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innovation insights
with donny shimamoto, cpa, citp, cgma
center for accounting transformation
those who hesitate to adopt mature technologies could find themselves too far behind to easily catch up, according to tech experts pete myers, ceo of auvenir, and donny shimamoto, founder and managing partner of intraprisetechknowlogies.
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see also: deloitte develops audit technology for smaller firms
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myers and shimamoto discussed the latest developments in cloud technology for audit, specifically for small to mid-size firms, explaining that heightened security measures have allowed platforms to expand capabilities and deliver streamlined results that can be tailored to specific situations. however, shimamoto lamented that many auditors and firms are hesitant to bring on new technology, a mindset that could leave them clamoring to catch up.
“if you’re not adopting technology, you’re going to start to fall behind because other firms are going to be more efficient and be able to get through faster, and if you leave it too long to adopt, the adoption curves might be a little too steep to catch up,” said myers. “so, the earlier you can adopt it, the sooner you start to see those savings you get from this power of technology.”
newer technologies utilize the cloud to seamlessly transfer data, integrate with other apps and update regulations in real-time. additionally, though most testing is standardized, myers said custom information usually isn’t that difficult to create.
“if there’s a new test that requires a completely different workflow, you know, we would take that into our product roadmap and update it,” myers said. “but it’s, it’s unusual to see something that’s requiring a significant coding change. it’s more just a content component, which makes it very easy for you to customize what you do as far as test there and your testing templates.”
transcript
donny shimamoto 00:12
all right. welcome to innovation insights. i’m your host, donny shimamoto. i am the inspiration architect for the center for accounting transformation. during these episodes, we’ll visit with a variety of people who can share with us ideas, information, technology and business practices that are accelerating innovation and transforming the accounting profession. i am joined by pete myers, the ceo of auvenir. and we are going to explore how the audit technology world is changing for small and midsize firms. so, welcome! actually, can we just start with your firm or your company’s name? because that’s definitely different. it’s not what we normally hear, here in the us. so, what is what we mean? and tell us a little bit about what you guys do?
pete myers 00:59
yeah, certainly. so naming is always an interesting challenge for any organization, that’s, you know, you’re trying to figure out a name that best represents who you are, and sort of makes sense. so, the name journey, it was a fairly lengthy process. we interviewed a bunch of people, mostly out of the new york area, to try and get a cross section from diverse backgrounds across the globe. and i do find, you know, entomology is very interesting, it’s sort of ever since reading bill bryson’s the mother tongue, sort of had this fascination of where words come from, and especially within the english language, that paul’s language or words from all the other languages. so, diving into sort of financial audit, and you know, getting into the audit word itself, and the base behind that being to listen. so, we wanted to pull that into the word–the, the essence, behind what know what an audit is, which is, you know, listening and perceiving what’s happening and what’s going on. so that’s where the au component of avenir comes from. and then the second part of it is “ave” and that’s from the french word avenir, being the future, sort of bring those two together. and it sort of becomes a bit of a nod to the origins of avenida, sort of looking to the audit space. and then also looking to the future of where we want to be, we want to help create the platform for the future of audit. and, you know, we always want to be looking towards the future. so, what we’ve been working on and developed as a platform for financial audit, and the intent here is to pull the best in class of technology and present it in an easy-to-use format for the end user. so, they can easily access the technology in context. so, in other words, you don’t want to be jumping between programs to use the technology. you don’t want the technology sort of sitting on the side. but it’s actually as you’re working through a working paper, and you need to do some testing that you can call that technology that you need to do that testing then and there and produce the results that are fed straight into the platform and continue to allow you to work through. so, some of these integrations should almost happen in the background where, you know, the technologies might be sophisticated and very clever, and it’s doing a whole bunch of things. but from a user perspective, you’re just working your way through working papers per normal and just able to leverage these tools, deliver the results in an easy format. and one of the key philosophies that we have here is that as an auditor, you need to understand what the end result is, because ultimately, you need to be able to produce a working paper and you need to be able to talk to the results that you found there. so, we’ve avoided the black box type approach of companies offering some great technology that just does a whole bunch of things in the background and produce the result. but it’s not easy for someone to explain, then it’s very hard to put that in a working paper and stand behind those results as an auditor, because you do need to be able to trust the technology and have some degree of understanding of what’s happening there. so that’s what we’ve done. we’ve really been focused on small and medium sized firms, because they’re the ones that don’t have access to the heavy technology. and they’re the ones that we can give the biggest value to in a short, short amount of time. so, we’ve focused on that end-to-end solution really driving for the small firms.
donny shimamoto 04:28
it’s been interesting. you’re actually i think, i feel like you’d like maybe the third audit-related person that i’ve had on here that where we’ve talked about this fact that audit technology really has lagged for a while that we’ve seen. you know, i always talk about the start of the pandemic and before the pandemic, actually since, like the 90s, audit was sort of leading the way because audit was working remote before there was such a thing as remote work and because we were always at client sites and we would– i was part of coopers and lybrand, where we rolled out the paperless audit in the mid-90s. so, kind of looking at that, but then there’s like this whole gap of lag, did you have a feel or any ideas why audit has lagged during this, this kind of maybe even the last 20 years if we go so far to say that?
pete myers 05:18
yeah, it’s interesting, because as you say, like early on board, audit was in the forefront with adopting excel and using the power of excel rapidly accelerated the digital format and doing things in digital format. and i think the next wave that we have of leveraging these technologies is really that migration from where we are today, into working in the cloud. and the all the capabilities that of cloud brings, which is the connectivity, you know, working live real time, all those components. you know, in the last 10 years ago, people were very nervous about the cloud, they were very nervous about the security behind the cloud. and so therefore, there’s this lag to adopt. and when you’re looking at something as confidential as financial data that you’re dealing with, there’s this hesitancy to migrate to the cloud because of that security concern. now, fortunately, you know, that the security has come leaps and bounds and moved very quickly. and a lot of the fear that people had was more of a perception from the very early cloud days, versus where it is today. and the reality is, is we’re connected all the time, we’re working online, we’re on video conferences, we’ve always got that connectivity forum; it’s got that vulnerability that comes with being connected to working in the cloud is no different to that. and i think there’s been a historic hesitancy for companies to accept that. the pandemic has obviously driven us to, to use the cloud more than we have in the past and a greater comfort with that. and a greater comfort around the security behind that, you know, for smaller firms has been a challenge of just accessing technology. you know, it’s not easy to grab technology, and it’s very expensive to build. and, you know, we haven’t seen that many technology providers in the audit space in, in the past. in more recent years, there’s, there’s been an explosion of companies coming into space, it’s been great to see from our perspective as a platform where we want to integrate with best in class. and the other thing is, a lot of those companies that were around or started, you know, five, 10 years ago, have now matured to the point that they’re meeting all those security requirements as well. so from our perspective, there’s a lot of companies now that we can integrate with and pull that technology in, which allows that acceleration of adoption, and we can just look at our own journey of connecting with alternate technologies, where we’ve seen, you know, there’s been a lot more availability and a lot more possibilities in the last couple of years than there has been historically and for the firm’s themselves, they will have seen that same increase in in choice that’s coming today.
donny shimamoto 07:56
can you give us some examples of these technologies that are that are starting to come together, or that you guys are integrating with?
pete myers 08:03
yes, from outside, we’ve recently connected with confirmation from thomson reuters to allow the automation, that confirmation process. we’ve very hot off the press, we’ve just announced that we’ve got an integration with validus, that’s going to be coming live in the coming months, and that’s allowing him to pull in all the data from your accounting practice allowing you to pull from the quickbooks allowing you to pull from xero and other accounting packages and have it in a standardized format, enabling you to leverage that, that dataset very quickly and easily. so that to me that a very recent, and then, you know, we’ll continue to integrate pulling in bank data and other data sources to automate and bring value to the end user.
donny shimamoto 08:49
that’s great. i think that’s one of the biggest challenges for smaller firms is just having to deal with all of these things. and then their clients are not as sophisticated. so, it’s harder to get the data and as much as we can push them, like, hey, use data analytics, do all these things, if they can’t actually get to the data, because the client doesn’t know how to give them access to the data, that becomes a huge challenge. so that’s great if you guys are pulling all of that together. one of the other challenges, i think that faces a lot of small firms is really just in keeping up with all the standards and having different types of methodologies and things. am i remembering right that you guys actually built your own methodology? are you collaborating with someone to do that?
pete myers 09:30
yeah, it’s very, very close to that. so, we, we’ve built platform to take in content from different sources. so, we’ve got content coming in that’s been customized for the u.s. markets. we’ve got a couple of authors based in the u.s. who are creating and updating the content there that drives our platform. but the platform has been built in such a way that methodology that’s behind the scenes, really drives the behavior of the platform. so, you know, what we’ve got is the technology is, you know, the running of different working papers, but how that looks and the words and the methodology behind it is driven by the content. so that way we’ve got, you know, content that works very well, in the u.s. we’ve got some canadian content that’s sort of drives a lot of the canadian audits. we’ve got the international standards of auditing built in for other places around the world. and we’ve got the ability then, for this is more for some medium to larger firms that have got, you know, customizations within their content, within their methodology, they’ve got the ability to customize. and it’s just the platform itself responds to the different content and just plays it through. but the key advantage behind that is, as those updates are made, from a regulatory standpoint, they flow through the platform. and you know, as you’re working again, in the cloud, you’ve always got the latest standards, you can choose, you know, when you let those upgrades go through, but the upgrades are there, and it’s always available for you. so, you’re never left behind and working on old standards. it’s always there.
donny shimamoto 11:05
right, i think you mean updates, when the updates to the standards actually come through?
pete myers 11:10
yeah, each time there’s an update, it flows straight through, and we get those updates go live to the users. so, you’re always dealing with latest. so, it can be a headache, trying to keep up with the standards, understand what they’re doing, and, and how they work. this way the updates are made. and really, you’ll see as you go through engagement, and you, you get to the certain points, where there’s updates made, you can see it within the platform. and that that makes it much easier for an auditor to, to 1) be compliant and be up to date and not having to stay on top of, you know, reviewing what the standards are and making sure that’s gone through.
donny shimamoto 11:50
yeah, well, you mentioned earlier having to flip through. so, i know a lot of them end up there have their working papers in one place. but then they have to go to their research app and kind of figure out what’s changed and flip back and forth. so that’s nice that it’s all together there as well. now, you said, one of the other things you mentioned was really about data. and we’ve seen a ton of data testing tools coming out, there’s all this call for increased analytics. do you guys do anything in the testing and analytics space?
pete myers 12:19
yeah, so on the testing side of things, we’ve got the… so, as the data comes in, you’ve got the ability to run tests and run the various tests within the platform. so, you can run those tests, with the data that’s there. and then you can…you’re working through the working papers. so, the results from that feed straight into your working paper results. so, you can you’ve got the tests always at your fingertips, so you can run, you know, all the standardized testing. you can create your own templates there. and then you can run those tests and get the data fed straight into the results there.
donny shimamoto 12:57
so, if as a firm, i’m specializing in a particular industry or something, can i create my own tests as well?
pete myers 13:05
yeah, absolutely. yeah. so now, you know, i’m going to say within limitations, but you know, most of your tests that you use are fairly standardized tests, that’s just, you know, the variables around it, that might change. so that’s, that’s all easy to do. from the content standpoint, if there’s a new test that requires a completely different workflow, you know, we would take that into our product roadmap and update it. but it’s, it’s unusual to see something that’s requiring a significant coding change. it’s more just a content component, which makes it very easy for you to customize what you do as far as test there and your testing templates.
donny shimamoto 13:45
makes sense. makes sense. a lot of the other tools we see are focused on more of the, of course, the name is escaping me now. substantive testing, it’s more focused on substantive testing. i was told that you guys have more controls testing capability, as well?
pete myers 14:04
yeah. so, we’ve enabled the ability to do that controls testing, making sure you can link things to the risks going through. we can do the auto generation of control testing, working papers and summarization of the control conclusions as well. by having it through the through the cloud enables us to sort of feed that those results through as well. so everywhere impacts, you see the results from those testing, and make sure that there’s consistency in the controls testing you’re doing as well.
donny shimamoto 14:36
so instead of… i know a lot of smaller firms maintain like a controls risk matrix, excel or something that has all that kind of linkages and things. so, you’re saying that’s all built into the platform now?
pete myers 14:49
yeah. so, once you’re working in the cloud, you can have that available at any time throughout the system by everyone that’s working on the engagement as well.
donny shimamoto 14:59
cool. you know, i feel like a lot of smaller firms will, will kind of hesitate on adopting new technology, because they’re worried about how big of a lift it is, how much of a change it is for them? is there anything that you guys have done to help make this easier for them? or what are you seeing as some of the drivers and some of the adoption from firms that you’re already working with?
pete myers 15:27
yeah, so for a lot of firms, you know, they sort of feel like they need to be tech savvy to come in what we’re seeing is a greater understanding that people have coming in, but, you know, there’s this fear to come in and adopt new technology, because you don’t understand whatever it is, you don’t have a deep understanding of machine learning and every other component that have exponential technology out there, so therefore, there’s this fear of the unknown. so, i think really, you know, the biggest thing is, you know, asking questions, and as you sort of come in, just come in and test it and try it. so, for us, we’ve, we’ve had some small and some larger firms come in, and just get in and try the product. and that seems to be the best way. and, you know, we’ve got some guidance to sort of help people walk through, you know, a practice engagement, just so you can get a feel of the system to walk you through, but what we’re finding is that people are coming in and, and just going and using it, and not even running that test, and they’re finding the way through and, and being comfortable with the software, which is, you know, a great sign. from our perspective, you know, that intuitive type platform is key, like, the more you can make this something that someone just pick up and use, with minimal training, the more effective it’s going to be. not only for that initial onboarding, but if you think about small firms, and especially this day and age where we’ve got a more significant turnover of staff, you’ve got new people that are coming in, and you want to get them on board very quickly. just having that intuitive platform enables them to get in and get working as quickly as possible with minimal training. so yeah, so we’ve got some standardized data and, you know, mock engagements that you can set up and run through to sort of get yourself up to speed and familiar with the platform quickly. but i think the key really is the intuitive behavior where you can just you can pick it up and start working on engagements if you want to and run through.
donny shimamoto 17:30
and do you have any thoughts on i hear some firms just say, you know, this is this is probably just the new trend, do i really need to adopt? can i just keep doing things the way i was doing things before? any thoughts on that response?
pete myers 17:43
yeah, i mean, i’m very confident that people had the same questions, when we sort of moved from paper audits into computer-based audits, like we, you know, you think about the security and you know, you’re just going to lose all your work if you go from writing something on paper to work on the computer. and, and it’s true, you know, you do lose work sometimes on computer, it’s really frustrating. but the efficiency you get out of that was massive, and the adoptions there and i think most auditors you speak to today wouldn’t dream of going back to paper and doing it in paper format. and i think what we’re seeing now, as you know, that migration to the cloud is the next big step of the connectivity and the unlocking of capability that you can do by migrating to the cloud is the next big step. and that is what we’re going to see. and there’s, there’s going to be some hesitancy to start with people, you know, not ready to, you know, unlock the benefit of it. but as people start to use it, you start to see the benefit and the efficiencies and the improved quality, i think it’s going to happen. you’re either going to be an early adopter now and get in and take advantage of it. or you can be a late adopter. but ultimately, we will move this direction. technology is it doesn’t necessarily create differentiation. it might if you’re an early adopter, you might have some differentiation from other accounting firms by adopting technology. but ultimately, it’s going to be a matter of you need to adopt technology in order to be stay on parody. if you’re not adopting technology, you’re going to start to fall behind because other firms are going to be more efficient and be able to get through faster and if you leave it too long to adopt, the adoption curves might be a little too steep to catch up. so, the earlier you can adopt it, the sooner you start to see those savings you get from this the power of technology.
donny shimamoto 19:36
and you’re seeing early adopter, do you feel like we’re still in the early adoption for audit technologies?
pete myers 19:43
i would say looking at the potential of where technology is going to go, we’re still in the early stage, like we’re migrating to the cloud. we’ve got some good adoption, but if you look at some of the major tools that are available, not from a desktop-base. they’re not necessarily cloud based and connected, as far as pulling data automatically from data sources and suddenly comparing it. i would say we’re still relatively in early stages there as well. so, yeah, ultimately, i think for where this is going to go, we’re still in the early stage of migrating the audit to the cloud and unlocking the full potential the cloud brings.
donny shimamoto 20:22
interesting, interesting. when you say that, then i start to agree with you, because i actually was thinking, “well, you know, the, we’ve had some of these technologies around,” like cloud. we’ve been talking about cloud for over 10 years, i think, at this point already. the data pulls, probably five years, maybe at least, you know, from when we started to see that come up, come out. but i think you may be right in terms of some things that are bringing them all together, because everything was very disparate. up to this point. maybe it is still pretty early. but perhaps the counterpoint to that is that these technologies have been around for a while. it’s almost like the whole pandemic, where the remote meeting, even this type of stuff. it’s like it’s always been there, just people haven’t adopted it, but it’s… the technology itself is already mature. it’s just that the adoption is still early, or is still needed.
pete myers 21:11
yeah, absolutely. it’s the adoption and, and sort of getting to the point of, you know, technologies, there, we’re getting it in that seamless, fully integrated kind of way where you’re fully unlocking that potential, because i would say, you know, to your point, that cloud has been around for a little while, the data pulls have been around, but the data pull has been a case of you end up with this messy data set that you need to then spend hours to sort out before you can start to utilize, and sort of getting that tidy data set and getting, you know, the all the integrations, the connectivity is something that, you know, that unlocks the benefit, and the full power of this. and, you know, half my people are seeing, adopting today you’ll see significant benefits, what you’ll see in in next three, four years from adopting is going to be much, much more significant. it’s going to be exponential.
donny shimamoto 21:59
well, actually, since you mentioned that, you know, i think we’ve made it really clear to firms that they need to look at this now. this is definitely something. it’s here. the technology is mature. maybe the platform that’s bringing it all together is still evolving, and we’re seeing multiple players come into that space. so, i think that’s a sign that the time is now. what do you see as the future in audit for accounting firms as we go forward? let’s say in this three-to-five-year timeline, what do you think is going to happen?
pete myers 22:30
yes, i think what’s going to happen is the technology itself is going to enable a lot more efficiency. and i truly believe there’s the opportunity here for us to look beyond just the financial component of the financial audit. so, if you look at what a shareholder cares about, when reading financial statements, or financial reports, there is a trend where people start to look at, say, the environmental impact, and you know, what’s happening there. and this is where the audit profession has a lot of trust behind them to start validating some of that information as well. so, we start to broaden, you know, what the opinion covers will be, it’ll be quite interesting to see what happens there. but i think the technology will enable us to, to be able to digest much greater sets of data, much less organized data, and to be able to provide some feedback to shareholders on other elements that they care about that changes their investment decision. and ultimately, that’s what we’re doing is providing a trust so that investors can trust what the management reports are telling you. and i believe that the cpa, as a profession, has the ability to provide a lot more than just financial feedback.
donny shimamoto 23:47
i definitely agree with you that’s part of why we’re here as the center for accounting transformation is to really look more forward and to say, “hey, esg reporting, non-financial reporting, that really is the future,” and we need to get financial reporting under control and automated and much more efficient and effective to start with. but as we go into the future, which is not that far away, we really need to start looking at all of this stuff. so, i definitely agree with you on that future look there.
pete myers 24:15
investors care today, and what you’re going to find is the next even three to five years, it’s not that far down the road that is going to become one of the prime priorities for investors as they make the investment decisions.
donny shimamoto 24:32
if i might ask, do you guys have anything that you can share with us that you guys are looking towards this already?
pete myers 24:38
so, what we’ve built is the ability to pull in content and all sorts of different content. so, we’re looking at content sources behind this, because really, you just need a methodology and a content to drive, you know, the way we go about this. so, we’re looking at different sources for that, but then, ultimately, once you’ve got a good credible source and then you know that can be poured into the platform very quickly and easily.
donny shimamoto 25:04
cool. oh, it’s good to hear that you guys are already getting ready for that. well, we’re pretty much at time. so, i want to really thank you again for spending, taking the time and spending this time with me to help, you know, our auditors out there, and especially our small, small firm auditors to really see like, hey, there’s new things. so, you should get your head up out of the out of the books and out of the workpapers and take a look at things before the next round of busy season starts. so again, thank you very much for giving us insights into the innovations that auvenir is bringing into firms and helping to transform really the audit space for small and midsize firms. i encourage all of you out there that are listening to visit the center for accounting transformation website at www.improvetheworld.net. and our center for accounting transformation really is to help business professionals like you get more information and background on the technologies that are not just out there, but our ready and available for adoption like auvenir here. so, thank you, again, and thank all of you. i look forward to seeing you all on the next podcast.