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stepping stone
ON-DEMAND WEBINAR

Interim audits: A stepping stone towards continuous audit

With audit season approaching fast, and business survival on everyone’s minds, more firms are leveraging interim audits to develop an earlier understanding of client risk. Through the use of interim audits, and taking steps towards continuous audit, you can better plan work, staffing, and budgets, while also offering value to the client earlier in the engagement.

How can your firm maximize the value of interim audits?

Join Gena Song, CPA, Adam Massia, CPA, CA, and John Colthart, Senior VP, Sales, for a deep-dive into how interim audits work and the value to clients. In this webinar, you will learn:

  • The value of early risk assessment and client engagement

  • Strategies for implementing and improving interim audits

  • How firms are implementing continuous audits

This webinar includes demonstrations and a Q&A session to answer your questions.

You will walk away with a better understanding of the value of interim audits and how to implement them within your firm.


Who should attend
  1. CPAs and CAs interested in interim and continuous audits
  2. CFOs, controllers, and internal auditors interested in using AI for financial data analysis
  3. MindBridge Ai Auditor users
Transcript

SUMMARY KEYWORDS

clients, audit, year, firm, transactions, technology, ai, months, procedures, understand, data, challenges, interim, revenue, implement, perform, team, jc, starting, engagement

SPEAKERS

John Colthart, Adam Massia, Gena Song

 

John Colthart 

Wonderful. Well, good morning. Good afternoon. Good evening. Wherever you are in the world, all of you should be aware based on the screen you're seeing is that we're here to talk about interim audits a stepping stone towards continuous audit. I'm JC and I'll introduce our other wonderful panelists for today's session. We've got Gina song, who's a CPA, chartered accountant, and she is in our customer success customer experience team is one of our senior advisors. Gina has spent a lot of time in a few different industries, including banking, and obviously accounting in both audit and an internal sort of reporting type scenarios. So she's got a lot of interesting input. And then we've got Adam Massia, another CPA, another chartered accountant here in Canada, who is a lead for our audit and assurance practice. So he spends all of this time working with our product group working with the industry with various regulatory and standard setters around the world, really understanding what's happening and how we will transform our business to help satisfy the needs of yourselves, the firm's and the individuals. As I mentioned, I'm JC i'm John Coltart, I run our sales group here. I've been in the industry for about 20 years selling to CFOs, internal audit committees, controllers, and the like. And recently, obviously, I've been spending a lot of time with firms and practitioners. So let's wander through what the agenda for today is about the state of the audit for what we see it as is 2020, some of the leading inputs from from around the world. We're going to then talk really, very deeply about where we see internal audits and procedures coming in. Adams going to do a great job of kind of walking you through that and seeing the product live, and how you could start thinking about a new world with with, with technology, informing that and then obviously, we've got Gina who's going to come in and talk about practical experience getting software implemented to help you along in your journey. So what are the learning objectives for today? Well, really, I mean, we really think that technology is going to enable the next level of next generation In a firm and practitioner, and part of that is to really help you along the guidance of where we see risk assessment going. And where we see overall client engagement going. Obviously, we're in very turbulent times right now. And there's a lot of reasons why we would want to look at interim audits and looking through things. The other thing we want to talk about is how to actually get there, right? What are some of the strategies that will help you empower you, as a team inside your firm to get from point A to point B point A being, you're thinking about it, maybe you've done some earn terms, but you don't have it wide scale across your whole business? How do you actually move those in, and then also talking about the continuous element of that and how that fits into the standard. So I think we've got a really good set of objective objectives. And we've got a really good panel here. That's going to talk to you very directly about what's happening inside of your business. So, you know, let's just dive right in. Thank you all for joining obviously, really fantastic to have this conversation going today. And it's all about the state of audit in 2020. Obviously all of us know where we are in the world and what's happening in the world, in terms of this current state of the pandemic, and what it's doing to your clients, and that's causing a whole lot of anxiety. But if we focus in on just parts of your business that are all around audit, we can talk about this, this constant polling of, you know, trying to make sure that it's efficient and the firm is effective in in doing that, while at the same time increasing the level of quality and the client value. We've seen a lot of different challenges across the globe around audit quality. The FRC, roughly two weeks ago, came out with a big study of how they're viewing changes required potentially for the Big Four, they've been asked to set aside some time to actually think through what their audit business needs to look like. And it comes on the back of some very high profile, audit quality issues and the challenge that we see is that the auditors really at the end of the day are being pulled right? You're being because your clients are wanting you to be done as quickly as possible with as least amount of cost as possible, but at the same time they feel they need to have quality in there. So make sure that nothing's going wrong in their business. But also, you're as a firm trying to provide added value because if the downward pressure on realization rates and on audit fees continues, then you've got this really big challenge of trying to make sure that we can actually satisfy your clients needs at a price point they're willing to pay. That just causes a whole lot of anxiety. And if we think forward into the next four or five years from today, we have to reflect on something that was written a few years ago. So the World Economic Forum, founder and executive chairman Klaus Schwab wrote this book, the fourth industrial revolution, and it was all around as as artificial intelligence started burgeoning in really mainstream conversations in 2014, 2015, 2016, with the advent of the likes of IBM creating Watson and, you know, people understanding alphabet and Google's components were whatever that might be. The artificial intelligence arena started to really open up, although it's been around for decades, it's really when we started having this conversation, and well Klaus Schwab did is he actually went ahead and wrote a whole book around what they saw as being the Industrial Revolution, fourth industrial revolution. And obviously, the challenging part is is, I believe it was four out of the top eleven jobs that would be impacted by artificial intelligence. And by impacted I mean, removed, would be in the accounting profession. So that's a really big challenge that they were seeing even back four or five years ago. And the expectation was obviously by 2025. That, as you can see, they expect that 30% of corporate audits would be performed by AI. Now, of course, that has a whole other scenario of challenged to the industry other than the fact that technologists are coming in and trying to apply this but it also means the whole standards and everything back up the value chain to the IAASB and others who are setting the framework for the standards have to really start thinking about how technology is going to be impacting the industry. Now, if we look at a digitization of the industry, and we've looked at all the things that we've done to date, right, there's been a whole series of movements towards a better way, you know, with some of our older partners in firms will joke with us, you know, if they've been in the firm for 30 plus years, you know, they they laugh about the idea of, of how big Xerox was at the quote unquote digitization of working papers. Now, we've seen over the last 20 years or so, you know, this continued introduction of other technologies that have helped support this and some of this has been in just computing things like cloud computing. Some of it has come to updates in standards, obviously, in the United States with Sarbanes Oxley in 2002. When that was all rolled out, a whole series of things had to start becoming more digital. But obviously the challenge with that is, there was there was a whole bunch of other barriers. And some of that was no how some of that was the standard. So obviously, we've had to deal with some of that. And some of that was actually just with sheer computing power. You know, I always joke with folks when I think about how, you know, gray my beard has got and I think about the first technology I had back in the 80s, to getting my first laptop in the mid 90s, to the type of power that I now have in my smartphone. And I really do have to laugh at just how crazy the technology has ramped over the last 30 or so years. But what's really amazing is how how slow we've originally been at deploying those inside the accounting profession, but I think we're, we're at that tipping point and I think this year is one of those critical points you know, as discussed by by Barry Melanson in in Engage even just last week, and some of the things that Barry was talking about was the digital CPA, you can see the hashtag here and about you becoming, you know, even more and more, the trusted advisor, but how do you do that? When you look at all these client challenges, so this is directly from from his slide, and you can see on the right hand side here, like all the different things that are challenging for for firms, your clients in terms of things they're trying to do. Now some of you have big advisory businesses, or thinking about getting into advisory, I say absolutely go for it. It's a huge opportunity to be that trusted advisor, but at the same time really help those clients through these challenging times. But you might be thinking to yourself, Well, how does this come into the realm of continuous audit or internal audits? Well, my point is, and the way that I would view it is that when you've got a client who's struggling this much when you've got a busy season that may have wrapped literally just weeks ago for you as firms, you can see that there's this this constant additional pull and push within the ecosystem. You've got clients who are demanding more time from either yourselves or others in these types of areas in their current client challenges, or you've got them delayed in getting new data for a higher quality audit or not enough data or whatever that might be, and so you've got this issue where, you know, it's hurry up and wait for them to give you stuff and then you have to be available. So you end up with this huge expansion of, of potential time debt, which you're trying to collapse into a few short weeks or a few short months, during whatever your busy season is. An internal audit helps you sort of elongate that and a continuous audit helps you elongate that. But it also helps you to also deal with understanding where these client challenges are, because we think that's also really important as where we think it is. Now. I mean, the last slide all happen then I'll I'll stop talking and let the really smart, Chartered Accountants kind of fit in is really where we see the industry starting to take a much more positive stance, which is the shift the emphasis of the audit of, you know, no longer being this sort of fuzzy rearview mirror side near that you're kind of like, okay, well, I think nothing is going to come up and bite that client. You know, we don't think there's a huge issue. It's very reactive to where we think we can start building pathways to be proactive with with your risk analysis. And I think this is, this is one of those areas where Adam is going to be able to delve more into depth and detail with you to make sure that we can actually help you understand why this can be important not just from a time but also how do we start putting the posture into the right place. You know, if Barry Melancon is saying that we're going to change and technology is going to change the profession more drastically in the next five years. This was as of last year's AI CPA engage more in the next five years than we've ever seen in the last 20 years. You know, you can imagine that as we're getting into that we're really starting to see it and when it relates to audit, we think that shifting the emphasis into that sort of more proactive risk assessment, earlier identification of where you need to spend your time is going to be critical to your firm's success and to your own successes, but what I'll do is I'll pass it off and transition it over to Adam, let him kind of walk you through, you know, his thoughts and where this fits into to the standards and maybe even see some of the product out them over to you

 

Adam Massia 

Absolutely, thanks, JC my role here today is really to walk you through more how we're going to start applying, or how we think you should start applying some of these these methods that JC was talking about, essentially trying to shift some of the time and the pressure away from busy season into the more, let's say, even keeled parts of the year. So first off, I mean, let's start with the challenges. Like JC said, this is pretty fresh for most of you. So I don't think anything on this stream will come as a surprise to you. But a lot of the challenges that pop up in busy season are with the volume of year ends, it typically happened in December. There's a high volume of engagements that need to be finished signed off and issued in those first 3, 4, ``6 months of the year. So there's a lot of pressure to meet client filing deadlines or expectations. So even if they aren't hard deadlines, you know, some clients are very picky. They know that they want their statements issued in the first few weeks of February as an example. Or you know if they're required for bank covenants or potentially 60 day time moments after, after the year end dates. So all that will result in you as staff or if you if your partners, your workforce, feeling pretty stressed and potentially burnt out over the course of the coming months, and maybe potentially lead to a bit of a decline in the output of the work, mainly because you know, they're just the human mind is only capable of so much. And you know, there there are challenges that come with that. The other part that I don't think any of us can ever forget, I specifically call back to some of the nightmare clients that I have had back when I was auditing myself is that not every finance function is really equipped or staff to be able to give you information in a timely manner. So on top of the other challenges, including, you know, the meeting expectations and filing deadlines, we layer on the client component, which you know, they might not give you accurate information the first time or they're late giving you information, which could delay some of your field work. There's just a number of variables that can go wrong that lead to, again, just a very challenging, resource constrained busy season. And as a result firms kind of have to staff in this very seasonal model, right. So I think everybody's kind of familiar with recruiting season happening in the fall, you're building up your base of either interns, co op students are just junior staff to be able to manage the load of some of the field work that has to happen in those first few months of the year. But really, the need if you are able to spread that work out a little more and move to a more continuous style engagement would be a little more flat throughout the year. And you know, I would assume that following this you would also see something similar with the hours being shifted as well. So you know, trying to move from that high pressure situation that would happen from January to April and spread out throughout the year so that you know, you're able to kind of provide that quality to your clients around but also just get a more you know, even year and potentially just take some some stress off your staff or the firm itself. So our thought on this is that you should consider changing the way that you're approaching your audits, specifically the strategy and the timing of when you're performing some of the requirements in planning, but all the way through to the procedures that you're performing and the opinions that you're providing. So, I took this quote directly out of out of the auditing standards in the US, it says, you know, planning is not a discrete phase of an audit, but rather a continual and iterative process that often begins shortly after, or in connection with the completion of the previous audit, and continues till the completion of the current engagement. So what does that mean? It means that, you know, you don't have to wait until three weeks before your fieldwork to start planning for the engagement that is due, you know, at the end of the month, it means that you can take some of the steps that you would have otherwise been cramming into that busy season and moving them out towards either, you know, let's say the fall beforehand, or even just portions of it throughout the year. So whether that be running more continuous analysis or data analytics throughout the year to be able to, you know, better understand the entity, and identify what your eventual plan or target procedures might be at certain points in the year, you can really kind of just benefit from some of that downtime that you would have otherwise had to move some of that out of busy season itself.  And I mean, there are benefits to this. So I don't think, again, a lot of these will come as a surprise to some of you. But the idea is, is that the earlier that you start planning, and the better that you plan your engagement, the more effective your output of the engagement will be. So, you know, if you're looking at things kind of throughout the year, and you're trying to understand maybe the ebbs and flows of the business, by improving your understanding of the entity and its operations, you are able to effectively assess the risks that exist and then you're able to effectively tie the procedures that you're going to perform and better you know, understand the nature timing extent of the procedures that you're planning to do to be able to respond to those risks. So, you know, the idea is if it's appropriate, you can move some of those procedures, whether substandard or test controls or whatever it might be into the fall, or you know, that period before your reporting periods, so interim period, to be able to, again, shift some of that work. But all this to say is that, you know, this doesn't have to be a point in time or the same thing every year, you are able to kind of move some of the work around depending on when the information is available to you. Again, it might not always be there, depending on the client and when they're willing to provide information. But you know, if it is there, it's something that you should have we considered just to be able to spread some of the workload out throughout the year, and again, potentially reduce that pressure in busy season. And again, so this is just another quote talking about audit plans itself. So the key part here that I want to highlight is just the nature timing and extent of the planned audit procedures. So If it is appropriate, given the risk assessment that you performed, so your understanding of the entity and that continuous assessment of risk throughout the year, and you are able then to consider the timing of what procedures could be appropriate in an interim period. So whether that be analytical procedures over let's say, a nine month interim period, to then you know, better understand potentially what you could expect to see for the last three months, or just other you know, tests of details or tests of controls that you're able to do in that period of time. But you could then go ahead and extend to the end of the year, or just focus, you know, that period end work on the period that's between interim and your reporting date, versus you know, having to do the full 12 months of analytics or the full 12 months, intensive details or test controls. So, again, it's just that consideration to the timing components of the the procedures that you're planning to perform. And again, so you know, just throw another one in here. It could help With the element of unpredictability as well. So, you know, historically, if you haven't been doing this to your clients, you've given them that kind of grace period to be able to maybe correct any misstatements or things that have happened in that in that period, if they weren't expecting to come out and perform procedures. So there is some benefit here, from the unpredictability standpoint, as well. And again, the benefit, like you'll see shortly of performing your analytical procedures multiple times a year is that in theory, you should be able to template the procedures that you are doing so that when you go back at that full, that full period reporting, there's very little updating required outside of adding the data. So if you understand the trends that you're looking at ratios, balances, whatever it might be, it should be relatively simple to extend that so that you're not doubling down on any of the work that you've done or or recreating the wheel. So how does this impact my busy season so the hope is that you know, if with the cooperation of your clients and Gina will talk on this a little later, it's shifting their mindset to get information ready to you at an earlier point in time, I think you know, there's some benefit for you to be able to pitch that to your client that way and say, in order for us to, to hit the reporting date that you require, or you know, in order for you to kind of maybe spend a little less time with us in that busy time of year because you know, they're obviously busy too, it might be beneficial to spread that out and and get more frequent contact with them. On top of that, you are able to kind of keep more frequent touch points with your clients. So you know, really showing that value throughout the year rather than that once a year compliance scenario where you knock on the door and ask for a list of invoices and you know, they struggle to get it to you on time or or get them all for you. And again, you can extend your analytical procedures or any other tests that you do out to the rest of the year. So unless there's been, you know, a significant change or significant finding that would alter the risk assesment or the procedures that that have been performed. And you should be able to extend that out to the full period.  And then again, we want you to just focus that time and really reduce the amount of time that you're spending on that audit in the you know, closer to reporting and your conclusion stage on that interim period end portion of it so that, you know, you're not pulling invoices from January or February. In this point, you're really only focusing on again, as an example, that  November December period, which will hopefully that, you know, allow you to spend other time equally on other clients and finish them up on time as well. So the main focus, shifting everything, I guess, a couple months earlier, if it allows it, to be able to spend your time you know, maybe a little more free time in the winter for those of you that like skiing or outdoor activities or whatever your climate around you might allow. And then to bridge this with, with a more continuous audit. A lot of you are probably aware that in the US, CICPA drafted some application material to SAS-142. And there's a there's a quote in there in the application materials that talks about, you know, using continuously available sources of evidence as as an audit procedure. So the quotes at the bottom there just as electronic information that might be available as an example blockchain on a continuous basis, you can develop audit procedures using automated tools and techniques to obtain information about it. So, I think the natural progression, JC had said before to cloud technologies and other information that's always available to really lends itself well here. So I personally can see a situation where we start analyzing continuously and start to be a little more proactive about the work that we're doing the audit, you know, real time might be, hopefully not as far away as we think. But the idea is, is that you don't always have to wait for 13 months after an error or something. To be able to identify it, you should be able to identify in a more timely manner, which would again show more value to your clients. So it's good to think, you know, da CPAs thinking about it as well. And inevitably, I think it's where the pressure will end up. Just as this kind of supports what was being said, maybe by JC before, as well as if there are other situations here, that could fall outside of the audit, some that are within the audit, that would just help support clients insights into your clients business. So obviously, from an audit standpoint, understanding the entity, I don't think we need to really explain that much more, the more that you're able to analyze data and better understand the trends that exist. You know, the more you can spend your time on the actual risky areas where a misstatement might exist. But there are situations outside of that as well where you might want to consider, you know, again, if your firm has an advisory department or team that focuses in on that stuff more. There are other insights that you might potentially be able to infer there that you could kind of pass along to other teams and maybe provide other services, again, subject independent rules, independence rules or anything else. But there are other use cases for monitoring ongoing activity. Although you know, we are going to focus on the audit component today. So what you're seeing is our data page in MindBridge AI auditor, you can see that I've loaded two separate sets of data here. So actually three, but we do have the interim period that we've loaded down here, and the full year so we'll start with the interim. So we've loaded the general ledger and the the opening trial balance here. So what we're working with is nine months of data. So we've summarized here on our risk overview page, and how we bucketed the transactions that have been scored into high, medium or low, and includes a quick balance check here just to show debits and credits, as well as the timing of when those risky transactions have occurred throughout the year. So you will notice that we're only showing them months of activity. And that makes sense because we've only been provided nine months of GL at this point by our client. So what you are able to do again, you know, depending on what your individual audit looks like is that you're able to look and slice and dice this data in a way that would help both understanding the risk component as well as the procedure that you're responding to for it. So as an example here, if I wanted to look at specifically to look at my revenue accounts, I only wanted to look at you know, the revenue accounts for the first nine months of the year maybe understand if there's anything that could be in here that would be kind of risky or things that I should I should maybe pay more attention to. So you can see that all of my revenue transactions here are low risk, so means that they're, you know, relatively routine. There's nothing that stands out that's rare and anomalous in there. So pretty consistent data set. So from my standpoint, as an auditor, I gained some confidence over that because I know that you No, there's no weird entries to revenue that have offsetting, you know, expenses or things that maybe shouldn't, shouldn't exist. So I'm assuming that you know, pretty much everything in here goes revenue AR kind of thing. And then from there, what we do is we summarize the triggered control points at the right hand side over the transactions that are being displayed here. So, in this case, you know, on the GL analysis, we run 27. And they include rules based GL, sorry, rules based, statistical and ml. control points. And in this case, we're only displaying the ones that are actually applicable here. So we have some that have triggered the to Did you benford. And then these started period, end of year have to do with kind of the timing when things are posted. So what you're able to do is get an understanding of the factors that make up this risk score at a very global level for revenue. And if you wanted to get any more granular on it, you can then just click where those are transactions are, and see what some of the the entries or the transactions look like. So you are able then, you know to kind of summarize and just validate that nothing in here is anomalous, that meets your expectations for revenue based on, you know, the client's specific controls and procedures, you can always look at it in an entry view as well, if you did only want to look at the single sided transactions. So now we only actually have the credit to revenue components. And from there, if you wanted to, for your full year, first nine months of the year, you can run a sample here. And we do run a risk stratified samples. So what that means is if there was anything that was sitting in the high and medium buckets, we do stratify between those, those risk scores for your sample. So we would focus the time and effort on your sample in the high medium buckets versus the low. In this case, since you only have low we'll give you the same output as we would with just irregular random stratified random selection. So you are able then, to add something in here, if you want to choose Add interim revenue sample, call it 10 here just for fun, seems pretty small, let's go 30 instead, I can't type today. And then from that generate your sample, we would summarize the dollar value of the information that's been provided to you. And then if you add that to your audit plan, you now have your sample for the first nine months the year for revenue, and are able then to send that off to your client, have them prepare all the supporting documentation that they need to allow you then to perform some of those tests of details well before you either go out on site, so you know this could allow you to send it to them and if they are set up electronically, potentially send that information back to you, via PDF or something that doesn't even require you to go out and visit them for this. Or, you know, if you are there, hopefully they have this nice folder ready for you. It says revenue, invoices requested or something. But most people probably chuckling right now they know that that's not usually how it goes down. But it is nice to think that you can kind of put that put the information in their hands and let them know that you know you are waiting on that information and move your audit forward. So that was one example of a way that you can use a procedure for the first nine months the other one if you use the trending page. So there are two views that you can do here. As an example, let's let's pick we're going to trend by account. I'm going to look specifically at my direct costs. So I can trend my direct costs over over the year. I don't want to look at ending balance here obviously because I'm looking at expense accounts. So I look at cumulative year to date activity. And what I can do see that my direct costs climb pretty uniformly throughout the year. And then as the year end turns over, we would go back down to the ending balance of zero with and this balance here now just be showing you at the end of 2019. So if you wanted to get an understanding, over time of how you would expect an account to trend, you're able to look at it even just for the first nine months of the period. In addition, you can break it down a little further depending on the information that's been provided to you. If there are cost centers, if there are codes for states, if there are just certain product lines, all that will vary just depending on the information that's been provided to you by your clients. But again, if you want to run analytics specifically to you know that state or that that cost center, that profit center, whatever it might be, you do have the ability to do that. Down below, these are all configurable ratios. So we've just displayed a few here. We typically display about 30 on default, and they range from activity profitability liquidity ratios. And we've also built out some for going concern. So the idea here is if you had more than what I have for data here, so if you had five years, we'd be able to trend those ratios for you over that period of time. And at that point, then you kind of just start to develop an expectation in your mind around how you would expect that ratio to display at a point in time. So in this case, you know, you can see that the day's expenses napi is actually a little lower, in this year, or at least it's a little more consistent in terms of the way that it's declining, versus the prior year, you kind of had some some spikes, that you, you know, might want to investigate. So this just helps you kind of develop your expectation and say, you know, should I be expecting another spike here in November, or you know, was that a one time thing and the more data that you have, the more that you'd be able to kind of inform that you are able to download any of these visualizations as support. And again, if you want to add an annotation here, just to say you know should we expect November to spike again, you are able to have that kind of back and forth and comment with your team. If you just wanted to, you know, make a mark up your, your preliminary analytics. So that's helped develop some expectations for what should come up in the next couple months. And we'll see what that looks like when we compare the full GL in just a few seconds here. Okay, so that is, that is the way that we envision applying on an interim basis very briefly. So again, there there are some more functionality that's available here. If any of you have kind of seen demos before, you might be familiar with it. If not, I encourage you to go to the website, maybe look at a few of the other demos that would walk you through the more detail. And then for now, I do want to make sure that we focus on the interim functionalities. So I'm going to go back and show you what the full year looks like. So in the full year file, you'll notice similar distribution of transactions, so nothing actually changes in terms of the functionality in tool itself. So what you'll see is now instead of the nine months, you get up to the full 12 months here. Again, if you wanted to, you know, you are still able to kind of hide and move any of those mounts, you can display in the way that you want. And you can download them annotate, so all that functionality is still the same. You can still filter out here to stay consistent with my last example and look at main business income. There are a few more transactions that are something but again, you can see now that there's actually a few more control points that have triggered between that point in time. So you know, if you wanted to focus your time, then on the last three months of the year, you would click the effective date. filters here, and then you would pick after, let's say we would go after September 30. And apply.  And now you're only looking at the control points that have actually triggered over the last three months. So if you were to focus, you know, your procedures or anything that you're you're doing on those three months, you can then drill down even further into this low risk component. And see only the transactions that have happened since after September. Again, you want to extend that procedure just to make sure that you're selecting and making sure that nothing significantly changed in those last three months. And you run the intelligence sampler again. And again, you are able to just filter by by other things as well. So that is there but you can add rows and add other conditions here, depending on what you're trying to accomplish. So let's say you wanted to look for material items or something like that, and you can just select the monitor value above whatever your your performance or ISI number is to be able to then select the ones that are potentially more material, and then do a random sample on the rest. So you can extend by then just selecting your your intelligent sampler here again, you're only going to pick on those last three months of your sample here would be period and revenue sample.  We'll do another 10 just for fun, generate sample.  And so you can see that we've we've generated that for you. I made a transaction view here, so I probably could have flipped over to revenue instead. But I'll just add this regardless. So now you've added those 10. You go ahead and validate send that off to your client again, and then just make sure you know that the sample that you've selected in the work that you've done is representative of the entire year. And if I go back to the trend thing, Page. Again, same functionalities, so if I just type in direct costs and again, I'm looking for cumulative here to date. So you can see that I've just extended out the next three months. So, very little kind of activity very little change your other options if you want to look at the actual activity by month, you can see just the volume of the trip the be expensive gone through that account. And so, you can see you know, if you try and compare August 31 of 2018, here, you have 169,000 worth of expenses versus in the current year you only had 40. So, you can see this kind of steady decline of direct costs and you know, to layer on top of that, and you are able to compare it with the sales component as well. So, you can overlay a revenue amount as an example.  So that's what's being displayed as your revenue. And if you wanted to, you can put both of them on the same graph.  And I apologize here because the credits are showing on the other side of the access. But essentially, then what you can do is kind of look at the trends just to make sure that the peaks and valleys are the same, you would assume that there's a correlation with your direct costs and your business income. And if there's anything that isn't, then you'd probably want to flag that maybe look at that anomaly. And then again, down the bottom here, if we continue the work that was done on the trending tab, we can see here as an example of the day's expenses napi that we didn't get that spike that we could have expected in the current year, so things appear to be a little more consistent this year. So again, you then compare that kind of to what your expectations were at period end and maybe document any differences again using the annotations so you are able to customize Any other ratios set them up in in an engagement libraries that they're all repeatable. But the idea is, is that you know, you don't have to go back and update any Excel formulas or anything like that, once it's loaded, it will automatically update all the information in the analytics to what you had specified on the initial interim load. The last thing I do want to show which is very important in terms of traceability, from performing your interim procedures to your final. In this report section here, we do have a series of reports that are available from financial statements. We also do have bounced checks, just in general to say that if you provided us with an opening balance and a closing balance, that we're able to validate the completeness of the general ledger. The other thing that we validate for you is that the lead the general ledger file that you've loaded at the interim period doesn't have any modifications to it based on the final, the final one, so we do give you these kind of updates here that talk about journaling trees that could have been backdated journal entries that appeared in the interim ledger that were removed for the full period. And then journal entries that have changed from the infirm and full ledger loads. So that means if it's edited a transaction, a lot of you familiar some systems like QuickBooks, I will I just edit a transaction, we would compare the fields that are available. So everything from dates, dollar values, account descriptions, account, sorry, transaction memos, all those fields are compared so that we can tell you what has changed to give you confidence in those ending balances and making sure that you can actually extend the work that's been done in interim to your finals. So again, nobody wants you to double up on any of the work that you've been doing. It's really about just validating that information. So with that, I'll pass it off to Gina to talk a bit more about the adoption.

 

Gena Song 

Thank you Adam. My name is Gena Song, and I one of the residence CPAs in the customer experience team. So I'll be sharing the AI Client adoption journey as well as some of the best practices again to your team very early on. So they're ready to implement AI as well as any other technology that you want to be implementing and part of your firm did a practice. This is just a very quick slide to talk about what a future ready accountant does look like. So a future ready accountant understand the environment impact of their firm industry, they can really anticipate the emerging technology trends are facing that industry as well as their clients that they're working with. And they want to continuously to evolve and grow their business in order for them to meet that growing demand. And they're just a very quick stat from a CPA comm study in 2015, shown that 92% of CPA feels like they're not ready. So with that, I'm just going to jump into our conversation regarding to what steps to take now. You know, in terms of adoption of AI, Thanks Adam. So this is a very quick info graph to show that no change is hard. Most organizations today are faced with the challenges of responding to a very fast, external business environment that they operate in. These changes can be coming from environmental, economical or political changes. What this means is we need to continually update our workplace processes, systems strategies, and we must continue to change and make sure that we are evolving our organization to remain competitive. Okay, so how do we deal with this time of constant change? So a change management client can really support a smooth transition process between these changes, and we must take a very holistic view when thinking about change and helping a firm to navigate through adoption AI to their tradition, audit practice. So here what we have is a very quick change scorecards which shows them the key components of assess as change management plan. So as we go water here, you can see that every organization that wants to implement AI or any technology within a part of their practice what we need to do is have these five, five key components in place, so starting with vision, so that's really talking about where do we see this technology fitting as a part of our overall business objectives? Going to scale? So what team, what team's goals we have currently what we need to work on? And how do we build successful training plan to make sure that our team can have the skills that they need to implement that AI project? Why does a team want to implement this process into a part of their day to day activities right now. So that really talks about the incentive, as well as the value added service that they can see we're implementing that technology, we also need to ensure that they have the resources they need to successfully implement that as well. And together we really have an action plan going forward and combine all of these key components when we have it's very positive change and a successful implementation of AI. And then if you don't mind just clicking through the perfect Thank you. So as you can see here, anything Lack of these key five components will causes our team to feel very confused. It could cause a few, our team to feel very a lot of anxiety, a lot of resistance work frustration. So through our experience working with our clients, the two biggest challenges we see is actually the incentives. Oh, sorry, I just don't mind going back Adam. The two really challenges we see is actually the lack of incentives within their team themselves that wants to change. And what that will cause is a lot of resistance, or trying to implement that technology. And the second part is really a lack of resources. This is when we see a team that understands the vision, they do have the skills that they need to make sure that we are implementing that technology. They understand the value of AI or the value of any technology that helps them to impact their current audit, or their current processes. And they have an action plan but where they're lacking is really the resources they need, whether that's training, support, communication, To really be able to successfully implement that, that technology so what that will lead into is a lot of frustration as well as resist as well as frustration when we're working with with that piece as well. So at MindBridge our customer success team is responsible to work with you to make sure that we are implementing this AI adoption journey. However, this These steps are really applicable across any technology or any tool that we're trying to implement into our practice today. So before we even begin this journey, it is very crucial to for organization to validate our business objectives. And kind of go back to the initial assessment of why do we choose that piece of AI? Or why do we choose that piece of technology and how that will benefit our business as of today. And it's important to keep those business objective in mind before we begin the phase two of our adoption journey. So the phase the first phase of the adoption journey is the onboarding implementation. So this is really all about exploring the use of AI, or any other technology investment within your firm and establish a plan going forward to meet those goals and objectives that the firm has identified. So during this initial phase, it is very crucial to establish those best practices very early on some of these activities, including this phase, including setting a project plan. So this includes the tasks, the timelines, who is going to be on our team to be working on this project and what our project is going to look like from 3, 6, 9 months from now. And it's also important to make sure that we select our initial implementation team. So they're going to be leading that implementation process solving any issues we come up, and eventually this implementation team will become the change champion for that technology as well, which we'll touch a little bit more on the second phase. And then next is really understanding the data requirement of the software. This is very important in terms of interim analysis piece that Adam and JC touched on. So as we know, some of the the Europeans are a little bit harder to work with in terms of getting our data ready in terms of formatting data as well. So it is important to make sure that we solve some of those kinks in the system very early on during our interim analysis, rather than at year end when we have a lot of time and resource constraints, as well, we want to make sure that we are providing training to our team. And we really develop and train our team on a data strategy as well. So the key to remember is success is a two way street. So in order to successfully incorporate AI into your firm's practice, we need to make sure that all of these plans are in place before we move on to the next step of our adoption journey which enablement and execution. So this phase is really all about getting the firm's ready to invest additional resources enabling their team and expanding to a larger audience. So some of the key activities that we'll be completing this video Including a retro, retro perspective look at the project plan that we established in phase one. This is where we look back on our project plan and kind of evaluate whether that still reflects our plans. As of today, some of those issues were experiencing the beginning. How have we resolved them? Do we need a new timeline? Do we need additional resources to support the team to make sure that we are continuing to implement these AI successfully? There's a lot to talk about incentive strategy, really, for us to understand what motivates your firm or your staff to make sure that we are adopting AI, and really trying to change some of their day to day behaviors that they have currently. We also want to roll out to a second larger group of users to make sure that some which some challenges we've seen in the phase one are resolved. If not, how do we resolve those issues as of today, and really starting to roll out to a larger group in addition to our implementation team, and this is where we're going to transition the implementation team that we had put together initially into more of a change champion group. So the key responsibilities of that champion group is to make sure that all the key stakeholders have an open communication with a change champion team to make sure that all the insights, the use cases and challenges are communicated both ways. They also want to make sure that we are continuing and continue to support that use of technology with other teams within the firm as well. With all those components in place, we're ready to move to the last phase of the customer adoption journey, which is a monitoring and expansion. So really, this this phase is really about a continuing monitoring and experience, sorry an expansion into the long term project plan of AI or technology implementation. So this is where we want to evaluate our results versus the initial goals that we've set in  the beginning. Does this technology still meet the goals that we've set in the objective that we're hoping to meet. If not, how do we change the implementation? Or how do we continue to build on our existing knowledge to make sure that we are meeting our objectives, we need to continue to monitor and support the use of technology, whether it's with our chain champion team, whether it's an additional support team, as we continue to roll that out to the overall overall organization as well, in addition to some really best practices during this phase, is to have a quarterly project plan review. This is something where we call quarterly business review as well. So essentially, it's a cadence is getting to a cadence to make sure we are looking at that technology on a quarterly basis, whether that's with your implementation team with their audit team, as well as the support team from that technology services as well, to make sure that we are looking at what we have done wrong, what we have done correctly and how do we want to move forward. We also want to continue to evolve our processes in our workflow, and really identify those additional areas that we might want to expand into so in respect to audit that can be advisory, transaction services, and so on and so on. And it's also important to keep a long term as well as to make in two ways communication between our chain champions and all the all the other team that are currently implementing this technology. So all the components we've talked about before is really anchored into four key building blocks to customer success. So starting with the left hand corner, what we need is we have we need a strategy in oversight of any organization to make sure we are implementing AI successfully. So this is where the firm of business map though their engagement strategy, the project management plan that we talked about, as well, as well as a change management plan, the moving over to the right, the second key building block is a successful data strategy, understanding when and what type of data we need in order to meet that system requirement, as well as who is responsible for gathering data and really communicate to our clients. Why what is the benefit of getting that data early. I'm trying to work out some of those kinks and, and challenges that we have early on Junior interim analysis rather than at the end where we're really resource constraints. So again, really touching on the benefits of why we encourage interim analysis, especially when we're implementing the AI in your firm's audit. Maybe we had that first or second engagement that we're working on. The third building block, and more specifically to the audit firms we work with is the audit methodology, building blocks. So this is a this is really two key components to it. The first one is how do we see AI being a part of our current procedures, processing documentation, but most, most importantly, is really the second piece is how do we redefine our existing audit procedures, our current processes to really leverage AI and see the benefits it can bring to our current practice. So a part of that as well is what kind of documentation we need to include in our audit file. So do we need to include Audit memo can explain that technology, do we need to update or our audit workflow. And from the results of the the choice well where do we want to put that in a part of our audit documentation audit file. And the last building block is really enabling your existing team as well as any team that we are rolling out this project to. So ensuring there's adequate training of implementation team, I made sure that we are giving them the right training support for that team to grow into a change champion team that will lead the rest of the organization. So make sure that another key component is the change champion team. We'll be delivering some of that training to the rest of the team as well. I really have an open communication about some of the challenges we're facing what's been working, what's been not working, and that team is going to continue to enable the rest of organization adopting that AI. Speaking of the importance of training piece is just a fantastic resource that we have here at MindBridge is what we call the MindBridge Academy. So this is an on demand learning management system that provides with any of our clients who have access to MindBridge AI Auditor with some fantastic training courses on demand webinars. And really the focus is really the focus is providing some very meaningful content regarding AI in your audit. So what that allows you to do is actually for your team to do the training at your own pace, and really help us celebrate the onboarding process. What I want to do quickly, I just want to share three client success stories and implementing them to their audit firm. For more specifically how to leverage intro analysis for a better overall audit process, our first use case, which is an interim interim audit, use case by one of the MindBridge clients. So they are CPA firm based out of the United States and their primary focus on assurance advisory services. So what they've shared with us really the benefits of the leveraging interim data analysis is allows them to see the higher risk as well as any anomalies in their data. them very early on and kind of empowers them to have a better audit planning. So kind of goes back to Adam was chatting a little bit more about, you know on a plane doesn't have to be done three weeks before you go on site, it can really be done anytime doing you know from the, from the the ending of your last engagement. Well, this really allows you to focus on and zoning on those high risk areas before we go on to the client field work. It also allows the opportunity to perform some audit procedures prior to fieldwork and also have a more resource playing Junior. And so what that allows you to do is actually have a better use of the client as well as the audit firms time during those really, really busy periods and allow you to focus on more targeted questions and really having those discussions that are really going to be addressing the client's business objectives. Yeah, and the next fantastic use case that we have is really addresses the importance of getting data early. So this is another MindBridge client which is based in the US as well, their primary focus is on assurance and advisory. So what this really is talking about is why we need to understand our clients data early. And why do we need to extract that data early. So that allows you to do is again, to work out some of those kinks with the data distraction process very early on. I found the clients ER pieces a little bit hard, hard to work with, but will allow us to do is actually get some of those administrative pieces solved during our interim analysis. And actually avoid doing that at year end audit when it's very busy. And also allow us time to give the client to provide us with more historical data. So with any AI or machine learning, the more data we have, the more powerful AI becomes. So what this allows the client to do is more time to provide us with additional data that we can work on so we can really leverage the AI auditor capabilities, such as the five year trend analysis, the SARIMA forecasts and things like that. This allows us to have a better understanding of risk in account balances and really allow us to analyze some of those multi-year trends. And also have a predictive forecast of what our actual your balance are going to be and compare them to the actual results that the client have as well. So really, what that allows to just provide a more value added service, as well as more insights to our clients. So really, for the CPA firm, what Ill have to do  is kind of transition from the more traditional honor roll into more of a key business advisor role? And the last case I want to share is kind of touching a little bit more on that continuous audit piece. So this is a fantastic use case from the Pun group. So essentially, what they're talking about is how we can leverage AI to provide more value into advisory services. So the group introduced a month in Chorley, a auto transaction advisory checkup so when they're able to do is provide their clients with a more productive analytic and risk pattern assessment very early on the process. So whether that's risk with transaction data, whether that's risks with user customers, and so on and so on. So they're able to do is provide their non audit clients with incurment recommendations of their existing internal audit process, as was in identify those areas and might have a potential issue very early on. So what they can do is, you know, solve some of those high risk transactions before the year end closing, and make sure that some of those those high risk areas are addressed before they your audits complete with external auditors. So they've also introduced this concept called audit readiness for all their non audit clients. This is really to move their clients into that more continuous audit model that we were speaking about previously, and have early detection of all the higher risk areas, and what they're really focused on as well as getting a five year data Ai auditor to earn a minimum. So with more data, they're actually able to unlock more predictive analytic capabilities, and providing more insights of a client's business. So lastly, they're able to demonstrate to our client, what somebody's anticipated key business measures are, such as liquidity ratios, bank covenants, to make sure that their clients is aware of the potential issues before we close year end, as well as before the external auditors is completed.

 

Adam Massia 

Summing up. What we're encouraging you to do here is just maybe look at your audits a little differently. So consider timing them a few months earlier, if you can to start analyzing, you know, portions of the year so that you're able to maybe document things or perform some of those procedures that would alleviate some of that pressure through busy season. Gina has been great in providing some resources or a framework for your firm to start moving towards a more continuous style audit. And again, I think we can agree that the more touch points that you have and the better that you're able to identify the risks and the things that are important to your client, the more value you will bring to them and ultimately have a happier client. Thanks again for taking the time. And if you have any more questions, feel free to reach out to us. Or again, visit our website for other information that's available about AI auditor. Thanks everyone have a great day!