Global and regional accounting professional organization dynamics
The International Federation of Accountants elects a new chairman
On November 11-12, the International Federation of Accountants (IFAC) held an online meeting of the 2020 General Assembly. The General Assembly elected Mr. Alan Johnson as the new chairman and Ms. Asmâa Resmouki as the new vice chairman. The term of office is from 2021 to 2023. The current chairman is Mr. Zhu Renji (Mr. In-Ki Joo) will step down at the end of 2020. Mr. Johnson has served as a member of the IFAC Board of Directors since 2015. He was the CFO of a food company under Unilever and has decades of professional experience. Ms. Resmoki is the first IFAC deputy from Africa and the Middle East. Chairman, with nearly 30 years of practice experience, previously served as the first female chairperson of the Pan-African Federation of Accountants. According to IFAC’s current election rules, Ms. Resmoki will take over as IFAC chairman after Mr. Johnson’s term ends.
Founded in 1977, IFAC is an international organization for the accounting industry. It is composed of 175 professional organizations in more than 130 countries and regions, representing nearly 3 million professional accountants working in accounting firms, education, government, and enterprises worldwide. The purpose of IFAC is to serve the public interest and strengthen the accounting industry, is committed to supporting the formulation of high-quality international professional standards, and represents the global accounting industry on issues involving public interest.
International Federation of Accountants Calls on G20 to Improve Regulatory Consistency
Recently, the International Federation of Accountants (IFAC) published an article calling on the leaders of the Group of 20 (G20) to pay attention to the issue of regulatory fragmentation and further enhance regulatory consistency. IFAC emphasized that, according to estimates, inconsistencies in supervision have caused the global economy to bear about US$780 billion in costs each year, especially considering the new crown pneumonia epidemic, which is a figure that the global economy cannot afford.
IFAC pointed out that this number is depressing, but it can prompt the global economy to take the opportunity to move towards regulatory consistency, thereby reducing heavy economic costs. Therefore, IFAC hopes to send a clear message to global policymakers: Regulatory consistency has a positive impact on the global economy. At the same time, IFAC emphasized that calling for regulatory consistency does not mean opposing regulation, but rather advocating the use of regulation to solve market failures and information asymmetry issues, so as to achieve the goal of restoring market confidence and promoting economic recovery.
The article also contains relevant survey information on the impact of the epidemic on SMEs. The survey shows that about one-third or even nearly 50% of small and medium-sized enterprises worry about their ability to continue operating in the short term, coupled with the risks of regulatory fragmentation and unfair market share, their competitiveness has been severely weakened.
The International Auditing and Assurance Standards Council published an article discussing further strengthening quality management
The International Auditing and Assurance Standards Board (IAASB) recently published an article analyzing the importance of quality management to the transformation of the audit business.
The article points out that shifting from a traditional compliance-oriented quality control thinking to a more active, dynamic and risk-oriented quality management method is crucial to the audit profession.
The article believes that, compared with before, market participants now need to maintain confidence in the information reported by companies and the verifiers of this information, and a set of standards that pay more attention to quality, accompanied by an emphasis on professional ethics, will be the key element of enhancing the auditing profession credibility.
Recently, the IAASB has successively approved a number of newly formulated and revised quality management standards, prompting accounting firms to adopt a systematic and continuous improvement method for business quality management. Specifically, these standards will promote the overall management of quality risks by accounting firms, including the strengthening of accountability systems for accounting firms, improving leadership responsibility and quality culture, and continuing to improve business quality in accordance with feedback on supervision and rectification results. The newly approved standards will provide standard users with a more complete quality management system, and at the same time promote the transformation of audit quality management models from traditional and linear models.
International Federation of Accountants explores the prospects of professional accountants
Recently, the International Federation of Accountants (IFAC) published a report entitled "Professional Accountants Facing the Future", which explored the future professional role of accountants and various professional skills that they should have in order to adapt to the new situation.
The report pointed out that accountants need to be aware of the upcoming economic and social changes and be prepared, including the practice of accountants and how accountants can help companies create value. In addition, accountants also need to predict the uncertainty caused by supervision, be good at using new technologies, and adapt to new business models.
The report draws an "adaptation model" for accountants' future professional roles, and emphasizes 7 areas where accountants can play a role, including strategic thinking to promote decision-making, assisting companies in achieving sustainable value creation, escorting corporate goodwill, and serving To meet the needs of business stakeholders, use business digitization to promote business development, ensure efficient work procedures and quality management, and become a business expert trusted by the company with reliable objectivity.
In addition, regarding the impact of the new crown pneumonia epidemic on professional accountants, IFAC conducted a series of discussions with the heads of accounting professional organizations, corporate management, heads of accounting firms, and academic representatives from many countries, and published the title "Accounting Skills" Development: The impact of the new crown pneumonia epidemic and career prospects" report.
The report outlines the changes in working methods, technological innovations, adaptation to new needs, and skills to balance with the epidemic, and outlines the career prospects faced by accountants in the future.
Accounting career trends in relevant countries and regions
Data from the Financial Reporting Council of the United Kingdom shows that the “Big Four” audit revenue in the UK increased while consulting revenue fell
The UK Financial Reporting Council (FRC) recently released a report entitled "2020 Key Facts and Trends in the Accountancy Profession". The report shows that in 2019, the audit fees of British companies increased by 7.1% to 2.3 billion pounds, while the increase in 2018 was only 1.7%.
The "Big Four" accounting firms ("Big Four") in the UK are facing a more severe regulatory environment. In order to enhance competitiveness, improve audit quality and reduce conflicts of interest, the "Big Four" must split their consulting and auditing by 2024 business. The FRC found that this mandatory split requirement has taken effect, and the cost of consulting services provided by the Big Four for its audit clients has dropped by 20.8%.
In addition, the share of accounting firms in the capital market has also changed. In 2019, although the "Big Four" still monopolizes the entire FTSE 100 (FTSE100) listed company, the two largest accounting firms outside the "Big Four" are responsible for auditing 10 listed companies in the FTSE 250 Index (FTSE 250), and the proportion has risen from 3.2% in 2017 to 4.8% in 2019. The competitive landscape of the entire capital market is undergoing further changes. For example, BDO International Accounting Company surpassed the "Big Four" and audited 310 British listed companies, becoming the accounting firm that audited the largest number of listed companies.
This report may be FRC’s last report in this field. FRC will soon be replaced by a new regulatory agency-the Audit, Reporting and Governance Authority (the Audit, Reporting and Governance Authority) to strengthen the supervision of the accounting industry. Boost the market and the public's confidence in accounting information and the accounting industry.
Hong Kong Institute of Certified Public Accountants releases strategic plan for 2020-2022
Recently, the Hong Kong Institute of Certified Public Accountants officially released the "Strategic Plan for 2020-2022", which provides a blueprint for sharing the Association's vision, mission and values, and formulating and implementing strategic goals. Behind all the goals and initiatives of the plan is an overall goal, namely to build trust, which refers to the professional trust of all important stakeholders and the general public in accountants. Enhancing trust requires the entire accounting industry to demonstrate professionalism, provide services that meet the needs of stakeholders and society, and maximize the value of professional accountants. In this strategic plan, the Association focused on the challenges faced by the industry and its future strategic goals.
"Planning" analyzes the main challenges faced by the accounting industry in Hong Kong. The first is digital transformation. Advances in technology and digital transformation are changing the way companies operate, professional accountants monitor business processes, report and interpret financial results, and provide high-quality audit services. However, due to the nature of its business, the availability of resources or other reasons, some accounting professionals and organizations have been slow to adapt. The second is the regulatory environment. The regulatory environment has become more complex and burdensome. The HKICPA will continue to contribute to the discussion of this important issue in Hong Kong and regional and international industries, and will continue to work closely with the Financial Reporting Council (FRC), and consider the role of the association as the new regulatory system is fully established And positioning will be affected. Third, financial reports and other professional standards have become more detailed. Financial reports and other professional standards have become more detailed, reflecting the diversity and increasing complexity of business models under the influence of globalization and technological progress. The call for simpler standards for less complex entities and services is growing and cannot be ignored. Fourth, the trend of population and socio-economic development has changed. The association has 45,000 members and 16,000 students, reflecting the trends of population and socio-economic development, as well as the challenges faced by the entire society. The HKICPA emphasizes the abilities that accountants should possess to become leaders in the industry or business community, which helps to highlight the long-term attractiveness of the industry to the next generation.
In response to the above-mentioned challenges, the "Plan" lists 7 strategic goals: qualifications and permits, standard setting, standardizing member behavior, member support and development, promoting best professional practices, maintaining the image and status of the accounting industry, and maintaining the association’s constitution and governance In cooperation with the organization, 27 action plans have been formulated for these 7 strategic goals to help the HKICPA better achieve these strategic goals: First, in terms of professional qualifications, the reformed Certified Public Accountant Qualification Course (QP) will be launched and electronic test paper question platform and online scoring path will be developed. Second, in terms of standard formulation and technical support, HKICPA will continue to participate in the formulation of international and regional standards, complete the update of the audit practice manual, actively identify problems in the application of standards in Hong Kong and strengthen technical support services. Third, in terms of registration and supervision, consider strengthening the registration management of public interest entity auditors, including issuing relevant guidelines. Fourth, in terms of member support and image building, assist small and medium-sized firms to adopt new technologies through auditing or practice management software, and use social media to push important information and short video content to members. Fifth, in terms of industry voice and professional development, strengthen policy research and thought leadership, and publish research reports and survey results on special topics. Sixth, in terms of guild governance and institutional management, the relevant rules of the guild were revised and the governance structure of the guild was inspected.
The Institute of Chartered Accountants of Singapore conducts an investigation on the provision of non-assurance services by auditors
The independence of auditors is critical to whether the public trusts the audited financial statements and helps to improve the quality of audits. In recent years, the provision of non-assurance services by accounting firms to audit clients has increasingly been regarded as an issue affecting the independence of auditors.
In the "EP100 Code of Professional Conduct and Ethics" formulated by the Singapore Institute of Chartered Accountants (ISCA), there are inconsistencies in the interpretation and application of non-assurance services and fee-related provisions. In addition, it is uncertain what information is relevant to assessing the independence of accounting firms. In order to make this clearer, the ISCA Professional Ethics Committee established a working group to draft best practice recommendations that can strengthen the independence of auditors in providing non-assurance services. At the same time, ISCA invited about 400 audit committee members to participate in an online survey, asking them to express their views on the above-mentioned best practice recommendations and issues that would affect the independence of auditors when providing non-assurance services.
The survey results show that nearly 70% of respondents support the suggestion that the designated accounting firm should obtain the approval of the person in charge of governance before it provides non-assurance services. The recommendation will allow those responsible for governance to conduct a more timely review of the independence of auditors. According to the requirements of current standards, auditors can provide non-assurance services without seeking approval from the person in charge of governance. Only when the cost of the non-assurance service provided exceeds 50% of the audit fee, the auditor needs to disclose to the person in charge of governance.
In addition, 92% of the interviewees believed that the information on non-assurance services provided by the accounting firm’s network of accounting firms to audit clients’ parent companies and subsidiaries is very important. Users of financial statements worry that the provision of non-assurance services by auditors may affect the independence of accounting firms that express opinions on financial statements in the same accounting company network, but in reality, it is difficult for accounting firms to obtain such information. In order to solve this problem, ISCA recommends that accounting firms should confirm with the network of accounting companies to which they belong, that the non-assurance service fees collected by each audit client’s parent company and subsidiary should not exceed 1% of network revenue.
International accounting firm dynamics
Deloitte releases report on the status of enterprise adoption of artificial intelligence technology
Regarding how to view and apply artificial intelligence technology, Deloitte surveyed 2,737 global corporate executives and released a survey report entitled "Enterprises Adopting Artificial Intelligence Technology". This is the third consecutive year that Deloitte has conducted such a survey. This year’s survey focuses on understanding what measures the respondent’s company is taking to keep up with the times as artificial intelligence technology is increasingly widely used, and when corporate boards increasingly focus on issues such as governance, trust and ethics of artificial intelligence technology, how companies have adopted artificial intelligence technology to manage technological risks.
Deloitte found in this survey that respondents believe that artificial intelligence technology can create value. Therefore, more and more companies are using artificial intelligence technology to improve work efficiency and achieve differentiated operations, forming their own relative competitive advantages. But at the same time, the interviewees also realized that the first-mover advantage of companies using artificial intelligence technology will soon disappear, and companies have to increase investment to maintain their competitive advantage in the industry. In addition, although the interviewees have recognized the risks posed by artificial intelligence technology, the company has not taken any action and is not prepared to manage and control related technical risks at the level of strategic, operational, and moral hazards.
Deloitte believes that in order to make better use of artificial intelligence technology to create value and pay attention to related technical risks, companies must start from the following aspects.
First, enterprises should break through the boundaries of current artificial intelligence technology through creative thinking, develop new products and services driven by artificial intelligence technology, and seek innovative and practical technical solutions. In the business, all departments including the IT department should work closely together to jointly apply artificial intelligence technology to create new data sources, tools and technologies, and supplier partnerships.
Secondly, companies should formulate overall principles and procedures, integrate artificial intelligence technology-related risks into the company's overall risk management and control procedures, and actively manage and control various risks including technical risks. At the same time, companies should keep abreast of the development framework of artificial intelligence technology, government policies and legislative actions in various countries to ensure that they meet the requirements of laws and regulations and develop future-oriented systems. At work, companies should actively use technical training and coordination to form risk awareness within the company.
Ernst & Young proposes a framework for megatrends to help companies achieve development goals
Taking the opportunity of participating in the 3rd China International Import Expo, Ernst & Young released the title "You Reshape the Future?" Or will the future reshape you? "The report puts forward the Ernst & Young megatrend framework to help companies allocate resources more efficiently and focus on investment opportunities.
Ernst & Young believes that under the influence of the new crown pneumonia epidemic, four driving factors such as technology, globalization, demographic and environmental changes (such as 5G, trade friction, climate change and other specific events) have accelerated the reshaping of the world. To this end, Ernst & Young proposed a megatrend framework to explore the new normal in the fields of global order, society and economy, enterprises and markets, and families and individuals based on the above four factors, and analyze how the megatrend framework reshapes the world.
The Ernst & Young megatrend framework mainly covers the following areas. One is whether companies can develop new solutions to reduce carbon emissions and seize opportunities. The second is whether the company is prepared to deal with threats such as rising populism, trade friction, high-tech competition, and cyber attacks. Third, given that human behavior is becoming a commodity, do companies understand consumer behavior and their own behavior, and whether they can measure, understand and shape behavior. Fourth, false information is being produced and disseminated more and more quickly and easily. How can companies help customers and employees distinguish between true and false information and reduce the threat of synthetic media? The fifth is how companies view the impact of social media and smart hardware on the interaction between companies and customers, governments, employees and the public. Sixth, the boundaries between work, leisure and study are blurring, how companies optimize and manage their workforce. Seventh, microbial technology will bring new development potential, how companies can incorporate it into the innovation system. Eighth, synthetic biotechnology will completely disrupt multiple industries. Are companies ready to incorporate biosynthetic technology into the value chain?
Ernst & Young pointed out that based on the framework of megatrends, companies should start from the following points to achieve development goals. First, the combination of technology, globalization and demographic characteristics will prompt African countries to go beyond the traditional growth path and greatly liberate African productivity. For enterprises, this represents huge opportunities and challenges. Companies can help African countries build sustainable business models, open up consumer markets, and seize opportunities. Secondly, in the current economic development process, environmental costs, social costs and inequality factors are increasingly not to be ignored. Companies should adopt modern business models, adopt new financial reporting methods, strengthen data and transformation strategies, strengthen their connection with ever-changing social values, and strengthen their ecological and social influence. Third, in the face of the increasingly fragile social structure caused by transnational immigration, digital communication technology, ethnic and religious integration, and family changes, companies should assume their own social responsibilities and build the workplace into a place that unites colleagues, seeks cooperation and benefits all employees , bring health and happiness to employees.
KPMG releases CIO survey report
Through a survey of more than 4,200 CIOs from 83 countries and regions (including more than 100 CIOs from China), KPMG released the 22nd "Global CIO Survey Report."
The survey shows that during the new crown pneumonia epidemic, in order to ensure health and safety and work from home, global companies increased technology spending by approximately US$15 billion per week, becoming the largest increase in technology additional investment in the past, resulting in technology spending in just three months Exceed the annual budget. Moreover, leading companies in the field of digital technology have made additional technology investments in distributed cloud and software as a service (SaaS) due to the epidemic, which has greatly strengthened their leading advantages over other companies.
Within companies, the epidemic has strengthened cooperation between business departments and technical teams, and has also accelerated digital transformation and the application of emerging technologies such as artificial intelligence, machine learning, the Internet of Things, and intelligent automation in mainland China. However, the epidemic has also highlighted the current situation of talent skills shortages in enterprises. 62% of respondents believe that skills shortages prevent their companies from keeping up with the pace of change, and this proportion is as high as 96% in mainland China.
The interviewees recognized the importance of cybersecurity issues. 41% of the respondents believe that their company has been attacked by a cyber attack, agreeing that large-scale home office work increases the cyber security risks for employees. They hope to hire cyber security professionals to support the home office transformation, which has resulted in cyber security-related skills ranking first in the global technical skills shortage ranking for the first time.
KPMG pointed out that under the influence of the epidemic, companies must start with liquidity, customer service and supply chain, and choose an appropriate business recovery model based on the current operating conditions. First of all, if companies (such as real estate, leisure, hotels, and transportation/tourism companies) encounter the problem of declining product demand due to the epidemic, and may not be able to survive the long-term recession, they should choose the Jedi restart model and formulate a clear strategy and action plan to reduce costs And eliminate inefficiency, and shape a new workforce through training. Second, if the company has a sustainable business model, but the epidemic has caused changes in the way it acquires and maintains customers, it should choose a transformation and rebirth model, change its operation method, and invest in technologies such as artificial intelligence, payment, integration platforms, and automation. Realize the digitization of customer channels, supply chains and middle-office department systems, establish a modern digital operation network and develop technical capabilities. Third, if companies (such as public utilities or financial service companies) are less affected by the epidemic and can achieve rapid recovery as consumer demand recovers, they should choose to follow industry practices to improve their operating models and accelerate digital transformation to meet customer needs. Finally, if companies benefit from the epidemic and demand for products rises, they should choose a business surge model. Such companies must expand quickly to meet expanding demand and to meet changing customer preferences and markets. They must continue to understand consumer preferences through data analysis, take measures to automate the supply chain, eliminate supply chain friction, and accelerate digital business transformation.
BDO releases 2020 global risk landscape report
BDO International Accounting Corporation conducted a survey of 500 corporate executives around the world on issues related to reputation and integrity risks, and released a survey report entitled "Global Risks in 2020". The survey focused on the relationship between integrity and risk.
BDO pointed out that 99% of respondents believe that corporate integrity is the foundation of brand reputation, and all respondents believe that integrity should be integrated into the company to avoid reputation and brand damage. In addition, interviewees believe that with the development of new technologies, especially due to the impact of the new crown pneumonia epidemic, remote office is becoming more and more popular, and privacy infringement has become a new threat facing enterprises.
BDO believes that given that only 22% of the respondents indicated that risk managers in their companies have taken up senior management positions, companies should be more proactive in managing reputation and integrity risks, formulate an overall integrity strategy, and appoint more risk management personnel.