In the article “Auditor Errors: Avoid Like the Plague or a Learning Opportunity?”, Anna Gold writes together with Oscar van Mourik, Philip Wallage and Arnold Wright about how auditors and audit firms deal with errors and the extent to which they learn from them. Can you tell something about yourself, your current position and your career? I am currently a professor at the Vrije Universiteit Amsterdam, where I teach auditing courses to third year-bachelor’s and master’s students. I also keep myself busy with research. I try to include research topics in my lectures, by trying to find a balance between theory and scientific research. Generally, I am interested in the behavior of auditors, which is influenced by multiple factors. For example, I am currently investigating the triangular relationship between auditors, client management, and the audit committee. Some of my research focuses on how auditors deal with errors. In the article “Auditor Errors: Avoid Like the Plague or a Learning Opportunity?” you say there is a difference between making an error and committing a violation. Do you think it is possible for accounting firms to clearly distinguish between someone making an error and someone committing a violation? There is certainly an important difference, but this distinction is, unfortunately, not always made. An error is a situation in which the person wanted to reach the goal, but failed to do so due to an unintended action. A violation, on the other hand, is an act that is intended. It is not always possible to make a clear distinction. In very extreme cases, auditors may even cover up violations by labeling them as errors. However, I don’t believe this happens very often. And I don’t think that’s the biggest problem. A much more common problem is that an auditor, unknowingly, misapplies the rules or standards in practice. From a legal point of view, this is a violation. However, since the violation was unintended, it should be seen as an error and something the individual and the organization can learn from. This does of course create a “gray area”. “Making mistakes is human. It is important that we dare to talk about errors and learn from them.” Then there is another area of potential confusion: the concept of “error” versus the concept of “risk”. A large part of the audit process is about risk assessment. How high is the risk of a material misstatement in a given account? Such assessments are made on the basis of information that is currently available. With hindsight and new obtained knowledge, the risk should perhaps have been assessed much higher. In the case of an oversight inspection by the AFM, the audit file will be reviewed often months or even years later, and then, with hindsight, interprets the inadequate risk assessment as an “error” or even a violation. This example shows how difficult it is to clearly distinguish between the concepts of risk, violation, and error. Do you believe that there is a risk for accountants to be overly penalized for committing an error that is considered a violation, but where there has never been any intentional act? Can you explain this? The expectation that you will be punished for making mistakes, determines your course of action and openness to admitting errors. The sector is still too deep in the mindset that a mistake is something bad. There are many preventive measures, but there is little understanding for the human aspect of the profession. It must be possible to admit an error without the organization or the regulator immediately considering it as a violation. The moment you are afraid of the consequences of making a mistake, you are willing to do everything you can to cover up this mistake. This prevents the possibility of learning from errors, since you tend to ignore or even cover up your shortcomings. Moreover, you prevent in all respects the possibility of also learning from errors at the organizational level. Only if you are open about it, a company has a chance to analyze the root causes of the error, and correct any systematic errors. Unless this happens, others will not learn from the error you made. This is an important message that nowadays is starting to get through to organizations who are becoming increasingly aware of the importance of a learning culture. Do students at the start of their accounting career have to fear making mistakes in the workplace? How should they handle this? Our research shows that as a trainee or assistant accountant you hardly have to be afraid of making mistakes. You are still in a learning process and that is also recognized by your environment. However, you get promoted to supervisor quite quickly. As you get promoted, it becomes more risky to make mistakes. Then, it is looked at with less understanding. At the same time, the higher the rank, the more you need to give a good example: a manager or partner should talk openly about his or her mistakes in order to keep the threshold for admitting errors low. After all, making mistakes is human and it is important that we dare to talk about errors and learn from them. So, what is especially important as a starting accountant, is that you have to be aware that everyone makes mistakes and, above all, you have to talk about your mistakes. Errors can be a useful lesson for the future, not only for yourself but also for others. You may not immediately run to a partner of the firm in the event of a mistake, but talking to colleagues also creates a culture where mistakes are permissible. As long as you will make a learning moment of your mistake, the environment will respond positively. Are you interested in actual topics in the accountancy sector? Do you want to meet your potential future employer? Register yourself for Accounting Insight 2019!
Accounting Insight 2017: Why good auditors do bad audits!
On the 29th of November Accounting Insight took place. Accounting Insight is an interactive symposium in which a discussion is held about different accounting-related topics. This event helps building a bridge between academic theory taught in lectures at Tilburg University and the practical situations individuals come across within companies. As of February we, as the organizing committee, have been busy organizing this event. The organization started with choosing a suitable topic and approaching interesting speakers. The topic was quickly chosen, the overall theme of the evening would be ‘Why good auditors do bad audits’. Finding the speakers for the speakers’ panel went more easily than expected. Within a reasonable amount of time we had a prominent and enthusiastic panel of speakers and the two most important components for a successful evening were a fact. After this we could start finding a suitable location, keeping good contacts with the sponsors and designing the promotion materials. “They believe that a whole generation has to be removed before this culture problem can be solved.” Soon we reached the 29th of November and enthusiastic participants who were waiting to obtain more insights in the current developments of the accounting sector were slowly filling the foyer of the Studiozaal of Theaters Tilburg. Chairman of the evening Bas Knoop lead the discussion and four propositions were discussed by Godert van der Poel (CFO Siemens NV), Rob Fijneman (Chairman KPMG), Pieter Jongstra (Chairman NBA), Dagmar van Boekel (Partner Joore) and Johan Hopmans (Partner Deloitte). The 53 measures that were implemented to improve the audits was the first topic that was being discussed. According to Mr. Jongstra the profession is heading the right direction, but this has not been acknowledged by the public yet. On the other hand, Mr. Van der Poel and Mrs. Van Boekel think that the problem is mainly about the prevailing culture within the audit firms. They believe that a whole generation has to be removed before this culture problem can be solved. The capacity problem and the partner structure were the next topics. There was no doubt between the speakers that the sector is dealing with a capacity problem. Audit firms are generally dealing with capacity struggles that don’t benefit the quality of the audit very often. Mrs. Van Boekel states that the partner structure is the reason she left a Big Four firm for a smaller audit firm. Because of this she is working at clients more often, even though she is a partner at Joore now. “Where improvement is needed? Communication” About the role of an auditor when detecting fraud the panel mostly agreed. Detecting fraud should not be the primary role of an auditor, the panel believes, but auditors for sure have to be alert! ‘Where improvement is needed? Communication’, states Mr. Jongstra. The last topic is technology. As of lately, the accounting profession is changing. Technological developments play a major role. Unfortunately this doesn’t show up yet in the education program, states Mr. Fijneman. An auditor doesn’t have to be an IT specialist, but in the future every audit team will consist of specialised individuals including an IT-auditor. After all these insights are being shared, there was a closing drink where all participants could evaluate the evening or get in touch with one of the partner firms of Accounting Insight 2017. All in all, I believe we can look back at a successful evening which has helped bringing together theory and practise! The evening would not be possible without our partners, therefore I would like to make use of this occasion to thank them again. Next to that, of course I want to direct a word of thanks to our speakers’ panel and the chairman of the evening! Last but not least I want to thank my fellow committee members Anne, Rob and Matthieu and our coordinator Cindy for organizing this event! I hope to see you all at the next edition of Accounting Insight!
Insight with Nienke de Wit
Nienke de Wit, Chairman Accounting Insight 2014, was asked to give us some insight regarding her experience at Asset | Accounting & Finance. She mentioned to have gained both social and business experiences. If you would like to learn more about why she became an Active Member or why she believes you should attend Accounting Insight, you can read her story. Who are you and what do you study? I am Nienke de Wit, Chairman of the ‘Accounting Insight 2014 committee’. I just started my master in Accounting. Last year I graduated from my bachelor in Business Administration Why did you join Asset | Accounting & Finance? I joined Asset | Accounting & Finance in January 2014. I was in my last year of my bachelor and decided I wanted to be involved in something besides my bachelor studies. I decided to take a look at the committees that Asset Accounting & Finance offered. After some well thought out considerations I decided to choose Accounting Insight because its details fit my interests very well. I wanted some extra challenges besides the lectures I had during my study. Next to that, I also wanted to meet new people at Tilburg University and I always got the impression that Asset | Accounting & Finance was a really nice study association. And I was right! Why did you join Accounting Insight? I wanted to gain more knowledge and experience in accounting and organizing an event. Accounting Insight suited my interests’ the most because you are continuously involved in topics that are up to date in the accounting news. What is the purpose of you and your committee organizing Accounting Insight? Accounting Insight is an event to help bridge the gap between the academic lectures given at Tilburg University and the practical situations that individuals are exposed to in companies. During lectures, students only get theoretical information from books, while during Accounting Insight there will be topics discussed that are more applied and relevant to the accounting world today. What and when is Accounting insight? Accounting insight is the 6th of November this year. During Accounting Insight multiple statements will be discussed which are focused on fields related to accounting. At this event you will hear the opinions of several important speakers, who all are very experienced in their own profession. The speakers are from four different categories, these are business, government, accountants and academic. Students are invited to participate and discuss the statements with the speakers and this makes the event interactive and interesting. Another element of Accounting Insight are the speeddates at the beginning of the evening. Students can choose to sign up and join the speeddates which give them opportunity to get in personal contact with the companies: KMPG, EY, Joanknecht & van Zelst and Wesselman. Have you gathered any benefits from being involved in this committee? The cooperation and collaboration required in a team is one thing that I learned whilst being involved in this committee and it is something I really liked doing. Another aspect of the committee that I really liked is that I had a lot of contact with the high profile speakers and professors that will attend the event. During your study it is hard to come in touch with important CEO’s and CFO’s and I had fortunate chance to visit them. Which guest speakers will there be at Accounting Insight? Gosse Boon will be one of the guest speakers. He is a registered accountant and CFO from Nutreco. Jan ten Kate, RA will also attend the event. He is the CFO from Amsterdam Commodities. Another guest speaker is Jan Dalhuisen, managing partner from EMEA Deloitte. A professor in accountancy at Nyenrode Business University, Marcel Pheijffer will be present as well. Finally, Henk Nijboer, member of the parliament for the PvdA and spokesman for Finance will attend and speak at Accounting Insight. Which companies will be present at the event? The key companies that will be present are the big 4 accountancy firms: KPMG, EY, PWC and Deloitte. Besides these four companies we will have some other very interesting firms attending the event, these are Joanknecht & Van Zelst, Wesselman and NBA. How did you develop the event? What were the processes from beginning to end to organize Accounting Insight? The first thing we did as a committee was establish the different topics to address and then we started contacting possible speakers. This was harder than we expected at first, but in the end we managed to find some seriously interesting and enthusiastic speakers. During the process we came to the conclusion that we would not focus on one specific subject, but rather on many different and relevant statements. We decided to organize the evening in a ‘house of commons’ setting. When this was all finalized we started looking for sponsors for the event. Once we found our sponsors it was time to cross our t’s and dot our i’s. This meant starting the promotion of the event! What are the benefits to participants of the Accounting Insight evening? Why should students participate? The students who have chosen to participate in the speeddates have a huge advantage because they have the opportunity to network and come in direct contact with companies that they could be working for in the future. For the other students it is an interesting and informative evening that will provide important insight into accountancy topics. They additionally have the chance to get actively involved in the discussion about very relevant and interesting issues. And besides that, how often do you have the chance to get into a conversation with a CEO or professor? Discuss your experience with regards to the contact with companies and speakers for the event? I thought it was very interesting and I learned a lot from it. It was nice to visit the companies for which the speakers will be representing on the event night. Most of the contact was made through the secretaries of the speakers,
The changing profession of the accountant
The accountancy profession is subject to change. The changing profession of the accountant is subject to the event Accounting Insight 2013. The event is titled ‘Adapt to survive’ and will take place in October. The topics discussed below will be the guideline for the discussion during the event in October. If you want to discuss the topics with people from the field or you want to know more about the subject, you can scan the QR-code, visit the website of Accounting Insight and subscribe for the event. Various developments put pressure on the traditional business model of the accounting firm. Both technological developments and changing needs of clients and society, require a cultural change within the accounting firms. Technology is changing the world around us. Accounting firms should anticipate on these developments to be competitive. Where financial records become more digitized, automated and standardized, the work of the accountant will dramatically change. Accountants sifting through boxes full of clients’ physical receipts was a known phenomenon, however these days of manual labor will be gone. From the perspective of the client, the developments make it possible for businesses to perform standardized bookkeeping services themselves. Because clients can do more themselves, they want more from their accountant. A sparring-partner with a proactive attitude is asked for. Also the needs from society have an impact on the role of the accountant. We expect the accountant to be more transparent, where they should give a more extensive opinion about the firm they audit. Finally, with respect to these aspects, the consequences for the education of accountants will be discussed. But first, the three most prevalent technological developments will be discussed in detail. Technological developments XBRL XBRL (eXtensible Business Reporting Language) is an open standard for automatically collecting, publishing and exchanging financial information via the internet. With this standard, different computer systems can communicate with each other in a uniform language. Numbers and text are tagged, which makes these data unequivocally interpretable and workable for different users. So, XBRL standardizes the definition of business data. In this way, data do not have to be transformed first, in order to be used for different purposes. The users of the financial statements can distill the necessary information itself from the datasets underlying the financial statements. XBRL is a development that causes the work of the accountant to change. The accountant should give a different type of assurance than merely the “true and fair view” of the financial statements. In the future, accountants should give an opinion about the quality of the underlying processes of the firm which have led to the digital XBRL statements or they should give an opinion about the underlying data. Continuous auditing The purpose of an audit is to give assurance about the information in the financial statements of the client. For information to be useful for users of the financial statements, it should be timely and free from material misstatements, omissions, and fraud. The development of Enterprise Resource Planning systems have enabled the timely generation of financial information. Although the timeliness of financial reports increases, the level of assurance decreases. Monthly and daily reports are not audited, which causes inappropriate decisions by stakeholders who increasingly depend on real-time information. In this perspective, it is more relevant to have reliable up to date information than reliable information from the previous year. And this causes continuous auditing to be more prevalent in the future. Nowadays the audit consists of an interim audit and a year-end audit. The traditional audit is both labor and time intensive because of manual audit procedures. However, the automation within firms causes accountants to rely on internal controls. Which makes it possible to have manual audit procedures to be replaced by automated audit procedures. With continuous auditing, the accountant can perform an automated audit several times a year or on a real-time basis. Enclosed with this form of auditing is the accountants’ opinion about the automated internal controls within the firm and the exceptions that will be detected by the software. At the end, the accountant will be the external supervisor of the internal system of the client. However a possible danger for the independence of the accountant with this development, is the risk of self-assessment because the accountant will be too much involved with the client. Cloud Computing Cloud computing is another important technological development that will have implications for the future of the accountancy profession. Cloud computing is a network of computers that makes software, hardware and data available on request via the internet. Cloud computing is a radical form of outsourcing. In this way, the user has been no longer the owner of the hard- and software used and is not responsible for maintenance. Because of cost savings, cloud computing will be used more and more by firms. In the future, more financial systems of firms will go to the cloud. With this development of outsourcing systems to the cloud, the traditional audit of the firm should be focused on guarantees and certifications from the products and services in the cloud. This is a so-called one-to-many principle: one audit should be performed with respect to one service provider with many clients. Instead of one audit for every client, one general audit of the service provider is needed which automatically encompasses all the different clients. In the end, the work of the audit is more complicated and an IT-expert will be necessary. This has a decreasing effect in the workload of the accountant. Increased expectations Besides the changes in technology, there are other changes to be made in the profession of the accountant. After the financial crisis the confidence in the financial institutions is gone and so is the confidence in the profession of the accountant. It is not obvious anymore that what the accountant does is right. Because of this decreasing confidence, the accountant nowadays has to convince and satisfy his customers and outreach their expectations. Especially now, due to the changes in society, there is