S T U D Y U NIT 11

ACCOUNTING IN TECHNOLOGY
IN THIS STUDY UNIT

1 Introduction
Society is becoming more dependent upon computer and communications technology.
Many would argue that we have left the industrial age behind, and the information age
has taken over (ACC_ACCAKP_E1_202201, 2021:216).

2 Blockchain
A blockchain has been described as a decentralised, distributed and public digital ledger
that is used to record transactions across many computers so that the record cannot be
altered retroactively without the alteration of all subsequent blocks and the consensus
of the network (ACC_CIMAKP_E3_202201, 2021:488).

Alternatively, it has been defined by the Bank of England as a technology that allows
people who do not know each other to trust a shared record of events
(ACC_CIMAKP_E3_202201, 2021:488). It is used in cryptocurrency such as bitcoin. In
blockchain, transactions are basically publicly stored to form a shared ledger and
verification (Park, Kim, Kim, & Ryou, 2020).

2.1 Benefits of a blockchain

The main benefit of blockchain is security. In the digital era, cybersecurity is a key risk
associated with the use of IT systems and the internet. This is because traditional
systems have been “closed”, and so modifications to data have been carried out by just
one party. If the system is hacked, there is little control over such modification to prevent
it from happening (ACC_CIMAKP_E3_202201, 2021:488).

2.2 Features of a blockchain

According to ACC_CIMAKP_E3_202201 (2021:488), the following are the key features
of a blockchain:

• In a blockchain system, transactions are recorded by a number of participants

using a network which operates via the internet. The same records are
maintained by a number of different parties; as a transaction is entered, it is
recorded by not just two parties, but instead by all of the parties that make up
 the overall chain. This can happen because all the records in the blockchain
are publicly available and distributed to everyone that is part of that network.

• When a transaction takes place (e.g., between a buyer and a seller), the details
of that deal are recorded by everyone – the value, the time, the date and the
details of those parties involved. All the ledgers that make up the blockchain
are updated in the same way, and it takes the agreement of all participants in
the chain to update their ledgers for the transaction to be accepted.

• The process of verifying the transaction is carried out by computers; it is

effectively the computers which make up the network that audit the transaction.
If all the computers review the transaction and verify that the details are correct,
the systems of all participants in the blockchain have updated records. The
computers work together to ensure that each transaction is valid before it is
added to the blockchain. This decentralised network of computers ensures that
a single system cannot add new blocks to the chain.

• When a new block is added to a blockchain, it is linked to the previous block

using a cryptographic hash generated from the contents of the previous block.
This ensures that the chain is never broken and that each block is permanently
recorded. It is intentionally difficult to alter past transactions in the blockchain
because all the subsequent blocks must be altered first.

• It is this control aspect of blockchain technology which addresses the main

concern of cybersecurity. If anyone should attempt to interfere with a
transaction, it will be rejected by those network parties making up the
blockchain whose role it is to verify the transaction. If just one party disagrees,
the transaction will not be recorded.

2.3 Typical stages in a blockchain transaction

1.Transaction is requested.

2. A block is created as digital representation of the transaction.

 3. The block is sent to every node in the network (distributed ledger).

4. The nodes validate the authenticity of the transaction.

5. The nodes receive a reward or the proof of work, such as bitcoin

6.The completed authorised block is added to the chain.

Figure 11.1

Source: ACC_CIMAAKP_E1_202201, 2021:147

2.4 The relevance of blockchain technology to finance professionals

Much of the accountancy profession is concerned with ascertaining or measuring rights
and obligations over property, or planning how best to allocate financial resources. For
accountants, using blockchain provides clarity over ownership of assets and existence
of obligations and can dramatically improve efficiency. Ultimately, blockchain provides
an unalterable, transparent record of all accountancy-related data.

Examples of how blockchain can enhance the accounting profession include the
following (ACC_CIMAKP_E3_202201; 2021:490):

• Reducing the costs of maintaining and reconciling ledgers

• Providing absolute certainty over the ownership and history of assets, the
existence of obligations and the measurement of amounts owed to a business
and owed by a business
• Helping accountants gain clarity over available resources
• Freeing up resources to concentrate on planning and valuation, rather than
record-keeping.

3 Fourth Industrial Revolution

 The phrase Fourth Industrial Revolution (4IR) is defined as the advent of a “cyber-
physical system” (CPS) involving entirely new capabilities of people and machines.
While these capabilities are reliant on the technologies and infrastructure of the Third
Industrial Revolution (3IR), 4IR represents entirely new ways in which technology
becomes embedded in societies and even our human bodies. Examples include
genome editing new forms of machine intelligence, breakthrough materials and
approaches to governance that rely on cryptographic methods such as blockmail (Davis,
2016).

Thus, the 4IR is the age that represents revolutionary changes to everything and
describes the phenomenon as it aptly applies to both the technical shift of Second
Machine Age (2MA) and how people will live in it. In the 2MA, the technological progress
in digital hardware, software and networks is about automation of knowledge. It is
underpinned by (a) exponential growth of Moore’s law yielding a new regime of
computing, (b) the digitalisation of everything, and (c) the emergence of an infinite
number of combinational possibilities for innovation of the two. In this regard, transition
is profound, and the pace is massive amounts of data being collected (Penprase, 2018).
Therefore, the 4IR can be generalised as ‘‘a rapid and major change in an economy,
driven by a shift in the methods and types of work undertaken’’. It is a new phase where
the fusion of several technologies is not only automating production, but also knowledge.
Thus, the changes that are occurring, are happening now because humans have finally
developed the computing capacity to store massive amounts of data which in turn enable
machine learning. The outcome of this is the development of CPS, which emerged in
Germany around 2000. In 2016, the 4IR officially sounded an alarm that labour costs
were about to be disrupted and the way we live and work would be permanently altered
by the introduction of CPS (Davis, 2016; Penprase, 2018).

3.1 Understanding of CPS

The term “cyber-physical system” was coined in 2006 by the US National Science
Foundation (USNSC), with the hosting of several workshops on artificial intelligence (AI)
and robotics. CPSs are physical and engineered systems where operations are
monitored, coordinated, controlled and integrated by a computing and communication
core. How we live and work is transformed by CPS and other new technologies such as
3D-printing, the Internet of Things, blockchain and artificial intelligence. Just as the
internet transformed how humans interact with one another, CPS transforms how we
interact with the physical world around us.

3.2 Emergence and navigating the industrial revolutions

 Technologies emerged and are emerging that affect our lives in ways that are
unimaginable (according to ACC_CIMAKP_E1_202201, 2021:132; Davis, 2016; &
Penprase, 2018).

The First Industrial Revolution (4IR) occurred roughly between 1760 and 1830.
Characterised by the generation of steam, the development of craft industries and
mechanical production equipment, it fundamentally changed the basis of the economy
of the time for many countries. It entailed a shift from our reliance on animals, human
effort and biomass as primary source of energy to the use of fossil fuels and mechanical
power. Furthermore, it constituted a shift from rural, agricultural life to urban,
industrialised societies.

The Second Industrial Revolution (2IR) took place from 1870 to 1914, thus between
the end of the 19th century and the first two decades of the 20th century. It was
characterised by the division of labour, the generation of electricity, and mass
production. It brought major breakthroughs in the form of electricity distribution, both
wireless and wired communication, and new forms of power generation. This saw the
growth of vast corporations and a wave of globalisation.

Third Industrial Revolution (3IR): It began in the 1950s with the development of digital
systems, communication, and rapid advances in computing power, which have enabled
new ways of generating, processing and sharing information. It also emerged with the
development of Information Technology (IT) and electronics, which enabled more
efficient production. In 1969, it manifested as electronics, IT, automation, and
production. It saw a move from mechanical and analogue technology to the digital
technology of today and is known as the Digital Revolution. Developments and
improvements in communications, computers and the introduction of the internet were
some of the key drivers of this period of rapid change. We are now in the Fourth
Industrial Revolution (4IR).

3.3 Features of the Fourth Industrial Revolution

Each industrial revolution above impacted society in their own specific way. The
characteristics predicted to define the 4IR include:

• Fusion – cyber and physical systems will continue to fuse, becoming

increasingly autonomous
• Employment – robotics, automation and digitisation are predicted to make
many jobs redundant or fundamentally different to today
 • Artificial intelligence and machine learning – improved computing speed and
optimised supply chains enable products to be customised more easily and
more cheaply
• Machine-led manufacturing – the shift from machines helping workers
manufacture, to workers helping machines, will accelerate
•
Improved asset management – benefits to the natural world through more
efficient use of natural assets, a shift to renewables, innovations in recycling,
coupled with digitisation, are anticipated to benefit the natural world.
(ACC_CIMAKP_E1_202201, 2021:133).

3.4 4IR and new jobs

The most discussed issue is the potential for 4IR to increase unemployment, and thus
drive inequality. Many of the new jobs that will exist even ten years from now cannot be
predicted or imagined yet. However, it is predicted that the well-paying jobs are expected
to involve creativity, data analytics and cybersecurity, as there is dearth of talent in this
area. What is known is that the skills needed to take full advantage of the automation
economy are different from those that have been emphasised by higher education (HE)
institutions in the past. According to the World Economic Forum (WEF) “Future of Jobs”
report, the top ten skills that will be needed in order of priority by employers by 2020 are:

a. complex problem-solving
b. critical thinking
c. creativity
d. people management
e. coordinating with others
f. emotional intelligence
g. judgment and decision-making
h. service orientation
i. negotiation
j. cognitive flexibility

Active listening and quality control, which were the skills identified as needed in 2015,
are no longer needed and were replaced by cognitive flexibility and emotional
intelligence in 2020. This is because, as work becomes automated, it will also become
much more fluid, needing employees to be agile and able to jump between very different
types of tasks and contexts (Penprase, 2018).
3.5 Major areas of concern

In his article published by World Economic Forum Global Agenda, Davis (2016) predicts
three major areas of concern. These are inequality, security and identity, as explained
below:

• Inequality: The richest 1% of the population now owns half of all household wealth,
according to Credit Suisse’s Global Wealth Report of 2015. Oxfam’s new report
presents an even more dramatic concentration of assets, finding that 62 individuals
controlled more assets than the poorer 3.6 billion people combined, or half of the
world’s population. On the eve of the World Economic Forum, Sanders and Price
(2018) revealed that Australia’s richest 1% owned 23% of the country’s wealth. In
the previous year, the figure had risen to 22%, more than the bottom 70%
combined.
• Security: Increasing inequality does not only affect production, mental health and
trust, but also creates security concerns for both citizens and states. The Forum’s
Global Risks Report 2016 highlighted that a hyperconnected world, when
combined with rising inequality, could lead to fragmented segregation and social
unrest (Davis, 2016). This mix of factors creates the conditions for violent
extremism and other security threats enabled by power-shifting to non-state actors.
The combination of a digital world with emerging technologies is creating new
“battle spaces” and expanding access to lethal technologies. This makes it harder
to govern and negotiate among states to ensure peace.
• Identity, voice and community: As reflected above, 4IR is the first where the tools
of technology can become literally embedded within us and even purposefully
change who we are at the level of our genetic make-up. It is important that the
emerging technologies of the 4IR increase diversity and the potential for
collaboration rather than driving polarisation. Emerging technologies, particularly
in the biological realm, are also raising new questions about what it means to be
human.

3.6 Role of higher education institutions in the era of 4IR

According to Penprase (2018), HE is changing around the world already, as a result of

the fast-shifting global economy and types of employees and thinkers it demands. Thus,
HE is at the centre of massive change and transformation along with the rest of society,
as it is accessible to more people, more places, and more ways than ever in human
history. Evidently, it needs to change to better prepare thinkers of the 4IR, and several
good books have already been released on what needs to change. However, the
importance of interdisciplinarity is emphasised throughout, as learners of all ages must
meet the challenges of the automation economy with creativity and curiosity, automation
being a tangible reality for anyone in higher education. Among others, the following key
observations were made:

a. Today’s HE was designed to meet the needs of past industrial revolutions, with
mass production powered by electricity. Those systems are not suited for the
automation economy. Today’s learners of all ages are faced with major challenges
in demographics, population (both growing and shrinking), global health, literacy
inequality, climate change, nuclear proliferation and much more. Thus, as they
 leave university, the 4IR world makes significantly different demands on them than
have previously existed.
b. The design, construction and verification of CPS pose a multitude of technological
challenges, that must be addressed by a cross-disciplinary community of
researchers and educators.
c. Information transfer is no longer the sole purview of institutions of higher education.
Everyone is now responsible for lifelong learning and upskilling as the skills that
will carry one through as the content will always be changing. To develop these
skills, learning must go way beyond information transfer.
d. Although traditional undergraduate, graduate and research education will remain
important to society, space must be created for adult learners to continue their
learning as well.
e. In collaboration with governments and industry, HE must prepare lifelong learners
together.
f. Whatever was promised before by completing an HE degree, is not promised any
longer.
g. Neither a high school or undergraduate education, nor a master’s degree or a PHD
is enough.
h. Nearly everyone will work with AI; this means, what one majored in will not
determine one’s job or career. The content and a deep understanding of it matters,
but it is also about what one can do with it.
i. The information transferred through the traditional lecture and test format does not
get the student up very high in cognitive capacity ranks of higher-order thinking.

Therefore, education is a mechanism that must propose learning that serves to interact
with the context that demands certain skills to be efficient. Thus far, the change in HE
has been considered inadequate, although some institutions are trying to adapt. As
classified by Bloom’s taxonomy of higher learning, remembering, understanding,
applying, analysis, evaluating and creativity are six levels of learning and knowing
(Penprase, 2018). Ultimately, university systems are responsible for training the
accounting professionals in the development of new skills of the new accountant and
auditors. This requires the innovation and updates that respond to the 4IR, without
neglecting the social and ethical responsibilities of anti-corruption (Gómez Méndez &
Janampa Acuña, 2020).

3.7 Skills level of public accountants in the digitalised economy

According to Stablings (2020), accounting and data processing are intertwined, but the
development of concepts that adequately reflect the changing situation is delayed.
During the last two decades, institutions have focused on integrated internal data
processing and receiving data from or transference to other institutions using
communication infrastructure. Now, the focus is on uploading data – fixed paper
documents – to computer media without using the keyboard, because this task requires
a lot of staff time and diligence. The use of computer version devices and elements of
AI allows automation accounting data input processes.

A study conducted by Gómez Méndez and Janampa Acuña (2020), intended to find
whether public accountants are qualified to face the 4IR and analyse the professional
 skills of accounting to provide services in the digitalised economic entities in Peru,
reached the following conclusions:

a. Although the 4IR does not replace public accountants, they do require new skills.
b. Accounting practice, which is a science that accountants cannot escape, is not
immune to the changes of globalisation and digital internalisation. Thus, for
chartered accountants (CAs), the arrival of the 4IR poses a dilemma common to
the profession.
c. Accountants (accounting and auditing professionals) are (in reality) not prepared
to take on and not ready to face the challenges of the 4IR. They seem to fail in
critical thinking, analysis and solving complex problems.
d. Skills that continue to grow in importance towards 2022 include analytical thinking,
innovation, active learning and learning strategies, as well as human skills such as
creativity, originality and initiative.
e. The accounting profession must expand its horizons and open itself to the
internalisation of financial markets and the advances of ICT and big data, which
are required to meet the demands of business organisations and users of
information.

The users of information and big data and users of information topics are covered
comprehensively in study units 1 and 6, respectively).

4 Enterprise systems

These are accounting information systems (AIS). According to Klaus, Rosemann and
Gable (2000), enterprise systems are commercial software packages that enable
integration of transactions-oriented data and business process throughout an
organisation. They include enterprise resource planning (ERP), software and related
packages, such as advanced planning and scheduling sales force automation, and
product configuration.

4.1 What is an ERP?

Many organisations prefer to use one computer system that can be used throughout
the organisation by integrating all the functions. Thus, ERP is that system integrating
management information through the management of the flow of data across the entire
enterprise (Khoualdi & Basahel, 2014). In this regard, it integrates the data gathering
and data processes of departments and functions into one singIe system of integrated
applications. It handles the vital operations of the entire organisation and often includes
some functions of the strategic and technical level of the organisation as well. Examples
of an ERP are SAP and Oracle (Booyse, Leonard, Scott & Viviers, 2017). These will be
dealt with below.

4.2 Why companies buy an ERP system

According to (Khoualdi & Basahel, 2014) companies acquire the system because of the
following:
 a. The application of ERP systems improves the performance of an organisation
in its daily operations by addressing inefficiency of institutional processes.
Through automating business processes, operational efficiency is enhanced,
and access to information eased.
b. To simplify the management and operations of large-scale companies that
have grown organically or through acquisition, where this involves multiple
currencies, offices or business areas.
c. To replace or upgrade an outdated, unwanted or ineffective existing ERP
system. This can involve improved information management through the
promotion of access to information, reducing duplication and improving
predictive capabilities.
d. ERP deals with many complex and overlapping business problems. Most
organisations expect to receive trade benefits through ERP implementation.
One of these benefits is to achieve the financial goals of the company through
productivity gains and efficiency resulting from business process automation.

4.3 Application of an ERP system

According to Faccia, Mosteanu, Fahed and Capitanio (2019), AIS are fundamental for
the recording of accounting transactions and for the preparation of financial statements,
as required by the legislation governing financial accounting. Thus, the application of
ERP has contributed to numerous changes in accounting information systems in the
modern era of networked computing. The most significant are:

a. Elimination of routine tasks of accountants, since the tasks that were once
performed by accountants are now performed by computers. In fact, they are
aimed at serious tasks such as analysis and performance measurement.
b. Although the application can imply the loss of some basic traditional accounting
skills, the requirements that are set before the accountants, are not reduced in
scope and complexity.
c. Operational management possesses require a lot more accounting knowledge,
which confirms the necessary decentralisation of that knowledge. Additionally,
the management is responsible for its own activities.
d. A large part of routine accounting tasks is done centrally and automatically,
while the coordination and preparation of various operational reports are
entrusted to the ERP.
e. Some of the traditional accounting tasks are transferred to other employees in
the enterprise, the most important being the issue of adequate high-quality
information support to management owing to ERP.
f. On the basis of advanced technology, the so-called centres of excellence arise,
that is, the teams of specialists who perform more demanding tasks, such as
statutory (financial) and tax reporting, including internal audit.

Also refer to study unit 2 on the accounting information system implementation in an

ERP environment and decision-making.
 The following diagram explains an ERP system (Booyse et al, 2017):

INPUT

OUTPUT
Data from transactions
with customers
Information for managing
production
(processes and products)
Data from transactions
with suppliers

Information for managing

ERP customer relationships
CRM
Data from employees
(hours worked, etc)

Accounting information
(general ledger, asset
Data about product register, cash books)
inventories

FIGURE 1 1 . 1 : Explanation of an ERP s y s t e m

4.4 Advantages and disadvantages of an ERP system

They are presented in the following table:

Advantage Disadvantage
Any authorised user (restricted to a profile) An ERP is expensive and time
linked to the server with a computer, has consuming to implement.
access to the authorised information.
An ERP is a system that is implemented It is difficult to implement changes.
throughout the organisation.
It makes processes and workflow more Risks arise when using only one
efficient. vendor.
It eliminates expensive and inflexible
systems.
Has a familiar interface, menus across all If implementation fails, all
modules. departments have a problem.
It improves tracking and forecasting.

Data only captured once will then be It might fail to live up to expectations;
available to all modules connected to ERP. however, this is a risk inherent to
 It is easier to upgrade only one system. any system.

4.5 Role of accountants

With the rise of implementation of ERP at the end of the 20th century and the beginning
of the 21st, public accountants have an imperative to develop new skills and
competencies to manage information systems. They must be broadly knowledgeable
about digital data and achieve the valid evaluation of the overdose of digital information.

Increasingly, their work is becoming more complex. The more demanding role of
accountants implies high analytical ability of data interpretation, a broad knowledge of
the business and information technology, a willingness for teamwork, strategic thinking,
communication and interpersonal skills as well as the ability of ethical evaluation and
decision-making. On the other hand, management accountants are required to have a
much higher level of knowledge of multidisciplinary tasks (Sanchez-Rodriguesz, &
Spraakman, 2012).

5 SAP

As mentioned above in defining what an ERP is, through a single, comprehensive ERP
system, many companies have introduced new systems that help in upgrading and
managing their daily business, reserves, and processes, and linking the sections. Many
companies specialise in building these systems. The most famous such company is
SAP, which produced a product that bears its name (SAP). The SAP program, which
began in 1972, was developed initially by three German programmers working for
International Business Machinery (IBM). Its main activity is to produce management
programs that help enterprises improve their businesses and connect them into one
system. The objective was to ensure its coherence and efficiency without having to use
several software systems from different companies, which are expensive and most often
purchased by the largest companies. SAP has evolved the software until it has become
a comprehensive program for all sections of a company, whether small, medium or large.
The applications in SAP are called modules and they are connected, but usually one
can buy one module or more separately according to one’s needs. It is now one of the
latest companies that provide practical business solutions (Khoualdi & Bashel, 2014).

6 Relationship between SAP and ERP software

SAP was found to be one of the best, the most popular and the most widely accepted
ERP software in a study conducted in Serbia. However, results showed the following:

a. The process of implementation of SAP and its initial phases, is complex, and
more attention is devoted to configuring the basic modules.
b. In one of enterprises surveyed, the implementation process itself has lasted for
more than 18 months and has still not ended. This resulted in simultaneously
using both SAP and the old software solution. Thus, a longer time necessary for
the full implementation of SAP can be conducted in a subsequent appearance of
expected effects.
 c. A time gap was identified between the moment of the implementation of the
system and the first positive effects less involved with data entry, thus allowing
them to undertake more analysis – as non-financial information is more
extensive.

6.1 Management accounting changes for companies using SAP

The role of management accountants has changed significantly. A study was done by
Malinic and Mirjana (2012), in relation to how management accounting changed under
the influence of ERP in industrial enterprise, given the intensive application of ERP
systems for the companies using SAP. It was concluded that SAP reduces the time
required for the traditional tasks of management accounting, while increasing the time
required for the activities of data analysis performance measurement and subtle
strategic reporting. Although SAP does impact the management accounting, that impact
is relatively modest in relation to the expectations. Thus, there is no strong causal
relationship between implementation of SAP and changes in practice of management
accounting. That is, the stabilising effect on management accounting is more
widespread.

7 Oracle

Since Oracle database is a popular product, its performance will impact many
applications in information systems. With the development of computer network and
database technology, information management has become the core of many
enterprises, while database is all business foundation; its importance is self- evident.
Oracle is a relational database, attempting to stay the world leader and maintain the
biggest market share. But, in the early days in China, although a large relational
database, generally only large enterprises were able to use it. Along with the shared
SQL, a multithread server system structure was introduced. This greatly reduced Oracle
resource usage and increased Oracle compatibility and processing ability, on a low-
grade soft hardware platform with fewer resources to use. According to Greenwald,
Stackowiak, and Stern (2013), over the past approximately 30 years, Oracle grew from
being one of many vendors that developed and sold a database product to being widely
recognised as the database market leader. In Oracle, the term “database” refers to the
physical storage of information, and the term “instance” refers to the software executing
on the server that provides access to information in the database and the resources that
software uses. Oracle includes many features that make the database easier to manage.
Although early products were typical of a startup company, the Oracle Database grew
such that its technical capabilities are now often viewed as the most advanced in the
industry. The foundation of Oracle’s database Server is known as Oracle Database
12c”.

7.1 Oracle Database 12c

Oracle releases new versions of the flagships database every three to five years. With
each database release, Oracle has improved the scalability, functionality, and
manageability of the database. New releases typically follow themes and introduce a
 significant number of features. In recent releases, these themes are indicated in the
product version’s naming. Typically, the terms “Oracle” and “database” are used when
describing them. In 2012, Oracle Database 12c appeared to be used somewhat
interchangeably as it included all the features of previous versions. It was released in
2013 and introduced a number of deployments. Today, enterprise Manager 12c
continues to be a framework used for managing the database (Greenwald, Stackowiak,
and Stern, 2013).

7.2 Managing the Oracle Database

Manageability and rapid provisions features are especially useful in the private and
public cloud computing environment, where hardware infrastructure and the database
are delivered as a service over a network, building upon capability introduced in previous
releases. There are three fundamental types of physical files that make up an Oracle
database. They are:

• Control file
• Data file
• Redo log files

Oracle also offers an Application Server and Fusion Middleware business intelligence
tools and business applications (the e-business suite, PeopleSoft, JD Edwards, Siebel,
Hyperion and Fusion, among others).

7.3 Database application development features

Oracle database is typically used to store and retrieve data through applications. All
versions of the Oracle database include language and interfaces that enable
programmers to access and manipulate the data in the database. Database
programming features usually interest developers who create Oracle-based applications
to be sold commercially, or Information Technology organisations building applications
unique to their business. Data in Oracle can be accessed using SQL/XML, XQuery, and
WebDev. Programs deployed within the database can be written in PL/SQL and Java
(Greenwald, Stackowiak, and Stern, 2013).

7.4 Optimisation of Oracle system

Optimising the Oracle system is becoming more and more important (Yang & Yang:
2012). According to Park et al (2020), as blockchain-based application and research
into, for instance, cryptocurrency increase, an Oracle problem to bring external data in
the blockchain is emerging. Among the methods to solve the Oracle problem, a method
of configuring practice-based transport layer support (TLS), and existing internet
infrastructure have been proposed. However, these methods have the disadvantage of
not supporting privacy protection for external data, and limitations in configuring the
process of a smart contract based on external data verification for automation.

7.5 Pastel

According to Tapang and Jones, 2018, Sage Pastel accounting software is the preferred
choice for many businesses. The accounting payroll ERP and business solutions allow
 for effortless daily financial management. This will enable customers to go “beyond
accounting” and focus on business.

8 E-commerce and digitalisation

In years to come, we will look at 2020 as the moment that changed everything. Nowhere
else has such unprecedented and unforeseen growth occurred as in the digital and e-
commerce sectors amid the Covid-19 crisis. While most sectors experienced slowing
economic activity, Covid-19 has led to a surge in e-commerce and accelerated digital
transformation. As lockdown became the new normal, business and consumers
increasingly “went digital”, providing and purchasing more goods and services online,
raising e-commerce’s share of global retail trade from 14% in 2019 to about 17% in
2020. These and other findings are showcased in a new report, Covid-19 and E-
commerce: A Global Review, by UNCTAD and e-Trade, for all partners, reflecting
powerful global and regional industry transformation recorded throughout 2020. At an
event to release the report, UN General Assembly President, Bozkir, said that that the
trend towards e-commerce was likely to continue throughout the recovery from Covid-
19. Thus, we need to recognise the challenges and take steps to support governments
and citizens as they continue to embrace new ways of working. Since the outbreak of
the pandemic, all e-Trade partners have worked together to raise awareness of the e-
commerce opportunities and risks emerging during the crisis. They also identified ways
in which businesses in developing countries could overcome the challenges. In this
regard, the Covid-19 repository launched in the fall of 2019 and e-commerce report are
the initiatives’ latest collective efforts to build a sustainable digital future (United Nations
Conference on Trade and Development news 15 March 2015).

8.1 E-commerce

Electronic commerce, also known as e-commerce, is the online business process of

selling, buying, delivering, servicing and paying for products and services over computer
networks such as the WWW or the internet.

The objective of e-commerce is to add and expand revenue streams, enhance

relationships with customers and business partners and improve efficiency using
computer networks. It is important to remember that although the largest part of e-
commerce is conducted entirely electronically, some part will entail manual interaction,
as a service that has to be rendered or a product that is sold, must be physically
transported and delivered to a customer.

Driven by e-commerce’s capabilities to empower clients, many companies are moving

from the traditional push business model, where manufacturers, suppliers, distributors
and marketers have most of the power, to a customer-driven pull model
(ACC_CIMAKP_E3_202201; 2021:155).

8.2 The main e-commerce categories

According to Unisa (Booyse et al, 2017), e-commerce can be divided in five main
categories, differentiated according to the participants.
 • Business-to-business (B2B): Both participants in the electronic transaction are
organisations, for example when a wholesaler sells to a retailer. Depending on
the e-commerce interface provided by the wholesaler, possibly through its
extranet, the retailer will be able to place orders, track the delivery of the orders,
search for new products and so on, all online.
• Business-to-consumer (B2C): This is one of the better-known e-commerce
categories and involves an organisation selling its product or service directly to
the public. You, a Unisa student, can for example electronically order and pay
for your prescribed textbooks using www.kalahari.net or www.vanschaik.com.
The business Van Schaik Bookstore sells textbooks, the product, directly to
you, the Unisa student as customer. bidorbuy (www.bidorbuy.co.za) is another
well-known example, where the sellers are often businesses, but a C2C site as
well.
• Consumer-to-consumer (C2C): C2C is an online version of the classified pages
of a newspaper, where consumers can sell their products or services directly
to other consumers. Gumtree and Junkmail are good examples of C2C e-
commerce sites.
• Consumer-to-business (C2B): This is a less well-known and used category,
where a consumer can post his request for a product or service online,
indicating the details for the product or service needed, that is, amount
available, delivery dates and other specifications. Organisations can then
review the consumer’s requirements and bid on the project. Based on the bids,
the consumer can then select the organisation that delivers the product or
service.
• E-government: This allows governments to transact with organisations, their
citizens, and other governments. For example, SARS e-filing
(www.sarsefiling.co.za) can be used by organisations and citizens to file their
tax returns and make payments to SARS. South African citizens can enquire
about their ID book, passport and permit application status and can verify their
marital and ID status by using the Department of Home Affairs website
(www.home-affairs.gov.za).

8.3 Action points for e-commerce

They are:

a. Governments need to prioritise national digital readiness so that more local

businesses can become producers of digital economy, and not just consumers.
b. Building an enabling e-commerce ecosystem requires changes in public policy
and business practices to improve the digital and trading infrastructures,
facilitate digital payments and establish appropriate legal and regulatory
frameworks for online transactions and security.
c. The approach should be holistic. Policies should not be made in silos.
d. To capture value form digital trade, entrepreneurship must become central
focus. This requires faster digitalisation for smaller businesses and more
attention to digital entrepreneurship, including reskilling, especially of women.
 e. Countries also need better capabilities to capture and harness data and
stronger regulatory frameworks for creating and capturing value in the digital
economy.
f. The international community needs to find new, bold and smart ways to work
with governments and the private sector to leverage these opportunities.
According to Bozkir, the digital divide which was real long before Covid-19, is
a challenge which can be removed through our collective efforts and
international support (Source: UNCTAD Article: How Covid-19 triggered the
digital and e-commerce turning point, 2021).

8.4 Advantages and disadvantages of e-commerce

Advantages Disadvantages
Direct customer relations: Organisations can Product expectations not met: Customers are
interact directly with their customers, thereby not physicall y able to touch or see the
el i minating third parties (the intermediary). products, as only pictures and/or descriptions
Through this direct contact with customers, of the products and goods are available on the
organisations can obtain knowledge of their business website. The customers’
customers’ buying behaviour and expectations of the product/ service bought
preferences. Using this intimate customer and then actual l y received may be material l y
knowledge, customer service can be different. This can cause customer complaints
enhanced, and customer loyalty increased. A and negatively affect the organisation’s
further effect of the el i mination of third parties reputation. The Consumer Protection Act 68
is that services and products can be offered of 2008 protects customers where products
to customers at reduced cost. del i vered are not the promised product.

Always open for business: While most Technological costs: Appropriate hard- ware,
traditional business are l i mited to working software and staff with the correct technical
hours, organisations using e-commerce are skills are needed to set upland operate an
open 24/7, that is, 24 hours seven days a effective e-commerce site. The costs to
week. These prolonged shopping hours obtain and maintain these i tems can be
make i t more convenient for their material.
customers.
Access to global markets:
Through e-commerce, organisations can
reach customers anywhere i n the world, as
long as the customer has internet access.
This al l ows an organisation to explore new
markets and opportunities, as i t i s not
limited to the geographical area in which the
organisation has physical stores. Global
access offers opportunities for developing
organisations and countries, and levels the
playing field.

Source: (Booyse et al, 2017).

8.5 Digitalisation
 Digitalisation refers to the technical process of converting analogue or traditional paper-
based tasks or processes to digital form so that computers can help in accessing, storing
and transmitting information. By contrast, it refers to sociotechnical process of
leveraging digitalised products or systems to develop new organisational procedures,
business models or commercial offerings. Thus, it denotes partially or fully converting
elements of firm value-chain activities and business models to using emergent digital
technologies (Amankwah-Amoah, Khan, Wood & Knight, 2021). Study unit 5, which
deals with the broad concepts of digital disruption, forms the basis of understanding the
concepts of applying digitalisation and what to consider towards being digitalised,
especially post Covid-19, which is seen as the great accelerator of digitalisation.

8.6 Applying digitalisation in enterprises and redefining business models

A business model (BM) is a function that maps business enterprise to its customers
and/or stakeholders. The success of a business idea depends significantly on the
comprehensive development, durability, and mapping of the parameters of the applied
BM. It is evident that a successful BM is strongly linked to rigorously scrutinised and
established BMs. Anticipating the significance of the interactions among the established
BMs in certain newer BMs for better value to customers, Framework was coined and
developed (Kumar & Lindgren, 2017). As digitalisation is redefining products and BMs
worldwide, evidence abound in the construction industry as a sector that is slow to its
adoption. While digitalisation tools have been applied in modifying processes or
procedures in the global north, a larger percentage of the sector in the global south is
yet to be disrupted. For indigenous firms to join rapid transformation, the
interrelationships between digitalisation and building information modelling was studied.
Results revealed production task and goal attainment, information or communication
technologies, workforce, innovation, learning and knowledge management as well as
conflict and dispute resolution as the prevalent cultural orientation. The availability of
resources to communicate, interact and collaborate digitally and leadership to organise
and coordinate digitally, are the top two strategic capabilities. On strategy, firms need
support from institutions or government on policies that will cushion the effect of the
provisions of resources for transformation (Zakariyyah & Ijaola, 2020).

8.7 Fast-tracking of digitalisation by Covid-19

Inspired by a burgeoning of scholarly interest in the role of digitalisation in the Covid-19

pandemic, Amankwah-Amoah et al (2021) conducted a study on how it was driving and
constraining the digitalisation of business around the globe. They established that it is
the “great accelerator” in fast-tracking the existing global trend towards embracing
modern emerging technologies, ushering in transformation in lifestyle, work pattern, and
business strategy. Thus, it has evolved to be a “catalyst” for the adoption and increasing
use of digitalisation in work organisations and the office, alongside presenting foreseen
and unforeseen opportunities, challenges and costs, leading to positive feedback. Whilst
digitalisation may bring new opportunities, the process imparts risks that may be hard to
mitigate or prepare for.

8.8 Barriers in the adoption of emerging technologies

 The adoption of emerging technologies may be hindered by vested external interest,
nostalgia, and employer opportunism, as well as negative effects on employee well-
being that undermine productivity, work-life balance, and future of work. Despite the
importance and effects of digitalisation, coupled with emergent research on implications
of the pandemic, and the proliferation of accounts on Covid-19’s likely impact, scholarly
work exploring the challenges confronting firms and their workers in transitioning to
digital technologies in the wake of this new environment challenge is only emerging.
Psychological barriers to the adoption of these emerging technologies are hampering
the efforts of firms and their decision-makers to embrace digital platforms. With
digitalisation, the stakes are high.

8.9 Areas of technology that will thrive post the pandemic

In an article, Mika Ruokonen, business director at Futurice, identified four areas that are
set to boom post the pandemic:

a. Data-enabling healthcare initiatives will increase: With the right privacy links in
place, the resulting massive increase in healthcare data represents an opportunity
for various data and artificial intelligence (AI). Specialists will develop useful
solutions that will help reduce risks of contagion and relieve consumer anxiety,
while also providing reassurance to help them cope with these difficult times. As
consumers focus much more on their health, testing is the order of the day, whether
for Covid-19 or other medical conditions.
b. Scalable digital business models (BMs) will start replacing product-focused
operations: As covid-19 pressurises the global supply chains of companies such
as Best Buy, Wayfair, Nike and Gap, companies will increasingly start to build
resilience in their businesses with complementary product-focused models with
scalable and stable digital alternatives. This might include business diversifying
from their core offer to sell data and AI assets to third parties. For example,
supermarkets such as Walmart already sell point-of-sales data to brands who use
it to ensure adequate stock of products in their warehouse and to promote real-
time availability of their product in grocery stores. Beyond retail, we can expect the
digital-enabled sharing economy to accelerate into B2B much more rapidly as
businesses face urgent pressure to find smart and quick ways to slash costs and
monetise existing assets.
c. E-commerce will experience a renaissance: Due to self-isolation, consumers who
normally visit physical stores are increasingly shopping online. Consequently, e-
commerce is booming, especially when it comes to tinned goods, pasta, health and
sanitary products. The uptake in e-commerce will become permanent if people
remain wary of mingling in real life and increasingly replace shop visits with online
purchases. Some logistics platforms are already revamping their concepts to
match the new market circumstances by enabling retailers to home-deliver fast.
d. Digital collaboration and entertainment tools should see an upsurge in valuation:
as companies rapidly and, in some cases, also permanently move towards remote
working, the market for digital collaboration tools such as Microsoft Teams, Google
Hangouts and Zoom is likely to grow exponentially. Zoom has already experienced
a 50% increase in its share price since the start of 2020. Instead of visits to
concerts, museums and events, consumers are seeking equivalent augmented
reality (AR) and virtual reality (VR) experiences which can be enjoyed safely while
 sitting on the sofa. Hand in hand with this, we are already seeing a growing demand
for digital media and entertainment, including gaming, social media, news, video-
streaming and books, as people seek to relieve boredom and fill time previously
taken up with travelling and socialising face to face (Ruokonen, 2020). PwC (2020)
and Dimelgani (2021) estimated that AR and VR applications have a potential to
deliver a £1,4 trillion boost to the global economy by 2030.

8.10 Solutions

In sectors that are less impacted by the pandemic, businesses need to fundamentally
rethink what creates value, what is important right now, and in the future, and what role
digital innovation can play in making new things happen. Companies which stay human
and customer focused and manage to quickly innovate new digital businesses to solve
problems created by the new condition, are best placed to seize any nascent
opportunities. Right now, it is essential for businesses to create and maintain a strong
and pervasive digital culture. As work becomes increasingly remote, leadership styles,
mindsets, habits and ways of working matter now more than ever. Winning cultures
encompass trust in people, transparency of work, caring for others as well as continuous
learning. Nurturing these important values during difficult times will ensure that firms
retain their digital talent, get things done and continue to thrive (Source: article by Mika
Ruokonen, a business Director at Futurice).

9 Current trends
9.1 Artificial intelligence (AI)

Although artificial intelligence techniques such as machine learning are not new, and the
pace of change is fast, widespread adoption in business and accounting is still in
relatively early stages. Increasingly, we are seeing systems that are producing outputs
that far exceed the accuracy and consistency of those produced by humans. In the short
to medium term, AI brings many opportunities for finance professionals to improve their
efficiency, provide more insight and deliver more value to businesses. In the longer term,
AI brings opportunities for much more radical change, as systems increasingly carry out
decision-making tasks currently done by humans (ACC_CIMAKP_E3_202201;
2021:474).

AI, no doubt, will contribute to substantial improvements across all areas of accounting,
equipping those in finance with powerful new capabilities, as well as leading to the
automation of many tasks and decisions.

Examples include:

• using machine learning to code accounting entries and improve on the accuracy of
rules-based approaches, enabling greater automation of processes
 • improving fraud detection through more sophisticated, machine learning models of
“normal” activities and better prediction of fraudulent activities
• using machine learning-based predictive models to forecast revenues
• improving access to, and analysis of, unstructured data, such as contracts and e-
mails (ACC_CIMAKP_E3_202201; 2021:474).

Despite the opportunities that AI brings, it must be remembered that it does not replicate
human intelligence. The strengths and limits of this different form of intelligence must be
recognised, and we need to build an understanding of the best ways for humans and
computers to work together (ACC_CIMAKP_E3_202201; 2021:474).

9.2 Cloud and mobile computing

Cloud and mobile computing is computing based on the internet. It avoids the needs for
software, applications, servers and services stored on physical computers. Instead, it
stores these with cloud service providers who store these things on the internet and
grant access to authorised users.

Benefits of cloud and mobile computing

• Store and share data – cloud services can often store more data than traditional,
local physical drives, and the data can be shared more easily (regardless of
physical location).
• On-demand self-service – customers and users can gain access to technology on
demand. For example, every time you download an app from iTunes or the Play
Store, you are downloading it from a cloud service where it is stored
(ACC_CIMAKP_E3_202201; 2021:475).

A simple example of how cloud and mobile computing might be of use to finance
professionals, can be seen in the budgeting process. Any organisation which has a
number of different locations (such as a multinational company), has historically
experienced difficulties and time delays in constructing budgets which require input from
people in different places. Cloud computing means that budget templates can be worked
on simultaneously by many people, without them having to be in the same location
(ACC_CIMAKP_E3_202201; 2021:476).
10 Cryptocurrencies

Blockchain has the potential to deal with some unique sets of requirements like
confidentiality and immutability and can therefore be deployed in many areas other than
cryptocurrency. Bitcoin is a digital currency that was introduced in 2009. Other
cryptocurrencies exist, such as Ethereum, Cardano, XRP and Solana. Cryptocurrencies
are being developed at a heightened and intensified rate, with decentralised finance
(DeFi) and non-fungible tokens (NFS) being the latest additions to the crypto market.
Bitcoin is the oldest cryptocurrency. There is no physical version of bitcoin; all bitcoin
transactions take place over the internet. Unlike traditional currencies, bitcoin is
decentralised, meaning it is not controlled by a single bank or government. Instead,
bitcoin uses a peer-to-peer (P2P) payment network made up of users with bitcoin
accounts (ACC_CIMAKP_E3_202201; 2021).

Bitcoin acquisition can be done using a bitcoin exchange such as LUNO, or

ALTCOINTRADER in South Africa. Coinbase and Binance are the most popular crypto
exchanges in the world. These exchanges allow users to exchange rands for bitcoins.
Bitcoin mining involves setting up a computer system to solve maths problems
generated by the bitcoin network. As a bitcoin miner solves these complex problems,
bitcoins are credited to the miner. The network is designed to generate increasingly
more complex maths problems, which ensures that new bitcoins are generated at a
consistent rate. When a user obtains bitcoins, the balance is stored in a secure “wallet”
that is encrypted using password protection. When a bitcoin transaction takes place, the
ownership of the bitcoins is updated in the network on all ledgers, and the balance in the
relevant wallets updated accordingly (ACC_CIMAKP_E3_202201; 2021).

A c t i v i t y 11.1

Go to your e-tutor site and complete this activity.

The new current trends discussed in this study unit, are artificial intelligence, cloud and
mobile computing, and cryptocurrency. Many companies are said to be moving away
from the traditional “push” business.
Explain how you see these trends and this move by companies (as driven by e-
commerce’s capabilities to empower clients, and the main categories of e-commerce)
affecting the emerging role of accountants.

–
 Digital collaboration and entertainment tools are to see an upsurge in valuation as one
of the areas of technology that will thrive post Covid-19. Consequently, as companies
rapidly and, in some cases, permanently move towards remote working, the market for
digital collaboration tools such as Microsoft Teams, Google Hangouts and Zoom is likely
to grow exponentially. For example, Zoom has already experienced a 50% increase in
its share price since the start of 2020. In addition, instead of visits to concerts, museums
and events, consumers are seeking equivalent AR and VR experiences which can be
enjoyed safely while sitting on the sofa. Hand in hand with this, we are already seeing a
growing demand for digital media and entertainment, including gaming, social media,
news, video-streaming and books, as people seek to relieve boredom and fill time
previously taken up with travelling and socialising face to face.

Go to the Discussion Forum for study unit 11 and discuss the above with your fellow
students. Describe how:

(a) it would impact the barriers in the adoption of emerging technologies.

(b) the solutions would help reduce the impact on these barriers.

(c) the role of the accounting profession and accountants in general would be
impacted.

11 Summary

In this study unit, you learnt that we are living in a digital age, where, among others, the
digital adoption, the new way of living and use of new technologies have been
accelerated by the Covid-19 pandemic. We also speculated that things will not be the
same and provided you with areas of technology that are predicted to thrive post the
pandemic.

We thus provided you with the concept of digital r/evolution by creating a better
understanding of concepts such as blockchain, 4IR, enterprise systems, SAP, Oracle,
pastel, e-commerce and digitalisation. Other new concepts that are currently trending
were also introduced to you, such as artificial intelligence, cryptocurrencies, cloud and
mobile computing.

In the next study unit, you will learn about the components of communication network in
this digital age.