Accounting Questions

November 7, 2012

Tax Question:

Why is it so hard to get a straight answer to an accounting question?

Facts:

Questions come in two main types:

  1. Algorithmic, which are rule-based questions, and
  2. Heuristic, which is experienced-based questions

Discussion:

What does that mean? Algorithmic (math and accounting) problems are like the ones you had back in elementary school. You are given a few numbers and an equation and left to solve the mathematical problem. There is only one answer and if you are a good mathematician, you can solve it quickly. In fact, since it is just a set of rules, you can program a computer to solve it almost instantly and you do not even need a person.

Heuristic problems are more like the advanced word problems you might also remember from high school and university. You were given a story and if there were any numbers given, you were not sure if they were relevant. The answer was tough to find and you might have bashed about for an hour only to learn later that a clue in the first sentence of the problem told you how to do the whole problem. These problems require extensive knowledge of the material before you start the problem. They also require a number of assumptions and extra facts that you may have to go back to the question writer to get. Often the answer requires trial and error or other past experience on similar problems.

Now let’s apply that “view” of the world to accounting questions and whole accounting files. Much of the work that used to be done by accountants is now done by computers and is done very fast. This has the effect of making it much faster to get an answer. This change has been great because it has reduced hours of drudgery to seconds. The challenge though is doing the work that is not done by computers, which is the heuristic work of planning and problem solving the “advanced word problems”. These “advanced word problems” were not often considered part of the accounting function years ago and in fact, people were so busy crunching numbers that they may never have got to these questions. However, now these questions are the bulk of what accountants do. Many people are not aware of this new reality and still think accountants are doing algorithmic work and that there is only one answer to each question.

Heuristic types of questions are coming up more and more often. So now that we have time to ask and answer these questions, we are actually tackling questions that we never considered before. This makes it all new and each fact situation different. Instead of doing fast algorithmic work, we are doing slow heuristic work and the answers are not clear or repetitive. In short, it is hard to get a straight answer to an accounting question because the questions have changed. Computers are doing the tedious algorithmic tests quickly, allowing for more complex questions to be asked.

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

Share this post

Related posts