FOCUS: MONTH: THE CHARTERED ACCOUNTANT OF THE FUTURE

SAICA RESEARCHES THE FUTURE WORLD OF WORK

Research indicates that many functions in the professional services field are likely to be automated in the near future.

To prepare for this disruption and to entrench the viability of the auditing and assurance profession, awareness and preparation are key

Through my travels and conversations with colleagues, clients and friends I have learnt that there are different interpretations of what exactly data and, more specifically, data analytics is. Do these interpretations really differ?

I have, however, spotted a common understanding: ‘the silver bullet’ reduced staff numbers and improved efficiencies, cost savings, etc. These are all terms that come up when discussing data  analytics; but are these perceptions taking us in the wrong direction in the sense that if it does not happen immediately, we lose faith in the data analytics journey and continue with our traditional way of doing things?

Without getting into the technical detail of data analytics, let us rather consider it a business imperative for our profession. Interestingly, in the auditing and assurance profession, many auditors challenge the use of data analytics and question its necessity, especially if the current traditional audit approach has been, and remains relevant. Imagine if many finance managers would not change their way of doing things – consider how many manual consolidations would still be performed.

So why change? Why fix something that is not broken?

It is safe to say that disruption1 is on the horizon in the auditing and assurance profession. It is about automation; less manual intervention; systems that produce high-quality output enabling real-time decision-making. All of this is necessary to boldly forge ahead into the digital age.

Consider how Uber disrupted the taxi industry, LinkedIn disrupted the recruitment industry, and Facebook and Instagram disrupted social interaction. And we hear it everywhere – ‘businesses must disrupt themselves (before someone else does) to survive’. The fact of the matter is – very few companies have successfully disrupted themselves. Instead, they leverage their existing assets to expand into new, high-growth markets and in doing so, they disrupt someone else. Think about how Google is disrupting the telecommunication industry with Project Loon – providing Internet access to individuals in rural and other remote areas.

Regardless of whether we could argue that the auditing and assurance profession is protected by our laws and regulations, the reality is: tension remains in the system for better, faster and more efficient audits. Users demand evolution of audit and assurance services and the profession would have to respond in the interest of the continued relevance and value of the external audit. Clients are also realising that auditors have (or should have) access to technology and are moving towards a more automated audit approach – they expect enhanced efficiency as a result:

Businesses are competing in a tight market where innovation is the order of the day. Some businesses are already investing millions in technology such as artificial intelligence. They can now make decisions via virtual and/or augmented reality, not to mention the concept of ‘mixed reality’. So instead of communicating in words, pictures or video clips, virtual reality enables businesses to communicate in a new-age language of ‘seeing is believing’.

This creates pressure for auditors. They are expected to leverage off these technologies by using 100% of the data to perform higher-quality and, of course, more efficient, continuous audits that support real-time business decisions.

As a result of the increased competition among audit and assurance services providers, enhanced risks assessment and risk response capabilities, including the ability to add value by providing greater insights to a clients’ businesses, is becoming a non-negotiable – and using data and analytical techniques and tools to achieve this is key.

High-audit quality is of utmost importance in protecting the public interest and enhancing the credibility of financial reporting thereby contributing to the stability of financial markets. The auditors’ ability to have a 100% view over all the transactions increases the opportunity to identify risks and direct the focus of the audit. Using technology that increases the auditor’s coverage and insight may contribute towards heightened levels of professional scepticism in evaluating trends, anomalies, exceptions, etc, and enhancing audit quality. Automating tasks that have historically been conducted manually enables the auditor to spend more time on understanding the entity’s financial information and reporting, analysing and evaluating results and exercising professional judgement in drawing conclusions in relation to the risks identified.

Finally, the International Auditing and Assurance Standards Board (IAASB) released a Request for Input (RFI): Exploring the Growing Use of Technology in the Audit, with a Focus on Data Analytics in September 2016. The RFI provides insights into the opportunities and challenges with the use of data analytics in the audit of financial statements, whether all of the considerations relevant to the use of data analytics in an audit have been identified and how best to proceed in relation to standard settings.2 At the comment closing date, the IAASB had received 38 comment letters, with some additional submissions that will be accepted after that date.

For the profession to remain relevant the effect and impact of technology in everything that we do cannot be ignored. Professional accountancy bodies may need to revise the competencies that aspiring professional need to demonstrate as part of the qualification process by creating more analytical thinking and increasing the use of technology during the training programme.

Based on my experience, we as auditors have always analysed data in some way or another in any type of audit. Predictive analytics have been used in auditing for many years. However, the data and information that is now available is yearning for even more robust and meaningful analysis and interpretation, for which auditors do not necessarily always need the most advanced tool available.

Now, let us take that leap forward and disrupt the traditional audit approach to avoid being left behind!

NOTES

1  A general business term to denote instituting challenge (disruption) within a business to break old corporate habits (Simon Waldman, Creative Disruption: What You Need to Do to Shake Up Your Business in a Digital World 2010).

2 http://www.ifac.org/publications-resources/exploring-growing-use-technology-audit-focus-data-analytics.

Author: Amé Rademan CA(SA) is Senior Manager, DPP Audit & Assurance at  KPMG Services (Pty) Ltd

THE FUTURE OF THE PROFESSIONS

What impact will artificial intelligence (AI) have on professions such as accounting?

This article was originally published in the December 2016 issue of Acuity.

For centuries doctors, accountants, lawyers, teachers and architects have solved problems too complex for most of us. But today, the future of these professions are seriously in question as artificial intelligence, non-thinking machines and automated systems are poised to do the jobs of human experts at a fraction of the cost.

Such a prediction triggers one of two responses, says Daniel Susskind, co author of The Future of the Professions. Young professionals are often furious; consumers are quietly optimistic.

‘For consumers it is very exciting. There will be far more affordable access to expertise that has traditionally been locked up in the heads of the professionals,’ he says. Or put another way: ‘The professions have created a Rolls-Royce service and most people are walking.’

Susskind wrote the book with his father, Richard Susskind, a lawyer. It is based on 100 interviews across eight professions, from law through to accounting, consulting and the clergy.

A barrage of statistics sets the scene. In 2014, 48 million Americans used online tax preparation software rather than traditional tax accountants. The best-known legal firm in the US is no longer a traditional law firm, but rather the legal advice platform legalzoom.com.

One architectural firm recently used flying robots to assemble a building; doctors talk to patients via Skype; even the Catholic Church has an app that tracks sins as it prepares its flock for confession.

TWO FUTURES

So is this the start of a social revolution?

‘We see two futures,’ says Susskind. ‘The first is incremental transformation. This is a more efficient version of what we have today, not a big bang revolution. The second future is long-term. Here, technology actively displaces the work of traditional professions. Over time more of the tasks done by accountants are going to be done either by different types of people or “increasingly capable systems” or machines, or by the two.’

There are two major factors that are shaping this future. First, the failure of ‘the grand bargain’. This is how the professions traditionally provide services to the exclusion of others, instead of as gatekeepers of knowledge.

Not only are their processes expensive and antiquated in our Internet-based society, it’s as if there is ‘an intentional obfuscation’ of the work they do, according to Susskind.

Second, to quote Patrick Winston, one of the fathers of artificial intelligence (AI), there are lots of ways of being smart that aren’t smart like us. This idea is central to the book.

OTHER WAYS TO BE SMART

‘We tend to think that the only ways of performing tasks like human beings is to replicate the way human beings perform,’ explains Susskind.

’A professional will say, “What I do in my job is exercise judgement and as a machine can’t think or reason, it can never exercise judgement, so these particular tasks are safe from automation.”’

This is the wrong question, he says. ‘It is not “can a machine ever exercise judgement?” The right question is, “To what problem is judgement the solution? Why do we call upon human experts in this particular case to exercise judgement?” The answer is uncertainty,’ he says.

‘So a better question is, “Can a machine deal with uncertainty better than a human being?” The answer to that is of course they can. What machines are incredibly good at doing is processing far larger volumes of data than human beings and running algorithms and routines through them.’

Famously, the first evidence of this was back in 1997 when IBM’s Deep Blue beat world chess champion Garry Kasparov. The computer was able to calculate up to 330 million moves per second whereas Kasparov – at best – could consider about 100 moves per go. The computer won through brute force processing power. Fourteen years later the supercomputer IBM Watson stunned Jeopardy audiences when it won hands down against two of the American quiz show contestants.

Today’s second wave of AI machines are no longer being built to replicate human reason. It is this that the Susskinds define as the ‘artificial intelligence fallacy’.

In the second wave of AI, many of these systems and machines are outperforming human beings by working in fundamentally different ways, Susskind says.

‘They are not like us. So much time is spent thinking about whether AI systems are conscious or thinking. That is not the most important question from the point of view of the professions.

‘What is most important is to ask if these machines can outperform human beings even if the way they do it looks very different to the way human beings do it? The answer to that is increasingly “yes”.’

In America, Daniel Katz, a law professor, has created a machine that successfully predicts the outcome of US Supreme Court decisions. This system knows nothing about the law, it relies on data from past Supreme Court cases.

’This lesson isn’t just true for judgement but across all faculties of human beings,’ continues Susskind. ‘It’s a mistake when people say a machine can never exercise creativity or empathy.’

FUTURE ROLES FOR ACCOUNTANTS

If you’re seeing visions of Stanley Kubrick’s HAL 9000 or your inner sceptic is doing cartwheels, it’s worth knowing that Richard Susskind has spent the past 40 years writing about how technology is going to affect the legal profession.

In 1996, when Richard published The Future of Law, predicting that the dominant way lawyers and their clients would communicate would be through email, the Law Society of UK and Wales declared that he shouldn’t be allowed to speak in public and he was bringing the profession into disrepute.

Since then, Susskind senior has written a clutch of heavy-weight legal tomes and when The Future of Professions was published in the UK in October 2015, Acuity heard that lawyers across London rushed out and bought a copy.

‘I heard accountants did the same,’ says his son. ’The accounting profession, probably perhaps more so than the law, has adopted and taken up the book. There’s been a huge amount of interest, both from practitioners and professional associations as they ask themselves what their role might be in the twenty-first century. In particular how associations can help their members understand the changes that are taking place and give strategies to deal with it.’

Disappointingly, it is the medical profession that is ostrich-like. The Susskinds’ joint collaboration brings an inter-generational perspective to their research. To write it, father and son initially holed up in a ‘bunker’ in the city of London, brought in white boards, post-it notes, hundreds of their books, and trays of smoked salmon sandwiches as ‘mind fuel’ to thrash out their argument.

Over the four-year period Susskind junior says: ‘We agreed to argue until we agreed on every point.’

Intriguingly, he describes 2014/15 as a watershed.

‘I think people wouldn’t have been so receptive to the book if it had come out earlier. Something happened during this time – people’s attitudes to technology and what it was capable of doing, companies like IBM working with Watson, Google’s work on AI, other books such as The Rise of the Robots by Martine Ford. All of them said something significant is changing.’

Susskind is both optimistic and pessimistic. In the medium term, the scenario is less about unemployment as about redeployment. The book describes a new class of ‘paraprofessionals’ who will be equipped to undertake routine tasks previously done by senior professionals. It identifies seven models for the production and distribution of practical expertise and 12 new roles, which range from ‘empathisers’ who can provide reassurance and empathy, to data scientists and systems engineers. The longer term, he admits, is more troubling.

‘It’s hard to avoid the judgement that there will be a decline for human professionals. In a world where these systems and machines become more capable the most challenging question will become one of distribution. It will be difficult to live in a society where some very productive people work while less productive people don’t work. The problems will be distributional and political and how we reconcile those things.’

For all of us, some serious food for thought.

Author: Claire Scobie is an award-winning journalist, author and storytelling consultant for business

Debating the Future

We asked four innovative and open-minded leaders, all CAs(SA), on what their thoughts are on the future of the accounting world. They discuss the trends that will be impacting us, the role technology will play, and simply – how to get geared up for the direction we are heading

WE INTRODUCE TO YOU

Stanford Payne CA(SA)

is a leading executive and entrepreneur coach, business strategist and columnist with global ties and experience assisting and enhancing individuals and businesses to own and maximise their unique goals and needs. Stanford is a spiritual family man, wanderlust sufferer, film buff, foodie, creative designer, tree hugger and Radiohead fan.

Paul Plummer CA(SA) 

is a senior manager at Monitor Deloitte driving business innovation, disruptive technology and rapid commercialisation for clients. Paul is a universal connector of people, an ideator and igniter of the business of tomorrow, and a snowboarder who enjoys playing chef, collecting shells and auditing in his spare time.

Terry Moore CA(SA), MBA 

is a director of and a business adviser to a number of corporates across a broad range of industries. Terry was previously a partner at Deloitte following which he spent a number of years in various leadership positions, ultimately serving as CEO of Global Forest Products. For over 20 years Terry has been actively involved in many of SAICA’s educational and development programmes.

Stuart van der Veen CA(SA)

is the founder of Paper Plane, a firm hacking corporate venturing and venture capital. Stuart is a co-founder, with Stellenbosch University, of the Exponential Africa Institute and is a Singularity University EP alumnus, a 2016 Top 35-under-35 finalist, and an SAPSA top three finalist for the young professional of the year. Stuart works with start-ups as a Google LPA mentor in San Francisco and as a UJ Commercialisation Investment Committee member.

KEY TRENDS

What key trends are impacting the profession today?

PAUL PLUMMER

I feel there are four main trends impacting and causing disruption in the profession:

  • Omnipresent technology: Technology is disrupting business models and radically changing the workplace and how work is done.
  • Demographic upheavals: With millennials making up more than half the workforce, and many baby boomers working post retirement age, there is potential for incongruence of work styles and culture.
  • The rate of change has accelerated: With consistent universal change, there is need to remain agile and adaptive to remain relevant.
  • Social contract trend: Younger workers demand rapid career growth, a compelling and flexible workplace and a sense of purpose at work – a massive transformative purpose (MTP).

STUART VAN DER VEEN

Prioritisation of new career skills (Basic coding, AWS, Tensor Flow, etc) over traditional skills and the ability to start working either during or directly after qualifying, without further examinations/qualifications. Also, acquiring a skill in which you can work independently without any specific affiliations required.

TERRY MOORE

The blockchain platform and triple entry accounting and Artificial Intelligence (AI), in the form of algorithms, have the potential to eliminate a vast element of general accounting and auditing work. The move from reporting on the past via the annual financial statement (AFS) format to integrated reporting will intensify – AFS are already pretty much obsolete. Financial advisory work will be done mainly by AI and will be fully automated.

The value attached to the audit process has been and continues to be eroded. This, in turn, will manifest itself in increasing legal actions (probably in the form of class actions) against board members and auditing entities. To avoid calamity, the skills base will need to be widened to include a far greater element of general business theory and practice with a specific emphasis on technology. This is especially relevant in the context where the disruptive technologies are the order of the day and threats of hacking or denial of service through botnet attacks will become increasingly frequent.

STANFORD PAYNE

E&Y in the UK made headlines in 2015 by changing their criteria for recruitment, which are no longer based on qualifications. The industry now is more aware and sensitive to this, as business trends across boards show that to become who you want to in business takes more than just a piece of paper – things like passion, aptitude, strengths and abilities.

TOMORROW’S BUSINESS LEADER

Based on these trends and developments, what competencies will accounting professionals need to develop?

TERRY MOORE

The emphasis on IFRS (which is essentially rule-based accounting) will become irrelevant and obsolete. The processes needed to correctly account for items of expenditure and revenue will be fully automated.

In the profession, technology skills are at the moment generally confined to using Pivot tables in Excel.

This won’t suffice and a detailed understanding of coding, developing algorithms, etc, will be fundamental, along with an advanced understanding of cyber security.

We may see a premium placed on strong interpersonal skills, as these continue to be eroded as a greater degree of communication occurs through social media and the related electronic interfaces.

Ethics and ethical behaviour will remain a key attribute but – and this is very important – some thirty years ago the profession was regarded as people of probity which may no longer be true.

An elementary Google search for ‘probity’ yields, among others, the following: ‘integrity, honesty, uprightness, decency, morality, rectitude, goodness, virtue, right-mindedness, trustworthiness, truthfulness, honour, honourableness, justice, fairness’.

These attributes served the profession well for many years and sadly, may be lacking today. The profession, like many others, has suffered from a values drift and in the process considerably weakened its status in society. Realistically, society today views a chartered accountant as someone who does or who has the ability to earn high levels of income. This is far cry from being regarded as people of probity.

PAUL PLUMMER

We need to understand that we will be operating in a perpetual state of VUCA (volatility, uncertainty, complexity and ambiguity). Over and above remaining ahead of the curve with our intellectual capital (core accounting and technical knowledge), we will also have to look at areas such as:

  • Our propensity to change: Our ability to embrace ‘the new’, to innovate, our boldness to take decisions in the face of uncertainty and our propensity to challenge the status quo
  • Conceptual and design thinking: Our breadth of perspective, insightful appreciation of any situation and the ability to rapidly grasp complexity and interpret it into actionable business decisions.
  • Our people potential: Our emotional intelligence, optimism in the face of ambiguity, social flexibility and our ability to inspire others.

STANFORD PAYNE

The skills that will be needed are not teachable necessary at profession level unless more focus is actually placed on training and developing humans and understanding what business is all about and what is needed to bring success above profit.

STUART VAN DER VEEN

For those with the right skills, technology presents great opportunities. Cloud computing enables users to operate in more flexible and collaborative ways. With big data, accountants can develop new insights to help businesses. There are opportunities in new financial technology – such as cryptocurrencies, new payment systems and platforms – to cut costs, improve revenues and provide new services. There will be a need a combination of traditional and ‘new’ skills in order to be able to understand the relationships and opportunities between the two and need to feel valued and part of the bigger picture and company strategy immediately.

ARE YOUNGER EMPLOYEES HARDER TO ENGAGE?

Is this a generational challenge?

STUART VAN DER VEEN

It’s more than just the way millennials use technology that makes today’s youth different – they behave differently too. Their behaviour is coloured by their experience of the global economic crisis and this generation place much more emphasis on their personal needs than on those of the organisation. Millennials tend to be uncomfortable with rigid corporate structures and turned off by information silos. They expect rapid progression, a varied and interesting career and constant feedback. In other words, millennials want a management style and corporate culture that is markedly different from anything that has gone before – one that meets their needs.

STANFORD PAYNE

Younger employees have different needs. They can absolutely be engaged but that means that institutions need to acknowledge their needs within the bigger organisation and see how it can be met focusing on staff first, then clients and their servicing and last business profit.

PAUL PLUMMER

The answer to this is relatively complex. I believe it comes down to what I can only describe as purpose parity. If your younger employee and yourself have a congruent vision as to the reason you come to work in the morning, your underlying mantra driving your day, giving a deeper meaning to your engagement, then the answer is no. If you don’t understand and agree on the ‘why’ you are doing what you are doing, I am certain your level of engagement with younger employees will be a challenge. In essence, I feel it is less of a generational challenge, but rather more of a clarity of shared vision of your MTP challenge.

TERRY MOORE

This may well be true but one needs to be careful in assuming that the fault, if there is to be one, lies with the younger folks – that is, it’s a generational challenge.

Research into the millennial cohort suggests that younger folks are driven by three primary needs: mastery in what they do; high levels of autonomy (that is, self-directed) and to be part of something that makes the world a better place – in other words, to serve a greater purpose.

In my view, these needs have surfaced in response to the actions taken by business in the last 30 or 40 years in the wholesale pursuit of shareholder value maximisation. Actions such as converting pension funds into provident funds, eliminating lifelong medical aid, and resorting to waves of retrenchment in the face economic adversity have all transferred significant business risk onto the shoulders of employees and negatively impacted on the fragile relationship that exists between any business and its employees.

In the business world of today, where job security is an anathema and the risk of periodic unemployment is very real, it is simply unreasonable to expect employees to offer 100% commitment. In this operating context the traditional ‘carrot and stick’ motivation systems are at best irrelevant and at worst demotivational

 

YOUNGER EMPLOYEES’ RELATIONSHIP WITH THE WORKPLACE

Do younger employees have a different relationship with the workplace than previous generations?  What does this mean for employers?

TERRY MOORE

Yes, indeed, and against the background of globalisation which has turned the world into a ‘village’, international skill mobility is now a fact of life and employers need to adapt.

There are a number of areas in which the relationship has changed and business needs to react as follows. The younger folks do not trust ‘big business’, and this is to be expected given the way ‘big business’ has behaved in the past in failing to deal fairly with all stakeholders. The actions of VW in their ‘defeat’ testing software and those of Sir Philip Green at British Home Stores serve as the worst examples of how ‘big business’ can and does behave, even when world-class governance safeguards are in place. As we move forward, business will need to not only do what do is legally right but to do what is morally right.

Companies that do not take adequate care of all stakeholders can expect big challenges in the future as they will fail to attract and/or retain the best and brightest who require that business makes a real difference to society as a whole. Remember the millennial need for purpose … The primacy of the shareholder no longer holds and societal licenses to operate are the new reality. Business in general and the profession, in particular, have been somewhat slow in accepting that the world has changed and that the short-term Milton Friedman shareholder value-driven approach to business will surely lead to long-term failure.

STUART VAN DER VEEN

Millennials want to be able to work in the way that suits them best. Their extensive use of technology means that the line between work and home has become increasingly blurred, although many would prefer to work in an office than alone. Millennials feel constrained by what they see as outdated traditional working practices. Employees could be rewarded by results rather than the number of hours or where they work, while offices will become meeting spaces rather than a fixed location for the working day.

Millennials display the following characteristics:

  • The downturn has had a significant impact on the loyalty of millennials (loyalty-lite).
  • Development and work–life balance are more important than financial reward.
  • This is a techno generation that avoids face time.
  • Career progression is the top priority for millennials, who expect to rise rapidly
  • They have a strong appetite for working overseas.
  • They feel that their managers don’t always understand the way they use technology at work.

 

PAUL PLUMMER

Younger employees have a yearning for making a meaningful impact and difference in the world. Understanding and addressing this by clearly articulating and linking your employee’s day-to-day activities and KPIs to your underlying massive transformative purpose is essential.

THE ROLE OF TECHNOLOGY

What role has technology played / will continue to play in driving some or all these changes?

TERRY MOORE

The impacts of technology have to date been somewhat restrained. However, as technology now comes of age so the speed of necessary change will increase at an exponential rate.

In attempting to predict what role technology will play in the future, one needs to be mindful of the fact that we are entering the age of radical uncertainty. Mervyn King defines this as an age in which ‘it is not possible to define, or even imagine, all the possible outcomes’. Faced with such uncertainty, it is only possible to resort to broad generalisations of what may come about.

Arguably, the first and most major change that needs to be dealt with is increased business transparency and accountability. Social media is an infinitely powerful technology, especially in the hands of those who inherently mistrust big business.

Much of the work done today by the greater profession is at risk. In fact, in a 2013 paper entitled ‘The Future of Employment: How Susceptible are Jobs to Computerisation?’ the authors concluded that on a scale of 0 to 1 (where 0 is not computerisable and 1 is computerisable) there is a 0,94 probability that accounting and auditing could be computerised. This being the case, one can only expect that the pressures on employee development will intensify. What today is viewed as CPD will soon become ongoing upskilling and reskilling.

STUART VAN DER VEEN

Technology enables and encourages on-demand, instant communication that is not necessarily in person or face to face. It also enables accurate, real-time measurement of output/productivity, rendering annual KPIs obsolete. It has increased the speed at which tasks or transactions are performed, and feedback received. It enables people to work very autonomously and even more globally.

STANFORD PAYNE

Technology is playing a huge role which the profession is probably ignoring as it is the biggest challenge the professional will be facing in the next 10 years. According to an Oxford University research study in 2013, the typical ‘accountant’ role will be the most extinct job by 2025, precisely due to technology.If the professional and profession acknowledge this and act upon it by specialising and thinking outside the box, some of these challenges can be overcome and even mastered into opportunity.

I think Deloitte is a frontrunner having acknowledged this challenge and proactively taken advantage of the opportunities that come with this.

The key to staying relevant will always be to upstage technology and still be in need – thus human involvement.

RESKILLING THE EXISTING WORKFORCE

What will employers have to do to?

TERRY MOORE

Essentially employee development will become as integral to the day-to-day operations of any business, as is delivering value. Work will increasingly take the form of one-off projects (gigs) that are interdisciplinary in nature. Job descriptions will lose importance and more fluid learning-type organisations will evolve.

Learning will be driven out of the workplace but much will take place online in real time – that is, as the need arises. This will be a far more effective form of learning and deals a death knell to the ‘horse and water’ conundrum that has for so long bedevilled conventional learning. Essentially, experiential will be the key word.

STUART VAN DE VEEN

The profession has grown by being flexible, embracing the chance to eliminate manual work, and focusing on higher-value tasks, such as advisory work. This approach will be essential, as accountants see their time freed up from more manual or basic tasks. As a result, they will need to concentrate on areas which remain difficult to automate, such as where human judgement or a deep understanding of the business environment is required. Specialist or niche products are also difficult to automate on the basis of economic return and therefore present good ways to develop differentiated skills.

To provide greater leadership on the exploitation of data in a data-centric economy, accountants may well need stronger technical skills around data, and greater understanding of statistics to challenge the method, assumptions and output of predictive models. Different skills may also be needed to support existing or innovative services. Greater emphasis on audit analytics, for example, will require stronger IT and data knowledge in auditors.

Accountants will need a mindset and attitude which enables them to embrace opportunities and change. This is especially important given the difficulty of predicting how technology may evolve and be applied across businesses. Accountants will need to focus on the differentiated value that they can offer businesses, the economy and the wider public interest. The environment will emphasise personal characteristics such as flexibility, collaboration and openness to change. It will also require a willingness to learn and acquire fresh skills throughout a career.

A SOLUTION FOR THE FUTURE

How can qualifications keep ahead of the demands of both employers and prospective chartered accountants?

TERRY MOORE

At some level, SAICA has already made a move in the right direction in the Assessment of Professional Competence (QE Part 2). This assessment of competence is everything that the old examination was not and represents an important move.

In terms of thought leadership, the profession may have lost its way in the last 30 years. It has become increasingly reactive, maybe in fear of litigation. Even in the functional world of finance, investment bankers (in the form of ‘quants’) have developed entirely new businesses and new products (notably at great cost to society) and the profession has been slow to react – especially in so far as understanding the dangers that these new inventions bring and drawing attention to them. Cynically one can argue that the profession was, in fact, complicit in the great financial crisis of 2007–2009 in opting to place reliance on the work of others, such as the rating agencies, rather than questioning the prevailing reality.

A sense of curiosity coupled with a strong dose of cynicism (or more technically professional scepticism) may have reduced the pain and suffering that occurred in the meltdown.

STANFORD PAYNE

The experience and specialism of the candidates or chartered accountants are what will make the difference going forward. And unfortunately, qualifications cannot substitute experience.

Today the future is changing so quickly that the old way of doing and thinking is not as applicable as it always was and if one does not adapt one will die.

PAUL PLUMMER

We need to structure our programmes to embrace and empower us to address the pertinent macro trends noted in my first comment above. Part of the answer will be to design our programmes to develop competencies. We need to foster an entrepreneurial spirit, especially with the opportunities Africa have to play a leading role in the global context.

STUART VAN DER VEEN

Accountants can potentially exploit enhanced capabilities to improve what they do in many ways. Greater use could be made of different sources of data to bring fresh insights about customers, operations or strategy. Predictive models could play a larger part in strategy, planning and control activities, with risks and opportunities more clearly identified and understood.

There are significant opportunities to develop further audit and assurance services over non-financial information as well as in areas such as cyber-security. Data analytics may make other assurance products possible, which are based purely on data interrogation.

New technology also raises concerns about privacy and surveillance. Given the strong ethical basis of the profession, there are opportunities to develop new services in this area, too.

 

Data analytics

Disrupting the traditional audit approach

Research indicates that many functions in the professional services field are likely to be automated in the near future.

To prepare for this disruption and to entrench the viability of the auditing and assurance profession, awareness and preparation are key

Through my travels and conversations with colleagues, clients and friends I have learnt that there are different interpretations of what exactly data and, more specifically, data analytics is. Do these interpretations really differ?

I have, however, spotted a common understanding: ‘the silver bullet’ reduced staff numbers and improved efficiencies, cost savings, etc. These are all terms that come up when discussing data  analytics; but are these perceptions taking us in the wrong direction in the sense that if it does not happen immediately, we lose faith in the data analytics journey and continue with our traditional way of doing things?

Without getting into the technical detail of data analytics, let us rather consider it a business imperative for our profession. Interestingly, in the auditing and assurance profession, many auditors challenge the use of data analytics and question its necessity, especially if the current traditional audit approach has been, and remains relevant. Imagine if many finance managers would not change their way of doing things – consider how many manual consolidations would still be performed.

So why change? Why fix something that is not broken?

It is safe to say that disruption1 is on the horizon in the auditing and assurance profession. It is about automation; less manual intervention; systems that produce high-quality output enabling real-time decision-making. All of this is necessary to boldly forge ahead into the digital age.

Consider how Uber disrupted the taxi industry, LinkedIn disrupted the recruitment industry, and Facebook and Instagram disrupted social interaction. And we hear it everywhere – ‘businesses must disrupt themselves (before someone else does) to survive’. The fact of the matter is – very few companies have successfully disrupted themselves. Instead, they leverage their existing assets to expand into new, high-growth markets and in doing so, they disrupt someone else. Think about how Google is disrupting the telecommunication industry with Project Loon – providing Internet access to individuals in rural and other remote areas.

Regardless of whether we could argue that the auditing and assurance profession is protected by our laws and regulations, the reality is: tension remains in the system for better, faster and more efficient audits. Users demand evolution of audit and assurance services and the profession would have to respond in the interest of the continued relevance and value of the external audit. Clients are also realising that auditors have (or should have) access to technology and are moving towards a more automated audit approach – they expect enhanced efficiency as a result:

Businesses are competing in a tight market where innovation is the order of the day. Some businesses are already investing millions in technology such as artificial intelligence. They can now make decisions via virtual and/or augmented reality, not to mention the concept of ‘mixed reality’. So instead of communicating in words, pictures or video clips, virtual reality enables businesses to communicate in a new-age language of ‘seeing is believing’.

This creates pressure for auditors. They are expected to leverage off these technologies by using 100% of the data to perform higher-quality and, of course, more efficient, continuous audits that support real-time business decisions.

As a result of the increased competition among audit and assurance services providers, enhanced risks assessment and risk response capabilities, including the ability to add value by providing greater insights to a clients’ businesses, is becoming a non-negotiable – and using data and analytical techniques and tools to achieve this is key.

High-audit quality is of utmost importance in protecting the public interest and enhancing the credibility of financial reporting thereby contributing to the stability of financial markets. The auditors’ ability to have a 100% view over all the transactions increases the opportunity to identify risks and direct the focus of the audit. Using technology that increases the auditor’s coverage and insight may contribute towards heightened levels of professional scepticism in evaluating trends, anomalies, exceptions, etc, and enhancing audit quality. Automating tasks that have historically been conducted manually enables the auditor to spend more time on understanding the entity’s financial information and reporting, analysing and evaluating results and exercising professional judgement in drawing conclusions in relation to the risks identified.

Finally, the International Auditing and Assurance Standards Board (IAASB) released a Request for Input (RFI): Exploring the Growing Use of Technology in the Audit, with a Focus on Data Analytics in September 2016. The RFI provides insights into the opportunities and challenges with the use of data analytics in the audit of financial statements, whether all of the considerations relevant to the use of data analytics in an audit have been identified and how best to proceed in relation to standard settings.2 At the comment closing date, the IAASB had received 38 comment letters, with some additional submissions that will be accepted after that date.

For the profession to remain relevant the effect and impact of technology in everything that we do cannot be ignored. Professional accountancy bodies may need to revise the competencies that aspiring professional need to demonstrate as part of the qualification process by creating more analytical thinking and increasing the use of technology during the training programme.

Based on my experience, we as auditors have always analysed data in some way or another in any type of audit. Predictive analytics have been used in auditing for many years. However, the data and information that is now available is yearning for even more robust and meaningful analysis and interpretation, for which auditors do not necessarily always need the most advanced tool available.

Now, let us take that leap forward and disrupt the traditional audit approach to avoid being left behind!

NOTES

1  A general business term to denote instituting challenge (disruption) within a business to break old corporate habits (Simon Waldman, Creative Disruption: What You Need to Do to Shake Up Your Business in a Digital World 2010).

2 http://www.ifac.org/publications-resources/exploring-growing-use-technology-audit-focus-data-analytics.

Author: Amé Rademan CA(SA) is Senior Manager, DPP Audit & Assurance at  KPMG Services (Pty) Ltd

Please rate this article

Relevance

Quality

Leave a Reply

Your email address will not be published. Required fields are marked *