discussing audit transformation and innovations, one advisor said the field is ripe for technological solutions that allow team leaders to focus on advising clients and help team members streamline processes for automation.
by the center for accounting transformation
improvetheworld.net
in kicking off an inaugural meeting with audit industry experts, donny shimamoto, cpa, citp, cgma, asked the group, “what does the modern or leading-edge audit practice look like?”
related: top issues: talent, time, and transformation
learn more about the center’s audit advisory board or view the center’s transformation courses.
the group, which met for the first time recently, is the center for accounting transformation’s audit advisory board. shimamoto, who created the center, brought together audit professionals with various backgrounds to help guide strategic direction, services, and program planning for the center, which helps professionals through the adoption and change required to step into the future of the accounting profession.
shimamoto, the founder and managing director of intraprisetechknowlogies llc, continued. “we see a lot of this as a journey and we want to be able to identify key points along the journey to help others identify where they are on the transformation journey, where they want to be, and specific steps to take to move forward in that journey.”
the audit transformation advisory board includes:
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- scott bailey, cpa, cgma, cisa, citp, cfe; partner; carr, riggs & ingram
in addition to serving as cri’s north carolina audit practice leader and industry line leader of captives and alternative risk, he also leads cri’s cannabis practice.
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- danielle cheek, cpa, cfe, cva; vice president, strategy & industry relations; mindbridge
cheek is the immediate past chair of the pcps technical issues committee with the aicpa and is the us representative to the ifac small and medium practitioners committee.
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- melissa galasso, cpa, cptd; ceo; galasso learning solutions
the founder and ceo of galasso learning solutions llc, galasso has nearly 20 years of experience in the accounting profession and serves on the fasb’s not-for-profit advisory committee (nac), aicpa council, and the vscpa’s board of directors.
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- mark mayberry, cpa, citp, ctsa, cida; founder, mark mayberry cpa
mayberry is a recognized thought leader and educator in the fields of assurance, audit technology, audit innovation, and it-related risk management and assisted with the aicpa’s audit data standard.
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- michael ramos; managing partner; mra learning
ramos has been an active contributor to the advancement of the accounting profession, leveraging his initial career as a senior audit manager with kpmg into a variety of roles creating authoritative auditing guidance and later, delivering technical training.
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- kevin wang, cpa, citp, cgfm; director of innovation; warren averette
in 2016, after being promoted to senior audit manager, wang transitioned to warren averett’s headquarters and became the firm’s first director of innovation.
“we recognize the value and importance of engaging a variety of perspectives on the audit industry in discussing and addressing issues facing auditors. the audit advisory board brings together a collective of diverse experience, innovation, and insight that will help align the efforts of the center to complement and elevate the work being done by other industry associations, consultants, and vendors,” said shimamoto. “as an organization that prides itself on accelerating transformation, the center has advisory boards with innovative leaders within the profession who enable us to seize the opportunities and nurture the seeds of transformation in collaboration with the next generation of accounting, technology, and association leaders.”
frustration leads to attrition
a key issue for the accounting industry as a whole is staffing.
“for my clients, the biggest problem that they’re all dealing with now is just on the people side,” ramos said. “retention is obviously a big thing.” he explained that many firm managers will come up with ad hoc solutions to keep the team moving and meet deadlines.
“the real problem is there are structural issues,” ramos said. “there are structural issues surrounding things like how decisions get made, who gets to make the decisions, lack of resources devoted to working on the business, as opposed to having billable hours and things like that…as a result, if you don’t have structures in place to deal with this stuff, then you’re constantly just running around trying to make patches.”
cheek asked, “can you blame the firm where there’s truly a shortage and they’ll take any warm body to fill in?” she continued, “they keep underperforming players longer than they should and then you get this culture of mediocrity…then your [best] team’s going to leave…i think it goes back to firm accountability structure concepts. if they’re not willing to enforce that, then you lose all your good people anyway. and then, when you lose your good people, you’re recruiting again.”
cheek went on to identify additional people issues.
“i think another issue is naysayers within an organization and what kind of undermining happens within the organization, either intentional or unintentional,” she said. “people who just refuse to follow the new procedures that are being rolled out and people are trying to innovate,” she said. “the problem is that there’s a subset of the organization that wants to transform, and many times it’s the next generation of leadership…but the compensation structure usually incentivizes the status quo.”
ramos included continuing education and training as a staffing issue.
“one of the things that contributes to that mediocrity is a view of learning that’s focused on compliance,” he said. “it’s the rare firm that sees learning as being a strategic play, as being a strategic asset.” stating that many firms concern themselves with only with providing their people 40 hours, ramos lamented that more firms didn’t see advanced learning and innovation as solutions for improving retention.
galasso agreed, saying, “it’s learning for compliance versus learning for professional development.”
she continued, “if they’re not looking to invest in learning and development, they’re likely not willing to invest in anything else. they just want to kind of get through it.” she used an example of an anonymous client who told her, “well, if we spend the time on training, then they can’t do the work,” to which she asked, “but if they’re doing the work wrong, then [how does it help]?”
transformation includes analysis
while hinted at, further discussion of people and staffing issues also identified a primary concern: processes. audit advisory board members agreed that most want to be more consultative and less task-based.
“our business is a relationship business,” bailey said. “the audit process, the client experience, the people we’re bringing in to interact with our clients, which then enables us to provide more meaningful interactions with our clients…that’s what’s going to save the day.”
wang added that in order to be more on the consultative side, auditing professionals would do better with more consistent processes.
“obviously, each client is going to use their own accounting system, but just being able to get all of that and being able to put it into a consistent format or some sort of mapping group so you can start benchmarking other clients, but right now, you’ve just got data coming in and text files, pdfs, excel files, you know, just a million different file formats,” he explained.
the group discussed several observations that audit partners and team members, even within the same firm, can often all perform audit tasks differently.
“that’s a big problem, especially from a training standpoint,” ramos said. “because if there’s no standard way of doing things, like preparing financial statements, then what do you teach people?”
bailey agreed, saying, “those inconsistencies eventually lead to regulatory problems, too. that’s a peer review land mine you’re describing.”
wang said it can be especially difficult for larger firms, especially when team members want to transition to advisory services.
“you’ve got all these different systems all geared toward completing an audit, and they’re just siloed,” he said, adding the importance of technology in the transformation journey. “you want to shift a lot of the work being done by staff. they’re not going to be doing archaic-type processes. they’re going to be doing more high-level, true auditing, true analysis work.”
ramos added that in an ideal setting, the culture of the firm should be that if there are changes or inconsistencies across the practice, people know to escalate that to the leaders in the audit department and try to resolve it quickly.
can technology offer a magic solution?
while there have been numerous software advances in auditing, the group seemed to feel there is still a need for assistance in determining the right fit.
“you’re seeing all these great tools that are being developed and marketed,” wang said. “trying to basically match that up with what we’re doing in our audit programs, what steps in our audit programs can we eliminate or do less of if we utilize these tools?”
he continued, “we’re utilizing teams, we’ve got emails coming in, we’ve got our portal… there are just so many different touchpoints and ways to get a hold of us. if there was one portal where they could do all of it, whether it’s communication, grabbing their final financial statements, seeing a calendar to find out when our next meeting is, if all of that is in one place, i think it would improve the client experience and help tremendously.”
however, cheek pointed out that it may be more complicated.
“here in the u.s., there are really two main audit standards—pcaob and aicpa concepts, but there’s still a lot of other stuff in the world. as we get more global, more and more stuff is happening. even mid-size firms and small firms are having to deal with more diversity. to come up with a singular tool that can do all that?”
she added a story of a firm that purchased what they believed would be a solution based on brand recognition, but that the purchase did not work out as planned.
“they put all their eggs in one basket when [the software] won’t be ready for another three years, potentially, to be able to handle the complexities of a firm this size. and they don’t want to have multiple methodologies and modes of releasing financial statements. what do you get for short-term triage while you wait for them to build it?”
just such an issue contributes to mistrust of technology and leads to duplicate work, cheek said, saying firms are worried about not passing inspections or peer reviews. “the whole point is that it’s supposed to actually enable humans to do better, real-time work…but they equate innovation transformation or anything new as double work.”
that view, the group said, reinforces the need for innovative thinking among auditors so that the “status quo” isn’t being automated. “we don’t need a better rock. we need a tire,” galasso said.
pros share parting thoughts.
as the meeting wound down, members of the center’s audit advisory board were asked about pieces of advice they would give based on the afternoon discussion.
galasso said she believes there’s a disconnect between what team members and team leaders feel is problematic. “listen to your own people,” she said, “the people who actually do the work.” she added that the quality of your future leaders depends upon the senior leader training them. “the quality of your current senior training the next generation is the most important job.” bailey agreed, adding, “the quality of your seniors is the quality of your partners in 10 years.”
wang encouraged others to know and understand their clients. “i don’t think cpa firms, in general, take that perspective into account enough.”
“know thyself,” bailey offered. “because if you don’t know who you are, we can talk about the roadmap and your journey, but you need to know where you are to know where you want to go.”
for ramos, he told the group the most important thing firms can do is to invest intentionally in their people. “compliance is just an expense item for a lot of folks, but treat it like an investment and measure outcomes as if it were an investment.”
in addition to creating a broad vision for the future of audit, they will also ensure that the innovative technologies and audit techniques that the center recommends are balanced by adherence to audit standards and protecting the public’s trust in the profession. the audit advisory board will also help to ensure the center’s efforts complement and elevate the work being done by other industry associations, advisors, and consultants.