In our new video conversation series, Inflo CEO Mark Edmondson
sat down with Donny Shimamoto
to talk all things audit transformation.
Donny Shimamoto is a respected member of the accounting profession and consults closely with many firms on their business practices and risk management. He has been recognised as one of the Top 25 Thought Leaders in Public Accounting (US) and is a frequent speaker at AICPA
and international accounting firm association conferences.
He is also the founder of the IntrapriseTechKnowlogies LLC (ITK)
, a CPA firm specialising in organisational development and business process outsourcing for small businesses, and middle market organisations. ITK recently launched the Center for Accounting Transformation whose mission is to accelerate adoption of accounting innovations.
Donny had much to say around how firms should assess processes, evaluate challenges, engage with the vendor market and approach changes within their firm.
WATCH THE FULL INTERVIEW:
Key trends in the accounting space
Donny believes that the big trend right now is around digital transformation.
He states that prior to the pandemic, digital transformation was moving along slowly and there was a great deal of resistance from people in the profession.
The pandemic however, had other ideas.
“The pandemic helped accelerate a change of mindset and bring everything together. It compelled firms to look at technology and ask themselves how they could do things better, how they could better manage their business processes and really embrace and enable remote working.”
Donny goes on to say that he has challenged firms to take a step back and look at the big picture. Rather than them taking what they are doing now and simply automating it or changing it into a remote or virtual context—, how do they actually re-envision how they are working.
Think of it as starting from a ‘blank slate’.
Assessing the process first and foremost
The key factor when looking at any type of innovation, or automation, is the process itself.
Donny explains that a mistake he often observes is firms seeing technology as a solution. They see this technology as a shiny new idea and automatically start thinking of what problem it can be applied to. He suggests that this is completely the wrong approach because it’s a solution looking for a problem.
It’s a mistake that vendors make too.
“It needs to be the other way the other way round. Ask yourself, what is your business strategy, what are the core capabilities needed as part of that business strategy, and then what tools can I employ?”
Donny suggests tools could be a technology, a business process, or even a methodology like Agile. But it really takes a much broader view of process and technology, and what’s happening in an audit to become truly innovative and to leverage the technologies that are becoming available.
To do that, firms need to move away from a linear approach.
The audit process has always been perceived as being a very linear approach.
Donny emphasises that an Agile framework for looking at things incrementally and iteratively really helps drive towards that end goal. It’s a key concept that needs to be adopted by the profession to shift away from the sequential and checklist-focused approach that firms have done in the past.
Choosing the right tools from the right vendor
It is easy to be overwhelmed with the features a vendor is going to demonstrate to you.
Donny explains that firms need to see what is possible from a vendor before they can envision what their new process looks like, but still need to have a good understanding of what their current process looks like and the business objective they are trying to achieve. With those two foundations, firms can then begin to look at what functionality a vendor is providing and how that would change their process.
Firms need to approach this with an open mind and consider that they are going to have to change a few processes to be able to leverage the vendors platform.
“One of the biggest mistakes I see firms make is that they’re looking for that 100% solution, and if it doesn’t match 100% of their business process and doesn’t do 100% of what they want to do, then they are not going to adopt it because it’s not going to help solve their problem. I’ve seen numerous times firms saying that this solution will work for 80% of these clients but it won’t work for these 20%, so I’m going to wait for the solution that’s going to give me a 100%.”
Donny makes clear that firms need to accept that there is no perfect solution, and waiting will only
stagnate a firm while others firms are moving forward and transforming their businesses.
“Be smart and look for vendors that are evolving and delivering continued innovation.”
Incremental approach to innovation
Looking towards the future of audit, and the move towards continuous audit, Donny believes that firms need to consider how they continuously engage with their clients over the course of the year so that they don’t have this hump of a busy season.
“Firms need to look into the future and say, how can I work with this client over the course of the year, whether it’s quarterly, yearly, every half a year, or whether it’s even monthly in some way? From a firm perspective, when I start to look at it, I would want the tools that are going to enable me to have continuous data ingestion into a platform, and perhaps in performing procedures or fieldwork testing over the course of the year.”
He goes on to say that by the time a firm gets to the forming of the audit opinion, all they are doing is wrapping things up, a final review to ensure everything is done and form this opinion over the period that they have been working on.
“I think the move towards continuous audits is going to be huge as we look at which vendors are going to enable me to do that.”
Advice for firms at the start of formulating their digitisation strategy
Change will continue and is constant.
Donny encourages firms to keep asking themselves where they want to be in two or three years from now, and when next year arrives, to ask the same question again.
“If you were starting your firm or your practice at this time, what would it look like? Use this statement to help craft the vision of where you need to go, where you want to go and compare that to where you are now.”
He adds that firms should not be constrained about what they are doing now and move away from the mentality of – ‘I’ve invested all this’ or ‘it’s going to take so much to change it now’.
Think back to the ‘blank slate’.
Watch the full video interview to take a deep dive into the conversation and get an insight into the thoughts of one of the leading names in accounting. If you think the time is right to implement a market-leading technology on your next audit or interested in seeing how Inflo could transform the way your firm works, get started for free today.