Magazine article The CPA Journal

Here's an Expert System-Based Support Tool for Making Accounting Decisions

Magazine article The CPA Journal

Here's an Expert System-Based Support Tool for Making Accounting Decisions

Article excerpt

In 1987, the AICPA published a management advisory service special report entitled, An Introduction to Artificial Intelligence and Expert Systems. The goal of the report was to present information about expert systems, including: basic components, opportunities for the accounting profession, ways accounting firms might use expert systems, issues to be considered, and prospects for the future.

One section of the report described applications suitable for future expert system development. The report suggested that expert systems would be developed to aid in making decisions concerning the correct accounting treatment for complex accounting transactions, such as leases, foreign currency exchange, acquisitions, pensions, and income taxes.

Benefits of Expert System-Based Decision Aids

Normally, a CPA in industry who becomes involved with a complex accounting issue for the first time must research current accounting pronouncements. An expert system-based decision aid captures all available information in its knowledge base, and that knowledge would be readily available for use.

Another advantage of an expert system-based decision aid is that such tools promote consistent and uniform performance of accounting tasks. Even if a firm or company is occasionally exposed to a complex lease transaction or a business combination, this does not ensure that similar transactions will be dealt with in the same manner each time. With an expert system-based decision aid, this would not happen, since a lease that should be capitalized or a business combination that should be accounted for as a pooling of interests will be consistently identified.

Another benefit available is to use the expert system to train accountants for special or unique tasks.

Expert System Shell Software

Developing an expert system-based decision tool is not as difficult as most people imagine. This is because of the existence of expert system "shell" software packages that allow users without considerable computer experience to develop their own personalized expert systems. A shell is an "empty" application consisting only of interfaces and an inference engine, without any built-in expert knowledge in the knowledge base. A special routine in the software allows users to input the shell's knowledge base. Figure 1 lists several popular expert system shell software packages currently available.

One expert system shell is VP-Expert, developed by Paperback Software International of Berkeley, California. The VP-Expert includes an "Induce" command that automatically creates a knowledge base from a table contained in a text, database, or worksheet file. Optional development windows allow the user to observe the behind-the-scenes path of the inference engine as it navigates the knowledge base to solve problems. VP-Expert makes use of simple English rule construction and provides the ability to explain its actions during a consultation. An interface can create "if/then" rules directly from decision tables in external files. Confidence factors (from zero to 100) can be assigned to each rule and response. More information on VP-Expert is available in a book, VP-Expert for Business Applications, published by Holden-Day, Inc., of Oakland, California.

Examples of Expert System-Based Decision Aids

The AICPA has suggested that expert system-based decision aids will be developed to solve various accounting problems. At least two such decision aids have been constructed. One determines the accounting treatment for leases by the lessee.(1) The other determines the accounting treatment for business combinations.

Lease Expert System. In a study by Boer and Livnat, an expert system was constructed to determine the accounting treatment for leases by the lessee. The system was used as a teaching aid by the researchers. The students in one accounting class used the expert system and textbook material, while another class used only the textbook material in solving problems pertaining to leases. …

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