The Future of Accounting: Emerging need to build the next generation accounting firms
The author is past President, ICAI and former Board Member, International Federation of Accountants. He can be reached at eboard@icai.in.
1. The New Generation Accounting Firm
The traditional accounting firms in India have been focussing on providing Audit and Assurance services, consultation on Direct and Indirect Taxes, Compliance related services and other Business Consulting services to clients since many decades. Our profession is moving into an era of specialisation and there is a need for the modern day accountants to up skill constantly by embracing technology and explore new opportunities opening up for the profession.
“The new generation CA firms should leverage on emerging technologies and provide world class services by building new delivery systems to clients across the globe.”
Traditional accounting firms have to re-invent and build the next generation accounting firms and move forward. The new generation CA firms can offer services in new areas such as Forensic Accounting and Fraud Detection, Valuation, Insolvency and Bankruptcy, Cyber Risk Management, Mergers and Acquisitions, Investment Advisory, Start-up support services and provide a host of Business Advisory Services to clients. The new generation CA firms should leverage on emerging technologies and provide world class services by building new delivery systems to clients across the globe.
2. Implementation Strategy to Build the Next-Gen CA Firm
A. Embrace Technology
Chartered Accountants need to analyse the size and nature of their organizations to decide the level of investment in technology. For instance, smaller firms having smaller teams require basic VPN and firewall facilities to enable remote working. Applications like Google Meet, Microsoft Teams, WebEx, etc. can be used for holding virtual meetings.
“The firms need to invest in Technology and develop go-to-market strategy to enhance clients’ execution of relevant business technology.”
However, larger organizations require a larger amount of investment in technology. The firms need to invest in Technology and develop go-to-market strategy to enhance clients’ execution of relevant business technology. The firms should also invest in Drone technology for Stocktaking.
B. Engage with IT Companies and Professionals
Once the firms tech appetite has been decided, we need to engage IT companies or professionals who can provide their expertise after carefully evaluating the needs of our profession. Professionals need to work closely with Business Process Consultants to create a detailed blue-print and build a suitable digital infrastructure.
The firm should develop Data Warehouse Architecture competencies to support clients Business Intelligence. The firms should also continuously work with technology companies to develop AI tools.
C. Up-skilling of Partners and Staff
The CA’s of today need to equip themselves with such skills and training that would enable them to up-skill themselves to deal with the complexities in today’s business dynamics.
Once the digital infrastructure is implemented, the next most important step is to train and up skill the staff with the emerging technologies and this can be achieved by conducting continuous training programs.
The most visible impact of the pandemic was the shift from “Work from Office” to “Work from Home”. Remote working and virtual meetings are here to stay, although less intensely. Offices have started working with less than 100% workforce while continuing to practice working remotely. Chartered Accountants need to adopt a hybrid system of working so as to significantly reduce the cost of workspaces.
D. Inducting New Partners and Hiring New Staff
Once the CA firm decides to offer services in new areas it has to decide on building the new service verticals by inducting young partners who have specialized Knowledge in emerging areas of the profession and hire competent staff who can work with new technologies.
E. Building Broader Client Base
During the pandemic, there has been a dramatic shift by consumers towards online channels and businesses have succeeded in responding digitally. Businesses have refocused their attention to existing business processes and industries have witnessed a dramatic change in their operations. Professionals need to look at this shift as an opportunity and seek to broaden their client base beyond geographical boundaries.
F. Pricing of Services & Risk Coverage
The new generation CA firms need to consider pricing their services keeping in view their increased infrastructure and HR costs. If the firms are still using an hourly rate model, they need to consider shifting to value-based pricing.
Also, as the firms expand their business they have to evaluate their professional indemnity coverage since they have a greater potential liability depending on the services they offer.
G. Networking with Other CA Firms
“The firm should network with other CA firms around the world and have networking relationships as per ICAI guidelines and this would facilitate the firms to grow fast.”
The firm should network with other CA firms around the world and have networking relationships as per ICAI guidelines and this would facilitate the firms to grow fast. The firms can also have informal networking arrangements with other firms and work with them on a collaborative mode in emerging areas.
H. Automating the Office by Using an Office Automation Software
The new generation firms should automate their office by using a good Office Automation Software to ensure that there is seamless flow of work in the office. The Software should assist in allocation of work to staff, review of work by partners, mapping time spend on each assignment, billing and also Client Relationship Management.
3. New Services Offerings for the Next-Gen CA Firms
1. Business Consulting Services
Business Consulting Services includes providing end to end services to clients in various areas such as Mergers and Acquisition, Demergers, Analysis of Financial Statements, Evaluation and testing of Corporate Strategy, Evaluating investment decisions in R&D, Capital Investments, Preparation of Project Reports & Project Expenditure Monitoring Control and Evaluation, Cash Flow Analysis & Working Capital Management, Deal Structuring and Financing including Valuations for the purpose of bidding, Business Set-up Services, Domestic and International Tax Advisory, Transaction Support, Compensation Structuring, Corporate Finance, Investment Planning, Ind AS/ IFRS Advisory, Private Equity and IPO Support services, Financial Modeling and Due-diligence reviews.
2. Valuation Services
The demand for Valuation Experts is increasing due to the need for Valuation by enterprises who are keen on raising capital from Foreign Institutional Investors, Venture Capitalists and other investors. These enterprises need to engage Valuation Experts to arrive at the value of the enterprise. Business Valuation requires specialize skills and competence and Chartered Accountants with specialized knowledge of Valuation can provide Valuation services.
Under the IFRS regime, enterprises have to recognize their Assets and Liabilities at their fair market values. CA’s with expertise in valuation can assist enterprises in arriving at the fair market values properly.
3. Forensic Audit and Fraud Detection
Forensic Accounting is a triage of accounting, auditing and investigative skills. As a forensic accountant, you are a bloodhound and not a passive watchdog; you work with the thought that there is a fraud lurking around the corner. No domain is spared from misconduct, fraudulence and injustice. The complicated nature of modern fraud has driven the growth of forensic accounting. Further, auditors and their firm would be jointly liable for frauds in the books of accounts and many auditors are likely to become forensic accountants in the days to come to avoid being caught on the wrong foot.
With the increase in the complexities in the business dynamics there are a lot of loopholes that are being exploited by organizations to their advantage and also other kinds of frauds that are deterrent to the economical growth of the country.
There is a huge demand for Chartered Accountants having specialized knowledge in Forensic audit and Fraud Detection.
4. Information Systems Audit (IS Audit)
IS Audit is the future of the accounting profession, in the emerging economic scenario; it has risen from a business enabler to business driver as internal controls today are implemented through Information systems. For the IS Auditor, the canvas is broad. It involves assessing risks including, reputational risks, and understanding the impact of data loss (theft, leak). The IS Auditor assists in investigating fraud. He works with the security team and with certified fraud examiners to establish the root cause of these frauds.
5. Insolvency and Bankruptcy
Chartered Accountants form a large part of the Insolvency Professionals fraternity. The Code provides for a specialized forum to oversee all insolvency and liquidation proceedings for individuals, SMEs and corporate. Introduction of the Code has led to improvement in recoveries by banks. Balance sheets of banks are being cleansed through higher write-offs, contributing to low GNPA ratios.
6. Cyber Risk Services
Chartered Accountants possess professional strengths and qualifications that make them ideal for Cyber Risk Management. Chartered Accountants, as Technology Consultants, can help businessmen in re-aligning their business to the dynamic economic conditions. Chartered Accountants are well-placed to step into the role of proactively guarding the interests of their clients and organizations in an era when rapid technological change is creating ever greater risk.
Cyber Risk Services which include Cyber Strategy Management, Cyber Intelligence and Cyber Analytics are gaining ground due to advent of mobile technology, Cloud Computing and Social Media. Chartered Accountants as Technology Consultants are in demand as they can help businessmen in re-aligning their business to the dynamic economic conditions.
7. IFRS Implementation
“Increasing complexity of business operations and globalization of capital markets make it mandatory to have a single set of high quality reporting standards. IFRS is a single set of high quality, understandable and enforceable global accounting standards.”
Increasing complexity of business operations and globalization of capital markets make it mandatory to have a single set of high quality reporting standards. IFRS is a single set of high quality, understandable and enforceable global accounting standards.
Chartered Accountants with the knowledge of IFRS can offer their services in implementing IFRS in various organizations. IFRS specialists are in great demand around the world.
4. Emerging Technologies to Be Embraced by Next-Gen CA Firms
I. Block Chain Technology
Block Chain is a distributed ledger system that allows each participant (or node) to see clearly where information has come from and gone to - in essence, Block Chain is an innovation in record keeping, a cryptographic chain of proofs.
To alter the Block chain without being obvious, anyone wanting to create a false record would supposedly have to modify every subsequent block, which generally requires everyone using the block chain to agree to the fraudulent transaction. Therefore, in a Block chain environment it is extremely difficult to alter data or insert false information.
Block Chain alters the conventional techniques for invoicing, reconciliation, documentation, contract preparation and mechanizes the physically performed. Block Chain can streamline financial reporting and audit processes. Chartered Accountants can also assist organizations in help implementing Block chain solutions effectively.
With the kind of confidential and important sensitive information that Chartered Accountancy firm deals with it is important that it remains safe and confidential, Block Chain will enable sensitive information from being leaked and causing a serious threat to organizations and save them from financial and reputational embarrassment that they might have to face had the information been leaked.
Accounting professionals who understand and can use (and teach others about!) distributed ledger technologies will be in high demand for process development, auditing and records management and more.
II. Cloud Accounting
“Cloud Computing is gaining acceptance around the world. Mid to large size companies are embracing Cloud based technologies to leverage on lower costs.”
Storing accounting data on remote servers will make geography unimportant. Cloud Computing enables you to work seamlessly from multiple locations without huge investments your office, your home, at the airport.
It provides flexible, on demand, and dynamically scalable computing infrastructure.
Cloud Computing is gaining acceptance around the world. Mid to large size companies are embracing Cloud based technologies to leverage on lower costs.
III. Big Data and Analytics
Traditional data processing applications are inadequate for Large or Complex Data sets. Challenges like analysis, capture, search, sharing, storage, transfer, visualization, and information privacy could be resolved by use of Big Data Analytics.
It provides new opportunities for growth from research and development to sales and marketing. Companies have started using Analytics to reduce costs. Accounting professionals can analyze financial information for effective decision making.
IV. Robotic Process Automation (RPA)
“RPA imitates human execution of applications. It focuses on automation of repetitive tasks and plays a significant role in bringing in process efficiencies. RPA drives improvements in quality, scalability, and resiliency in a cost effective way.”
RPA imitates human execution of applications. It focuses on automation of repetitive tasks and plays a significant role in bringing in process efficiencies. RPA drives improvements in quality, scalability, and resiliency in a cost effective way.
There is a huge opportunity for existing finance and accounting functions to optimize their processes through RPA.
V. Artificial Intelligence (AI)
Accountants, for example, can put their uniquely human skills to work transforming the insights extracted from high-quality data into more effective financial planning and reporting. In an integrated environment, they can collaborate with peers from other business units to leverage financial data to drive innovation, build more resilient and agile supply chains and develop business management plans that promote growth while ensuring continuity.
5. Conclusion: Tomorrow’s Accountant — More Strategic and Creative Than Ever
With diverse skill sets and greater technical acumen, accountants can bring their own expertise to teams in other business units, providing crucial financial intelligence, refining budgets or ensuring compliance. As a function, accounting may become less about refining one’s skill set through certifications and more about core competencies that grow over time, with a focus on lifelong education and skill development required to take on a complex, ever-changing business environment.
The current generation of CA’s need to adapt to changes happening around the globe and explore new opportunities that looks attractive and exciting. We are in a period of rapid change and in the next few years, the role of many Chartered Accountants will be to keep pace with the gradual digitization of clients and help them navigate technologies, systems and data digitisation.
The CA curriculum must offer students an insight into digitisation trends, technological developments and new business models, and value chains as well as new types of risk, transformation processes, etc. affecting accountancy activities. They must learn how to apply new business models (including models based on information technology, business procedures, analytics, risk, strategy, value chain analytics, processors and product development, the blurring of sectoral boundaries, etc.
Tomorrow’s Chartered Accountant will spend a greater portion of his or her time giving advice to clients about data infrastructure and analytical setup and accordingly will need new competencies within computer science, computer engineering, etc. Moreover, he will need communicative competencies to be able to translate big data volumes to output like pie charts, heat maps and geo charts that are easily comprehensible for enterprise management.
“Lifelong learning is critical to future-proofing the profession - incorporating both technology itself as well as its effective application and implementation. This learning will showcase to the world that we the CA profession is a future ready profession. The way forward for the profession looks exciting.”
Announcement for Members and Students
Survey for seeking preference for learning foreign language through virtual mode from ICAI Members and Students
LAST DATE: 15th April, 2022Committee for Development of International Trade, Services & WTO (CDITSWTO) of ICAI is taking forward the Action Plan for Champion Sector in which promoting foreign language amongst members and students is one of the mandates by Government of India.
With an aim to overcome language barrier and thereby to have enhanced professional opportunities overseas, ICAI, under the aegis of the Committee had initiated online batches of German, French, Spanish, Japanese and Business English Languages for its members and students through German, French, Spanish, Japanese Embassies and British Council and is working to initiate batches for Chinese, Arabic and Dutch languages in next few months based on the demand for said foreign languages.
Interested members/students are requested to kindly express their interest for the preferred foreign language which would facilitate ICAI to open up future batches of foreign languages. The expression of interest can be provided by visiting https://www.icai.org/post/survey-learning-foreign-language-through-virtual-mode latest by 15th April 2022.
Committee for Development of International Trade, Services & WTO