The Identity of The Accountant: The Impact of Digitalization on The Dutch Small and Medium Enterprise Accountant

The Identity of The Accountant: The Impact of Digitalization on The Dutch Small and Medium Enterprise Accountant’s Role

Sybrant Heidstra Student number: S3855457

MSc BA Management Accounting & Control Supervisor: Andrea Bellisario

1 Abstract

Hybridization, stimulated by digitalization, is “driving the increasing elusiveness of accounting’s boundaries and gives rise to the question what the role of the accountant should be” (Knudsen, 2019, p. 15). By drawing on the theoretical perspective of Bernardi, Sarker and Sahay (2019) that

conceptualizes how affordances influence deinstitutionalization trough the mechanism of identity work, this study seeks to identify the processes that dominate the identity work of SME accountants coping with the threats and possibilities of digitalization and how these processes lead to changes in the institutional practices in the profession of accounting. The analysis in this paper is based on a single case study and follows an interpretive methodology. This study contributes to the existing literature on accounting and more specifically to the changing role of accounting regarding digitalization, and on the relation between identity work and institutions by putting the model that Bernardi et al. (2019) developed into the accounting context.

1. Introduction

The development of digital technologies has changed the way businesses operate all over the world. Accounting, something that every company must deal with, is one such area that has seen massive transformations because of digitalization. Remember, bookkeepers used to do accounting manually, with actual pen and paper. It was not until the year 1978 that the accounting world was able to use spreadsheet software that allowed financial modeling on a computer (Cassel, 2019; Untapped, 2018). Since then, the world of accounting has changed dramatically.

Knudsen (2019) distinguishes three technological phases in accounting. According to him started the first phase with the emergence of computerized information systems in the 60’s and 70’s. These systems allowed accountants to record data in a more detailed manner and to produce more accurate analyses. With the development of the World Wide Web and Integrated Information Systems in the 90’s and 00’s started the second phase. He argues that Enterprise Resource Planning (ERP) systems were important in providing and acquiring information across the organization in an efficient way during this phase. Knudsen (2019) says that the third phase of technological advancement is currently evolving and involves technologies as artificial intelligence (AI) and big data analytics (Htaybat and von Alberti-Alhtaybat, 2017; Qasim and Kharbat, 2020).

This third phase is referred to as ‘digitalization’ (Knudsen, 2019). Some studies focus on the impact from technologies in this phase on accounting as a whole (e.g. Warren, Moffitt and Byrnes, 2015). There is however an important difference between management accounting and financial accounting (Epe and Koetzier, 2014). Though both disciplines share a lot of similarities, as in providing

2 decision-making of third parties (the outside world) regarding the organization (Koetzier and Epe, 2009). Management accountants are often controllers or financial managers that operate inside a firm. A financial accountant is commonly an external professional.

Some researchers use the term ‘accountant’ when referring to the ‘management accountant’ (e.g. Arnaboldi, Azzone and Sidorova, 2017). However, this might cause some confusion as the title of ‘accountant’ is legally protected in the Netherlands and refers to this certified external financial accountant (NBA, 2020). Next to that, “accountants must abide by ethical standards and guiding principles and have a legal responsibility to be honest and to avoid negligence in their duties” (Kagan, 2019). Therefore, in the forthcoming of this report, I will refer to ‘the accountant’ when denoting this certified profession and explicitly mention ‘management accountant’ when referring to the controller or financial manager that operates from inside a firm.

Why is this distinction so important? Researchers expect management accountant to develop more into the direction of a business partner, “seeking to attain a new set of responsibilities and a new identity” (Goretzki and Messner, 2018, p. 1). As the accountant has a special place in Dutch society, since their profession is legally protected, their need for change is less obvious. However, Frey and Osborne (2013) calculated that accountants and auditors are some of the most vulnerable jobs to technological developments, with a high risk of computerization. When technology can take over (parts of) their current tasks, this poses a threat to their existence. Meanwhile, other professional areas, such as IT and marketing, are utilizing digital technologies to leap into the field of performance management

(Arnaboldi et al., 2017; Knudsen, 2019). As such, we see hybridization between management

accounting and financial accounting, but also between accounting and other domains (Arnaboldi et al., 2017; Bhimani and Willcocks, 2014; Caglio, 2013; Knudsen, 2019). This hybridization, stimulated by digitalization, is “driving the increasing elusiveness of accounting’s boundaries and gives rise to the question what the role of the accountant should be” (Knudsen, 2019, p. 15).

Especially Small and Medium Accounting Practices (SMPs) experience increasing competition from different directions (van der Weerdt and Rijsenbilt, 2018). “SMPs are involved in assisting Small and Medium Enterprises (SMEs) in their compliance to accounting, taxation and other regulatory

requirements” (Husin and Ibrahim, 2014, p. 55). It is necessary for the accountants at SMPs (the SME accountants) to distinguish themselves and to develop their identity (van der Weerdt and Rijsenbilt, 2018)

3 with the threats and possibilities of digitalization and how these processes lead to changes in the institutional practices in the profession of accounting. This study thereby contributes to the existing literature on accounting and more specifically to the changing role of accounting regarding

digitalization. This study also contributes to existing literature on the relation between identity work and institutions.

The research question for this study is: ‘how are Dutch SME-accountants developing their role regarding digitalization?’

2. Literature Review

In this section, I will first assess literature on recent technologies in digitalization that impact financial accounting practices with the objective to identify some of the main implications for financial

accounting regarding digitalization, thereby informing about the context and background of the study. Next, I will discuss the different literature on the role of accountants in the light of digitalization, addressing the problem statement. After that, I will provide a theoretical framework through which the role of the SME accountant can be assessed.

2.1 Background: Digitalization and Financial Accounting Tasks

Knudsen (2019) found that the third phase of technologies in accounting is often referred to as ‘digitalization.’ Yet, Verhoef, Broekhuizen, Bart, Bhattacharya, Dong, Fabian and Haenlein (2019) have made a clear distinction between the concepts of digitization, digitalization, and digital transformation (p. 3). They define digitization as “the encoding of analog information into a digital format such that computer can store process and transmit such information.” Digitalization is about “how information technology or digital technologies can be used to alter existing business processes.” Digital transformation is “a company-wide change that leads to the development of new business models.” As such, there is a recognizable stratification in which digital transformation is the most extensive transformation and digitization the least comprehensive.

I will review literature on two of the main technologies from what Knudsen (2019) considers the third phase of technologies in accounting: big data analytics and artificial intelligence. I will also address shortly: cloud computing and blockchain. I will thereby specifically focus on the implications for financial accounting, as this addresses the main tasks for accountants. This section therefore provides the background and context of this study.

4 and Byrnes, 2015). This data growth is for a significant part because of the increase in online media and social networking possibilities (Bhimani and Willcocks, 2014). Most of this information is unstructured, but “a substantial proportion is amenable to structuring in an economically purposeful sense” (Bhimani and Willcocks, 2014, p. 478). If firms want to manage and use big data for

innovation and decision-making in an efficient manner, they must use big data analytics (Dong and Yang, 2018). Big data analytics are applications for analyzing “information with unprecedented volume, velocity, variety, veracity, and value” (Dong and Yang, 2018, p. 1) for business purposes. Warren et al. (2015) recognize four types of big data: video, images, audio, and textual files. According to them, does big data have increasingly important consequences for accounting: “the information made available via big data can provide for improved managerial accounting, financial accounting, and financial reporting practices” (Warren et al., 2015, p. 397). In the field of financial accounting is expected that big data complements traditional financial information and can provide improved transparency and usefulness for decision making. Big data analytics can help in valuating intangible assets and off-balance sheet assets, such as customer base and human resources, and therefore complement the notes to financial statements (Warren et al., 2015).

Krahel and Titera (2015) argue that accounting and auditing standards where accountants have to abide by “have not kept pace” (p. 409). They find that the GAAP-based financial statements are not sufficiently dynamic and argue that these standards should be replaced by big data. As such, big data analytics can help in addressing the disparity between financial reporting standards and fair value accounting, creating a global set of accounting standards. Next to that, big data analytics can support financial accounting in risk analysis, as it allows for quantitative probability estimates (Choi, Wallace and Wang, 2017).

Vasarhelyi, Kogan, and Tuttle (2015) argue that big data analytics “has the potential to cause a paradigm shift allowing economic activities to be traced and measured earlier and deeper” (p. 384). According to them, are accountants able to provide real-time information with big data, which is in contrast with the traditional way of accounting that involves summary and aggregation of information on a periodically basis.

2.1.2 Artificial intelligence. “The term artificial intelligence stands for a large number of algorithms, models and techniques derived from the assimilation of statistics, machine learning, databases and visualization” (Moudud-Ui-Huq, 2014, p. 8). The American Institute of Certified Public Accountants (1987) defined artificial intelligence as “a set of techniques whose processes give

5 There are three types of artificial intelligence systems: Neural Network Technique, Knowledge-Based Systems and Robotic Technology (Moudud-Ui-Huq, 2014). “Neural Network Techniques uses background knowledge about events and their relations to other concepts in the application domain.” This can improve the quality of event processing and decision making, a knowledge-based system is a computer program that reasons and uses knowledge to solve complex problems and Robotic

Technology are techniques used to make robots that include artificial Neural Network, Knowledge-Based Systems and all other possible decision-making systems” (Moudud-Ui-Huq, 2014, p. 11). Many accounting tasks require expertise to form opinions about complex information, something that artificial intelligence can help with. Accounting areas that have been suggested as suitable for artificial intelligence are external auditing, internal auditing, governmental accounting and auditing, and tax accrual and planning (Baldwin-Morgan, 1995). “Currently, the use of AI in the auditing process is at an evolution stage, where repetitive audit tasks can be subject to current AI technologies” (Qasim and Kharbat, 2020, p. 109).

Subjects in which scientist and technologists are developing artificial intelligence in accounting are: credit authorizing and screening, mortgage risk analysis, financial and economic analysis, risk rating of exchange traded, detection of regularities in security price movements, prediction of default and bankruptcy, risk analysis of fixed income investment, detection of management fraud, machine learning techniques to automatically identify characteristics of fraud, artificial intelligence in marketing (Moudud-Ui-Huq, 2014).

2.1.3 Other IT techniques.

Cloud computing. “The cloud has enabled enterprises to store, access and share resources at lower costs and with greater flexibility” (Bhimani and Willcocks, 2014, p. 470). “Cloud computing consists of internet based remotely hosted data centers, platforms or applications run either internally, or by external service providers, or a mix of these” (p.484). “Internet corporate reporting provides stakeholders with varying levels of accessibility, interactivity, research and data sharing ability, which can create a revolutionary terminal that will transform the current corporate reporting landscape practices to interactive corporate reporting” (Htaybat and von Alberti-Alhtaybat, 2017, p. 853). Working in the cloud has many benefits, for instance real-time updates regarding the clients’ administration, allowing users to extract data for their own analyses. Accounting offices can reduce the costs for maintaining their own IT, as this can be outsourced (Bhimani and Willcocks, 2014). It also allows accountants to work from home or even at a client’s location.

6 (Murray, Kuban, Josefy and Anderson, 2019, p. 3-4). Blockchain has many functions, “such as

distributed data storage, anonymity, data obfuscation, shared ledgers, and so on” (Cong and He, 2019, p. 1759). These systems can help accounting offices, for instance, in storing their own data in a safe environment or automate value transfers by creating ‘smart contracts.’ But above all, blockchain has implications for financial data integrity, financial reporting risks and corporate governance practices and accountants must be prepared to address these challenges leading up to financial statement preparation (Smith and Castonguay, 2020).

2.2 Literature Review: Illusive Boundaries in Accounting

IT used to be classified as a strategic necessity rather than a source of competitive advantage (Clemons and Row, 1988). For example, using e-mail will not give any company a strategic advantage, but not using it could be very harmful. However, from a resource-based view, researchers have theorized that the relationships between IT-assets and organizational resources are synergistic and can lead to superior business performance (Bharadwaj, 2000; Nevo and Wade, 2010). Although, individual IT-resources might be relatively easy to acquire, combining these IT-resources create IT-capabilities that are hard to imitate and therefore can lead to achieving a competitive advantage. Verhoef et al. (2019) conclude that digital transformation occurs in response to changes in digital technologies, increasing digital competition and resulting digital customer behavior. Combining these views is helpful in explaining why the accounting business is changing through digitalization. First, because clients expect accountants to adapt to new digital technologies, and if they do not, they are bound to be replaced by other accounting firms who do. Or else, to create a sustainable advantage by, for instance, being able to work more efficient or more adequate than competitors.

This process of continuously improvement is shaping the accounting world and creates a shift in how accountants are doing their jobs. As explained in the previous section, technologies such as big data analytics, artificial intelligence, cloud computing and blockchain allow for a shift from forecasting to nowcasting, other new ways for storing data, automatic prediction of default and bankruptcy, and so on (Moudud-Ui-Huq, 2014; Cong and He, 2019; Knudsen, 2019). This has a major effect on the ways in which accountants perform their tasks, but what does this mean for their role? Knudsen (2019) argues that “digitalization is the impetuses for increasingly elusive boundaries of accounting” (p. 14-15). In addition, he says, “other professional areas such as IT and Marketing are utilizing digital technologies to leap into the accounting domain.” As such, he claims that “hybridization fueled by digitalization is driving the increasing elusiveness of accounting boundaries, rising questions about what accounting is and what the role of the accountant should be in the digital age.”

2.2.1 Increasing competition and hybridization. Knudsen (2019) argues that these questions first and foremost apply to management accountants. He finds that management accountants’

7 digital tools and techniques is the engine of this change. Some studies have validated this view. For instance, Arnaboldi et al. (2017) show how marketing and communications managers entering the field of performance management can take the lead in social media management and that reluctant management accountants with a traditional mindset are likely to observe this process at a distance with the risk of becoming obsolete. Goretzki and Messner (2018) found that the management accountant aspires to become a ‘business partner’ for management, potentially creating conflicting interests with operational managers.

I agree with Knudsen (2019) on his views that the boundaries of accounting are becoming more elusive. However, I suggest that this is not only applicable to management accountants but also to the profession of (financial) accountant. First, as Frey and Osborne (2013) have calculated, accountants and auditors are some of the most vulnerable jobs to technological developments with a high risk of computerization. And, as already explored in the previous section, new technologies do affect financial accounting as well (e.g. Moudud-Ui-Huq, 2014; Cong and He, 2019; Bhimani and

Willcocks, 2014). This means that the profession of accountant is at risk and has to find ways to stay relevant.

Especially the position of SMPs, that aim at SMEs, are being pressurized because of increasing competition and digitalization (van der Weerdt and Rijsenbelt, 2018; Vlaming, 2014). Of course, the accountant’s main task is in creating and auditing the external financial statements, and this role is even protected by Dutch law (Epe and Koetzier, 2014; NBA, 2020). But there is a general

misconception that every legal entity requires an auditor’s report from the accountant: only medium sized and large companies require this (Raedenburg, 2020). So, with the advances of digitalization by their side, are large accounting office’s increasingly better in providing financial statements for small enterprises and are bookkeepers able to provide cheap and efficient services in accounting as well (van der Weerdt and Rijsenbelt, 2018).

Also, as Husin and Ibrahim (2014) argue, SMEs use SMPs “beyond the related audit services as a source of advisory and support” (p. 57). Caglio (2003) found that ERP systems allowed offices “to revise processes and to integrate financial accounting with management accounting” (p. 135) and as such, hybridization arose between management accounting and financial accounting. This allowed the accountant to also provide some management accounting services, although SMPs do experience some difficulties with the billing and marketing of these services (Vlaming, 2014). Nevertheless, some of the same consequences that Knudsen (2019) implies for management accountants, apply also to accountants regarding these management accounting services.

Also, in my opinion, does Knudsen (2019) see hybridization between different professional groups mainly as a ‘one-way street.’ According to him are other professional groups infiltrating the

8 boundaries of accounting also create an opportunity for accountants to gain relevance in the domain of other fields. If SMPs would adapt even a broader role, extending their services into, for instance, IT and marketing, they might be able to counter this threat from other professional groups. Husin and Ibrahim (2014) also argue that the lack of expertise with SMEs becomes advantageous to SMPs to extend their services into advisory and consulting services” (p. 55). As Van der Weerdt and Rijsenbelt (2018) found: “SMPs need to break away from the stereotypical image that SME accountants have” and this could be a way to overcome that. As Knudsen (2019) says: “accountants would be remiss if they failed to take charge of defining their own future” (p. 15).

2.2.2. Role of the accountant in the digital age. Despite research on this subject is still in its infancy, some studies have sought to look at the accountants’ role. There is however a general focus on the management accountant. Arnaboldi et al. (2017) did research on the “processes whereby organizational actors can seize opportunities opened up through social media and the way in which the relative information is managed” (p. 821). They drew on the notion of boundary objects: “a concept that explains the nature of cooperative work among heterogeneous groups” (Arnaboldi et al., 2017, p. 822). They found that in social media accounting, marketing and communications managers are entering the field of performance management and can take the lead in social media management. This causes hybridization, and “faced with this change, reluctant accountants with a traditional mindset are more likely to observe the process at a distance, focusing more on their routine operations based on conventional data” (Arnaboldi et al., 2017, p. 821)

The study of Arnaboldi et al. (2017) is focused at the hybridization between management accountants and marketing and communications managers. The study shows an interesting insight in the

hybridization that accounting is facing regarding digitalization. It shows that the accounting business is under threat and that management accountants have to be open for change. However, this study is purely focused on analytics in social media, which is just a small part of digitalization, and is therefore not generalizable to all other technologies.

Goretzki and Messner (2018) found that management accountants are taking efforts to position themselves as a business partner. Drawing on identity work and the notion of front stage and backstage interaction, Goretzki and Messner (2018) examined how different types of interaction influenced management accountants’ efforts to establish a business partner identity. The study showed how ideational and experimental storyable items help management accountants aspirations equip a vague aspirational identity. Though, the study gave insight in the aspirational identity of management accountants, it does however not consider the effects of digitalization.

9 sensemaking. Also, he examined the ways in which organizations use IT systems to establish

appropriate behavior among employees. His study drew on Alvesson and Willmott’s (2002) framework of identity regulation and work. The author found that “IT system presents the central means of establishing appropriate behavior in case organization and at the same time, the IT system acts as a sense-giving device, the central reference point for management accountants to make sense of their work” (Heinzelman, 2018, p. 465). Also, he found that “dissonance emerges from differences between the ideal business partner role and the organizational reality, prompted by management accountants making sense of their role and work by drawing on sense-giving devises such as role models, tasks and work” (Heinzelman, 2018, p. 479). “The IT system is an important sense-giving device used by management accountants to make sense of conflicting and threatening influences on their identity by framing them as an inherent aspect of the IT system” (Heinzelman, 2018, p. 479). Heinzelman’s study (2018) rendered some interesting insights. The understanding that IT systems act as a sense-giving device shows the importance of digitalization. The focus of the research of

Heinzelman (2018) is on the occupational identity of management accountants. The concept of identity and identity work is very useful for this research as well, as it gives insight in the self-understanding of the accountant in relation to the outside world. For explaining how digitalization eventually leads to changes in the deep-seated habits and institutional logics of the accounting profession, an extra step is required (Lok, 2010; Burns and Scapens, 2000). The model developed by Bernardi et al. (2019) is a useful linkage in this study as it translates how differences between the aspirational and current self eventually lead to changes in institutionalized accounting practices through ‘affordances,’ and therefore the changing role of the accountant. I will elaborate on this in the next section.

2.3 Theoretical Framework: Identity Work and Affordances as Means of Deinstitutionalization I draw in this study on the model developed by Bernardi et al. (2019) that theorizes identity work as a mechanism that links IT affordances to institutional practices, to show how misalignment between the aspirational identity and current identity informed by digitalization potentially causes changes to the institutionalized practices of the accountant, and therefore its roles. I will first explain the concept of identity and identity work and then explain the model.

10 may identify himself with the organization he works for but also with all the other accountants as a professional group, sharing the same values, customs, and norms.

In their paper, Kärreman and Alvesson (2001) found that central characteristics, coherence, distinctiveness, and direction are four important aspects of identity construction. “Central characteristics refer to questions about a person’s, group or social institution’s feelings and ideas about basic concerns and qualities, for instance ‘who am I?’ or ‘what are we?’ calls for a response in terms of some dominant or defining identity” (p. 63). “Coherence describes a sense a feeling of continuity over time and situations and implies consistent behavior in similar situations” (Goretzki and Messner, 2018, p. 3). “Distinctiveness means that somebody is definable, by herself and others, as different from someone else” (Alvesson and Willmott, 2002, p. 625). Direction is the fourth aspect. Identity indicates an orientation, it implies what is appropriate, natural, and valued for a specific subject: “a specific outcome to questions of identity implies action” (Alvesson and Willmott, 2002, p. 625). “A sense of direction makes certain sets of actions look more natural, reasonable, appropriate than others and guides the actor’s decision making” (Goretzki and Messner, 2018, p. 3).

Traditionally identities were seen as somewhat fixed and stable, only likely to change gradually in the course of time, but nowadays we think of identities as social accomplishments (Kärreman and

Alvesson, 2001). We see that identity “is subject to ‘identity work,’ a process by which individuals continuously form, repair, maintain, strengthen, or revise the constructions of their self” (Bernardi et al., 2019, p. 1181; Alvesson and Willmot, 2002, p. 626). In identity work “actors reflect upon their current and their aspirational self and undertake efforts to reduce the gap between the two, whereby aspirations are often informed by role models” (Goretzki & Messner, 2018, p. 1). Watson (2008) describes identity work as “the mutually constitutive processes whereby people strive to shape a relatively coherent and distinctive notion of personal self-identity and struggle to come to terms with the various social-identities” (p. 129). Social identity here refers to “what they think we are” (Bernardi et al., 2019, p. 1181). In this perception are ‘social-identities’ (Watson, 2008) similar to ‘role models’ (Goretzki & Messner, 2018) in that they both inform the aspirational identity. Watson (2008) however recognizes that individuals are able to influence social identities as well.

Kärreman and Alvesson (2001) found that “identity is achieved, maintained, changed, elaborated, and communicated through conversation and narratives” (p. 66). Thus, “identity work results from the collective efforts of individuals who consciously enact and negotiate their selves through talk and action” (Bernardi et al., 2019, p. 1181).

11 When there is a gap between the aspirational self and the current self, the accountant will try to reduce this gap by performing identity work (Alvesson and Willmot, 2002). The concept of identity and identity work is therefore very useful for assessing how the accountant thinks about themselves, now and in the future, and how they think they can bridge that gap.

As Bernardi et al. (2019) say: “it is through the enactment of specific roles in situated settings that we make our identities function and have an impact on the world” (p. 1180). “The concept of identity is of central importance to understanding shifts in institutional logics, because identity is thought to form an import link between institutional logics and the behavior of individuals and organizations” (Lok, 2010, P. 1305). Therefore, I will draw on the model created by Bernardi et al. (2019) that uses identity work and affordances as means of deinstitutionalization.

2.3.3 Identity Work and Affordances as Means of Deinstitutionalization. In their paper, Bernardi et al. (2019) have developed a model that theorizes identity work as a mechanism that links IT affordances to institutions. This model allows for greater understanding on how the accountant’s identity work eventually leads to a change in the role of the accountant’s profession. First, to understand the model, I will explain the concepts of affordances and institutions.

Affordances. Affordances, or more specifically ‘functional affordances,’ are “the possibilities for goal-oriented action (given) to specified user groups by technical objects” (Markus and Silver, 2008, p. 622). “Affordances are not just expressions of either the properties of a technology or its uses, but account for the relation between them” (Bernardi et al., 2019, P. 1180). When an IT feature is lacking a desired affordance, the materiality of a technology then becomes a constraint to the performance of a desired activity (Bernardi et al, 2019). Materiality refers to the properties of the technology that provides users with the capability to perform some action (Leonardi, 2010). Thus, an affordance is a judgement of the value that properties of certain technologies have for achieving the desired goals of its users.

Institutions. “Institutions are socially constructed systems of rules, norms, and meanings that regulate social actors’ behavior and influence the adoption and institutionalization of new IT systems” (Bernardi et al., 2019, P. 1179). These rules and routines appear as taken-for-granted, and

“organizational fields or individual organizations simply reproduce the externally imposed institutional forms, without subjecting them to modification or change” (Cruz, Major and Scapens, 2009, p. 92). However, institutions do change, and this process is called deinstitutionalization: “the process by which legitimacy of an established or institutionalized organization practice erodes or discontinues” (Bernardi et al., 2019, P. 1179).

12 engage in identity work to protect their identities and practices from institutional change” (Bernardi et al., 2019, p. 1181). As such, this concept forms the link between identity work informed by

digitalization or a changing environment and actual changes in the accountant’s role, as Bernardi et al. (2019) explain in their model (p. 1181):

Users might perceive changes in technology or the environment either as a threat to or opportunity for the performance of their professional and organizational identities. In some cases, they become conscious of a misalignment between their social identity (what others expect them to be) and their own sense of self as members of a profession or organization. This assessment triggers identity work. We posit that affordances (i.e., the possibilities for goal-oriented actions that users perceive through their interaction with a technology) can be seen as either an opportunity for or a constraint to identity change and, therefore, play a part in the way users review their identities through identity work. Users’ identity work and the affordances it generates can potentially influence the deinstitutionalization of practices through which users adapt to change.

2.3.4 Application in accounting

What I expect, based on the model of Bernardi et al. (2019), is that the accountants experience changes in their environment (e.g. elusive boundaries) and in technology (e.g. big data, artificial intelligence, etc.). This might trigger them to form an aspirational identity based on certain role models or/and the clients’ expectations (social identity). When there is a misalignment between what they perceive themselves to be now and what they want to be, they will try to overcome this gap (identity work). The accountant will then make a value judgement whether a certain technology, action, etc. is helpful or not in bridging this gap (affordances). When they apply this certain technology or action that appears helpful, this brings them (a small step at the time) closer to their aspirational identity. When something is perceived as not helpful in bridging this gap, this might lead to a reassessment of the aspirational identity. The combined steps towards bridging the aspirational identity make a difference for changes in the institutionalized practices, and eventually in the role of the accountant. This study therefore renders insight into the role of the accountant, and especially the SME accountant, in this age of digitalization.

3. Method

13 company fits the phenomenon being studied (Bhattacherjee, 2012). From April till June 2020, I have performed four interviews. Three of these individuals interviewed are accountants with all over 20 years of experience. The fourth person is the IT-specialist and an assistant-accountant at Van Wieren & Vellinga.

3.1 Case study details

Van Wieren & Vellinga is a small accountancy office with 17 employees and is based in Dokkum, the most northern city of the Netherlands. As Dokkum is in Friesland, the languages spoken at Van Wieren & Vellinga’s office are mostly Frisian and Dutch. Their orange and blue colored office stands at the end of the Zuiderschans business park. Though, the company used to be larger with a second office in Leeuwarden, both offices have bifurcated for strategic reasons.

Van Wieren & Vellinga Adviseurs Accountants has a strong regional function and their services are merely focused on small and medium-sized enterprises. Their clients are active in various sectors, for instance: agricultural, paramedical, catering and recreation, but also nonprofit organizations.

Moreover, Noord Oost Friesland, the region where most of Van Wieren & Vellinga’s clients are located, is considered a shrinking region, and therefore has its own specific challenges. Accountants at Van Wieren & Vellinga therefore require expertise in various fields and need to be broadly oriented. At their website, we find Van Wieren & Vellinga’s mission statement, vision, and core values (https://www.vanwieren-vellinga.nl). Van Wieren & Vellinga’s mission statement is: “we guide our clients towards their goals.” They aim to be involved throughout the year and not only during reporting and auditing. “By using modern technologies, we are able to inform our clients at any time about the state of affairs in their businesses, we are constantly optimizing our processes and

developing smart solutions.” The core values of Van Wieren & Vellinga are professionalism, personal attention, passion, practicality, and profitability.

3.2 Data collection and analysis

The broader scope of case studies allows to detect patterns and potential explanations that initially neither were expected nor looked for (Blumberg, Cooper & Schindler, 2013). An interpretive method allows to derive a theory about a phenomenon from the observed data (Bhattacharjee, 2012). An interpretive method is appropriate for this study, as interpretive research is well-suited for studying context-specific processes and can help in uncovering interesting and relevant research questions. By putting the data through the theoretical model of Bernardi et al. (2019), I want to answer the research question.

By performing semi-structured interviews with the accountants at Van Wieren & Vellinga, I seek to unravel the processes of the accountants’ identity work regarding digitalization and what the

14 their own input while still addressing all the main subjects for my research. Interviews are very good for finding out the experiences and underlying motives of the respondent (Verhoeven, 2011). Each interview took between 40 and 70 minutes and all interviews have been recorded and transcribed. I have added the interview protocol in appendix A.

Eventually, I analyzed the transcripts by marking and coding sections which related to the different subjects of this research. I started by indexing the interview transcripts into first-order codes by seeking similarities and differences in the data from the viewpoint of the interviewees. Second, I conceptualized the first-order codes into several isolated concepts by comparing these ideas to the literature. After this, I grouped the conceptual categories into explanatory theoretical elements (themes) for this research. This process is summarized in figure 1.

15 4. Results

In this section I present the findings of my analysis. For confidentiality reasons, I have anonymized the names of the interviewees. I will first elaborate on findings concerning the changing environment, second on the identity construction, then on the aspirational identity, after that on identity work, and lastly on IT and affordances.

4.1 Changing Environment

The accountants at Van Wieren & Vellinga are all very experienced and have seen a lot of changes in the profession throughout the years. Next to digitalization, they consider changes in the law very important. Accountant 3 says: “there are many developments in our profession, now is privacy for instance really import, but next year something else might be considered essential again.” Accountant 1 finds, next to changes in the law, also changes in culture as very important: “it used to go without saying that the oldest sons took over the family business from his father, but nowadays is that not so obvious anymore.”

The accountants mention a changing playing field. As accountant 1 and 2 put out: “traditional services that banks and insurance companies used to provide, have disappeared as a result of centralization.” This has left a gap for the accountant to fulfill. There is however increased competition from, for instance, bookkeepers. But the IT specialist, also assistant accountant, does not consider this as a threat, as he finds that Van Wieren & Vellinga is able to deliver better value than most bookkeepers. These findings add to Knudsen (2019) in that there is increasing competition.

4.2 Identity Construction

Important aspects of identity construction include claims and ideas about central characteristics, coherence, distinctiveness, and directions (Kärreman and Alvesson (2001). Asking the accountants about their role or identity, calls for a response in terms of some distinctive or defining identity. When asking the accountants at Van Wieren & Vellinga about their social-cultural role as an accountant, this resulted in some defining characteristics: an accountant should be “confidential, reliable, objective, and with integrity.” Accountant 1 argues that society puts trust in the accountant to guarantee a certain quality in their statements, operating as an independent watchdog. Being

16 much.” Accountant 3 gives an example of reliability: “when an accountant says that something is 50, then people should be able to trust that it is actually 50.” Also, the accountants at van Wieren & Vellinga find that an accountant should be confidential: “clients should be able to discuss everything with us.”

The accountants at Van Wieren & Vellinga also make some distinctions between their profession and a few other professions. We can see this from the next example: Accountant 2 observes, for instance, “that consultants and bookkeepers are sometimes able to provide easy advice without having to deal with the consequences when things go wrong.” Accountants cannot do these kinds of ‘easy advice jobs’ as they need to be reliable and objective:

There are many parties that can provide the closing financial statements. There are for instance bookkeepers or even software that can do that. But that says nothing about the quality of these statements. One of the characteristics is that an accountant has to be objective: when an accountant says it is not allowed, then it is simply not allowed. For example, I had a client that was in bad weather: rippling turnover, yet a positive operating capital. Still, we had some doubts about the continuity of this firm. In November, we finished the financial statements. We still had some doubts, but we found it was at the verge of

permissible to approve these statements. The entrepreneur had to sign for the conformation of the statements, but he did not do that in time. Now, since the prospects have changed due to the coronavirus, he even put a letter of resignation out to his staff, I told him that we cannot maintain the same conformation of the financial statements. Too much time had passed, and we would never come to the same conclusion. The client did not agree with this, but I will stand my ground. A bookkeeper does not have to deal with that: ‘here are your financial statements and good luck!’

Accountant 3 also addresses the difference with the controller (management accountant) that operate inside the firm. He observes that people in this profession can go more ‘into depth’ as they only have to focus on just one company. He implies that the accountant is probably able to do this as well, but that this is just “too costly.” However, he finds that the controller should not be seen as competition. On the contrary, “I think the accountant and controller are complementary to each other: it can be really helpful to have a person on the inside of a company that is able to provide a certain quality of information.” He says that “even though this person is not independent, it is a good interlocutor for accountants.”

17 accountant 1 argues, “nowadays largely the same rules and quality norms apply to the average SMP than to the big four.” “But of course, those companies operate on a whole other playing field as they work internationally with companies like Shell or Philips.”

Apart from describing the central characteristics and differences with other professions or other offices, the accountants also described certain roles they perceive to have. According to accountant 2, were accountants traditionally considered more as bookkeepers. He finds that the accountant used to be a ‘narrow-minded specialist’ that had to be good at bookkeeping, but still with a deep professional knowledge. Accountants were ‘auditors,’ according to accountant 3, who in general made sure that “things went as they had to go.” Currently, they consider the accountant more as an interlocutor, a relationship manager, and/or a confidential counselor. As accountants and assistant-accountants prepare the required financial statements, they simultaneously gather lots of information about the client’s private life and their company. This makes them an ideal sparring partner for the client. But this also requires a broader scope of the accountant and different views on the matter. “The accountant has to wear many hats,” according to accountant 2. “One moment I am the interlocutor and next moment I need to be a firm auditor.”

It is interesting to see by which means certain characteristics are stabilized (Kärreman and Alvesson, 2001). I sense from the interviewees that the central characteristics, being confidential, reliable, objective and with integrity, are so important that they are somewhat fixed: they define the core of being an accountant. These characteristics make the accountant stand out from the other professions in the accounting business and provide a certain script for behavior. Yet, these characteristics sometimes might feel as a handicap, as their advice takes more time to construct and therefore are more costly. But then again, it also makes an accountants’ advice worthwhile. As some of these characteristics are established by law, it is hard for competition to replicate. Accountant 3 says: “these laws make that we sometimes have to act as a police officer, however those regulations can be very fruitful as well.” Next to that, a broad view seems to become even more important in the future. I will elaborate on this in the next section, where I will examine the claims and ideas about the aspirational identity.

4.3 Aspirational Identity

At Van Wieren & Vellinga, they expect the accountant to change into even more of a ‘consulting’ role than it already has. This role is something they aspire as well. Accountant 3: “my passion lies with advising clients, and not particularly with auditing or preparing the financial statements.” Accountant 2 also finds that there is more added value in consultancy work. This is due to a changing playing field and certain characteristics that accountants possess. Because of this, the accountants at Van Wieren & Vellinga see a broadening of their role. As accountant 1 explains:

18 regularly hold sessions. There used to be more financials, for instance banks or insurance persons, who gave very good independent advice. Next to this, society has become more complex. Think about tax laws, environmental laws, organizational matters, etc. Though in the past it used to play a part as well, it has now become even more important. As of this, our role as counsellor is even more valuable. Therefore, accountants need to have a really broad view: it is more than just bookkeeping. We need to look, for instance, at the social-economical and psychological aspects as well.

Accountant 2 and 3 see a similar pattern as clients expect them to be a source of information of all kinds of aspects. Accountant 2, for instance, has even clients that ask him if he can show how a certain software works: “but how should I know, I am not an IT specialist.” What I find interesting from this is that the accountants experience somewhat of a misalignment between what others expect them to be (social identity) and their own sense of self (Watson, 2008). That is, their clients expect them to know something of everything, to be someone where they can put all of their questions. The accountants therefore feel and see that they have to do something to overcome this gap, triggering identity work (Kärreman and Alvesson, 2001). Overall, it seems that the accountant largely holds true to its core values but tries to emphasize certain roles such as the sparring partner.

4.4 Identity Work.

Examples of activities regarding identity work are “implicit or explicit accounts of self-identification and role claims and use” (Bernardi et al., 2019, p. 1181). Accountant 3 gives an example of what he finds important:

Auditing a company such as Shell: that is not something I admire. That might take days, even months, and in the end, we know if everything went as it had to go. No, my heart is with the family business. Sitting together with an entrepreneur, of course you have to take a look at the past as well, but with the aim to help preparing for the future. Ok, this happened, how can we adjust for that in the future? Is business going well?

Between the lines, I find that the accountant 3 is aimed at a consultancy role, giving advice, or becoming a sparring partner. There are also some explicit role claims, as accountant 1 says: “I am increasingly getting into an advisory role.” But, accountant 1 mentions that not all entrepreneurs expect that from the accountant. “My role is I then to keep them within the lanes,” he says.

19 as important. Surprisingly, accountant 3 and accountant 2 do not consider the news and media as one of their main sources for information on new applicable technology.

Though the accountants are consciously making choices to become a better advisor and business partner, they reckon that most of their progress happened subconsciously, by learning and building experience through the years.

4.5 Information Technology and Affordances.

Though a changing law and an altering competition has had a big impact on the accountant’s role, IT and automatization are also considered a major influence by the accountants at Van Wieren en

Vellinga. This is in line with the model of Bernardi et al. (2019) in that changes in technology, but also other changes in the environment, are considered to spark identity work.

At Van Wieren & Vellinga, they have seen their organization change because of digitalization. “In the past, we had to manually process administrations, but nowadays you can trust automatization to do a lot of work for you” says accountant 3. “Especially the primary recordings, bank transactions for instance, can be done automatically and save a lot of time, which allows me to spend more time on the things that matter most.” Accountant 2 agrees with accountant 3, though he does have a critical note. He finds that he “spends less time on the primary recordings but has to be more critical on whether those recordings are correct.” As new bookkeeping software allows companies to do their own administration, it does not mean that clients know how accounting is done.

Accountant 2 notes that the ratio between the number of assistants per accountant has changed from approximately five-to-one, to almost one-to-one. He concludes that the work of the assistant has been taken over by computers and software. The IT specialist, besides assistant-accountant, also sees a change in the division of roles: “the division of tasks in our office is shifting, the accountants are becoming more the ‘sparring partner’ for clients, and the assistant-accountants are solely responsible for preliminary work.” But, he says, this is something that should have been the case already, and that this is not because of automation but more due to a shortage in personnel.

The accountants at Van Wieren & Vellinga do not see automatization as a threat to their work since a huge part of their work is still about human aspects. Accountant 1 finds that that accountants have to consider things as “future follow-up, divorce, social economical and psychological aspects” as well. That are things that a computer simply cannot do. Accountant 3 endorses that view and gives an example:

20 makes this person unhappy, we should reconsider this. I think that it is really important to calculate for the human aspects as well.

They do, however, feel a certain pressure to be at least informed about new technologies. As accountant 2 says: “when a client asks me about ‘the internet of things,’ I need to know what that is about.” This is a perfect example of how technology informs social identity, what the client expects the accountant to be (Watson, 2008). The IT-specialist says that they “should not want to be

frontrunners, because new applications often have a lot of teething troubles.” Accountant 1 endorses this view: “if you lead the way, you have to pay some tuition fees.” However, the accountants at van Wieren & Vellinga do also not want to fall behind: “if you are a really late mover, then you risk being old news” as accountant 1 says. The accountants generally have a feeling that Van Wieren & Vellinga is somewhere in the middle of the advancements in digitalization comparing to other offices, lacking just a bit behind to the big four.

The accountants commonly do not feel IT as an obligation. Accountant 2 says: “the software that we use is really helping us, I am really glad that I don’t have to use all those physical folders anymore.” But the IT-specialist is a bit more nuanced: “I see that some colleagues have trouble adapting to the digital world.” He says: “you can really see who is accustomed to using computers in their work during this time of the coronavirus; those who are not working at home are here at the office because their files are still all on paper.”

I have asked the accountants about what they think about technologies such as big data analytics, artificial intelligence, blockchain and cloud computing. Especially big data analytics is something they perceive to have great benefits. “It would allow us, for instance, to look at the average creditor term in a certain branch and use it as benchmark” says accountant 1. What is interesting to see is that they distinguish the possible benefits of certain technologies in the long run from its direct applicational opportunities. For instance, using big data analytics for new standards (Krahel and Titera, 2015) has some beneficial applications, however certain technology is “something for the international offices to develop.” Offices such as Van Wieren & Vellinga do not have the means to innovate in these

technologies, even though they see the benefits. This shows that the accountants are restricted in achieving their aspirational identity when certain technology is just not available yet in a specific form.

21 safe way or the ability process invoices as fast as possible in the administration, is something that the clients do expect from Van Wieren & Vellinga.

The biggest downside (or threat) that the accountants at Van Wieren & Vellinga witness regarding digitalization, is the security of data. Accountant 1 says: “if there somehow slips a ‘virus’ in our cloud, that will cause a big problem.” However, he puts this in perspective: “if there would be a fire at our office, and it burn down to the ground, then all of our paper files would be gone as well.” Accountant 1 also mentions that digitalization might have consequences for employment, but that we have seen the effects of this probably already.

5. Discussion and conclusion

Hybridization fueled by digitalization is driving the increasing elusiveness of accounting boundaries, rising questions about what accounting is and what the role of the accountant should be in the digital age (Knudsen, 2019). By drawing on the theoretical perspective of Bernardi et al. (2019) that conceptualizes how affordances influence deinstitutionalization trough the mechanism of identity work, I seek to identify the processes that dominate the identity work of SME accountants coping with the threats and possibilities of digitalization and how these processes lead to changes in the

institutional practices in the profession of accounting. The research question is: ‘how are SME-accountants developing their role regarding digitalization?’

The environment of SME accountant has changed quite dramatically throughout the years, which has made the accounting world more complex than ever before. Next to digitalization, changes in laws and a changing culture, create new challenges for the accountant. On top of that, there is increasing

competition from different directions. However, due to centralization have traditional services that banks, and insurance companies used to provide, disappeared, creating new opportunities for

accountants. Accountants might perceive these changes in the environment and technology as a threat or opportunity for the performance of their professional identity (Bernardi et al., (2019).

Important aspects of identity construction include claims and ideas about central characteristics, coherence, distinctiveness, and directions (Kärreman and Alvesson, 2001). It is important to note that these claims “are not meant to stand any reality test” (Kärreman and Alvesson, 2001, p. 64). However, it is interesting to see if accountants perceive misalignment between their current self and their

22 (Bernardi et al., 2019) found that affordances, that are “the goal-oriented actions that accountants perceive through their interaction with a technology” (p.1181), play a part in the way users review their identities through identity work. At van Wieren & Vellinga, the accountants found that big data analytics could be very useful for ‘benchmarking.’ Therefore, this technology might help the

accountants at van Wieren & Vellinga to construct a new identity regarding this applications. On the opposite, they found blockchain less useful, and the accountants might therefore adapt their

aspirations. Eventually, the identity work and affordances of the applications together “can potentially influence the deinstitutionalization of practices,” (Bernardi et al., 2019, p.1181) and therefore the role that the accountant has.

This study contributes to the existing literature on accounting and more specifically to the changing role of accounting regarding digitalization. There is a general focus among researchers on the

changing role of the management accountant (e.g. Knudsen, 2019). This study sparks the debate of the role of the accountant as it shows that there are reasons to believe that the accountant is undergoing change as well. Also, this study contributes to existing literature on the relation between identity work and institutions by putting the model that Bernardi et al. (2019) developed into the accounting context. For accountants, and SMPs in particular, are the insights from this study useful as it shows what the impact of digitalization can be on their office. The study also informs about the technological possibilities in financial accounting. Also, the suggestion that accountants might benefit from a broadening of their role is, is something that SMPs could benefit from.

5.1 Research Limitations and Further Research

Ideally, I would have executed a multiple case study as it makes it possible to investigate the issue in more than one context. However, during this research, the Covid-19 virus has made it unwanted to visit different companies. It is therefore more pragmatic to perform this research with one single case. Nevertheless, single case study provides the opportunity to get a more in-depth reasoning as it makes possible to better distinguish between company-wide and individual views on the matter. Moreover, Van Wieren & Vellinga is a typical SMP and I expect that the processes occur in a similar way in other similar-sized accountancy offices, though the results might slightly differ as company-specific circumstances are unalike. I therefore suspect the results to be generalizable, but there lies an opportunity for further research to verify the outcomes.

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27 Appendix A. Interview Protocol

Introduction research

1. Could you describe your function?

-Can you describe how your usual day looks like? -For long have you been an accountant?

-Did you work at other offices before? Or at other jobs? -What study did you do?

2. How would you describe the role the accountant? -Has it always been like that?

-Is this different at other offices?

-Is there a difference between bigger and smaller offices? 3. Is the role of accountant changing?

-Why? Which factors are influential?

-How does the future for the accountant look like? 4. How important is digitalization in accountancy? -How does that show?

5. Which IT do you use at the office? -Is this helpful in your daily job?

-How has this changed throughout the years? -How did this change your work?

-How did this change your role?

6. How do you implement new technologies? -Why is it this way?

-Are you actively looking for new technologies?

-Which factor is most important for determining new IT? Law/ Competition / clients / other? -Do you feel pressure regarding technology?

7. Are you familiar with these technologies and its applications? -Big Data Analytics?

28 8. What do you consider the pros of this ongoing digitalization?

-And what are the cons/threats? -Can you keep up with digitalization?

9. How do you see the future of the accountant?

-What are your ambitions? Do you want grow into the role of advisor/consultant/business partner? -How do you feel about this future role?

-Are you aware of your role? And are you taking conscious steps to grow into a new role? -Is the accountant profession under threat?

-Do you reconsider the role of accountant because of this interview?

10. Which factors are influencing the role of the accountant according to you? To which extent do you consider the following aspects influencing?

-Courses and trainings

-Conversation with colleagues and competition -Conversation with clients

-Conversation with other professions -Media