← AICPA Town Hall
AICPA Town Hall
Navigating Change, BOI Updates and Audit Transformation
01:01:43
Topics include: DC and profession update Changing Psychology of Influence Audit transformation Key technical updates Speakers: Erik Asgeirsson, President and...
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- [00:01]
A
Welcome to the AICPA Town Hall Series, your resource for the latest news and updates on pressing issues facing the accounting profession.
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B
Good afternoon and welcome to the AICPA Town Hall. I'm Eric Ouskerson, one of your hosts for today. Today is Thursday, November 21st, and we've got a great show for you in store. I'd like to bring up Lisa Simpson. Welcome, Lisa. Good to see you. How are you doing today?
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A
I'm doing great. How are you, Eric?
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B
Good, good. So, Lisa, we've got quite an agenda here. We're going to kick things off with plenty going on in Washington, D.C. with a D.C. and profession update with Rachel Dressen. We're then going to have a great discussion on driving influence with some new techniques with one of our digital CPA keynotes, Hannah Pryor. Then, Lisa, you're going to be giving us the technical update portion. And then we're going to have an audit transformation discussion with Emily Remington and Sarah Fishel, and I'll be introducing them shortly. But, Lisa, before we get underway, you and I just want to talk a little bit about kind of this phase that we're entering. And you and I were reflecting on where things stand right now. And even looking back to November and December of 2020, and we had similar slides to this then. I mean, the change that we're entering right now with the new administration, the pending 2025 tax legislation, ongoing uncertainty at times, and the business outlook, and then just all types of interactions that are required with the clients or with your employers.
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A
You know, Eric, I've been out on the road the last few months, and it gives me the chance to meet a lot of our members and a lot of town hall community. And we instantly start talking about back in the initial days when town hall was the source of trust because we were keeping them up to date. As soon as we got news, we were bringing it live onto the air. And I think that we are going to be entering a period of that significant change again where we're going to be having to monitor developments on a regular basis. But we're here to help, and we want to make sure that we give the lens to you that we're coming from so that you can think about what these impacts are going to be for your clients, for your firm, and how you can stay ahead of them. So it's going to be another fun 2025, and we're here with you.
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B
It's going to be a busy hundred days. And what we do every week, every two weeks is we bring you the best available information that we have, we interpret it as best we can and we talk about different strategies that firms and companies are putting in place to kind of move forward and build success. And that kind of takes us to this next slide here. And you know, you and I were talking about 2025. This is a slide that we have reviewed before where you start stepping back a little bit and saying, okay, you know, what are my top priorities? There's all kinds of opportunities, but where do I want to focus? We talk about sometimes we're in a sprint week, there's new information coming out, but it's really a marathon. It's the long game. If you're investing in new capabilities for your tax tax business or your audit platforms, your audit area, are you doing something in finance related to your company? Some great questions here, Lisa, as well.
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C
Yeah.
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A
And I think your analogy of sprints and marathons is true. And as you're running your marathon, as you're training, you got to be thinking about where will I best use my time and which clients or which lines of service are the ones that I want to be investing in. So I think this gives us some really good things to think about as we're deciding where to put the investment, how to approach 2025. And as a, as a person who focuses on practice management, I have to call out that, that third bullet that says, you know, be looking at who your key clients are and making sure that you're investing your time and efforts there so that you can get that, that long term relationship solidified and not be too busy to call them and not be too busy to respond to an email, but to really be more proactive with those particular sections of your business, whether it's public accounting or business and industry.
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B
Thanks. And Lisa, what we're going to do now is we're going to, we've got a couple of polls here which is going to help us better support the town hall audience. So this, this first poll asks, you know, what sector do you work in? And we've, we've got five options here. Public accounting, business and industry, Government, academia, or the catch. All other.
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A
I love these questions because it really does help us understand who's joining us each week and helps us know which content is going to be most relevant. So we appreciate you taking the time to respond to our polling on this one.
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B
And last week we had a record attendance. I know a few people got knocked off. We've upped the capacity. So hopefully everyone's having a good experience logging on today. So we have one more question for you and please answer. You know, click on the poll. I mean, some of you are answering via Q and A. We'd like you to answer via the poll by by clicking your selection.
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A
Yeah, it was a great town hall last time. Melanie Larson was with us and I was on the back end answering questions and they were coming in fast and furious. So we'll see how many questions we get this time.
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B
So here's the second question. This is for those who are in public accounting. Maybe at a future channel we'll ask a special one about, you know, the business and industry members. But this is for if you're in public accounting, what is your primary focus area? Assurance Tax accounting services, the CAS area, Consulting other or, you know, if you does not apply. I'm not, I'm not a public accountant.
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A
Eric, we're getting some responses in the Q and A that they can't see the poll. So they might have to refresh it to get that poll to appear. You might just want to hit F5.
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B
Thanks, Lisa. Okay. Well, thanks everybody for answering those poll questions. And now we're going to move to the DC in profession update. And here with me in the studio is Rachel Dressen. Rachel, great to have you with us.
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D
Thank you. It's good to be here.
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B
So moving right in, we've been talking about this. Mark Peterson gave a great update on the last town hall looking at the potential lame duck session. I guess we've now officially started lame duck.
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D
That's right. The lame duck started last week when Congress came back into session after being out for the elections. So we are in the lame duck and there are some priority issues that they need to address during the lame duck. The first one, and probably the biggest one is government funding. So as mark talked about two weeks ago, the CR expires on December 12th, 20th. And so they need to decide what they're going to do. There's discussion right now if they do maybe a CR until sometime the beginning of next year, which would be around, you know, sometime in March. We understand, you know, the issues that could potentially create for practitioners if there were a potential government shutdown in the middle of filing season. But that's just, just one of the things that they're talking about. Speaker Johnson is inclined to do a short term cr. What he is arguing is that a short term CR would then mean that President Elect Trump would then have more of a say in the government spending for the rest of the fiscal year. So that's the argument there. But then there's Also a separate argument just to clear the decks before President Elect Trump is inaugurated. And so they could do that by passing an omnibus bill or they package all 12 of the bills together or they do just some minibuses. So they take the 12 bills and they break it into three or four bills at a time. So that's what's going on right now as far as government funding during the lame duck. But then there's also discussion on a disaster relief package, and that has tremendous bipartisan support. There have been, as everyone knows, some recent natural disasters. And so there is a huge effort right now to get some appropriations money to fund some of the disaster relief efforts. So that's a package that they're working on. We'll talk a little bit more about some of the potential tax provisions in a minute. And then another one of the must pass bills during the lame duck is the ndaa. And we'll talk about this in a couple minutes. But BOI legislation could potentially ride on ndaa. So we're focusing on, you know, following the ndaa. And then of course, right now they're just preparing for the next Congress. Right now they are just organizing as far as, you know, electing their leadership. The Democrats and the Republicans, they've donethey've held some of those elections and there's still more that they need to hold. But for the profession, one of the big issues that they are working on in preparation for the next Congress is the tax reform bill that we all know is going to happen next year. The TCJA has some expiring provisions, so next year will be a big tax year for Congress.
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B
A lot of questions coming. Just a quick one. CR yes. What it stands for?
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D
Oh, I'm sorry, Congressional Resolution. So what it means is they just take the current funding and they extend it for however long. You know, it might be day, weeks or a month, they determine, but it just continues the current level of funding.
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B
Rachel, it feels like a lot of these appointments are being made rather fast. We even had somebody withdraw their nomination today just a couple hours ago. And this is something that is very important to the members of the town hall community. Who is going to be the treasury secretary.
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C
Right.
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D
So as you said, it seems almost like there's a trickle every day of a new name for a cabinet secretary or one of the appointed officials getting named. We're still waiting on treasury, which is one of the big cabinet positions. There are four names that are most rumored at the moment. And you see those here. There's Kevin Warsh He's a former Federal Reserve governor. And then Scott Besant, he was a contributor to the Trump campaign, but he's also a hedge fund manager. Mark Rowan is the co founder and CEO of Apollo Global Management. And then Senator Hagg, he's from Tennessee and he also sits on the Banking Committee. He was elected in 2020. So these are the four names that we're hearing the most about right now. But I will say that this list is ever changing. There have been some names that have been on the list and then taken off and then brought back on. So it's ultimately up to President Trump who he names as a secretary. But we're very anxiously awaiting the announcement for Treasury.
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B
And we've got a new acronym out there, doge, in the Department of Government Efficiency. And you've got two people nominated for that. Are they going to need approval?
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D
No. So that's, that's not, it doesn't require Senate confirmation for that. That's just a committee that the president has created. So, and they're already, you know, if you're on social media at all, you're probably seeing that they're already starting to, you know, get ready to, you know, on one to start.
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B
Yeah. And they did. Musk made an announcement about developing potentially an app to file your taxes that shook the market up a little bit yesterday to be seen if that one gains any traction.
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D
Yep.
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B
So moving on to disaster relief.
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D
So as I mentioned, one of the things that they're working on, the lame duck, is related to disaster relief as far as appropriations go. But there is a chance, and I won't, I don't want to get a lot of people's hopes up, but there is a small chance that they could include some disaster relief tax provisions in what they are considering. And so the aicpa, we have sent a letter to Congress encouraging them to include some of these bipartisan disaster tax bills in a package if they are willing to include some tax provisions and not just have it be a pure funding bill. I'll highlight one of the bills that we mentioned in our letter. It's a bill that we have been long supportive of and it would provide certainty to practitioners. What it would do is it would allow practitioners to have more certainty because when the current, under the current system, when a natural disaster occurs, IRS almost always grants tax extension deadlines after the fact. They do it after the disaster hits. Then FEMA comes in and assesses the damage and IRS then grants those extensions. And what this legislation does, it's the filing relief for natural disaster act is it would allow the IRS to make those extensions prior to a disaster. So it would be once a governor makes a state declaration at that point and that can often occur before a disaster happens. It' syou know, if you see a hurricane coming and a governor makes that declaration before it even hits at that point, the IRS could then grant those extensions. So it just helps provide some certainty to CPAs if this is occurring around filing deadline. If you think about October 15th, April 15th, then it just helps CPAs so then they can really just focus on taking care of their own personal needs during a disaster.
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B
That sounds like some really good progress. And this is something I can last Last town hall we had I think six over 600 questions. I think Lisa's going to maybe even more than that related to beneficial ownership information. A lot of questions already coming in and some of them are, you know, what's the AICPA's position and are they asking for a delay?
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D
And I think absolutely, absolutely is right. So we have sent a letter to Congress urging them to delay this by one year. 80% of those who need to make this filing have not done so as of yet. And so we highlighted that in this letter that we sent to Congress asking them to delay this by a year. Our hope is I mentioned the NDAA is a must pass bill in the lame duck and there was an amendment offered to the NDAA back in the summer that would provide this one year delay our to get that included in the final version that passes in December. So the AICPA is very supportive of the delay. We're urging Congress to do that. But we're also asking the town hall community to reach out to your elected officials, reach out to your representative, reach out to your two senators and ask them to delay this requirement. In the resources. You will find links where you can find who your representative is and who your senators are and you'll find some talking points. If you want to call, you could call them on the phone or else you could email and there is language in there that you can just easily copy and paste asking them to delay this by a year. Having worked on the hill for nearly 10 years, I cannot tell you how effective it is to hear from actual consent constituents on an issue. So please reach out as soon as you can and just ask them to delay this. The more people they hear from, the more likely that it is to happen. I'll also just mention one more thing. The AICP is working with state societies on a letter that will go out in the next couple of weeks or so just to FinCEN and to treasury directly urging them to do a delay themselves. So we have kind of a multiple, multi pronged approach here. We have an approach, you know, via Congress, but then an approach via FinCEN and Treasury. So just wanted to let you all know, you know, where things stand on that right now. But please just, you know, this is our call to action to the town hall community to reach out to your senators and representatives.
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B
Well, thank you, Rachel. Great updates. I one thing we're checking, I think on the links you've got to download the file and your resources and click on that through the PDF, we'll confirm that those two BOI links are working properly. And if not, we'll absolutely make sure you get them in the follow up newsletter, which will be coming out early next week. So now I'd like to bring up Hannah Breyer, who's going to have a great discussion with me on some of her techniques and best practices that she recommends to the many executives and companies that she works with as a workplace performance expert. Just a little bit more about Hannah. She's a highly featured keynote speaker, a very visible TEDx presentation, also on a number of these other media entities. But very interestingly, she started her career at Ernst and Young. She is a cpa. She worked in their audit practice for a number of years during the birth of Sarbanes Oxley. So she understands the intensity of the profession. And then she spent 10 or 15 years as a recruiting director going out and helping Phil staff at a lot of top 100 firms, firms of all sizes. So really just great knowledge about the profession. And now she's working as a workplace performance coach. So welcome Hannah.
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E
Thank you so much. I feel obliged to say, inactive cpa, I don't want the PICPA knocking down my door.
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D
So yes, you stab it.
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B
Yes. But I think that was a very defining part of your career. You even reference your time there at Ernst and Young during your TED talk.
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E
I do, I do. In fact, I don't think there was any better breeding ground for what became ultimately work ethic, of course. But what defines a lot of what I teach and train on now, which is how do we create the most productive environments for ourselves? How do we create change in ourselves and in others. And honestly, everyone in any sort of accounting and finance function knows there's no greater masterclass of how do we get more out of our time than in this industry in particular.
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B
Well, I know we're going to talk about some of your techniques and even the strategy you call focusing on the neutral. But before we get into that, you saw the opening slide that we presented. There's so much change occurring right now. So just some thinking related to navigating this change and setting your vision as you head into a new year.
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E
Absolutely, yeah. There's a lot of changes happening concurrently, which is one of the unique things about the moment in time that we live in. So change is no stranger. Anyone who's been in their industry for any period of time has experienced some level of change. But what's unique is that we're going through so many at once. So organizationally, people have changes happening globally, Politically regulatory, I mean, there's just technologically, there's so many. And as it relates to some of the work that, you know, hopefully if you'll be joining us at the summit in December, we are going to be talking a little bit about the changes as it relates to influence. And so where I thought it might be useful to level set is what we're actually dealing with. And you all mentioned it at the beginning. Here is a modern trust crisis where very little anymore do we believe anything that anyone says without our own due diligence. Now, accounting and findings folks are good at due diligence, but this is where we're starting from. So that's one of the biggest changes I think that we're dealing with right now.
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B
Well, let's bring up the slide here about neutral thinking, and it kind of highlights some of the things that you just mentioned. You know, a truth and behavior based thinking, focusing on objective and concrete facts without judging or grading. And there's a lot of judging and grading that's occurring every day in the marketplace.
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A
Yeah.
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E
In the few minutes that we have, we thought, how can we give this group a tactical tool that we can use today that we can take with us? And so with everything changing, with everything swirling around us, what tends to fall away first or maybe go a little unproductive first is our mindset. Now, let me start by saying very clearly, I used to be a skeptic of mindset work. If you told me, hey, Hannah the accountant, we're going to do a session on mindset, I would have said, I have things to do today. This is not a billable hours thing. Are you sure? And what I learned about mindset in particular is there's ways to really operationalize it. And so often when a lot is changing around us or we're trying to convince someone of something, we have these two options that have been presented to us. We can think positively Right. It's going to be great. This difficult time that we're in, it's an opportunity. Let's look at the bright side. Now. Ask anyone in industry who's going through a tough time in their job, tell them that and tell them how that lands. You know, it's not going to be good. They're not going to be thrilled with being forced to be positive. But at the same time, we know that negative thinking and getting stuck in negative thinking is not helping us. We get stuck in those thought spirals, we start venting to others, we get unproductive. There's actually a third option, and that's something that I learned from my friend Russell Wilson and his former mental conditioning coach, Trevor Moad. And that's called neutral thinking, which is exactly this. It's a truth and behavior based thinking where instead of giving everything a story, instead of saying this is good, bad, it's what are the objective and concrete facts without judging or grading, what is the evidence and how do we move forward from that place in order to create change in our productivity, our behavior, our influence?
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B
Well, it's pretty powerful. I don't know if everybody knows Russell Williams. He's the current quarterback for the, the Pittsburgh Steelers and he leveraged some of this. I mean, he had a tough time. I think it was with the Broncos. Right. When he was with, with Denver for a few years. I, I can tell you on some town halls, if we go overboard. So now this is an opportunity. This is an opportunity where we'll say, even Boi Boi, you can build a practice there. They'll be like, hey, that's, you know, you don't understand all the challenges related to it. In the same side, if we just go too negative on something, we can all vent and vent about it, but that's not necessarily getting us anywhere. So maybe just a little bit more on what you think Russell Williams did to get from where he was to where he is now.
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E
Yeah. What it starts with, honestly, is radical acceptance of reality. Your circumstances are what they are. There are certain things within your sphere of control. You can try to control the people around you. You can try to control the regulations. Obviously, where you have a voice, use it. But to a degree, once you've done all of that, there's only so much within your control. So how can we start to dance with the reality in front of us instead of wishing for one that isn't there? So again, it's not about pretending that we're okay with it right away, but it's about Slowing our thoughts down. I like the expression and I often use it, is we can't choose our first thought, but we can choose the second. So if your first thought is, this is hard, I have a lot on my plate. These are all disruptive things that are happening to me, that's fine. You're allowed to have that thought, but you have an opportunity to choose a different second one. And if you do that, if you stay hyper present, not only are you going to be more productive in your own performance, but it's going to help you be hyper in tune with others who are finding themselves in similar situations. Resistance, which is going to help you actually be more influential and be able to help enact action in other people. And we're going to talk a lot about that when we're together in Denver.
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B
Well, sorry about that. I'll tell you, I lit up the town hall by calling Russell Wilson Russell Williams.
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E
Yeah, I didn't want to, I don't want to correct you, but he's not here.
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B
Correct me. Russell Wilson. You know, you know, I'm from Massachusetts, so I knew Tom Brady's name a little bit better. So let's, let's talk a little bit about what, what your, what your session is going to be. And, you know, thanks for sharing some of these, these, these technology of, of thinking around influence techniques that I think are really important.
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E
Yeah, no, I'm really excited for our time together. You know, what I know to be true for a fact is that modern influence is not the same that it was five years ago. If I asked for a show of 10,000 of you, I said, who's the same person that they were five years ago? I'm going to assume I might see a handful of hands, some stubborn outliers, but for the most part, not a single hand would go up because we have all changed irrevocably in many ways. And so the way we now need to treat our clients, our colleagues, our direct reports in order to enact change and move ideas forward is very different. And so we are going to learn exactly how to do that today. So I hope if you haven't registered, that you join us in Denver.
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B
Well, thanks, Hannah. Great. People are asking, you know, for some more information related to your materials. We can get that out in the newsletter next week. Great having you on today and look forward to having you in Denver with us.
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E
Thanks so much.
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B
Welcome, Lisa.
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C
Thank you, Eric.
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A
That was great to have you back.
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B
Lisa, looking. Go ahead.
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A
Super interesting conversation with Hannah. I'm anxious to hear more at Digital cpa. So thanks for bringing her in for a sneak peek.
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B
We're right on time. So.
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A
All right, so let's get through some technical updates and I'm going to start with boi. Not that there's anything new to report other than what Rachel talked about with our request for delay and almost as many comments about BOI and why we're asking for delay as there were about Russell Wilson. So I do want to take a second to respond because there are a lot of folks in the Q and A saying we've known about this for a year and a half. It's on state websites. Why are we advocating for delay? It takes 10 minutes. Just file it. The majority of circumstances it might be a 10 minute filing, but there are also some very complicated ownership situations in which determining who is a beneficial owner might be tricky. It might need some legal advice. And there are also so many small business owners who still have no awareness of this requirement. We've had statistics on past town halls around studies that the National Federation of Independent Businesses has done that shows such a very small percentage of awareness. So our position is frankly that we could use that extra year for FinCEN to increase their communication out into the marketplace so that you can have another opportunity to connect with your small business clients that you may only see once a year and that we continue to build that awareness. There are also questions about certain types of entities and who is a beneficial owner and who is not. As you may recall, we spent the first part of the year talking about were CPAs going to be able to help their clients with beneficial ownership information filings. So there's been a lot of confusion, a lot of noise. You had one district declare BOI unconstitutional. That only impacted a small number of businesses. So there's a lot of noise out there. And in our opinion we would be best served by delaying the reporting requirements for a year. Getting lots of questions about penalties for not filing on time. Our discussions with FinCEN have been good in that respect. They've said that they're not going out to penalize everyone to the fullest extent, but they are looking for willful failure to file. So we'll keep you updated on that. Those are great questions. Thanks for bringing them to us. But let's go through from what we're getting through the Q and A back to what we wanted to get to you about today, which is to highlight again that the AICPA has resources available to you if you are a member, regardless of whether or not you're part of the tax section or not, you can now access all of the BOI resources. Included in those BOI resources are sample communications that you can send to your entire client roster to let them know about the requirements. It is your decision as to whether or not you will provide those services, so be clear in your communications. We are. We are not. We also have language that you can include in every engagement letter. Every engagement letter that says this is not to include any BOI filings or this is an engagement letter for BOI filings. It again, it's up to you to decide if you will perform these services. So look at those resources. And I also wanted to point out that we have a rebroadcast of a webcast coming up on December 4th that looks at some of those updates that we've been talking about for the past few months. And we get some insights from practitioners, which I think is what a lot of you are really looking for. So you can join that webcast and hear what some of your peers are doing. If you were not on AICPA Town hall last time, I would urge you to go check out the segment where Melanie Lauridson spent quite a bit of time with phil lamb from FinCEN. It was a great conversation. We got great feedback. We also got a ton of questions. But again, I would encourage you to go watch that segment. The link in the slides should take you directly to it. We also address some questions in the Open forum, so stick around to the end. So those are our resources. Some of our resources. But then I also want to point out that that FinCEN has some great information for you. Their small entity compliance guide is chock full of information. There's a flowchart that will take you through whether or not an entity needs to file their FAQs. Also helpful. What I always do is I download them and then I use the search function because otherwise it's kind of hard to do that when you're just looking at the online version. Download and search to get the questions that you're after. We're also getting lots of questions about how to actually file. The FinCEN folks put together an E filing guide that takes you step by step through that filing process. Great resources, some of my favorites. And they really came into play when we started answering those, oh, I don't know, 800 or so questions that y' all threw at us in the last town hall. So I've pulled out a few. Again with so many we couldn't get to all of them. But there were some themes that we saw in the questions And I've pulled out, I think five or so of the questions on the next couple of slides that I wanted to make sure I called to your attention. So if we look at those questions, Eric, if you can advance for me, that'd be helpful. And I wanted to talk about I'm not going to go through all of these, download the materials. They'll be in your slides. They were also in the town hall newsletter last week, but I know that some of you may have skipped that part or weren't getting the newsletter. The first one is about a fence in identifier and why to use it in BOI filings. I think it is just a way to simplify the reporting process, especially if you've got an individual who might be a beneficial owner in several entities. So take a look at that. We are continuing to get the question about single member LLCs. And so it's really fairly straightforward. Unless there is an exemption that it meets out of the list of exemptions in the fence and Resources and if it is registered with a Secretary of State's office, there is a filing requirement unless another exemption is met confirming that a BOI report was submitted. This is a very common question that we're getting as of right now. It doesn't look like there is a way you can do it as you're filing. You can snap it and get that download, but if you're trying to go back, we haven't found that way just yet. A couple other questions that we're getting a lot of on the next slide. So again, I'm going to skip those just for the interest of time, but I wanted to call them out so that you can check those when you download the slides. And got to skip from BOI to erc. As of now, we're hearing that the IRS has about 400,000 claims worth over $10 billion. If you paid attention to the press last week from the national tax conference that AICPA held, you'll see that Erin Collins, the taxpayer advocate, says that she thinks there could be over a million claims still in inventory by the end of the year, which is obviously concerning right now. What we're hearing is that Most of those $400,000 claims may be valid, but that they just haven't been processed for payment yet. We're also continuing to hear that those disallowance letters are going out and in a fairly high volume. So if you look for the filing Instructions on letter 105C, you'll see that they outline the information that they want you to provide with your letter that says, you know, hey, you disqualified us. We qualify either because of partial or full suspension, dropping gross receipts and then giving additional information that they're asking for. I know another common question that comes up is what to do about filing amended returns, especially as we're reaching extended due dates for amended returns. So the IRS is continuing to work on how to navigate all of that. We are obviously still letting them know how urgent it is and we'll keep you posted as we hear from them. So that's our ERC update and I wanted to throw up some quick reminders for you. The two I'm going to point out are that PTIN renewals are due by the end of the year and the always well received news that the IRS E filing system is going to shut down for its maintenance and update to get ready for the next filing season. And that date as of now is November 30th at 11:59pm Eastern Time. So being very specific there, so we don't catch you off guard. So a few quick reminders that I wanted to get to you and then also a fairly nuanced note about tax exempt organizations being exempt from alternative minimum tax. The IRS is taking comments on that, but for 2023 I believe if we can flip to the next side, they do not have to file that amt. So we've got that. And then I wanted to talk a little bit about things to think about as we approach year end. So we've got some reminders for you on that and I believe we're going to talk about the importance of engagement letters and some resources that we have for you. So as a reminder, these, these are incredibly important. I know you've heard me talk about how one of my roles is to be staff liaison for the AICPA Professional Liability Insurance Program, and I've learned so much about the benefits of engagement letters and how they can really help keep a firm out of trouble. They are really good at establishing boundaries and managing expectations, as we call out here. So we've got some resources to remind you about that. We've got a podcast, a blog, and then some resources from our AON and CNA Insurance friends FAQs around engagement letters. And then do I really need an engagement letter for that? So good stuff. Do not neglect these engagement letters. They can really save you in case a circumstance arises that you don't want to find yourself in. In addition to engagement letters, I wanted to make sure that we remind you again that the Tax Section Tax Compliance kit is out and as you can see, it starts with engagement letters. Those are always really popular. We have lots of different varieties in the compliance toolkit. Coming up, you'll get the other resources, which are your organizers, checklists and practice guides. So that is available to Tech section members only, but we do have those available for you. And then I know this slide looks a little busy, but I'm so excited about it I had to share. We have spent the last year or so talking with practitioners of all firm sizes about how they're transforming their business model. So we've taken what used to be our Small Farm philosophy podcast and we've rebranded it to something that really talks more about what these conversations are. And because we're talking about busy season, I wanted to let you know that there is a blog right out right now or a podcast, I'm sorry, that gives you some insights from practitioners who right size their client base. So some tips for you there and then my nerd focus on governance structures and decision making in firms. Two great conversations that I think could really get the wheels turning in terms of how you're addressing governance and decision making in your own firm.
- [40:16]
B
Well, Lisa, some great updates, some great reminders, and this is actually a really good segue into our next session where we're going to dig into the transformations occurring in the audit practice.
- [40:29]
A
I'm looking forward to that conversation. Thank you.
- [40:34]
B
So with that, I'd like to bring Emily and Sarah up. Welcome to the town hall. Sarah, there you are. So, Sarah Fleishel, she's a director of Audit Transformation and training at AAF. CPA is a top 100 firm based out of Massachusetts. Welcome to.
- [40:54]
F
Great, Eric.
- [40:54]
C
Thank you.
- [40:55]
F
It's great to be here. And certainly on a topic that is relevant, we see it on the political scene, discussion of transformation, and as Lisa mentioned as well. So I can certainly say I am a CPA, and before I was at CPA.com, i spent about 20 years in public accounting at three firm sizes, Big Four, midsize, regional and small firm, as well as some time in industry. And I can say with certainty from my own observation that I have heard more about audit transformation in the last 18 months and I think the last 18 years combined. So it's certainly a topic with a lot of movement and momentum around it and not only transformation, not only in the audit space, but really across all categories. So we'll dig in a little bit today in terms of the specific audit landscape, so you can go to the next slide. So with that, key drivers of transformation and these are really universal. These apply not only to audit, but really any transformation environment. So I'll dig a little bit into the audit specific landscape and what that looks like and what we're seeing is really tremendous growth across these drivers. But I'm going to focus first on technology and on the technology front we're really seeing a lot of of new entrants to the market. So purpose built solutions where that's really focused on specific tasks within the audit that are helping with efficiency and those specific procedures within the audit engagement. We're also seeing an uptick in the end to end solutions and a lot of activity there. When you look at kind of existing solution providers within the audit space, you have those legacy providers who have been in the market for 25 or 30 years and now they're starting to build in new capabilities to reflect really the needs of the auditor today. And then last on the technology front is we're seeing existing providers who are not necessarily tech companies, but I think of alliances or firms where they may have provided technology and methodology to firms. And we're seeing an exit of that. So that's caused a lot of disruption within the market and activity. As we think about standards, that's the next thing I'll focus on as a driver. We're really seeing an increase in standards, complexity of those standards and evolution of standards. And the evolution is reflective partly of that technological trend. So data analytics and generative AI, for example, how those are then being incorporated into the audit process and how the standards are being reflected into the financial reporting environment. And the last thing that I'll touch on is just skills. And we're seeing again, not just in public accounting firms, but really in business organizations, again in the public and private sector where new roles and new focus is being given to innovation and strategy around innovation. So public accounting firms, for example, are creating departments and titles specific to transformation within the firm. And with that, that's a nice segue into Sarah, who I have here with me today. And Sarah Fleishel is a director of audit transformation and training at AAF CPAS. As Eric mentioned, AFCPAS is a top 100 firm headquartered in Massachusetts. They have over 350 multidisciplinary team members nationwide. And I'd be remiss if I didn't bring up when we're Talking about AAF CPAs and innovation, Carla McCall, who's managing partner at AAFCPAs, who is our AICPA chair and certainly a champion of innovation and change and working smarter, not harder. So Sarah, with that I welcome you and I know that innovation and transformation is really built into the culture of aafcpe. So we're happy to have you here today. So thank you for joining us. Can you tell us a little bit more about your role, which really reflects kind of the transformative mindset that we're seeing in the profession and how you're thinking about change and transformation at aafcpas?
- [45:24]
C
Absolutely, and thank you for having me. I get asked a lot, what exactly do you do? And so as Director of Audit Transformation and Training, I was hired to help the Audit Department through their search for our next audit methodology. We have been on the same methodology for over 20 years. And if you think about that timeframe, that's a full generation of people. So I was hired to not only evaluate the solutions on the market, make a decision, but also take us through that implementation process as part of that role. I do sit as a member of the Audit Department, but I do not have any billable work. And that was an intentional design, so I could be dedicated to this process. It gives me time for creative thinking, which you need when you're thinking about transformation and new solutions. But also it's going to give me time to react quickly when issues come up when we get to implementation phase. To get here, the firm had a need because we were growing. It's hard to hire in the profession right now. And we really wanted to lean on technology more to address those issues that we're seeing. And we also knew this is a huge change for us. In addition, we saw some peer firms who were also hiring roles like this. But what's interesting is it's not always the cpa. I've seen a lot of people sit in this role that are project managers. However, as a takeaway, if you are running any kind of transformation at your firm or at your organization, doesn't have to be about audit. You do need to carve out some non billable time in your schedule in order for this to be successful.
- [47:08]
F
That's great insight and good reflection too, because I know sometimes moving those billable hour around is not always possible popular, but it's important and really focusing on that transformative element. So with that, I think it's important to kind of speak to the landscape of what we're transforming from. So I know, Sarah, you mentioned the audit has really been unchanged for a very long time. And now we're seeing, you know, the profession wasn't able to kind of iteratively change. So now it's a time for that transformative change. And as we Talk about that. We think about some of the common pain points of the traditional. More of that on prem legacy.
- [47:52]
A
Tech.
- [47:52]
F
A little more antiquated on the tech side. Some of those pain points which are represented here, I'm sure auditors on the call are wincing as this resonates, but some of those key things are really inefficiencies around syncing and you think of lost work or duplication of work having inconsistency or really conforming to personal preference in your methodology. And as we shift into the data driven audit, we kind of shift away from these things and we're really using technology as an enabler to make us work a little bit smarter and more efficiency and with enhanced quality. So I know you and I had connected about a month ago on a Boomer webinar, and in that webinar I think of the ANA practice leaders that.
- [48:39]
D
We have.
- [48:42]
F
Along with Jim Boomer who had been on we had 64% of people who indicated that they were somewhere in their transformation, they had started, they had completed, or they were really in the midst of that. So I think that's really reflection of what's going on as well. Can you speak a little bit about what you're seeing within your own firm and even within the audit transformation community?
- [49:06]
C
Yes, firms are in motion and we're really excited about the technology that's finally available to us as auditors. However, if you're sitting in this audience and thinking I don't think any of my peers are moving to new technology, then I imagine that you're going to start hearing about this more and more. As Emily mentioned, it is a pretty new concept. One of my favorite quotes that I heard five years ago from Tom Hood is change is doing things differently and transformation is doing different things. And it's really stuck with me. I want to share some accounting specific examples to drive this quote home so you understand what I'm talking about. Change is incremental and it's usually focused on one area. So an example of this would be updating your accounting software to the latest version or perhaps revising your internal controls to comply with new regulations. However, when it comes to transformation, there is truly a fundamental shift in the way the accounting function operates. These are usually longer term projects and require significant planning, investment and time. An example here is moving away from traditional bookkeeping of simply looking at the past to now, using that past data, using advanced data analytics to make future decisions for a business. The message I want you to go home with today is that we live in exciting times and there are solutions on the market today to help your organization transform. And in addition to that, there are also peer firms that can help you on your journey. I co founded an Audit Transformation Community group bringing those of us on this journey so far together so we can share our experiences and learn from each other. We're open to US based firms who are looking at changing their audit methodology and looking at transformative solutions and we meet regularly. It's even open to anyone who's curious. So you don't even have to be ready to jump in and know what you're choosing. You can come learn more about what's available and the group is very generous with their experience.
- [51:12]
F
That's great. And I think as we talk about change, it's important to think about these key questions. We'll also leave in the resources some deeper thinking for you and your firm as you go through this and the last minute here. Sarah, I just want to talk Spend a quick minute on kind of your key takeaways as AFCPAS has gone through this transformative journey. Can you just leave us with three things in terms of tangible tips that you can give to others who are in this audit transformation journey?
- [51:44]
C
Absolutely. Before I give you my three things, I just want to say that getting started is the hardest part, but you have to start somewhere, so don't be scared to just start. Okay? The three lessons I have for you all. There will be a shift in how auditors spend their time. We've typically spent a little bit of time planning, a lot of time and field work, and a pretty good amount of time towards the end in reporting and wrap up. And what we're seeing is a shift where more time is going to be spent in the planning phase, which results in less time and fieldwork and then very little time in wrap up and reporting, which is exciting. With the new tools on the market that are transformative, data ingestion is going to be an issue. Previously we've never ingested general ledgers, but with the new technology and insights it provides, you need to upload the general ledger to get that data. And what we've always asked for from our clients is not what we need.
- [52:41]
A
Today.
- [52:42]
C
There are additional data fields that you need in order for that analysis to be performed smoothly. And then lastly, this is my favorite one, you can buy time. It's called outsourcing to someone else. So I want you to consider what is the best and highest use of your time, what drains your energy and fill in gaps in your expertise by hiring someone external who has this skill set.
- [53:07]
F
That's great. Thanks, Sarah. Good actionable items and we appreciate that. So there's additional resources within the deck today, so thank you so much.
- [53:17]
B
Well, thank you, Emily and Sarah. You guys are doing just providing great leadership to your firm. Emily, the role you're playing here@cpa.com with us with the AICPA on our broader technology transformation initiative. I just want to comment a little bit about that opening slide. The four drivers that are really changing and transforming the audit area based on what was happening with technology, what was happening with the evolution of the methodology standards and skill development. The AICPA launched the Dynamic Audit Solution initiative and it's really been an incredible project working side by side with an all star group of auditors from many, many firms to really rethink how an audit can be done by these new capabilities. The data driven audit, AI leveraging obviously cloud so much, so much more that can be done with, with analytics. And where we are right now and where I think the overall marketplace is, I think over the next two years we're going to see more audit transformation than we've probably seen in the last 20. We're in, we're at an inflection point right now. You know, firms like aaf, I know you're, you're migrating to, to a new audit platform. I'm speaking with firms around the country. We'll be speaking with a lot of the firms that at digital cpa and it's a very exciting time. I mean we've seen the innovation occur in the accounting services CAS area. We've seen a lot of rapid development in the tax area. And now it's here. It's here. It's arrived for the audit area. So let's bring Lisa. Lisa back up and we can drop the slides, go to Open Forum. I mean, Lisa, I know you're very active with the PCPS community. You know the audit category well. Any comments you have related to this kind of audit transformation movement that's underway.
- [55:18]
A
I think it makes the audit environment exciting and interesting and engaging. I'm at a conference this week and we've been talking about firms investing in technology and the payoffs of that investment are making the profession more attractive because the work is fun. The feedback on being able to see the reasoning for why a particular audit procedure is required, see how it all fits together and then just the opportunity to improve quality and efficiency is incredible. Such an exciting time.
- [55:55]
B
Thanks, Liz. And there is questions coming in. Here's a question to you, Emily. I mean you, you're out there with a lot of the firms. I know you're, you're part of these pilot groups, these training groups. Yeah. How are the, I mean, this is kind of, you know, we're talking about the talent, you know, situation a lot. But this is a way to really engage your talent and to motivate your talent. I mean, what are some of the feedback that you're receiving?
- [56:17]
F
Yeah, we've seen tremendous feedback, positive feedback and as you mentioned, it's really time of opportunity and we're seeing specifically within the dynamic audit solution, very positive feedback and especially around upskilling. So when you think of some of the automations and capabilities built in, instead of a staff person being the first person to look at the data, now they're getting data that's been ingested and now they're more in that review stage. So right out of the gate you're seeing that upskilling and really the guided approach and Lisa mentioned, really, it enables staff and managers and at every level, not only the efficiency piece, but the quality and better understand the why, why they're doing things, how it's applicable to the client and give deep understanding there.
- [57:08]
B
Thank you, Lisa. We got, I know again, well over 500 questions.
- [57:15]
A
I contributed to a few of those. So Eric, if I can just answer, one of the common questions that we've been getting is about the E filing system shutting down and whether or not that's only for individuals or if it's also for business filings as well, it is just for individuals. So business, business E filings can still be going through.
- [57:38]
B
Okay. And Rachel, lots of, lots of, lots of editorial feedback at times for you on some of the, some of the things that are happening down in Washington D.C. i mean, anything else you want to add based on some of the technical updates you heard from Lisa? There is a lot of support for this call to action that the AICPA has requested related to boi.
- [57:58]
D
That's great. Well, you know, all I can say is please reach out to your senators and to your representative on boi. It's going to be a busy lame duck in preparation for next Congress and just buckle up because next Congress is going to be equally as busy. So.
- [58:17]
B
Okay, well, thank you, thank you again, Sarah. Look forward to having you on again sometime soon. And Emily, you as well. So. And thanks Rachel. Lisa and I will now, now, you know, clear out the final, the final slides here. The AICPA town hall rebroadcast that occurs Mondays at 1pm Eastern. You can get CPE for it. You know. Click here to register. You also can subscribe to the ICPA Town hall series via this link and once you subscribe you will also receive the newsletter which comes out at the at the start start of the week following the Town hall on Tuesdays. We've talked about the digital CPA conference and that is when we are going to be back with you again, Lisa. Next week is Thanksgiving, so we're not going to have a Town hall on the next Thursday and we will be back with the Town hall community on Dec. 11. It's going to be Wednesday though at 10am Eastern, so an early start for those on the west coast. We're actually be in Denver So it'll be 8am our time.
- [59:31]
A
I'm looking forward to it. It's always great to get to be in person to have Pascal join us again and it's going to be another great lineup. Yeah, if you haven't registered for digital you can attend virtually and I would highly recommend that you give it a look. It's good, interesting, exciting, optimistic content. I love it.
- [59:55]
B
Yeah, it's a very progressive group of firms as well as some members from business and industry. We'll have Lexi Kessler on with us there, the Vice Chair. We're going to have a lot of the AICPA leadership at the conference. Barry Malonson will be there. Mark Koziel, the incoming CEO is going to be with us. Avni Desai is the CEO of Shellman. She's gonna be talking about some technology and security topics. So Lisa, looking forward to closing out the year with you here. I wishing you and everybody from the Town hall community a very, very happy Thanksgiving and we look forward to being back with you sometime in December.
- [60:36]
A
Happy Thanksgiving everyone.
- [60:39]
E
Thank you for your participation.
- [60:41]
A
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