Industry 4.0, also known as the fourth industrial revolution, involves the integration of smart technologies that connect machines, computers, and people. It will impact cost accounting in several ways: by enabling real-time data collection through sensors; facilitating extraction and sharing of large data pools; and increasing reporting credibility through self-auditing systems. For accountants to adapt, they must increase their awareness of Industry 4.0, engage in relevant professional development and education, and recognize that accounting information will be less controlled and more transdisciplinary. While some jobs may change, accountants knowledgeable about new cyber-physical systems will remain in demand.

1. INDUSTRY 4.0
AND
IT’S
IMPACT ON
COST
ACCOUNTING

2. Industry 4.0, or the fourth industrial revolution
Industry 4.0 is an umbrella term used to describe the
deliberate bringing together of smart technologies which
connect machines, computers and people. Nicholas Davis,
head of society and innovation at the World Economic
Forum (WEF), defines the fourth industrial revolution as ‘a
new era that builds and extends the impact of digitization
in new and unanticipated ways…and can be described as
the advent of “cyber-physical systems” involving entirely
new capabilities and connectivity for people and
machines’.

3. It can be argued that Industry 4.0 will present a new mindset within which accountants
must learn to operate. Industry 4.0 can be expected to influence accounting practice in
the following ways. It will:
– enable accountants to obtain previously unobtainable data in real time – through embedded sensors
– facilitate data extraction from large common pools – for all types of decisions, all types of managers, all
types of gatekeepers and all kinds of stakeholders
– raise the quality of data – through greater timeliness and higher accuracy and detail to improve
efficiency, data assurance and other decision-making purposes
– improve transfer of data for management planning and control – e.g., in supply and value chains and
between countries
– increase the credibility and relevance of reporting – through self-controlling, self-auditing systems and
demand pull custom accounting for individuals.

4. Several steps can be taken to keep on top of
developments for Accountants:
1. Awareness: One of the most important steps is to become aware of
Industry 4.0 developments and look for opportunities that may arise. At this
point businesses themselves are only just beginning to understand the
potential developments. In Germany, 80% of companies have Industry 4.0 on
their agenda; China is not far behind with 60% building knowledge; but most
countries are at the very early stages of information dissemination, with few
as yet considering investment in implementation.

5. 2. Professional development: While awareness can
be created in-house for accountants in business and the
public sector, pressure is likely to rise on professional
bodies and their continual professional development
programmes for face-to-face and online presentations
about Industry 4.0 developments such as smart factories
and how these might affect members.

6. 3. Education:
For new entrants to the profession, whether in business
or practice, professional bodies can assist by bringing
pressure to bear on educational institutions to make
curricula relevant to graduates who may need to
grapple with the new digital connectivity. This might be
through, for example, investment in technology for
practical experience, experience with role play in
Industry 4.0 scenarios, gaining knowledge of the
potential social effects of automation and intelligent
systems and how to address these

7. 4. Reaching out: Accountants operating in the fourth
industrial revolution will also need to recognise that
they have less control over accounting data than in the
past. Accountants are becoming part of a
transdisciplinary mix of advisers. For example,
environmental accounting is heavily influenced by
physical information largely in the hands of engineers.
If connectivity continues apace accounting information
might not remain the preserve of accountants.

8. Accounting in a cyber-physical world
The prospect of the Industry 4.0 era arriving is both credible and intriguing and professional
accountants need to anticipate its potential. Despite claims from some that careers will be
lost, professions destroyed and accounting and audit services made redundant by new
digital technologies, there are unknown opportunities for those with knowledge of new
cyber-physical systems. Accounting for the integration of these systems and boundary riding
will likely be at a premium, as will engagement with local accounting issues in global
business settings operating on high levels of connectivity. Professional accountants who
become well versed in the new technologies and social settings arising from them are likely
to remain strongly in demand.