Archives For IT

cloud computing

By Raef Lawson, Ph.D., CMA, CPA, vice president of research, IMA

Some metaphors are perfect, enabling you to conjure up a precise image in your mind. Other metaphors: not so much. If you’re confused by the term ‘the cloud,’ you’re not alone. But ‘the cloud’ is easier to understand than you think – and it has the potential to reshape the business and accountancy profession over the next decade and beyond, according to a recent report from ACCA and IMA, Digital Darwinism: Thriving in the Face of Technology Change,

In the early days, ‘the cloud’ was simply a metaphor for the internet. As this evolved from a network that connects millions of computers into a network of interactive computing platforms, the metaphor evolved too.

Organisations of all kinds now supply and use a growing range of cloud-based IT resources ‘as a service’ rather than ‘as a product’. Physically remote software applications, computing power, and data storage can be accessed online from fixed and mobile devices, providing benefits that can include:

  • 24/7 access
  • ability to scale up and down to meet demand
  • reduced up-front costs
  • pay-as-you-go charges based on consumption
  • lower management overheads
  • reduced maintenance costs
  • rapid implementation times
  • easier data-sharing and collaboration.

As with many types of technology, levels of adoption vary across geography, industry, size and type of organisation, and profession. In our profession, accountants are already exploiting different types of cloud and cloud-based services. For example, systems for bookkeeping and accounting were among the first software applications available as online services.

There are two types of cloud deployments – public and private – and each brings its own challenges. A recent survey of IT professionals (IDG Enterprise 2013) found that private cloud deployments outnumbered public ones. That’s likely the result of concerns over public cloud resources, including data security, privacy and sovereignty, and the transmission and storage of data outside national boundaries. Many of these concerns are driven by regulations, such as the UK Data Protection Act and the US Patriot Act.

There are other areas where public cloud services and their consumption-based, pay-as-you-go approach can create challenges for accountants and their organisations. For example, lack of integration between systems and their associated data can be a barrier to efficiency. Other concerns range from the expectation that IT systems will be (because they are online) available at all times to the widespread misconception that pay-as-you-go is always the most cost-effective way to resource IT.

Despite these and other challenges, most organisations will continue to access IT resources using both traditional and cloud-based systems well into the foreseeable future. What’s more, the ACCA and IMA research found unanimous agreement on the significance that cloud computing will have as it becomes increasingly adopted by accountants and the finance function; some 72% expect this to happen during 2014-2015.

You can read more about this and other technology trends that are impacting the accounting profession by visiting the ACCA and IMA website, www.roleofcfo.com.

By Jason Piper, technical officer, ACCA

To people of a certain age, programmable digital computers were The Future, promising 3 day working weeks, the end of manual labour and untold leisure time. For another generation, they are all about social interaction, and keeping in touch with all your friends and contacts from the comfort of your own sofa.

But for one group of people, computers are the cause of misery, delays, frustration and expense, the cause of longer working hours and a replacement for human interaction. Those people of course are tax agents, taxpayers and in fact anyone who has any dealings with HMRC. Over the past few years, HMRC has pushed technology as the solution to all its woes, and the replacement for all (well, a sizeable chunk) of its staff. And has the computer really improved things?

Case study 1: Penalties. In October 2008, the Revenue computer sent out a penalty notice to a taxpayer, in the name of Mike Christensen. Unfortunately, Mike Christensen had retired that August, and so the penalty was invalid and had to be withdrawn. But because no-one had told (ok, reprogrammed) the computer, it had issued several months worth of invalid penalties – and Mike Christensen was the Area Director, so it had probably issued thousands of invalid demands to taxpayers in that time. Verdict: an embarrassing error, though many of the actual penalties had probably been rightfully assessed and could have been reissued.

Case Study 2: CIS refusals. Up until a couple of months ago, HMRC routinely refused building companies the benefit of “Gross Payment Status” in the Construction Industry Scheme for three technical failures in tax compliance – and the letters were sent out automatically by the computer. However, the tax tribunals pointed out that the legislation required HMRC to exercise some discretion, and that meant human intervention into the process. To their credit, the CIS team instantly dropped all their ongoing disputed cases where the computer had issued refusal letters (around 50, an indication of how dissatisfied businesses were with the computer’s decisions), and revised the process so that judgement is now exercised by an HMRC officer. Verdict: A failure to fully appreciate the terms of the underlying legislation, but a prompt and reasonable response by HMRC.

Case Study 3: Debt Collection. Described by one MP as “scaring old ladies and pensioners”*, one of the computer’s finest moments came when it started sending threatening letters out to taxpayers, warning them of impending bailiffs and auctions of their goods to settle tax debts. Not only were the letters short on contact details for the taxpayers to respond, they were also light on the details of the tax debt. For the very good reason that in many cases, there wasn’t one. Verdict: No excuse. A basic programming error left the machine responding incorrectly to nil submissions. We can and should demand better of a publicly funded body.

So what’s the overall conclusion? No doubt computers have a (huge) role to play in administering tax in the UK – I haven’t listed the tax code debacle under NPS (National Insurance and PAYE Services System) above, for the reason that I still believe NPS is a Good Thing; the coding issues arose from HMRC failures in project planning and communication. But taxpayers (and their agents) are all, ultimately, human. We need human contact, and the good sense that humans can bring to the mind numbing complexity that is the UK tax system. Maybe we can’t go back to a Dixon of Dock Green style policing of our tax system, but we need to stop the headlong rush into the Big Brother ‘steel plate in the wall’ dystopia. Digital by default is fine as a communication channel, with humans at each end, but must not become a digital abyss into which taxpayers time, money and efforts are poured with no guiding mind to make sure that things run sensibly. Administrative efficiency is only useful so long as it is also effective, and computers cannot measure that, only properly trained Revenue officers.

*Taken from uncorrected committee evidence