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3.3. A FIELD IS BORN

Daniel E. O'Leary, Paul Watkins, and the Advanced Technologies in Information Systems Program (ATISP) in the School of Accounting at the University of Southern California (USC) played a key role in bringing these separate streams of research into a cohesive and well-focused research area. In 1987, the ATISP began publication of Expert Systems Review for Business and Accounting (O'Leary, 1987-1990), the first expert systems journal including an accounting focus with Daniel O'Leary as Editor. The publication continued for 4 years until the end of 1990.

During that period it evolved from a quasi-newsletter format to being a respected journal. Though relatively short-lived, it played a key role in bringing the field together. Articles in Expert Systems Review included survey papers with extensive bibliographies: one on auditing expert systems by O'Leary and Watkins (1989), and two on tax expert systems by Carol Brown et al. Carol Brown's (1989) annotated bibliography, which contained bibliographic references and abstracts to 478 papers related to accounting expert systems, has been widely cited as evidence that a body of research on accounting expert systems exists. Expert Systems Review also attracted excellent papers on topics ranging from "Using Rules to Model Variance Analysis" by Anita Hollander, to "The Architecture of Expertise: The Auditor's Going-Concern Judgment" by Mallory Selfridge and Stanley F. Biggs.

In 1988, the first in a series of five International Conferences on Expert Systems in Business, Finance, and Accounting (Watkins, 1988-1993) drew together researchers from all over the world. The conference series was sponsored by The Peat, Marwick, Main Foundation and the Advanced Technologies in Information Systems Program at USC. Papers on cutting-edge research were presented by authors from academic, government, and industry backgrounds. This series of conferences provided a forum where researchers could exchange ideas and find out about each other's most recent work.

In 1989, the first in a series of collections of papers published as books under the running title Artificial Intelligence in Accounting and Auditing appeared (Vasarhelyi, 1989; 1995; 1995). That same year, a book entitled Expert Systems in Accounting by Edwards and Connell (1989) was published under the auspices of the Institute of Chartered Accountants in England and Wales. It included the preliminary results of a survey indicating that as many as 29% of U.S. companies and 22% of U.K. companies asserted that they had a major department dedicated to the exploitation of expert systems.

In 1990 and 1991, Ed Blocher spearheaded efforts to establish a new special interest section of the American Accounting Association to bring together researchers interested in accounting expert systems. The Artificial Intelligence/Expert Systems Section of the American Accounting Association was established as a provisional section in 1991, held its first of a continuing series of workshops in 1992 (AI/ES, 1992-continuing), and achieved permanent section status in 1994.

In 1991, Expert Systems with Applications, a well-regarded international journal, published a special issue (Brown, 1991), on Expert Systems for Accounting, Auditing, and Tax. A second special issue on the same theme appeared in 1995 (Brown and Wensley, 1995).

In 1992, the International Journal of Intelligent Systems in Accounting, Finance & Management (O'Leary 1992-1997; continuing) was launched as the successor to Expert Systems Review for Business and Accounting. The third issue of each volume is dedicated to accounting research and applications. The third issue of each year has been adopted as a member benefit for the AI/ES Section of the American Accounting Association.

In 1995, the First International Meeting on Artificial Intelligence in Accounting, Finance, and Tax was held in Huelva, Spain (Sierra and Bonsón, 1995). The meeting has become an annual event.

4. APPLICATIONS AND IMPACTS OF ACCOUNTING EXPERT SYSTEMS

Today, the research domain of expert systems for accounting tasks is a rich body of literature that ranges from descriptions of expert systems development using neural networks (authors include Boritz, Kennedy, Coakley, Hoyt and Lay, Hansen, Messier, and others) or case-based reasoning (authors include Morris, Denna, Hansen, Meservy, Wood, O'leary, Mott, Stottler, Bryant and others) to studies of the impacts on organizations of using such systems (authors include Baldwin, Trewin, and others). Expert systems encompassing financial accounting and taxation rules and regulations are in widespread use across the profession, particularly in the larger accounting firms. Audit firms have expert support systems in place for many of their tasks (Brown, 1991). Taxation has seen a large growth in development, as has management accounting. Taxation expert systems include both systems to assist the taxpayer, whether individual or corporation, and systems used by government tax agencies in the collection and audit process.

While much effort still revolves around audit and tax, the literature has moved to encompass other accounting tasks. Brown and Philips (1995) chronicled the entire body of application-oriented research relating to a broad range of management accounting tasks, an area in which literally hundreds of expert systems have been developed. However, despite the many systems that have been developed and are in use, there is still only scattered adoption of expert systems technology across the thousands of companies that practice management accounting.

The continuing development of expert systems for accounting tasks has sparked growth in studies of the impacts of using those systems. Organizations develop expert systems because they believe the systems will provide more knowledge about the task, improve effectiveness and efficiency, and provide a comparative advantage. A number of studies of accounting expert systems have attempted to identify the existence of those and other expected impacts. A future forecasting Delphi study attempted to predict the impact of expert systems on auditing firms in the year 2000. Expertise, effectiveness, and education impacts were identified as most likely (Baldwin-Morgan and Stone, 1995). Others have projected other social and organizational impacts.

Impacts on novices. Most studies that have investigated the impact of expert system use on novice auditors have reported better accuracy and efficiency for expert system users. Even when little impact is reported for more knowledgeable users, an effect is noticed for novices. This has also been the case with novice financial analysts.

Experienced decision-makers. Impacts on more experienced decision-makers are less clear. Some systems tend to have little effect on experienced auditors, for example, while others show differential impact associated with different attributes of the system. For example, a system utilizing negative explanations may generate more user reliance.

Workflow and task impacts. Impacts have also been observed on task and task processes. Expert system use has resulted in less need for supervision, broader problem handling by users, improved quality, shorter task time, improvements in decision consistency, and changes in task process.

Organizational effects. Accounting expert systems also affect organizations at the macro level. Organizations may encounter changes in technology orientation, organizational structure, and organizational culture.


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