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Audit & Accounting Alert July 2018 (Issue 4)


At-A-Glance

Gerry HerterWith a bit of irony, AICPA President Barry Melancon kicked off his keynote speech at the June, 2018, AICPA ENGAGE mega-conference by stating “The pace of change in our profession will never be as slow as it is today.” In the first article of this issue, we highlight Melancon’s challenge to CPAs and CAs to not let up in their pursuit of technological advances, while predicting a rewarding future for those that rise to the occasion.

Dialing down on one aspect of Melancon’s speech, our second article showcases a report and interactive tool developed by the International Federation of Accountants. These aids are designed to assist accountants with resources that can help them develop a practical familiarity with various technology advancements, that currently, or soon will, impact their services. Here we focus on one of those, namely blockchain.

Finally, our Worldwide Update covers news from organizations across the globe.



The Horizon for Change Closes in on the Accounting Profession


AICPA leaders paint a picture of rapid and relentless change

Change

“The pace of change in our profession will never be as slow as it is today.” That’s how AICPA President, Barry Melancon, began the keynote address he gave along with AICPA Chairman, Eric Hansen, at the annual AICPA ENGAGE conference in Las Vegas this past month. To put that declaration in perspective, a year ago I reported that in his address at the same conference, Melancon stated “We will not recognize our profession in ten years.” He went on to say then that the timeframe was more likely to be five years.

For many years I have looked forward to hearing Meancon’s observations and predictions for the profession at this conference. This year, unable to physically attend, I live streamed the keynote to my office, an alternative not even technologically possible until recent years.

Melancon is known to cover a lot of ground in a short amount of time. Fortunately, other advances came to my rescue. While watching the presentation in the middle of my computer screen, live tweets filled the right side, while chats maintained an ongoing commentary on the left. Key quotes displayed in the tweets were a lifesaver that enabled me to catch important points I may have missed while I frantically scribbled my notes.

While covering the broad gamut of the profession’s issues, including audit and accounting, tax and regulation, workforce changes, financial challenges, and geopolitical shifts, the speakers emphasized the relentless impact of technological advancement that is pervading all areas. Listed as most currently significant were cognitive computing, in-memory computing, visualization, process robotics, cloud, advanced analytics, and blockchain.


More "Horizon for Change"...



Blockchain Plays a Key Role in Accounting Federation's Vision



International Federation of Accountants offers comprehensive tool

BlockchainDuring my developmental years, decades ago, the emergence of “labor-saving” devices promised untold hours of leisure time just around the corner. The reality, looking back, has been a relentless and ever faster procession of increasingly powerful “devices.” But somewhere along the way, the promise of leisure time was replaced with the drive for greater and quicker productivity. To keep up and prosper requires continued learning and adapting to new technology and processes.

Addressing the urgency of these changing times, the International Federation of Accountants published in May, 2018, A Vision for the Finance Profession and the Finance Function.Focusing on customer needs, technology developments and related skill requirements, along with the importance of risk management, quality and ethics, the report is a useful resource for all accountants.

In the section on technology, Sam Peterson, Partner and Blockchain Leader for EY, describes Blockchain as follows:

  • Blockchain is software, both a database and a network. It is a distributed ledger with no central authority (i.e. no single participant controls the blockchain) that keeps a record of each transaction that occurs across a network. All transactions are secured by encryption to prevent tampering.
  • A transaction and record occur in one single event with automated validation of a record in a "block". This validation happens through a consensus algorithm (also referred to as a consensus protocol), which is an important mechanism to ensure data being added is properly validated. The type of consensus algorithm to use is a key decision when setting up a blockchain. They can be very complex and require high computing power, which in turn consumes vast amounts of electricity. There are also less complex methods that use less power, but will impact on the speed of processing.
  • Chained blocks form a ledger and each computer participating in the chain has access (via a key) to the complete ledger.
  • Blockchains can contain smart contracts, which are a type of automation that attach a set of rules to a transaction through small programs that govern when and how transactions are processed. These could be legal agreements, but could also be other business processes.

While Peterson states that there is great potential for Blockchain, EY first applies a five-point test to determine applicability in any given situation:

More "Blockchain..."





Worldwide Update Worldwide update


Periodic roundup of recent and upcoming actions and activities by Audit and Accounting Organizations throughout the world....

International

IASB– International Accounting Standards Board (www.ifrs.org)

  1. Accounting Policy Changes (Proposed amendments to IAS 8): an overview, issued May 11, 2018, to accompany the Exposure Draft issued March 27, 2018, for purposes of providing an overview and to describe intended application in practice. The proposed amendments “would simplify the application of accounting policy changes resulting from agenda decisions published by the IFRS Interpretations Committee.” The comment period ends July 27, 2018.

IFAC– International Federation of Accountants (www.ifac.org)

  1. Blockchain: Impact on Business, Finance and Accounting, published May 24, 2018, is a comprehensive set of guidance and tools that details “the fundamental concepts in blockchain, a broad overview of developments in blockchain and how it can streamline processes and change business models, and the potential role of blockchain for finance and accounting professionals. This resource is mean to be read in conjunction with the report, A Vision for the Finance Professional and the Finance Function.
  2. A Vision for the Finance Professional and the Finance Function, published May 24, 2018, explores “how to develop a vision for the finance function and provided updates on current initiatives, including: 1) The Customer Perspective of the Finance Function: Opportunities and Challenges; 2) Building Awareness of the Latest in Digital and Technology Developments; 3) Future Finance Vision and Development Roadmap; 4) The Finance Professional Profile of the Future; and 5) Key Skills Needed for Technology Competence.
  1. International Public Sector Accounting Standards Board (IPASB) - Exposure Draft 65, Improvements to IPSAS, 2018,released April 16, 2018, “proposes improvements to IPSAS in order to address issues raised by stakeholders, and to converge with amendments to International Financial Reporting Standards based on the IASB’s Improvements to IFRSs projects, Narrow Scope Amendments projects, and Interpretations of the IFRS Interpretations Committee.”The comment period ends July 15, 2018.

CIMAChartered Institute of Management Accountants(www.cimaglobal.com)

  1. Connecting value generation for the long term - A practical guide to the CGMA Business Model Framework, published June 1, 2018, “is designed to help boards, senior executives and staff quickly and easily gain an understanding of their organisation’s business model.”
  2. Managing the Trust P&L:A toolkit for boards, published June 14, 2018, “designed to help board members manage trust over the long term by viewing their business model through the Lens of Trust.”


    More "Worldwide Update, including IFRS, ACCA, IIRC, FRC, FASB, GASB, AICPA..."


    Additional A&A News

    Thailand enacts tough cryptocurrency law, including fines and jail terms

    (https://www.straitstimes.com/asia/se-asia/thailand-enacts-tough-cryptocurrency-law-including-fines-and-jail-terms)

    SEC sets up bogus coin offering site to warn investors what scams look like

    (https://www.cnbc.com/2018/05/16/sec-bogus-coin-offering-site-warns-investors-what-scams-look-like.html)

    Blockchain-enabled bookkeeping system to launch this summer

    (https://www.accountingtoday.com/news/blockchain-enabled-bookkeeping-system-peacounts-to-launch-this-summer)

    Technology is the future for accountants, but not without risk

    (https://www.accountancyage.com/2018/06/14/technology-is-the-future-for-accountants-but-not-without-risk/)

    Add value to audits with client-focused analytics

    (https://www.journalofaccountancy.com/news/2018/jun/auditing-client-focused-analytics-201818830.html?utm_source=mnl:cpald&utm_medium=email&utm_campaign=14Jun2018)

    Big Four under attack as timid accounting regulator gets tough

    (https://www.accountingtoday.com/articles/big-four-under-attack-as-timid-accounting-regulator-financial-reporting-council-gets-tough?utm_campaign=daily-jun%2020%202018&utm_medium=email&utm_source=newsletter&eid=88f2c6c88ddb1fb5f4efdb549d6622a1

    I

    Audit & Accounting Alert is a publication of Integra International intended to highlight emerging issues in the profession.
    The goal is to give Integra members an awareness of developments impacting the practice of Audit & Accounting
    enabling them to stay on the forefront of industry trends.

    Editor Gerald E. Herter ~ HMWC CPAs & Business Advisors, 17501 E. 17th Street, Suite 100, Tustin CA
    email: gerry.herter@integra-international.net

    Integra International is registered in London at 1st Floor Sackville House, 143-149 Fenchurch Street, London, EC3M 6BN, United Kingdom