COVID-19 & Accounting firms: Will only the agile survive?

The impact of COVID-19 is impacting everyone, including accountants. As discussed in the last post, the crisis has made video calling normal to the point that people are experiencing fatigue. It speaks one of the adjustments people have had to make due to the "new normal"

But what is the wider impact on the profession? How are firms handling the COVID-19 Crisis?

Accounting Today published a survey, "The accounting profession and the coronavirus: The crisis in number" that gives some data as to where the accounting firms are at.

Economic Impacts: Bad News and the Good News

Not surprisingly, nearly three-quarters of the firms surveyed, felt that the pandemic was going to reduce their revenues. In terms of magnitude, 37% of those surveyed are predicting a 10%+ loss in earnings. The good news, however, is that most had not let staff go. Only 7% had laid off staff, while 4% were planning to do so.

The other interesting find is that the most popular service to come about due to this crisis was CARES Act Consulting, with 73% offering this service. The next closest was business continuity consulting at 36%. 

There were also some interesting finds around the tech front. 

• Working Remote: Over 60% of firms had challenges with closing their offices, with nearly half of those having some challenges with the "online approach". The survey found that only 10% had no remote capabilities. See the graphic below for more details
• Closing offices: Closely related to the previous result, only 13% fully shut down their office. The survey did not reveal why this was the case.  But if you can't work remotely, what other choice do you have? 
• Communications: Although more than half used traditional means of communication, 33%were looking at new forms of communication. 

https://www.accountingtoday.com/list/the-accounting-profession-and-the-coronavirus-the-crisis-in-numbers

CPA firms provide COVID-19 services free of charge
Many small businesses have been drastically impacted by the coronavirus shutdown. As reported by the Wall Street Journal, "about 20% of them had enough cash saved to operate normally for only two months if their revenue were to dry up. Among less financially secure companies, only 10% could operate normally on savings alone for two months". The survey found that 1/3rd of CPA firms are stepping up to help by not charging for COVID-19 related services. 

Agility in time of uncertainty

Virtual firms, like Live.ca, seem to have been well prepared for this pandemic. With no offices to speak of, the firm was online from day one. The firm was featured on this CPA Canada promotional video:

Being agile in times of adversity is key to success. Understandably, tech can be daunting for small firms. However, it is also daunting for small businesses. Consequently, the tech-savvy CPA firms are able to offer consulting services like business continuity planning. But before getting there, firms need to ensure that they have the underlying capabilities to be agile. For example, if the firm has limited capability to service clients remotely it not only reduces the ability to service clients but also prevents the firm from being viewed as adaptive by current and prospective clients.

That being said, it's a matter of will. With nearly three-quarters of the firms already offering CARES Consulting, just shows how agile firms can be when the mindset is there.

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else

Have you heard of Zoom Fatigue? Killing the commute is not all it's cracked up to be

We are all probably familiar with "Zoombombing" by now.  This is where nefarious hackers (FBI has a warning about this) or Australian comedians (like Hamish Blake) invade your Zoom calls.



But have you heard of Zoom Fatigue?

Well, according to the BBC, USA Today, and The Wall Street Journal (WSJ), it is real.

COVID-19 has forced a locked-down, requiring people to work from home. That is, those who are fortunate enough to work from home during this pandemic, can use Zoom, Skype or other video chat apps to conduct business as usual. Except there are challenges. As noted in the USA Today article:

"From having to focus on 15 people at once in gallery view or worrying about how you appear as you speak, a number of things may cause someone to feel anxious or worried on a video call. Any of these factors require more focus and mental energy than a face-to-face meeting might, said Vaile Wright, the American Psychological Association's director of clinical research and quality."

BBC echoes something similar:

"Being on a video call requires more focus than a face-to-face chat, says Petriglieri. Video chats mean we need to work harder to process non-verbal cues like facial expressions, the tone and pitch of the voice, and body language; paying more attention to these consumes a lot of energy. “Our minds are together when our bodies feel we're not. That dissonance, which causes people to have conflicting feelings, is exhausting. You cannot relax into the conversation naturally,” he says"

To mitigate these impacts, both articles suggest being judicious on what calls should have the video turned on. USA Today quoting Vaile Wright (see above): "Be thoughtful about how you're using Zoom calls. You probably don't need video chat for all your work."

The WSJ sees this new reality differently.

They looked at the premise that working from home would result in free time for people. One of the individuals they interviewed for the story, thought that they would learn how to crochet. That didn't happen. What they found instead was that the inability to physically separate oneself from the work environment has enabled an "always-on" mentality. We all know no one is going anywhere, so the default assumption is that you are available. This is both for work as well as non-work meetings. For example, another individual in the article noted that they had to maintain an online calendar for their social life just to manage things.

For me, it's the commute. It takes about 20 minutes to drive to the commuter train station, then about an hour on the train. Then another 10 to 15 minutes to walk to the office. What I hadn't fully realized until now is a couple of things. Over time I have learned to use that time productively. It was during these gaps in my day that I could catch up with audiobooks and podcasts.

But there was another thing that was surprising.

The changing of scenario from home to the car to the station to the streets of Toronto and then the office gave me a chance to take a mental break automatically. At each point in commute, I was refreshed. With life at home, you can just be stuck behind a computer. (I am fidgety, so I guess that helps!) My podcast and audiobook consumption has collapsed, but I am writing more blog posts :)

Is this what the future holds?

I think that after this is over, the mental barrier that some executives had against working from home will be reduced dramatically. Even prior to the COVID-19 shut down, I knew of a fellow Hamiltonian who worked at a start-up where everyone was online. There was no office to speak of. With this being the new normal, weighed with the cost savings may convince some businesses that it's worth it to abandon the office lease altogether. That being said, there will need to be some kind of periodic physical meetings. But that can be accommodated in free public spaces like parks.

We often see in futuristic scenarios, how someone rolls out of their bed, slips a microphone/earpiece into their ear and then starts working with the hologram downstairs. Who would have thought it would have taken a pandemic to bring this future closer.

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else

How can blockchain help us deal with the COVID-19 pandemic?

One of the post-peak challenges, we will face with COVID-19 is to determine who is immune and who is not. Assuming that people can get immunity (and there are reasons to believe that this may not be the case), there needs to be a way to determine who is capable of being in "high contact" area.

In other words, how do we verify that you have the COVID-19 anti-bodies that would enable you to work at a restaurant, grocery store or drive a bus?

Now the infrastructure to deliver this type of testing is still not there. For example, in "Laredo, officials discovered the tests they received were woefully inadequate. The local health department found them to have a reliability of about 20 percent."

Assuming we can get a test that works, then we would need a way to certify that the person has achieved the desired immunity.

Think about how this process could work manually:

1. The walk-in or doctor/lab will process the test.
2. The person waits for the test results.
3. They will then need to produce the results to the government.
4. The government will need to issue some type of official certification. 

There could be an incentive to fake the certification. Well, let's rephrase. That there will be an incentive to doctor these things. Not just to get a job. But also to defy quarantine orders using fake certificates. Consider the people protesting the quarantine that blocked healthcare workers in Michigan:

And so that's where blockchain comes in.

To be a bit more specific, this is the permissioned blockchain (unlike bitcoin which is a public blockchain) that is implemented between trusted parties. As noted in the process described above, there are many parties involved - the doctor, the clinic and the government - all these parties would need to be on-boarded through a KYC process that would give each participant a private key that enables them to "sign" the "digital paperwork" at each phase of the process.

This would then allow "digital immunity certificates" to be issued instantaneously. No need to wait for test results. No need to get an official document from the government.

As it turns out, Vottun is working on some type of "Immunity Passport" that "can be verified at any time using cryptography by any mobile phone that can read a QR code". The company is working in Spain and is in discussion with Dr. Fauci of the CDC.

There are a lot of assumptions on how this could work. But it could be the killer app that helps saves lives.

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else

What do the Sony Car and the Visa acquisition of Plaid have in common?

Visa announced in early that they were going to buy Plaid for $5.3 billion. Who is Plaid, and why are they worth so much? 

According to the CNBC article that published the announcement: 

“Plaid’s API software, often referred to as the “plumbing” behind fintech companies, lets start-ups connect to users’ bank accounts. It’s well-known among financial technology developers, but the average person interacting with it most likely wouldn’t recognize the name. High-profile Plaid customers include popular peer-to-peer payment app Venmo, mobile investing app Robinhood and cryptocurrency exchanges Coinbase and Gemini.”

The article went on to note that about 25% of American bank account holders have “connected” the company’s app. 

Meanwhile, at the Consumer Electronics Show (CES), Sony unveiled its electric concept car, the Vision-S, in Las Vegas earlier this month. 

The car is a novel way for Sony to market its various technologies within the automotive space. The approach is not dissimilar from what Microsoft did with the Surface Book: allowing each company to put their stake in the ground as to what they see as the ‘art of the possible.’ 

This TheVerge video does an excellent job of highlighting its features and showing what the car:

Although these two innovations occur in vastly different fields, they speak to a common reality: data. The concept of big data has been with us for a while, but what separates it from innovations like AI and blockchain is that its underlying elements can give us insights into how a particular innovation lies on the value spectrum:

• Cars are increasingly being “datafied.” According to Intel, autonomous vehicles will produce about 4 terabytes of data per day. So it should be no surprise that Sony’s concept car looks to harness the power of data. According to Time, the car has “33 sensors inside and outside the car” that help with ensuring the safety of passengers by detecting external threats and internal threats (e.g. falling asleep at the wheel). Coindesk takes this one step further, speculating that this type of move will help auto-makers more broadly make machine-to-machine cryptocurrency payments a reality. 
• Plaid and the value of verified data: The Plaid acquisition highlights the “4th V” that some use – veracity. Visa's purchase of Plaid illustrates how “boring data” that is of how quality can be worth billions of dollars. But such value proposition is not limited to the financial realm. Blockchain databases can offer a similar value proposition, as they force standardization and data quality standards. 

In future posts, we will test this model further to see how the four Vs: volume, variety, velocity and veracity help us understand the value of up-and-coming technologies and trends. 

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else

Are we too confident in Artificial Intelligence? A look at AI's "stupid problem"

In the rise of AI over the past few decades, the victory of IBM's Big Blue over Garry Kasparov is the stuff of legend. However, what may not be as well known is how the actual artificial intelligence alone didn't result in machine defeating man.

Many chalked up the win to Big Blue being superior technology that allowed the computer to defeat the chess champion. He narrowed down his defeat to a move that "was too sophisticated for a computer". 

What actually happened? 

It turns out that the specific move that Kasparov attributed the win too was executed by the computer. However, the chess move didn't come from the AI programming specific. It rather was more attributable to "technology controls" that there programmed into the system. The system was designed to conduct a random legal move if the system started going into an endless loop (go to 6:35 in this video to see the full story):

As noted in the video, the move through off Kasparov as the move made no sense. In the video, it insinuates that Kasparov put too much faith in the machine. However, according to Wired, he attributed the win to some type of human intervention. Either way the computer threw-off the chess championing; a factor that arguably contributed to his loss.

Enter Janelle Shane.

She did a Ted Talk entitled "The danger of AI is weirder than you think". In the talk, she notes how she applied machine learning to discover new ice-cream flavours based on 1,600 pre-existing flavours. The result:

Anyone want to hire this machine as their next culinary expert? Probably, not.

The example is illustrative of AI's "stupid problem".

As Shane notes, AI "has the approximate computing power of an earthworm, or maybe at most a single honeybee, and actually, probably maybe less. Like, we're constantly learning new things about brains that make it clear how much our AIs don't measure up to real brains."

The challenge with programming nuance into algorithms and AI more broadly speak to the classic accounting problem that goes with architecting proper incentives. We should not forget that the underlying equations that are built into such incentives are algorithms in their own right. For example, strictly profit-oriented incentives have incentivized management to look at short-term and forgo the long-run. This, in turn, resulted in more comprehensive incentive structures such as Kaplan's balanced-score-card. Putting the two together, if we programmed an algorithm to increase "shareholder value", what would happen? Would it launder money for drug cartels (i.e. because the benefit of the revenues outweighed the cost of the fine), clear-cut Amazon rainforests or outsource manufacturing to take advantage of low-cost labour in China, Bangladesh and elsewhere? As the links suggest, these are all practices that would be programmed into the sharehoder-maximizing algorithm. 

With this in mind, it requires risk and control specialists to approach AI like any system. They are ultimately programmed by regular human beings who make mistakes. If a system can throw off a reigning chess champion due to a coding flaw, we need to take heed.

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else

If Artificial Intelligence can identify Shakespeare's linguistic signature, can similar techniques be used in audit?

Can AI help us identify who the real authors of classic literature?

According to MIT, the answer is yes. In a recent, article they noted how machine learning was used to identify how much a co-author helped fill in the banks for Shakespeare's Henry VIII. They had long suspected that John Fletcher was the individual but couldn't identify what passages he wrote into the play.

Petr Plecháč at the Czech Academy of Sciences in Prague trained the algorithms using plays that Fletcher that corresponded with the time that play was written because "because an author’s literary style can change throughout his or her lifetime, it is important to ensure that all works have the same style".

Based on his analysis, it appears half the play is written by Fletcher.

The experiment is a proof-of-concept that there is a certain linguistic signature to how people author things. In a sense, it means we have a unique pattern when it comes to how we construct sentences. With respect to the experiment run by Dr. Plecháč, the algorithm was able to detect what was written Fletcher because he "often writes ye instead of you, and ’em instead of them. He also tended to add the word sir or still or next to a standard pentameter line to create an extra sixth syllable."

Can this be used within an audit? 

A paper co-authored by Dr. Kevin Moffitt of Rutgers University entitled "Identification of Fraudulent Financial Statements Using Linguistic Credibility Analysis" found just that. In the paper, they explained how they used a "decision support system called Agent99 Analyzer" to  "test for linguistic differences between fraudulent and non-fraudulent MD&As". The decision support system was configured to identify linguistic cues that are used by "deceivers". The papers cites as examples of how deceivers when they speak "display elevated uncertainty, share fewer details, provide more spatio-temporal details, and use less diverse and less complex language than truthtellers".

The result?

The algorithm had "modest success in classification results demonstrates that linguistic models of deception are potentially useful in discriminating deception and managerial fraud in financial statements".

Results like these are a good indication of how the audit profession can move beyond the traditional audit procedures.

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else

Larry and Sergei's Exit from Google: How did they get from 'Don't Be Evil' to 'Get Rich or Die Trying'?

Larry Page and Sergey Brin have left the building.

The two founders who built the information empire Alphabet Inc. have left Google. As they noted in their farewell post, Sundar Pichai will now become CEO of both Google and Alphabet Inc. They also pocketed a couple billion or so for their troubles.

I write this post with mixed feelings.

As someone who started at university the year the Internet became commercialized, I witnessed the rise of Google from a number of many search-engine to the only one that you use. And I've written previously about this experience.

But reality is reality: Google doesn't look like the company it used to be.

They began with their motto: "Don't be evil". As noted here the idea, per Paul Buchheit (Googler #23). was not to be evil like "those other companies":

"It just sort of occurred to me that “Don’t be evil” is kind of funny. It’s also a bit of a jab at a lot of the other companies, especially our competitors, who at the time, in our opinion, were kind of exploiting the users to some extent."

And now it's arguable that Google has become one of "those other companies".

In fact, they officially abandoned the "Don't be evil" motto to the less aspirational "do the right thing."

Sure, we could hypothesize that the legal, risk and other compliance experts advised Google to abandon this slogan due to risk aversion. But the problem with that theory is that Google has been raking up the fines, not in the millions but in the billions.  According to The Verge, "Google’s total EU antitrust bill now stands at €8.2 billion ($9.3 billion)". Not sure how that fits in with "doing the right thing". Perhaps it has more to do with "get rich or die trying".  It's no wonder politicians think they can get votes by promising to break up Google and the other tech giants. 

But the fines are just the tip of the iceberg. Google was one of Obama's top campaign contributors in the 2012 election. As noted in this article by the Intercept, the coziness between Google and the Whitehouse went beyond just the election. They visited the Whitehouse 128 times over Obama's tenure. More troubling:

"Most notably, Google has faced questions for years about exercising its market power to squash rivals, infringing on its users’ privacy rights, favoring its own business affiliates in search results, and using patent law to create barriers to competition. Even Republican senators like Orrin Hatch have called out Google for its practices.

In 2012, staff at the Federal Trade Commission recommended filing antitrust charges after determining that Google was engaging in anti-competitive tactics and abusing its monopoly. A staff report that was later leaked said Google’s conduct “has resulted — and will result — in real harm to consumers and to innovation in the online search and advertising markets.”

The Wall Street Journal noted that Google’s White House visits increased right around that time. And in 2013, the presidentially appointed commissioners of the FTC overrode their staff, voting unanimously not to file any charges.

Jeff Chester, executive director of the Center for Digital Democracy, said the administration “has been a huge help” to Google both by protecting it from attempts to limit its market power and by blocking privacy legislation. “Google has been able to thwart regulatory scrutiny in terms of anti-competitive practices, and has played a key role in ensuring that the United States doesn’t protect at all the privacy of its citizens and its consumers,” Chester said."

So now they are using their capital to subvert laws and investigations to maintain their dominance.

What happened? Why did Google take a taxi ride to the dark side? 

Tim Wu, a Columbia law professor, has a theory.

In The Master Switch, he calls this type of thing the Kronos Effect. The idea is that yesterday's scrappy start-up - who defeated the evil ogre's of their day - only to becomes today's evil ogre. For example, he explains how Adolph Zukor and the other avant-garde filmmakers of his day fought the tyrannical Motion Picture Patents Company, which required you to pay royalties for just using a camera. Who did they end up becoming? The major studios of today - who sue people for copyright infringement of their content. Similarly, we can see Google, who was able to defeat Yahoo, Microsoft and others, has become arguably the Microsoft of our times.

But I think Douglas Rushkoff, ironically in Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity, has a better theory. 

When start-ups that emerge from the "operating system of Capitalism" the end-up being defined by that system's code or DNA: growth, profits, market share and shareholder value - these are the only things matter. Capitalism doesn't pay attention to humanitarian values, moral values or spiritual values because, well, they don't add to the GDP. And at the end of the day, that's all that matters in a Capitalist society. 

I would never push anyone to adopt the motto "get rich or die trying". 

But as we can see, Google or otherwise, companies end up with this as their mantra when they want to get to the top. 

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else.