Accounts scandals aren’t just blameable to a lack of integrity, but also to the inability to look at facts and numbers in an open minded way. That’s what Harvard professor Max Bazerman maintains in an, in the meantime famous, article called “Why good accountants do bad audits”. People sincerely and unknowingly interpret information in a way that fits themselves best, without even noticing. Psychologists call it “self-serving bias”. On the one side this is good news; not everybody who doesn’t show integer behaviour does this on purpose with cross motives. But it has also an anxious side, when even integer people exalt information, how, for example, do we prevent accounts scandals then? It is for certain that just a normal course in integer behaviour doesn’t show up with a solution. But what does? In 2014 “In het Publiek Belang”, written by a group who had discussed the future of the accountants job, showed up. The reason was that it was precisely that industry, who has to take care of that stakeholders can trust on the reliability of the financial statements, who had lost the trust of the stakeholders. One of the recommendations of the group was that the industry had to take the initiative to an independent scientific research institute. Because of that, in the academic year 2015/2016 the Foundation for Auditing Research, abbreviated FAR, was founded. The science and the practice have achieved this development, which has to enable research into determinants of the quality and independency of an audit. Next, this has to lead to recommendations which can improve the quality and increase the chance of failure. The special thing of the FAR is that the industry doesn’t only make money available to use but also people and data. That last thing might be even more important than the first. Cause how do you define the determinants of quality and the risks of failure of an audit if you don’t know how the audit works? In this way, the structure of an audit team could have some influence, for example on the before mentioned “self-serving bias”. Are changing teams right or wrong then? Doe de culture between accountant firms differ, or are there inside a firm culture differences between branches? Is there a relation between the compensation and the result, and if the answer is yes, what kind of relation? To receive a scientific reliable answer to these kind of questions we have to know a lot more than the amount of information that researchers had until now. And, contrariwise, to give research results practical relevance, they have to be made accessible and shared into practice. The added value of the FAR is the willingness from scientists to formulate research questions. These questions can lead to answers, relevant for practical purposes when it comes to improving quality and preventing from, as they say, incidents, but these of course aren’t incidents – because of that, it is important to find the causes. By finding these, it could be that some surprising realizations show up for science, the industry, supervisor and, not to forget, the politics. The Dutch legislative proposal for implementing one European directive for statutory audit controls, which will be discussed by the Dutch Senate in the autumn of 2016, obligates accountant companies to an appropriate policy of paying that, as they say, includes enough incentives to perform to ensure the quality of statutory controls. Apparently the minister thinks that financial incentives are necessary for the quality of the financial statements and even to give any assurance. That’s not something to be taken lightly. It is for certain something with a lack of reliable evidence. This makes it even more important that the industry and science are going to work together in the upcoming years to increase our knowledge about the determinants of quality!
Accounting Insight 2016: Exploring the future of accountancy
On behalf of the Accounting Insight 2016 committee, I would like to invite you for this event of the study association Asset | Accounting & Finance. The accounting profession is changing! There are many new developments that affect the profession of the current auditor. Lately, the accounting profession is very often in the news; headlines such as ‘The accountants have become cowards, and ‘Longing for the auditor as sparring partner’ are no longer shocking nowadays. Everyone is aware of the changes, but how does this really have impact on the future? Is there even still a future for the audit? Perhaps, in the long run, the current auditor will be entirely redundant. There are innumerable IT innovations going on, but what will be the consequences? Should we be happy with this or will this lead to the extinction of the profession? In addition, a reform plan is being implemented; this also requires in many areas a new approach within the accountancy world. It is important to continue to look to the future and to keep our expectations of the profession realistic. And who said the future will not be better than ever before? “Everyone is aware of the changes, but how does this really have an impact on the future?” During the symposium on November 22, will be a discussion about all these changes and reformation. Thus, the future of the audit will be the central theme. After a brief introduction of each statement, they will be discussed one by one by the panel of speakers and the audience. As a committee we are very pleased to introduce the following speakers of the evening: Dr. Nout Wellink (commissioner PwC), Drs. Jan Hommen (commissioner Ahold Delhaize), Drs. Christine Scheper RA (manager AFM), Drs. Johan Hopmans RA (partner Deloitte) and Drs. Martin van Dijke RA (CEO Van Oers). Chairman Prof. Dr. Eddy Vaassen RA, associated with Tilburg University, will lead the evening. Because of their knowledge in the field of accountancy and the experience they have accumulated in their careers, we are convinced that the speakers and the chairman will share very interesting insights with you. Moreover, this night gives you the opportunity to get in touch with four different accounting firms: KPMG, BDO, Joanknecht & Van Zelst and Wesselman. Before the start of the main event, the audiTTalk will take place in cooperation with these four firms. In this short session you will have the opportunity to get your CV checked and ask all your unanswered questions regarding the accountancy profession and your future role in it. Do you want to remain one step ahead of your future? Then you should definitely be present at this event! After this evening you will be fully informed with all the actualities within the accounting profession. Click here to register!
A brief flashback of the Financial Business Dinner
My name is Bolot Ebbing. This year I had the honor to be chairman of the Financial Business Dinner 2016. The Financial Business Dinner 2016 took place in Villa de Vier jaargetijden on September 29. And I must say it was a great success! The preparations for the Financial Business Dinner 2016 were launched in January. Along with Eline Bulsink, Jeanine Adams, Rianne Steinbusch and our coordinator Immo van der Veen, we started the first meetings with reading the conveyance and by discussing last year, also we started the brainstorm session about what we want this year. Just like last year, we decided to invite 5 Accounting and 10 Finance firms to participate in the dinner. The most important question was: which 15 companies should be invited? We are very proud of the 15 companies that were present at the Financial Business Dinner 2016. The Accounting firms which participated in the dinner were: BDO, EY, ING, KPMG, and Witlox Van den Boomen. The 10 finance companies were: ABN AMRO, Ahold, Delhaize, CZ, Delta Lloyd, ExxonMobil, FrieslandCampina, JUMBO, KLM, PostNL, and Rembrandt Fusies & Overnames. It was also important that the dinner took place in a nice location which would be able to accommodate 100 people. The location that met all our requirements was Villa de Vier Jaargetijden. It was a beautiful location with the ambience we were looking for and also important: delicious food. “60 top students participated” Besides arranging the firms and the location we needed 60 top students to participate in the Financial Business Dinner 2016. The students were invited by the companies based on their resume. We started our promotion with distributing flyers at the master Finance and Accounting and minor Finance and Accounting. Also, we had a chat lecture for extra promotion of the event. After the intensive promotion period, we were very pleased with the number and the quality of the resumes. Most of the work of the Financial Business Dinner 2016 started after receiving the registrations, namely matching the resumes. All resumes were sent to the companies and the companies communicated their top 10 to us. After receiving the top 10, we had to start with the big puzzle. Which 60 students may participate in the Financial Business Dinner 2016 and were selected by the companies. Last Thursday it was finally THE day. After months of preparation we were pleased that the day of the dinner finally had come. The night before we made everything ready and controlled it, so that we would have no stress on the day. But of course, there were always things that could be better or need to be arranged last minute. First, at 14.00 hours, a workshop Business Etiquette provided by butler Laurens took place, in which 25 students participated. During the workshop butler Laurens taught the students how it’s supposed to be, so the students could make a good impression on the companies during the dinner. At 18.30 the evening started and the first students and companies arrived. After the opening reception and the speech the dinner started. All companies saw the first 4 students of the total 16 students the get to see over the evening. After 50 minutes the students changed place, so the companies saw 4 new students and the students saw another company. Unfortunately, after four course the dinner was ended. All companies and students were excited, so this positive news was well received by the organization. After the closing reception, the Financial Business Dinner 2016 ended. I am very proud that the Financial Business Dinner 2016 was a huge success. I want to thank all partners and Eline, Jeanine, Rianne, and Immo for all their help and effort.
Discover the fun side of learning
Who is Bob van den Brand? Bob van den Brand is a teacher and researcher, part-time at the University of Tilburg and part-time at the TIAS School for Business and Society. I combine these two and I especially have fun in teaching people and learn them new things. I like teaching stuff that people find very difficult for example mathematics, accounting and bookkeeping. The aim of this is to bring these lessons in a funny way so that people will remember it later and that they also have something that they can use. Further, I live in southern Netherlands, Brabant, I am married and I have three children. What did you study and how does your career look like? After high school I studied teacher training at Fontys in Business Economics and Economics, which lasted for 4.5 years. Then I studied Economics here at the University of Tilburg, at first I thought overall economy was very fun, but during the study I found accounting and external reporting more interesting. After my graduation, I started at the University of Tilburg. Here they sought people who could give a good education and the dean had taken a good look at my resume and then approached me. I mostly taught accounting in bachelor years 2 and 3. Later on, other things came on my path, such as business courses for all different companies. Then, I also did research for being promoted here in Tilburg; my research was about financial reporting in the Netherlands and Belgium. After that I started teaching in Rotterdam, RSM, I have worked 7 years, at the accounting department. I set up and decorated it. When I was asked by Jan Bouwens to come back to Tilburg, at that moment the accounting course had a very bad name. I had the honor to address this. The success rate was between 20 and 30 percent. I then started with the E-learning. Later, in Tilburg I did about everything from bachelor’s to master. In Tias, I am particularly concerned with online learning. You have to imagine that you enter at a business school to learn, but everyone there has a totally different background. Trying to use all kinds of fun interactive social media design you bring in those people custom knowledge. It’s a very international school, which also makes it great fun. Why did you ever choose accounting? The teacher program gave the same amount of all subjects, micro, macro, marketing, finance, accounting and organization. Just like here at the university at the beginning of your bachelor’s degree in Business actually. I found consolidating and everything what is related to it and the laws and regulations surrounding very interesting. That is why I thought accounting was something for me. The topics just appealed to me, I did something with it. I also see it in my family; so much is also a bit towards accountancy. That would have influenced me stuck in my choice of accounting. At that time there was also a lot of work in the accounting industry, I have a job in accounting and external reporting. Perhaps, it influenced my choice, but most of all I had just fun in accounting! What does your typical week look like? There are colleges, lectures and seminars. They are scheduled in the beginning of the week, I teach financial accounting and bookkeeping. I am very busy with it. That is actually the first half of the week. Second half of the week, I do my tasks as Chair of the Examination Board at TIAS and I run a big starter module there. Furthermore I am also very busy with making weblectures; I do this both for Tilburg University as well for Tias. I especially like to make funny weblectures and that preparation takes really a huge amount of time! When I record one day, I need three days to prepare. It takes a while before you really have a nice product. If you record an hour, you have only ten minutes of good film. Often I want to create a nice background, or with a football shirt or a Burberry bag or something. I try to dress it in an attractive way and that takes time, but makes it more engaging. Accounting topics are not only about sports and football, there is also fashion included. What is the i-STAR method and why did you start this program? We started i-STAR because we only had 7 lectures and the students needed more time to understand the course. The students were motivated but we wanted to activate them as well. Therefore, in 2008 we started to make digital lectures which we call interactive weblectures. We record or broadcast the weblectures live so students can respond immediately. The S represents the Snippet Practice. This includes exercises which we try to make in a fun way. Trying Tests and Bonus Tests, do you understand the information which was discussed in class. Ask Questions, several times during the semester where you can ask questions. 60 to 70% of the registered students watch these weblectures. Results, after the examination the exam will be discussed again live. 40 to 60% of the students attend these weblectures and afterwards they are viewed more often. The weblectures consists of two parts, the part where I explain the question and the part which has a poll to rate the question. Furthermore, we want to implement more gaming activity in I-Star. For instance, if your answer is wrong, we will lead you through other questions so you will understand it eventually. This will lead to more gamification. In addition, we would like to have more open educational resources. So everything is available everywhere, for example via YouTube. How do you see the future of i-STAR? Because everything is free available at the moment, I believe that one will invent a business model for online education. I support online education but combined with traditional education. We call this combination Blended. In the beginning
Accounting fraud
In this article Inez Verwey1 talks about the differences between public auditors and forensic accountants in their ability to identify fraud risks and to plan effective procedures to mitigate fraud risks. According to her, especially in fraud detection an out of the box mentality is crucial as successful fraudsters are ‘top of the bill” in being creative thinking. The ‘Thinking-out-of-the-box’ ability? Fraud and public auditors; not really a happy marriage. And that is an understatement. Improving the fraud detection ability of public auditors is a hot topic for regulators in the auditing field. But most of the research on this topic is only focused on the implementation of assumed aids to improve fraud detection without knowing why public auditors have so many difficulties in fraud detection. To be able to implement effective aids it is necessary to address this issue. Regulators (PCAOB, ISA, NV COS, SAS) are more and more interested in a more forensic view during the audit. The expectation that a more forensic view will be effective is based on several assumptions. The first assumption is that forensic accountants are more able to detect fraud during an audit engagement. The second assumption is that a so-called forensic view exists. Regulators tend to describe a forensic view as being skeptical and ethical. Also having a lot of fraud experience and fraud training is considered as being of great importance. These assumptions are quite obvious, but have not been subject of academic research yet. My background as public auditor and forensic accountant made me curious: Is it that simple? I started PhD-research on the subject. In my dissertation[2] I describe a study between forensic accountants and public auditors. The aim of this research is to compare the abilities of public auditors and forensic accountants to identify and assess fraud risks and to plan effective audit procedures to mitigate those risks (hereafter this will be referred to as “fraud detection” for brevity). To address this issue I designed an experiment. In a between-subjects experiment 48 Dutch forensic accountants and 131 Dutch public auditors were asked to identify fraud risks, assess the fraud risk and plan audit procedures to detect the identified risks. The case used in this study is based on a SEC enforcement fraud action and adopted from Asare & Wright (2004). In this experiment I manipulated the time budget pressure for planning audit procedures. Public auditors are prone to time budget pressure during an audit engagement. I combined the scores of the participants on bot fraud detection tasks with data about the level of ethics, the level of professional skepticism, and the amount of fraud experience and training of the participants. I collected these data with a post-experimental questionnaire. The data-analyses showed that forensic accountants are better able to identify fraud risks as well to plan effective audit procedures to mitigate these fraud risks. Under time budget pressure public auditors planned even less effective audit procures. Forensic accountants proved not to be sensible for time budget pressure. Another interesting finding is that although forensic accountants tend to be more skeptical, more ethical and have more fraud experience and received more fraud training than public auditors these higher scores do not explain the differences in both detection tasks between both groups of participants. The relationships between the different research variables differ between both groups. Furthermore, for public auditors fraud experience is negatively related to the ability to plan audit procedures. This finding can be explained by the relatively low amount of fraud case experience by public auditors. As fraud cases are rare during the career of public auditors, a single fraud experience may lead to the situation that the auditor unjustly thinks he recognizes the same fraud case. The auditor then projects his specific experience on a new situation and focuses on procedures to detect this fraud as used in the earlier experience. So the risk of misrecognition of fraud risks may lead to a loss of audit quality instead of improvement. Another interesting finding is that for both groups of participants there is no relation between the ability to identify fraud risks and the ability to plan effective audit plan procedures. So what can be concluded from this study? First of all, forensic accountants indeed can ad value during an audit engagement. Is this a surprise? Not really, but finally it has been proved now. But unfortunately, the assumption that this expertise is a result of a higher score on the levels of professional skepticism, ethics, fraud experience and fraud training than public auditors is not right. So we have to concentrate on other factors to improve the fraud detection abilities of public auditors. And the big question is: what are those factors that make forensic accountants successful in fraud detection??? The unexpected findings that fraud experience has a negative influence on the fraud detection ability of public auditors as well as the missing relation between the tasks of identifying fraud risks and planning audit procedures may give us a clue. And personally, I think that the direction of interesting future research on this topic can be described as: “The Thinking out of the box – ability” I don’t think this is an existing word yet, but let me explain what I mean with this description. The negative relation between fraud experience and the ability to plan effective audit procedures is an example of a cognitive bias. Cognitive biases are tendencies to think in certain ways that can lead to systematic deviations from a standard of rationality or good judgment, and are often studied in psychology and behavorial economics. In this case, a single fraud experience may lead to the situation that the auditor unjustly thinks he recognizes the same fraud case. The absence of a relation between the ability to identify fraud risks and the ability to plan effective audit plan procedures is also an example of a cognitive bias: thinking in separate tasks instead of overlooking the whole audit engagement. Probably strengthened by internal procedures within an audit
UBL standard as a breakthrough for electronic invoicing
In this article Gerard Bottemanne and Marcel Wiedenbrugge talk about UBL standard as a new device for electronic invoicing. Nowadays more and more invoices are exchanged electronically. Currently PDF is undisputedly the most widely used format for the exchange (by email) of invoices as an attachment. Whether or not combined with scanning and recognizing of booking documents, electronically received invoices are processed automatically in the accounts as a booking proposal. The role of PDF, however, is increasingly replaced by UBL (Universal Business Language). The benefits of electronic invoicing are acknowledged for many years. The expected cost savings compared to the traditional sending of invoices by post and the efficiency of the processing of invoices in the accounting was well known, both inside and outside the accountancy profession. In more and more countries, including the Netherlands, UBL is used as a standard digital format to exchange and recognize electronic invoices; therefore a real breakthrough of electronic invoicing seems inevitable. For the vast majority of invoices electronic invoicing is about the exchange process without differentiation to for example, articles or hours. The latter also requires more than simply recording of an invoice in the accounts, often a (wholesale) trade or for example a project administration. We then talk about ERP applications that, whether or not industry-oriented and based on UBL, have standards for electronic invoicing, accompanied by control systems such as two-way or three-way matching. Apart from UBL, there are also several other – usually sector focused – standards for the exchange of commercial documents. For example ‘HR Open Standards’ is used in the temporary employment sector en GS1 eCom is among others used for logistic service providers and in retail. Two-way matching is a verification process in which automated invoice matching (comparison of data) takes place on the basis of the purchase order and the invoice before payment is approved. By specifying margins deviations can be accepted. Thus, small differences (e.g. rounding differences) have no negative impact on further processing. Three-way matching is a control procedure in which automated invoice matching is based on the purchase order, the delivery note and the invoice itself before payment takes place. Such controls also apply even if invoices are manually entered into the records and are preceded by a purchase order and whether or not separate receipt of goods. An increasing number of accounting firms use solutions for scanning and recognizing booking documents. In parallel, more and more documents are exchanged electronically, such as sending and receiving invoices by email or through a different (digital) channel. That the one does not exclude the other is proven by a number of smart solutions that besides scanning of booking documents also has a connection to the electronic exchange of booking documents. The most famous example is undoubtedly the receipt and processing of an invoice in the accounts as a PDF attachment via a ‘scan-and-recognize-solution’. The role of the scanning is then taken over by, for example, email and thus reduces the number of manual operations. Also receiving and processing of electronic invoices in UBL is increasingly part of the standard functionality of these solutions. In this hybrid era this provides organizations the opportunity to benefit optimally both from scanning and recognizing of booking documents as well as electronic invoicing. Why UBL as we already have PDF? A fair question is “what is the advantage of electronic invoicing based on UBL instead of PDF?” When a bill is delivered in UBL format the data fields and its content are clear. For example it is always clear which field contains the customer number, the invoice amount and the VAT invoiced. On this basis, a booking proposal is made. Based on text recognition a PDF invoice can also be turned into a booking proposal. However, within a PDF invoice one can search for “customer number” or is it “client number” or perhaps “relation number”? When an invoice is in UBL format, it is simply clear in which field the invoice number is located and that also applies to many other data on an invoice. The PDF invoice will continue to maintain its value in addition to a UBL invoice, i.e. as a readable booking document for the user. In practice, an ‘invoice set’ is therefore exchanged, consisting of a bill in UBL format for processing in the accounts and the same invoice in PDF format to save as a readable document in the invoice archive. The latter can be useful in ‘assembly operations’ (samenstelwerkzaamheden) or the support of an (outstanding) post. The display of the contents of the UBL bill itself is also possible, but then through an UBL viewer. As long as the latter is not yet commonplace, PDF invoices will continue to exist and there seems nothing wrong with that. UBL is already operational? For a couple of years now there are suppliers of accounting software who already offer functionality to send and receive UBL invoices. A limited number of companies already use UBL, both outward and inward. The use of UBL within accounting firms is still limited, but is now starting to appear. In the autumn of 2014, a number of major suppliers of accounting software (Asperion, Exact, Muis Software, Reeleezee, UNIT4 and Visma) mutually exchanged UBL invoices via the “UBL Ketentest”. During the exchange only small differences in interpretation occurred. The six vendors therefore quickly agreed to correct these minor issues. To turn UBL into a success, both suppliers and customers must have the assurance that the exchange of such invoices goes smoothly. Meanwhile more than 50 vendors have committed themselves to participate in a sequel to the UBL Ketentest. In 2009, legal rules on strict conditions that an electronic invoice had to comply with were abolished. Since then entrepreneurs are (legally) allowed to send each other invoices via email, without all kinds of rules and regulations. For the tax return the tax authorities accept bills that have been sent via internet as a simple message. In the Netherlands, electronic invoicing is widely accepted