markets, key suppliers etc
• Open data - from the large amounts of public sector data available, such as transport data, government financial data and public service data
• Human-sourced data - from individual interactions on social media, blog posts, emails, text messages and internet searches
• Machine-generated data - from the internet of things (IoT). IoT refers to data collected from embedded wireless sensors attached to, for example, smart home equipment, cars, mobile phones. As more products are labelled 'smart', more data is being collected on everyday items.

Some of the ways in which a business can use big data to create value include:

• Customer and market understanding - analysis of big data can provide useful information as to customer needs, which can be particularly valuable if a gap in the market can be identified and addressed. It can help identify changes in social preferences such as a preference for quality or price for the selected market segment, behaviour patterns and trends and market price fluctuations.
• Performance improvement and decision marking: analysis of big data can provide real-time, information that allows managers to make better decisions as to how an organisation should utilise its resources, how to price its products, when and where to purchase its inventory etc which should result in better profitability.
• Risk management: big data can help managers to assist with the identification, quantification and management of risk.

Distributed ledger technology

Distributed ledger technology (DLT) is emerging and is an area that you are expected to have an awareness of as an ACCA Accounting Technician apprentice but a detailed understanding of DLT at this stage is not required. You may have heard of it referred to as blockchain technology.

DLT allows multiple organisations to access an accurate, shared record of data about a transaction, asset or liability that provides increased clarity and transparency about the ownership of assets and existence of obligations. Because the same set of data is shared amongst interested parties, there is no concept of centralised data storage and no question about the parties having different information from others using the same distributed ledger. Organisations can be satisfied that the data held using DLT is complete and accurate.

Written by a member of the TRS examining team

July 2020