A group of managing partners of three New York-area accounting firms discussed the challenges they are facing and some of the new trends during a meeting Thursday of the Accountants Club of America.
One of the trends is artificial intelligence. “As a small firm, we’re just starting to look into AI and things of that nature,” said Bart Raffaele, managing partner of Gruber Palumberi Raffaele Fried CPAs PC. “We’re waiting to see what the bigger firms are doing and we’re just going to jump in at that point. For us, it hasn’t really had much effect yet.”
One of those bigger firms is Citrin Cooperman, which is trying to decide whether to participate in a new initiative from the American Institute of CPAs to develop audit technology using artificial intelligence like the kind used by the Big Four and other major firms.
“The much larger firms, the Global Seven, have been spending hundreds of millions of dollars on their own initiatives, developing their own proprietary software, spending a lot of time on it,” said Patricia Cummings, co-managing partner of Citrin Cooperman’s New York City office. “As a firm we’ve looked at what they have coming in the pipeline that could potentially plug into our audit methodology.”
Her firm is evaluating the Dynamic Audit Solution, or DAS, technology being developed by CPA.com, the AICPA’s technology unit, with CaseWare. “The AICPA is spearheading this effort in conjunction with the AICPA Major Firms Group, which is the largest 100 firms in the United States,” said Cummings. “The proposal is that these firms outside the Global Seven pool their resources and talent and over the next four years develop a Dynamic Audit Solution, not just taking the audit methodology that we all know and love today and automating it, but really starting from scratch.”
However, she noted that the price could be steep. “Any firm that wants to commit and be part of this project is being asked to contribute 0.6 percent of 2017 total revenue, so for us, a $250 million firm, that’s a $1.5 million commitment that needs to be paid over the next three years,” she said. “My firm, my CEO, my executive committee, we’re all considering it. It seems for us, in terms of being able to protect our audit base and being able to compete in the future, knowing that we can’t go alone — it’s too big a spend and too much talent and resources needed. The ability to work with our competitors in a friendly way and develop this product and have a seat at the table -- it seems like it’s going to be a solution. As we know, technology is going to change the way we do work, and we want to stay in the audit world, so this seems like a very positive step forward for us.”
Mark Goodman, managing partner at Janover LLC, is a big believer in using advanced technology. “Technology is not something that’s going to impact us in the future,” he said. “It’s helping us right now. On many of our large jobs, and hopefully in a year or two on all of our jobs, we’re not reading contracts anymore, we’re not reading leases anymore, and we’re not reading loan agreements anymore. That’s all being done through robotic processing. It’s pulling in the information and summarizing it. We don’t do public work per se, but we have a system where we work with public companies and do outsourced CFO. We take their trial balance and populate the MD&A section, as well as the financial statements, automatically. We expect within the next year or two to be able to take our trial balances and turn them into financial statements without anyone touching them. We’ll have pre-approved footnotes we’ll be able to utilize.”
However, he is more skeptical about the use of blockchain for auditing, at least in the near term. “You hear everyone talking about blockchain,” said Goodman. “I don’t think blockchain is going to impact our industry for at least a decade or two, only because of the computing power and processing.”
Despite the challenges, he sees great potential. “What’s happening right now is robotic processing, artificial intelligence, and there are ways right now they can be used to improve the amount of time and efficiency in doing our work,” said Goodman. “This is raising a lot of opportunities, but it’s also raising a lot of challenges, for example, how are we going to train tomorrow’s reviewers and supervisors when they never worked as preparers, when they never did the detailed work? These are the interesting challenges, but I think this is a great time. I’m somebody who believes in lifelong learning and is interested in being continually challenged. This profession is going to have so many opportunities over the next years to come.”
New service possibilities
Some firms are getting more heavily into blockchain, cryptocurrency and the growing cannabis industry, including Citrin Cooperman.
“We’re seeing a lot of new opportunities in industries and we’re addressing them, for instance, in cannabis,” said Cummings. “We have a large group of folks that are working on our cannabis industry group. Many people say it’s federally illegal and they want to stay away from it, but we think we need to be in front of it and understand it. In Canada, it’s been legalized so our folks are staying at the forefront. Right now, we’ve done a lot of work in the tax area and we’ve done some advisory work. We haven’t touched the attest side, but I see it is coming.”
Cummings also sees potential in cryptocurrency and blockchain technology at Citrin Cooperman. “We have a large financial services practice, and there are a lot of broker-dealers that are looking into potentially custody of crypto assets” she said. “Some new broker-dealers are going to focus on it, and some of our current clients are looking at the new business model. We’ve been having meetings with regulators, such as FINRA and the SEC, making sure where their stance on the issue is, and making sure we have the folks in place in the event that it’s approved. In terms of blockchain, we need to understand the blockchain and how this is going to work, because we’re probably going to have to audit through the blockchain when these broker-dealers are in this line of business. So we are obtaining talent in that area to make sure that we have the IT folks who can help us audit when that eventuality is here and we’re auditing it.”
Citrin Cooperman has also been getting involved with companies that have been set up to mine cryptocurrency such as Bitcoin. “We’re working with two companies right now that are getting involved with mining,” said Cummings. “There are a lot of interesting things that are happening in terms of emerging industries that the firm wants to be involved with, understanding that risk and making sure we measure the risk and decide when we want to put more than our toe in the water.”
Raffaele is taking a more cautious approach to emerging technologies and industries at Gruber Palumberi Raffaele Fried. “We’re a small firm,” he said. “We have to wait and see how things go. But in the last month, I’ve gotten calls about cannabis and a company that works in cryptocurrencies. I had a meeting with one of my partners about it and we said that we’re not ready to take on that particular risk yet in terms of cryptocurrency. It’s something that we are addressing. We’re trying to keep more up to date with it because as a smaller firm we wait and see how the bigger firms do it and we piggyback off of that. For us to get involved with areas like this, I think we’re way ahead of the curve for firms of our size.”
Janover has also been delving into servicing the cryptocurrency and cannabis industries.
“We have a rapidly emerging practice in the cannabis area and in the crypto area,” said Goodman. “In the crypto area, we’re not dealing with miners. With broker-dealers, we’re dealing a lot with funds and really progressive high-net-worth investors, many of whom come to us and they have not reported cryptocurrencies for years back so we’re going through literally thousands and thousands of transactions, and developing tax strategies in terms of reporting on that.”
A major area of focus now for Janover is data analytics. “For the past few times we’ve been in new client pitches for bringing in new business, we get an hour to spend time talking about our client services, but all they want to talk about is data analytics,” said Goodman. “They want to know how we can help them understand their business better. There are great programs out there. We’ve been using them. We’ve been working with businesses across all different lines — distribution businesses, retail businesses — helping them understand how to get their information on a real-time basis.”
The challenge of diversity, and the next generation
Cummings sees the importance of diversity and inclusiveness at firms, and she pointed to the women’s initiative at Citrin, which is encouraging the development of more female partners like her.
“We’re putting a lot of resources into our women’s initiative in particular,” said Cummings. “I grew up in the profession and have been involved for a number of years and I’ve seen a lot of changes. In terms of how I came up the ranks, in my view, a lot of the experience I had was not what right looks like. I want to make sure that for the women at my firm and the women in the profession, that things are different for them. In terms of our women’s initiative, it’s about recruiting, it’s about retention, and mostly it’s about advancement of women in the pipeline. [At] my firm, in terms of the percentages of women partners, I want to see that percentage increase. Even when women are partners, I want them to be impact partners and to make a difference, to have a seat at the table and to be able to influence the direction of the firm going forward.”
Raffaele's firm also has been trying to be more diverse, and he pointed out one of the six partners is a woman and one comes from a minority background. “For us, it’s about talent and not about gender,” he said.
“We also don’t look at it as a woman’s issue,” Goodman agreed. “There’s opportunity for everybody. Four of the past five people who have made partner at our firm have been women. We see that as a reflection of the environment and the culture that we have.”
J. Michael Kirkland, a former president of the New York State Society of CPAs, moderated the panel discussion. “I think this discussion highlights the importance of having a good CPA,” he said. “Not only do you audit, but you’re an advisor and you’re a partner. Just consider that going forward.”
He asked the panelists what other skills are needed by managing partners and how things have changed since they started.
“The profession has changed a lot since I’ve been doing it,” said Raffaele. “The thing that I’ve noticed is technical skills is where it starts. If you’re not technically competent, you should leave the room. That’s just the way it is. For me the skills that need to be taught, and I think they should be taught at an earlier level, are communication skills, oral and written. In my mind the thing accountants have always had a tough time with is soliciting business, meaning networking and things of that nature. Those are the things that down the road are going to separate the men from the boys. I find that a lot of young professionals coming up the ranks, they know their debits and their credits, but if you ask them to sit in a meeting, they’re like deer in the headlights. I think it’s up to us as the leaders of the firm to teach them.”
Goodman agreed and said he believes young staffers need good communication skills, as well as problem-solving skills and IT skills. Cummings said Citrin Cooperman is hiring more employees with IT skills. One of the floors at the firm is known as the Millennial Floor. She noted that it’s quieter than the other floors because many of the employees there text with each other rather than talk out loud.
Despite all the challenges and changes, Kirkland noted, “It’s a great time to be in the CPA profession.”
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access