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Need an expert? Ask a computer.

Expert advisers can be expensive, and they're not always available when an urgent call for help goes out. Increasingly, accountants are getting assistance from another source: computer programs that are called expert systems.

An expert system is a software program that includes the accumulated knowledge of one or many experts. Accounting subjects include auditing, personal and corporate taxes and personal financial planning.

Aside from providing high-level support on technical issues, a major advantage of expert systems is they allow CPAs to focus on the professional parts of their jobs instead of being distracted by the routine, repetitive tasks.

Expert systems have been around for years, but their commercial use has been limited because they were expensive and difficult to use. Recent programming design innovations have made them more accessible; that, in turn, has increased their popularity and brought down prices.

These programs are especially effective in responding to questions that have more than one answer or that are difficult to frame because of their complexity. When a user queries a typical expert system, it responds with its own questions that prompt the user to reframe the question or simply dig deeper. In this way, the program helps the user uncover subtleties or complications that may affect the answers.

Expert systems have another plus: Not only do they answer questions but they also give the reasoning behind the answers they provide, and that can be a big advantage in decision making.


Although some expert systems in the accounting field are available for sale or lease, most are restricted to in-house use by their developers, mainly large CPA firms. (See the sidebar on page 93 for programs available to the public.) There are two reasons for that restriction:

1. Expert programs could leave developers exposed to liabilities. For example, if a user acts on incorrect advice provided by an expert system, the developer could face a damage suit.

2. The developers usually want to protect their proprietary expertise. Thus, they prefer to lease, rather than sell, programs.

Developing an expert system package is expensive and time-consuming. It requires a sizable investment to debrief the expert; then all the information must be programmed into an easily accessible format; and finally the program must be extensively tested against a human expert's solutions and improved until the system performs at a professional level.

Today, most of the expert systems used in accounting, even those that are proprietary, are designed for personal computers (PCs) so professionals can run them in the field. Only a few require the power of a mainframe computer.


Expert systems have at least one major flaw: As smart and as flexible as they are, they still lack the common sense even a non-expert may bring to a question. For example, an expert system sometimes is unable to adapt to problems outside its range of expertise. In fact, sometimes it cannot even recognize it lacks the knowledge to solve a problem.

For these reasons, expert systems require an intelligent user. For example, when used in an audit, the program helps the professional by suggesting the appropriate auditing procedures, assisting in risk assessment and providing consulting backup in technical areas.

Although auditors generally agree on internal control judgments, individual differences often exist on the substantive tests to be performed, the degree of audit risk in a particular set of accounts and the point at which an item is considered significant enough to have a material effect on financial statements.

As market and regulatory pressures increase the demand for quality audit services at competitive prices, CPAs must become more efficient. Expert systems are one of the tools that can assist them in making consistent, reliable and defensible audit judgments.

The largest CPA firms have more than 30 expert systems integrated into several different audit areas, including audit work program development, internal control evaluation, risk analysis and technical assistance for tax-related topics and other accounting issues. These systems are proprietary and not available for general use. Among the auditing expert systems currently in use as in-house products are Ernst & Young's EY/Decision Support and Deloitte & Touche's Audit Planning Advisor. Other proprietary expert systems include Coopers & Lybrand's Risk Advisor, which identifies and quantifies audit risk; KPMG Peat Marwick's Loan Probe, which analyzes bank loans and determines the level of loan loss reserves needed; and C&L's ExperTAX, which assists in the determination of the tax accrual and in corporate tax planning.


For years, personal financial planning (PFP) expert systems also have been limited to in-house use. But now, as their owners seek to leverage their high development costs, some of the software has gone on sale. And as competition for such software grows, prices have softened.

One large CPA firm charges clients as little as $125 to run a comprehensive PFP analysis on its in-house program. Its report includes a detailed plan of 50 pages or more. By comparison, a typical personal financial plan prepared by a professional can start at $2,000 and go as high as $20,000 for wealthy clients with complex finances.


Readers who want to see an expert system in operation should consider taking a look at Andrew Tobias' TaxCut, a tax preparation program designed for people who know little about the income tax law. The program is available at any software retailer for $79 and runs on most home PCs. Anyone running the program, although a simple expert system, will get a good idea of how helpful such programs are and how easy they are to operate.

TaxCut opens with a questionnaire that asks the user to provide income data and tax status. This information helps the program identify reportable income, deductions and credits. A checklist specifies the tax form required for each item identified. When the user is ready to get to the form itself, the program "walks" the user through related schedules and forms; screen prompts explain each step. Pushing a help key at any point calls up a more detailed explanation relevant to specific line items on the return.

Shoebox, a feature of the program, allows the user to determine the correct place to enter information on the return by identifying the data source. Another part of the program, the Auditor, scans the completed forms for mistakes and inconsistencies. It even makes tax planning suggestions.


The knowledge and skill an accountant needs in today's business world are growing at a rapid rate. With the help of expert systems, CPAs can provide quality professional services at lower cost than is possible without them.

MARY ELLEN PHILLIPS, CPA, is an associate professor of accounting at Oregon State University College of Business, Corvallis. A former member of the personal financial planning committee of the Oregon Society of CPAs, she is a member of the society's estate planning committee. CAROL E. BROWN, CPA, PhD, is an assistant professor of accounting at Oregon State. She is a member and former vice-chairwoman of the computer services committee of the Oregon state society.
COPYRIGHT 1991 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Author:Brown, Carol E.
Publication:Journal of Accountancy
Date:Nov 1, 1991
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