CEO mid-year update: what have we learned in the last 6 months?
In January I gave a look forward as to what I thought 2021 may have in store. Now we are six months in how are things shaping up?
Striking a Balance: virtual vs reality
We have never worked more flexibly, and that is not necessarily a bad thing.
We hope for a little more balance though. That we can work from home, the office or anywhere else of our choosing.
Many of us crave the camaraderie of working closely with colleagues, meeting clients, or making new connections at conferences.
In my opinion, video calls maintain relationships, but they do not advance them. In 2021 we look forward to a chat over a coffee or banter over a beer.
Virtual interactions remain dominant as we continue to battle towards the global pandemic exit.
Where allowed, we have started to see a level of return to the office and in-person meetings. But expectations have shifted, and all businesses will need to listen closely to their employees and customers.
Most accounting firms are planning for staff to move to a hybrid approach to office and home working. It will be interesting to see if client preferences change regarding the audit approach. Can technology reduce the need for such a heavy on-site presence by auditors?
As we look forward to accounting conference season, international events will undoubtedly be impacted by travel restrictions. But I anticipate a broader shift in events, with people being more selective and a greater focus at live events on the aspects virtual events cannot replicate, such as networking.
I am sure we are all looking forward to getting back together as a group and having a healthy debate on the key topics across the profession.
A new audit standard: less complex entities
In December 2020, the IAASB Board closed the year by approving the proposal for a new international audit standard for less complex entities (LCE). This has been in high demand for some time, and it has been a privilege to personally contribute to the development of this standard.
As a member of the IAASB’s reference group, I have input to the scope and purpose of the LCE standard and reviewed each draft to provide the view of a technology leader with recent practice experience. The global group’s discussions have been highly informative and greatly benefited the development process which is moving at pace.
The standard is on track for exposure draft release in June 2021. This is an exciting development for the international profession and one I look forward to discussing with people and implementing.
Following the presentation of a draft standard to the board in March 2021, the exposure draft of the ISA for LCEs was presented at IAASB board level in June. The discussion of which is available to all on the IAASB YouTube Channel.
It will be interesting to read the responses from the global audit community to the proposed standard. In particular, whether the standard achieves the simpler audit of an SME that many firms are crying out for, and some of the key topics debated during the drafting such as the exclusion of group engagements.
The proposed implementation plan will follow a period of consultation.
Audit reform: UK and beyond
Sir Donald Brydon’s review was the last in a series of reviews of the UK audit market’s quality, regulator effectiveness and competition. Yet limited progress was made in 2020 against the backdrop of COVID-19 and Brexit. And there are multiple other reviews in other territories.
Audit reform is likely to be higher on the UK’s to do list in 2021. But with certain of the recommendations in-flight and challenger firms making already inroads to the Big 4’s listed dominance, it will be interesting to see how many of the more radical recommendations are progressed.
The UK Government published its recommendations “Restoring Trust in audit and corporate governance: proposals on reforms” on the 18 March for consultation.
The objectives of these reforms are to:
- restore public trust in the way that the UK’s largest companies are run and scrutinised.
- ensure that the UK’s most significant corporate entities are governed responsibly.
- empower investors, creditors, workers, and other stakeholders by giving them access to reliable and meaningful information on a company’s performance.
- keep the UK’s legal frameworks for major businesses at the forefront of international best practice.
There continues to be a great deal of public debate on the subject. In a recent update, Financial Reporting Council’s CEO Sir Jon Thompson shared one of the most significant proposals, managed shared audits, might not be possible. We are nearing the point where words and thoughts must be turned into action.
The Government consultation closes on the 8 July, with next steps expected in late 2021.
Skills: A revolutionary accounting qualification
In September 2019 ICAEW announced plans to incorporate emerging technologies into their ACA qualification through a partnership with Inflo.
Complementing ICAEW’s already paperless examination process, the partnership means students will answer questions by reviewing Inflo outputs on an illustrative client data set as part of their studies and examinations.
This is the first accounting qualification to integrate the practical use of data analytics and AI technology directly into the assessment process. Examinations in March 2021 will be the first, bringing a new wave of tech-enabled auditors into the profession.
Read more about our partnership with the ICAEW here.
On 10 March 2021, just under 1,000 students sat their Audit & Assurance exam as part of the Professional Level of their ACA qualification. This was the first time that any external party/technology had formed part of an ACA exam. The feedback was very positive:
“It’s a great way for the exam to mimic the real-world environment and allow students to understand how the audit and assurance model links back to their day-to-day roles” Cassandra Barker, Tutor, First Intuition.
Students also reported an excellent experience using Inflo: “It allows you to find the required transactions very quickly, I also found the Cascade module very helpful to identity the problem areas”.
Also, on the 7 June 2021, approximately 1,900 students used Inflo as part of their Corporate Reporting exam looking at applying technical and analytical techniques to resolve compliance and business issues.
We look forward to supporting more students to the Inflo platform for the exams in September 2021.
US: AICPA’s Dynamic Audit Solution
In 2016 AICPA began discussing with US firms an unprecedented project to develop the Dynamic Audit Solution (DAS), a transformational auditing methodology to breathe life into the US audit technology space.
With over $50m of funds raised directly from US CPA firms to support, a project commenced in 2018, the firms contributing significant funds and technical expertise will be hoping to get their hands on a viable version of the technology in 2021.
All eyes will be closely monitoring developments, given anecdotal evidence that innovation has slowed in US participating and watching firms as they await the outcome of a project intended to advance the US profession.
Since the start of the year, there has been limited information shared publicly regarding DAS.
One of the few articles providing a progress update quoted Erik Asgeirsson, CPA.com CEO, as saying a version will be available by the end of this year. But that this version will only allow for some testing and will not be a complete solution.
It would appear the project is behind original aspiration, yet the demand from US firms for more innovative, data-driven, complete audit solutions has never been higher.
We can expect bullish updates at AICPA’s flagship conference ENGAGE in July – but how much longer can firms wait for a viable solution?
Starting a revolution: The Complete Digital Audit
In late 2020 we presented our vision for the Digital Accounting Platform, where auditors could leverage emerging technologies in a complete Digital Audit solution. This centred on the new development of workpapers documentation and audit methodology to drive an innovative and modern approach to auditing. A truly data driven audit approach.
Close to 40 firms from around the world are in early adoption of the solution as part of our highly collaborative Innovators’ Circle programme and the feedback to date has been incredibly positive.
We look forward to the general release of Inflo Workpapers in spring 2021.
The Inflo Digital Audit was launched this spring through a series of events, which are now available on demand. The solution, underpinned by our 10th Module, Inflo Workpapers, is now available to accounting firms across the world.
Taking a completely data-driven approach to the audit process, and incorporating Inflo’s unique Hybrid Intelligence capabilities, Inflo’s Digital Audit represents a revolutionary new approach.
Accounting firms are now performing Digital Audits on live client engagements as they advance toward replacing legacy audit software with an intuitive and engaging platform focused on advancing efficiency, quality, staff experience, and client value.
To find out more, contact our team.