I remember talking to my accountant in the UK a long time ago when I was newly self-employed, asking if I could pass something off as a business expense that was sort-of-related, but I knew probably not really OK. Her reply has stuck with me ever since: "HMRC [the UK equivalent of the IRS] are interested in matters of fact, not interpretation."
As an accountant at a large Corp, I can tell you that there are cases daily where two senior accountants argue over how to interpret accounting and tax rules, and often each agrees that the others interpretation is valid. I regularly see rulings from area specialists, and have to challenge them, only to be told, 'well in that case, you would be right'
I sometimes ask an AI to comment, and usually their answer is couched is ifs and maybes, just like the humans.
I often consult with auditors who tell me x is wrong, and they go away agreeing that y and z would be valid too, and x is also fine. There are often second order effects that need to be thought through.
This is the problem with the majority of AI push coming from devs. They look at something as complex as accounting and only think in terms of what they see on the surface and then say “oh that looks easy enough, there couldn’t possibly be more under the hood”.
Yeah, my query was an open-and-shut case, I know there are grey areas too. The Arctic Systems case in the UK was an interesting one for IT contractors.
Accountant here. It suprised me when I joined the field, but profit is calculated using a range of accounting estimates. Each accountant will make different decisions. Not least about which accounting period something belongs. Imagine a factory with freight inwards. It is month end and I have a sheaf of bills from various freight companies, but which ones are missing, not received yet? I can't wait, I have 2 days to report, so I make an estimate...now imagine that I have perhaps 100 such things. I may have to justify my estimates, but how should I estimate it? Same as last month? Perhaps I know there is a lot of shipments so I make it at the higher end.
Now I have a product failure at a major customer that I may have to send free replacements for. Should I recognise that cost now, or not? The accounting standards say if I know about it, and I can measure it and there is a high degree of certainty then I should. But the method of choosing is up to me. £10m or 1m cost, and this year or next...
and I get to decide.
We bought a £6m dollar machine to be depreciated over time, but how long. The machine lasts 10 years, but will we still be using it then? Do I capitalise the internal R&D work as well?
All of which is audited, but the auditor often only has the information I give them.
Accounting is not deterministic, within certain bounds it is very subjective.
Ha even if this was true (it’s not) you’re basically saying “humans will make some mistakes so let’s throw caution to the wind” which is probably the worst application of AI that I’ve heard yet.
If there is an acceptable margin of error for humans, we should be able to measure it for AI, and once AI is within those margins then it should be feasible to replace the human.
That made me laugh, thanks.
I remember talking to my accountant in the UK a long time ago when I was newly self-employed, asking if I could pass something off as a business expense that was sort-of-related, but I knew probably not really OK. Her reply has stuck with me ever since: "HMRC [the UK equivalent of the IRS] are interested in matters of fact, not interpretation."
As an accountant at a large Corp, I can tell you that there are cases daily where two senior accountants argue over how to interpret accounting and tax rules, and often each agrees that the others interpretation is valid. I regularly see rulings from area specialists, and have to challenge them, only to be told, 'well in that case, you would be right'
I sometimes ask an AI to comment, and usually their answer is couched is ifs and maybes, just like the humans.
I often consult with auditors who tell me x is wrong, and they go away agreeing that y and z would be valid too, and x is also fine. There are often second order effects that need to be thought through.
Good luck AI
This is the problem with the majority of AI push coming from devs. They look at something as complex as accounting and only think in terms of what they see on the surface and then say “oh that looks easy enough, there couldn’t possibly be more under the hood”.
Yeah, my query was an open-and-shut case, I know there are grey areas too. The Arctic Systems case in the UK was an interesting one for IT contractors.
Do you think human accountants are deterministic?
Get a large enough org and watch your accounting grow an error margin.
Accountant here. It suprised me when I joined the field, but profit is calculated using a range of accounting estimates. Each accountant will make different decisions. Not least about which accounting period something belongs. Imagine a factory with freight inwards. It is month end and I have a sheaf of bills from various freight companies, but which ones are missing, not received yet? I can't wait, I have 2 days to report, so I make an estimate...now imagine that I have perhaps 100 such things. I may have to justify my estimates, but how should I estimate it? Same as last month? Perhaps I know there is a lot of shipments so I make it at the higher end.
Now I have a product failure at a major customer that I may have to send free replacements for. Should I recognise that cost now, or not? The accounting standards say if I know about it, and I can measure it and there is a high degree of certainty then I should. But the method of choosing is up to me. £10m or 1m cost, and this year or next... and I get to decide.
We bought a £6m dollar machine to be depreciated over time, but how long. The machine lasts 10 years, but will we still be using it then? Do I capitalise the internal R&D work as well?
All of which is audited, but the auditor often only has the information I give them.
Accounting is not deterministic, within certain bounds it is very subjective.
Ha even if this was true (it’s not) you’re basically saying “humans will make some mistakes so let’s throw caution to the wind” which is probably the worst application of AI that I’ve heard yet.
>Ha even if this was true (it’s not)
You haven't met many accountants i see.
Regardless that's not what he is saying.
If there is an acceptable margin of error for humans, we should be able to measure it for AI, and once AI is within those margins then it should be feasible to replace the human.
Ah yes, because there’s no difference between a shifted decimal and entirely hallucinated credits and debits.
This was my CPA wife’s response btw.
The entire field is based on balance sheets and context that informs compliance.
Let me put it this way: it’s such a bad idea that even Intuit doesn’t let their AI replace a human.
Why would Intuit be the barometer here? They're old technology. Pilot.com's got AI bookkeepers and they love them.
Man I hope so because they’re the ones selling them haha.
The "beatings" delivered by IRS will be deterministic for sure!
The tax code is so complex that business taxes are already nondeterministic.