John Slattery shares his simple three-step process to help you make a career choice you will not regret. In adulthood, bar sleep, we spend more time at work than anything else. Our career will have a massive bearing on the happiness, success, and fulfilment we experience in life. It is critical, therefore, that we make the best career choice possible at every professional junction. Making a career choice is a complex process, and there are many nuances to consider. Inspo’s three-step guide to making good career choices is designed to steer you toward the right decisions for you. The three steps are as follows. Step 1 Create an uninhibited list of career choices One measure of success around career choice will be the absence of any regret upon deciding. For this to be the case, we must identify all possibilities that appeal to us as possible career choices. This will enable us to feel confident that we are choosing from a complete list. You may be able to identify all possibilities yourself. Alternatively, you may need to bounce it off one or more people to help you formulate the list. If so, chat with someone you know who will give you a genuine opinion as to what career options they think would be worth considering. You must also ensure that you build an understanding of what each role entails. You can then make an informed decision as to whether to pursue or discard each option (more on that in step three). The end-goal for step one is to feel that you have identified a complete list of career choices and to have an informed understanding of each option. Step 2 Self-reflect To decide on the suitability of each option, you must self-reflect. You will use the output of your self-reflection to evaluate each option that has emerged in step one. There are three elements of self-reflection to carry out: Vision Positive psychologists Scott Barry Kaufman and E. P. Torrance claim that inspiration is the attempt to realise a future vision of oneself. Making career choices that align with our vision can, therefore, create a sense of inspiration in our professional lives. Research also suggests that making a career choice that is connected to our vision can lead to higher levels of productivity, motivation, and positivity. Therefore, our vision is a critical evaluation criterion. Strengths and interest areas This focus area of self-reflection derives from a definition of meaning by positive psychologist, Martin Seligman. He defines meaning as “using your signature strengths in the service of something greater than you are”. Seligman’s research identifies meaning as the most significant contributor to happiness. Strengths and interest areas are a simplified extraction of Seligman’s definition, but tapping into these two areas will give us excellent access to meaning and joy through our work. So, as with vision, strengths and interest areas are crucial evaluation criteria. Priorities Our career choices must be grounded in the priorities that exist in our lives at the time we make a choice. They might be personal, such as a desire to travel or buy a house, or they might be related or separate financial priorities. Honouring our priorities through our choice gives us the best chance to meet our goals, ambitions, and desires. It is the final critical element of evaluation. Our end-goal for this step is to have a clear vision, a sense of what our strengths and interest areas are, and an understanding of our priorities in life. Step 3 Evaluate, pursue, and decide In the final step, you first evaluate each option against the self-reflection criteria. For each option, you decide whether you are going to pursue or discard that option. This will leave you with a shortlist of options. From here, you pursue each shortlisted option further by furthering your understanding and actively exploring opportunities related to each career option. As you do this, you check-in with yourself regularly as to which prospect feels like the right one. You continuously repeat this check-in exercise during this final stage of exploration until you feel ready to make your career choice. I wish I could offer you a process that guarantees success in your career choice. Alas, neither I nor anyone else can do so. What I can say is that I have seen, through my work, that this process helps people make good career choices – and I hope it can do the same for you. The referendum effect Career choices are an imperfect process simply because the ‘perfect choice’ is rare if non-existent. So here is a concept I call the ‘referendum effect’ to help define success when it comes to career choices. Let us look back to the two most recent Irish referendums – the same-sex marriage referendum and the referendum on the Eighth Amendment. In both cases, there was high-quality information available and thorough debate and discussion on the merits of both sides of each argument. This allowed people to make an informed choice at the polls. In both scenarios, the consensus was that the right outcome was achieved. However, in both cases, more than 30% of people voted against the outcome. For me, these referendums are a good metaphor for what you should hope for with your career choices – that is to collect high-quality, accurate information regarding your options, to self-reflect, and to discuss the issues with people you trust and respect. At the end of the process, you will hopefully have a substantial majority for one choice. That for me would be the best outcome you could hope for when making a career choice. There is another side to this metaphorical coin. Consider Brexit – the quality of information shared with the UK electorate was of questionable quality and clarity. In some cases, the information was alleged to be factually incorrect. Voters therefore went to the polls with much higher degrees of uncertainty and a narrow, unconvincing majority voted in favour of Brexit. It has taken Britain several years to make any type of progress on the back of the referendum result and all the while, a vast cloud of doubt looms over the outcome itself. This is a good metaphor, in my view, for a poor career choice – poor or incorrect information, lack of clarity on the options available, and a very uncertain choice. Given the importance of our career in terms of our overall happiness, fulfilment and success, there is only one approach to take. Take the right one. Given the importance that we’ve discussed our career has in terms of our happiness, fulfilment and success – there is only one approach to take of these two shared in the Referendum Effect. Take the right one. John Slattery ACA is Founder of Inspo.

Jun 02, 2020

Is your battery full on Monday, depleted by Wednesday, and empty by Friday? Dr Eddie Murphy considers why we take care to charge our phones, but not ourselves. We have all been there – when you think your phone has been charging all night only to find that you did not flick the switch. You immediately accept that it will not function, or you will have limited usage until your next charging opportunity. Yet, when it comes to our bodies, we push on, potentially until we are stressed, exhausted, or burnt out. I am convinced that people who are continually in stress/overwork mode by choice or by necessity will eventually succumb. Illness will always catch up and then the person is forced to reprioritise. What if it did not have to be this way? What if we could manage our energy levels so that we can thrive rather than survive? As we all try to stay safe and healthy, here are my top five tips to help you keep your body’s battery in the green. 1 Sleep Sleep is the quickest way to emotional health and a fully charged battery. Ireland is a sleep-deprived nation. In general, we do not go to bed early enough or get enough good-quality sleep. Too often, the mobile phone is brought into the bedroom – invest in an old-fashioned alarm clock.    2 Exercise As paradoxical as it sounds, the more you exercise the more energy you self-generate. The issue is often motivation or planning the right time for physical activity. For me, I know that I am a poor trainer on my own but when I get out with the athletic club, the chat and social element keep me going. While social distancing makes that more challenging, you can always look into virtual ways to train as part of a group. 3 Savour moments Be mindful. Each morning when you wake up (before you check your phone), notice your breath and take two or three long deep breaths in and out. Throughout your day, do this whenever you think of it. It calms down the fight or flight stress response and allows the adrenaline to drain from the body. Your body will be less depleted as a result. 4 Write a real  to-do list Making an unrealistic list of everything you have to get done in one day and then attempting to accomplish everything will lead to immense frustration and a feeling of failure. This also wears down the body’s battery. Make a realistic list and you will, therefore, feel that you have set and reached some – if not all – of your goals in that day as best you can. This will not only conserve your battery life, but it will also give you some energy. 5 Call in help If you are struggling, admit it. It is okay; we all struggle. If you feel overwhelmed, share it with family, a colleague, or a friend. You will be amazed at how much better you will feel when you face the problem and how much energy you will save by merely addressing the issue. When asked for help, I know very few people who say no – and if they do, are they a true friend? Conclusion Remember, your battery life is your life, and you only have one of those. We are what we do daily, so check-in with yourself right now. What do you do? Do you need to add or subtract from it? If so, that could make all the difference in keeping your battery life a little healthier than usual. We all want to do a lot in our lives, yet our bodies and brains have finite daily resources. So, as you stick your phone on charge for the night (ideally not right under your pillow), just remember to keep an eye on your own battery life too.   Members and students can contact CA Support on 01 637 7342 or 086 024 3294, by email at casupport@charteredaccountants.ie or online at www.charteredaccountants.ie/ca-support. Dr Eddie Murphy is a clinical psychologist, mental health expert and author.

Jun 02, 2020

Pamela Gillies shares her thoughts on the future of the profession, wealth distribution and the therapeutic art of mowing the lawn. What do you most enjoy about your role at BDO? I started my career in BDO Northern Ireland 23 years ago, and today, I am a Director within the Advisory team in the Belfast Office. Depending on the cycle the broader business environment is going through, I see my role as either helping my clients’ businesses to grow or helping them navigate challenging commercial and financial situations. Being able to help and guide my clients gives me enormous satisfaction. What is your professional highlight thus far? One of my earliest career highlights was the sense of achievement when we completed the first M&A transaction I managed. Other highlights range from successfully securing new funding for my clients to helping clients develop their strategic plans and returning to see that they have been successful in achieving their targets. The aftermath of the financial crisis was an interesting period in my career when our team was managing around 200 jobs covering insolvency and land/property receiverships. I worked on several high-profile cases at that time and enjoyed the challenge of managing complex transactions and working to save as many jobs as possible, while maximising the return to creditors – often a delicate balance. How will the profession change in the next ten years? Like all professions, we must evolve with the times. Our clients are becoming much more innovative and we are no different; going forward, we will all need to be adaptable and more agile in the services we provide and how we support them. While the majority of our clients are Northern Ireland-based, we see an increasing number with global reach, and we need to be equipped to support this with a broader knowledge of the global marketplace. As a profession, integrity must be the absolute cornerstone upon which our work is based and as such, I expect to see more advanced regulations, standards, and change for the better in the years ahead. What is the most memorable lesson you have learned? Patience is a virtue. When I was younger, I was probably quicker to react to situations than I am now. This usually came as a result of trying to impress someone with my speed of action and the desire to move onto the next task. I have since learned to take in all the facts, to listen, and to assess all of the information calmly and thoroughly before deciding on the best course of action. What do we most need in this world? We need a more balanced and sustainable approach to the generation and distribution of wealth. As we have, once again, seen over the last 12 weeks, we are all collectively facing unprecedented challenges. The statistics show, yet again, that it is the poorest who are suffering most. The 26 wealthiest people in the world control the same level of wealth as the four billion poorest. There must be a more equitable solution so that everyone can benefit from wealth creation but, importantly, that the creators of wealth are not penalised in doing so.    How do you recharge? I get my energy from staying busy. I like to be ‘on the go’ both during the working week and as a family at weekends. I am not the sort of person who likes to sit down a lot. A perfect Saturday is mini rugby with the boys in the morning, a walk up the Cavehill in the afternoon, followed by a great meal (prepared by my husband) around the kitchen table with the kids. My guilty pleasure is cutting the grass – one day I am going to write a book entitled ‘Zen and The Art of Mowing the Lawn.’

Jun 02, 2020

Although the cost of examinership may be prohibitive for smaller entities, Companies Act 2014 provides two alternative restructuring mechanisms that are both less complicated and less costly. Declan de Lacy reports. The restrictions imposed to stem the spread of COVID-19 have caused an unprecedented economic shock. The IMF’s Economic Outlook forecasts that the global economy will experience its worst recession since the 1930s, with Ireland experiencing a fall of nearly 7% in GDP and a rise of almost 150% in unemployment. The oncoming recession will inevitably result in companies failing at even higher rates than were seen during the downturn a decade ago. It is equally inevitable that many of the companies which will ultimately fail could be made viable by restructuring their debts and other obligations. It is incumbent on our profession to steer troubled companies through this crisis and give them the best possible chance of survival. The examinership process is the most widely recognised mechanism for restructuring insolvent companies. This mechanism is not suitable for small and medium-sized enterprises (SMEs), for whom the cost of examinership is prohibitive. That is not to say that formal debt restructuring is not accessible for SMEs. Companies Act 2014 provides two alternative restructuring mechanisms that are both less complicated and less costly. These mechanisms are the schemes of arrangement provided for by Sections 449-455 and Section 676 of Companies Act 2014. Neither mechanism is well-known or widely used, even though they have existed in one form or another for more than 50 years. Companies Act 2014 introduced the most recent version of these schemes and made the Section 449 scheme much more accessible. The infrequency with which these mechanisms are used is not a reflection on their effectiveness. They have recently been used by international companies to restructure hundreds of millions of euro worth of debt. They were also used to restructure the obligations of the property funds operated by Custom House Capital and by the company at the centre of the pork dioxin scare of 2008. Both schemes provide mechanisms by which a company may propose an arrangement in which the amounts due to creditors are either written off, deferred or otherwise compromised. If the requisite majority of creditors approve the arrangement, it can then become binding on all creditors. In practice, creditors need to be offered some quid pro quo to induce them to accept the proposals. This might be the introduction of new funds to partially reduce creditor balances or future payments linked to trading results. In each case, the outcome for creditors must be no worse than in a liquidation scenario as otherwise, an aggrieved creditor would have grounds to ask the court to refuse to permit the implementation of the arrangement. It is not necessary to treat all creditors in the same manner. Indeed, it is likely that any arrangement would involve secured creditors, preferential creditors and trade creditors being treated differently. Unlike examinership, neither scheme provides a mechanism by which onerous leases may be disclaimed. Notwithstanding this, landlords are likely to support proposals to reduce excessive rents to market rates if the alternative is the termination of the contract when their tenant goes into liquidation. A significant advantage of a scheme of arrangement over an examinership is that a company’s directors can commence the process without going to the High Court. There is also no requirement for an independent accountant’s report to be prepared. This means that a scheme of arrangement can be implemented for a fraction of the cost of an examinership. A further advantage of a scheme of arrangement is that the company does not automatically go into liquidation if a scheme is proposed, but not approved. The Section 449-455 Scheme There are no criteria that a company must satisfy before proposing a scheme of arrangement under Section 449-455. The first step in preparing to implement an arrangement is to identify the separate classes of proposed affected creditors. These might typically include preferential creditors, secured creditors, trade creditors, and related parties. A meeting of each category of creditor must be convened to consider the proposed arrangement. A ‘scheme circular’ must be prepared, in which the company sets out details of the proposed arrangement and how each class of creditor will be affected. Once notice of the class meetings has been issued, the company may apply to the Court for an order giving it protection from existing and new proceedings. This application is unlikely to be made unless a company is under immediate pressure from creditors. An arrangement becomes binding on all of a company’s creditors if 75%, by number and value, of the creditors represented at each class meeting votes in favour, the arrangement is sanctioned by the Court, and a copy of the order is filed with the Companies Registration Office (CRO). The Court has recently held that it should sanction a scheme unless “it is satisfied that an honest, intelligent and reasonable member of the class could not have voted for the scheme”. By comparison, a proposal by a company in examinership may be approved by the Court if it is agreed to by more than 50% of only one class of affected creditors. The Section 676 Scheme Any company that is either being, or is about to be, wound-up may propose a scheme of arrangement under Section 676 of Companies Act 2014. This means that the company must be in liquidation, or that a winding-up petition has been filed, or that an extraordinary general meeting (EGM) and creditors meeting to pass a winding-up resolution and appoint a liquidator has been summoned. Of course, if the proposed arrangement is approved, the winding-up need not proceed. A scheme pursuant to Section 676 is less complicated to implement than either an examinership or a scheme under Section 449-455. There is no requirement to distinguish separate classes of creditors or to obtain separate approval from each class. Additionally, an arrangement approved by the requisite majority of creditors becomes binding without the need to be sanctioned by the Court. The Court only becomes involved in the arrangement if an aggrieved creditor applies to have it amended or varied. The major disadvantage of the Section 676 arrangement is that it must be approved by 75% of all of the company’s creditors, and not only by 75% of those represented at the meeting where it is considered. This means that a proposed arrangement could fail through creditor apathy and not because of any opposition by creditors. Conclusion Neither scheme offers a perfect solution, either for companies or their creditors. The requirement in a Section 449 scheme to obtain the agreement of a majority of all classes of creditor means that a class comprising a small fraction of a company’s overall indebtedness can frustrate the wishes of the majority. The requirement in a Section 676 scheme to obtain the agreement of 75% of all creditors, and not only those who choose to make their views known, means that a meritorious proposal could fail due to creditor apathy. In many cases, onerous contracts, including leases, may be the reason for insolvency and the absence of a means to repudiate them is a defect in these schemes. It is not controversial to say that the restructuring options available to SMEs require improvement. As long ago as 2011, the programme for government adopted by Fine Gael and Labour included plans to introduce new restructuring mechanisms for SMEs that did not require court involvement. The Company Law Review Group made recommendations on the matter in 2012. More recently, in 2019, the European Union issued a new directive on restructuring and insolvency, which will require changes to our restructuring law and must be implemented by July 2021. In the meantime, directors of SMEs will need expert guidance if they are to avail of the imperfect restructuring options available to them today. Members of the Institute should be mindful that they must hold an insolvency practising certificate to advise companies in connection with arranging schemes of arrangements. The approach of Revenue and public bodies to schemes of arrangement In most companies, the debt due to the Collector General will represent more than 25% of the debts due to the preferential class of creditors. In such circumstances, Revenue’s agreement will be essential to securing the agreement of 75% of each class of a company’s creditors, as required for a Section 449 arrangement to succeed. Companies Act 2014 explicitly states that State authorities may accept proposals made under a scheme of arrangement that would result in their claim being impaired. This means that debts for taxes, local authority rates, and redundancy payments may be compromised as part of an arrangement. Notwithstanding this, the section of the Revenue Commissioners’ collection manual dealing with Section 449-455 proposals indicates that, where a company “wishes to put forward proposals, Revenue would be prepared to consider them but that they are unlikely to be accepted if they do not provide for full payment of the tax debt”. Interestingly, the section of the same document that deals with examinership indicates that “Revenue’s position will depend on the circumstances of the case (e.g. previous tax collection history, whether there will be a change of directors etc.)”. It therefore seems that Revenue approaches proposed write-downs of tax debts in examinership cases with a more open mind than they would for Section 449 proposals. This suggests that SMEs, for which the cost of examinership is prohibitive, may be treated less favourably by Revenue than larger enterprises, for which examinership is an option. Revenue’s response to the COVID-19 pandemic has been extraordinary and has gone so far as to suspend debt collection procedures entirely. In this context, it might be expected that Revenue will now adopt a more open mind to proposed arrangements in the interest of preserving industry and employment.   Declan de Lacy leads the Advisory and Restructuring Department at PKF O’Connor, Leddy & Holmes.

Jun 02, 2020

The accountancy profession needs to engage with  how emerging technologies like artificial intelligence will disrupt traditional career pathways. By Dr Patrick Buckley, Dr Elaine Doyle, and Ruth Gilligan Information technology has become inextricably embedded in virtually every aspect of our professional and personal lives. Data about what we do, what we are interested in, with whom we communicate and where we go can all be captured and stored at a scale unimaginable even five years ago. Technology giants such as Google, Amazon and Alibaba are engaged in a competitive race to capture the data generated by this new reality, lending credence to The Economist’s claim in 2017 that “the world’s most valuable resource is no longer oil, but data”. The data captured is valuable for several reasons. For one, traditional activities such as advertising can be personalised and optimised to a revolutionary degree – think of Facebook. Data also allows companies to build entirely new products. For example, the utility of Google Search results depends on analysing what information others have found useful in the past. A further value assigned to these data streams is linked to the development of artificial intelligence (AI). A host of mathematical and algorithmic tools – some novel, some more mature but turbocharged by the advent of big data – has propelled the development of AI. Leaving aside philosophical questions such as to what extent these systems are intelligent, every-day and now familiar examples of AI (Siri and Alexa, for example), are demonstrably practical and effective. These visible successes, combined with the breakneck pace of development, pose a multitude of questions about the impact of AI on our future – not least its impact on the future of work. The future of work Concerns about automation and jobless futures are not new. Two centuries ago, Ricardo proposed that technology caused unemployment. In the 1930s, Keynes predicted that new technologies would reduce the demand for human labour. In the 1980s, Leontief compared the role of a human in the modern economy to that of a horse in agricultural production – first diminished, and then eliminated by automation. Until the advent of AI, the consensus was that such predictions were overly simplistic. While new technologies can have a destructive effect on a particular industry or sector, their introduction often leads to increased opportunities in other areas. The overall effect is to change the structure of the jobs market, rather than result in a reduction in the work available. The jobs eliminated by new technology are replaced by jobs requiring higher-order cognitive skills (e.g. a robot replaces a welder but requires a software engineer to program it). Though this can be frightening and stressful for individuals, at a societal level, as long as education and training enable people to adapt to changing conditions by acquiring new skills, the long-term impact of technological change on the jobs market should be positive. The rise of AI has disrupted this consensus. In brief, the suggestion is that the human monopoly on tasks requiring significant cognitive processing is being broken. Education and training may become ladders to nowhere if AI systems that match or surpass human cognitive abilities are feasible. A glance at the world today demonstrates that many tasks humans once performed are being automated by AI systems, with virtually all studies showing that the process is accelerating as the capability of AI systems improves. For example, two Oxford economists, Frey and Osborne, predict that 47% of jobs in the US will be automated by 2030. The impact of AI Investigating how this disruption is likely to impact the accountancy profession, our research profiled the tasks that practitioners perform at different stages of their career and at three levels: trainee/junior, manager, and director/partner. We then calculated the probability of each task being automated by aggregating information from a range of sources, including academic studies and reports from professional, industry and government organisations. Our analysis makes it clear that, taken as a whole, accountants perform an enormous variety of tasks for their clients and employers. Some tasks, such as preparing accounts or tax returns, are considered extremely vulnerable to automation. Others, such as designing effective financial control strategies for clients, building relationships, or mentoring juniors and trainees are not. This feature of the profession has two implications: Given the enormous variety of tasks performed and roles fulfilled by accountants, assigning a single probability and suggesting that this represents an objective assessment of how vulnerable the profession as a whole is to automation is a simplification to the point of absurdity. The large number of tasks not vulnerable to automation means that for the foreseeable future, the profession as a whole does not face an existential threat. Tasks like designing effective tax strategies or the financial structures of businesses will require a mix of quantitative and soft skills as well as a deep, strategic understanding of the world beyond the capabilities of AI. Career pathways However, this does not mean that the profession can afford to be complacent. Analysing the potential effects of AI at different stages of a traditional career pathway reveals that the tasks vulnerable to automation belong predominately to early career stages. This is particularly the case for trainees/juniors, but also applies substantially to certain work at manager level. Therefore, while accountants may always be needed, the current economic case for most trainees and some managers may disappear. This presents challenges for the profession. Most obvious is the need to redesign career pathways in response to these trends. A traditional career pathway through the profession follows the well-worn path of trainee to manager to director to partner. A key question for firms and the profession is how to replenish senior ranks if the bottom rungs of the career progression ladder are removed. If there are no trainees or junior staff, where does the next generation of managers, directors and partners come from? A second, related issue is that of skills and knowledge development. Generally, the more experienced individuals in organisations perform the more cognitively demanding tasks. The tasks most vulnerable to AI automation are often seen as repetitive and undemanding. At first glance, the automation of such tasks may seem a positive development for employers and employees alike. However, this perspective takes no account of the knowledge and skills gained by performing these tasks in a real-world setting. For example, designing effective tax strategies requires experience that can only be acquired by spending time working on basic tax compliance. It may be possible to develop the skills and aptitudes required by more senior practitioners without a long, real-world apprenticeship. However, there is no evidence to support this position. At the very least, it seems likely that the entry pathway to the profession will need restructuring, with substantial changes required to curricula and entry requirements. In an extreme case, firms may face severe skills shortages a few years after engaging in significant automation. Higher-order skills may atrophy and disappear due to the lack of entry-level positions rupturing the supply pipeline of employees capable of performing higher-order tasks. Perception of the profession A third potential issue is the attractiveness of the profession to new entrants. If some of the tasks traditionally performed by managers are automated, then this will presumably have the effect of reducing the total number of individuals required at this level. The profession may evolve towards a position where a relatively small number of individuals (say 5%) do high-value, well-remunerated work while the other 95% are relegated to low-value, poorly paid tasks. A rational and risk-weighing decision-maker, the very type of intellect the profession seeks to attract, may select away from careers where the odds seem stacked against being able to access opportunity. In the long run, this selection bias may have a significant adverse effect on the profession’s ability to attract high-calibre candidates. The future of the profession Forecasting the future is a notoriously uncertain endeavour. Any predictions regarding the impact of AI on the accountancy profession (including those in this article) should be treated with scepticism. Reports of the imminent demise of the accountancy profession are, in all likelihood, greatly exaggerated. However, it would be equally short-sighted to discount the potential impact of AI on the profession entirely. It does seem likely that in the medium-term, the traditional career pathways associated with accountancy will be significantly dislocated. Responding to this will require meaningful, profession-wide dialogue and debate about how the next generation of accountants will be recruited, educated, and motivated.   Dr Patrick Buckley and Dr Elaine Doyle lecture at the Kemmy Business School, University of Limerick, and Ruth Gilligan is a Tax Associate at PwC Ireland.

Jun 02, 2020

What does ISA 570 (Ireland) Going Concern (Revised) mean for directors and statutory auditors? Noreen O’Halloran explains. Trust matters. The importance of accurate and reliable corporate information, especially information subject to external audit, is fundamental to the confidence of shareholders, investors, and the wider public. Recent corporate failures, particularly in the UK, severely affected that confidence and unsurprisingly led to public concern over whether more could have been done to prevent these failures from occurring. The collapse of several high-profile companies prompted the UK government and regulators to conclude that radical action was necessary to restore public trust and confidence in audit quality and the effectiveness of the audit in the UK. To identify the required changes, the UK government commissioned several very significant reports on the regulation and operation of statutory audits in the UK. These reports included Sir John Kingman’s Independent Review of the Financial Reporting Council (FRC), which stated that it was time for the FRC “to build a new house”. The report proposed that the FRC be replaced with a new independent statutory regulator with a clear focus on shareholders, investors and the wider public, and the power and support to regulate appropriately. Separately, the Competition and Markets Authority (CMA) conducted a study of the statutory audit market and provided its recommendations thereon. Sir Donald Brydon also carried out an independent review of the quality and effectiveness of the audit. The FRC has witnessed examples of audit weakness through its inspection and enforcement work and believes that a revision of the International Standards on Auditing (ISAs) UK will assist in restoring public trust. One of the most noteworthy of these revised standards is ISA (UK) 570 Going Concern (Revised). The standard sets out significant changes from the previous standard, with the aim of strengthening investor confidence. The Irish Auditing and Accounting Supervisory Authority’s (IAASA) stated policy concerning standard-setting in the Republic of Ireland is to follow the FRC standards, amending where there is a conflict with Irish or EU law. IAASA has therefore released ISA 570 (Ireland) Going Concern (Revised), which is largely based on the FRC’s version. This standard is effective for statutory audits of Irish entities, like the FRC version, for periods commencing on or after 15 December 2019. The standard addresses the auditor’s responsibility in the audit of the financial statements relating to going concern and requires the auditor to include an independent assessment of the entity’s ability to continue as a going concern. Nevertheless, attention must first be given to what the directors will be expected to provide to the auditor. The responsibility for making the going concern assessment of an entity has, and always will, rest with the directors. But going forward, directors must be prepared for increased scrutiny and challenge from the entity’s auditor in respect of their assessment of going concern, which may result in more work for the directors of an entity when making and supporting their going concern assessment. Directors’ assessment Where directors have not performed a going concern assessment, the auditor must request that one be completed and shared with the auditor. If the directors cannot, or will not, make an assessment, the auditor must consider whether there is a significant deficiency in the entity’s internal control system. The inability or unwillingness to prepare a going concern assessment will result in a limitation of scope in terms of the evidence available to the auditor. This limitation is likely to result in a qualified opinion in the auditor’s report. The assessment made by the directors should take into consideration both the environment in which the entity operates and its internal systems and controls. The auditor will expect the directors to be able to show how developments in the industry or economic environment, along with internal operations, current and future business risks, and any future or prospective plans, have been taken into consideration to assess going concern. The directors’ assessment should explain how alternative methods, assumptions and data were considered. The directors of smaller companies or companies that may not have previously performed, or provided the auditor with, such a detailed assessment on going concern must identify the necessary additional steps. A transparent process of internal review and challenge will also be important, as the auditor will need to understand the nature and extent of the entity’s oversight and governance regarding its going concern assessment. The oversight and governance within the entity will influence the auditor’s understanding of the effectiveness of the directors’ assessment of going concern. When the assessment has been delegated to management, the auditor should expect that the directors possess the skills and knowledge to understand the methods used by management, the ability to evaluate the assumptions used, and the authority to challenge management. Entities will need to consider whether changes to their systems of internal control are required. These changes will inevitably lead to increased costs for entities when making their going concern assessment, perhaps disproportionately so for smaller entities. Nevertheless, the UK market has demanded more reliable corporate information and IAASA believes that the public interest in Ireland is best served by adopting the FRC’s standard with minimal change. The standard will also require increased work effort from the auditor: As part of the auditor’s risk assessment procedures, the auditor must design procedures that actively look for matters or conditions that may cast significant doubt on the entity’s ability to continue as a going concern; The auditor is required to obtain adequate support from the directors for the going concern assessment including methods, assumptions and sources of data used in the analysis; The auditor will need to evaluate how the directors have determined the relevance and accuracy of the methods and data used and understand whether alternative methods, assumptions and data have been considered; The auditor must maintain professional scepticism and probe the directors when audit evidence obtained suggests that there may be bias or contradictory evidence included in the assessment; and The auditor may perform a retrospective review of previous outcomes and forecasts to assist in measuring the effectiveness of the directors’ process for assessing going concern. Events or conditions not identified by the directors If the auditor identifies events or conditions that may cast doubt on the going concern assessment, and which the directors have not identified, the auditor must understand why the relevant events or conditions were not identified. They must also determine whether there is a significant deficiency in internal controls and perform additional audit procedures regarding the newly identified events and conditions. Audit report implications Shareholders and investors can expect to see a change in the auditor’s report with respect to reporting on going concern. The auditor previously reported by exception as to whether the directors’ use of the going concern basis of accounting was appropriate and whether appropriate disclosures were made. Going forward, the auditor must carry out a process of independent testing and examination on the entity’s assessment of its prospects and conclude based on sufficient and appropriate audit evidence. When the going concern basis is appropriate, the auditor’s report will include a conclusion that the auditor has not identified, either individually or collectively, any events or conditions that result in a material uncertainty that may cast doubt over the entity’s ability to continue as a going concern and that the directors’ use of the going concern basis of accounting is appropriate. Also, for public interest entities and certain other entities, the auditor must make additional disclosures in the auditor’s report over and above those previously required. This includes an explanation as to how the auditor evaluated the directors’ assessment of the entity’s ability to continue as a going concern and, where relevant, key observations arising concerning that evaluation. Conclusion Re-establishing shareholder confidence and trust in the audit is critical. Society wants and expects more from auditors concerning the future prospects of entities. Sir Donald Brydon stated in his Independent Review into the Quality and Effectiveness of Audit that “audit is not broken, but it has lost its way and all the actors in the audit process bear some measure of responsibility”. The regulators are of the view that this new standard will go some way to re-establishing trust in the audit. The intention of the standard is not to create a checklist for directors and auditors. Instead, it is to ensure that the directors and the auditors focus on the prospects of the entity and consider all available information. It will put the directors’ assessment of the entity’s ability to continue as a going concern under increased scrutiny and challenge by auditors. It will also, in some cases, lead to significant additional cost and effort for the directors and their auditors. However, if it can provide the earlier warning signs concerning corporate distress that are envisioned, this can only be of benefit to society.   Noreen O’Halloran ACA is a Director in the Department of Professional Practice  at KPMG.

Jun 02, 2020

Why is a target operating model important to your organisation? Kieran O’Brien explains.To succeed in today’s challenging marketplace, organisations must be capable of a continual process of transformation and renewal. To achieve this, an organisation must have an in-depth understanding of its existing business operating model and how this model can be changed to optimise operations with resulting increased returns on investments, better service delivery for customers, as well as new offerings. Recent studies indicate that optimum business models are most often found in start-up entities. In more established entities, however, operating models are often no longer appropriate for the business and the challenges the unit is facing. Your organisation’s business model may have served you well in the past, but there is no guarantee that it will be successful for the future. Business models need to be continuously reviewed and refreshed to deliver on the organisation’s goals. Technology plays a vital role in supporting your business model. However, it is only one of the pillars supporting your business model alongside organisation/people, go-to-market approach, and process. The reality is that many organisations do not fully understand the strengths and weaknesses of their existing business operating model and are often slow to conduct a deep-dive analysis and embrace an enhanced operating model. In this article, we look at how your organisation might review your current operating model to move to a target operating model that creates a platform for sustainable future growth. Definition Although the term is familiar, there are various definitions for the target operating model (TOM). We would characterise it as a representation of the structures needed for an organisation to create and deliver optimal value for its customers in a repeatable manner while delivering on the organisation’s vision and growth strategy. Organisation, market strategy, process, and technology are the key underlying components of a TOM and are critical to its success. Ultimately, the TOM should provide a visual overview of how a business can be ideally structured to implement the organisation’s strategy by showing how each of the main business activities is represented. Common issues In my experience, TOMs can be ineffective due to several common factors. These include: The inflexible nature of historic business models, which fail to support a business that is evolving its operations (for example, a financing organisation that is moving from supporting large/complex transactions to a flow business operation); In financial services, the continuation of the historic segmentation between ‘front office’ and ‘back office’ when it is evident that both cannot continue to operate independently of each other effectively; and Having an operating model that is not aligned to a specific business operation, with the consequence that the organisation develops functional silos that result in process inefficiencies and poor communication. Key elements There can be several aspects to a TOM, but the critical interdependent elements we consider to be essential are:    1.   Organisation/people;    2.  Go-to-market;    3.  Process; and    4.  Technology. We discuss each of these elements in turn below and outline scenarios or questions for consideration under each category.Organisation/people The objective of a TOM is the development of an organisation that will support the business strategy and has clear roles and responsibilities with measurable skills and capabilities. The organisation should have the right number of people with the appropriate remuneration, expertise and experience across all functions. Also, the structure should be transparent, easy to understand and adaptable to changes that will arise over time.  Before determining the appropriate organisational structure, consider the following elements: Define the existing organisational structure; Review current role profiles, reporting lines and the number of people in each role; Review the type of people in each position (full-time, temporary, outsourced etc.); Complete a competence, performance and experience audit; Analyse performance evaluation methods; Analyse remuneration and incentive schemes; Analyse decision-making and governance structures; Analyse the degree of headquarter control versus local/regional autonomy; In a banking/leasing entity scenario and where the entity is bank-owned, determine the level of bank control versus the lease organisation control for critical functions (e.g. credit, pricing, asset management etc.); and Determine whether the entity is a functional or a product organisation. Go-to-market The successful business model should have a go-to-market (GTM) strategy that delivers a range of products and/or services to its customers on a profitable and cost-effective basis. The various GTM channels should be clearly defined and operate effectively. Let’s take the scenario of reviewing the GTM approach for a leasing/financial services provider with a supporting bank branch network. Areas that could be subject for review before deciding on the optimum GTM strategy include an analysis of: The entity’s commercial approach; The revenue and profitability model by product and service; The sales/operations approach, with a focus on the direct and inside sales route; How the supporting bank branch network operates and is controlled; The distribution routes to market through brokers, partnerships and others, and how this operates and is controlled; The typical customer profile and segmentation; The product and service offerings; Regulated and non-regulated product offerings; ‘X as a service’ and pay-per-usage products and services; Value-added data and customer insights in the customer value proposition; Various product portfolios for cross-selling opportunities; The ancillary product offerings including insurance, maintenance and others; Ancillary product offerings provided by associations, partnerships and joint ventures; and The asset management, end-of-lease operations and systems capabilities. Process Organisations must analyse and define the optimal business processes that support their business objectives. This involves the development of processes that are scalable, repeatable and the performance of which is measurable. An end-to-end ‘as is’ process review is recommended to map out the process suppliers, inputs, outputs and customers, and detail all critical dependencies. An essential element of this analysis is the identification of the core and non-core processes of the business to determine where value is added. Areas that could be subject for review before deciding on the optimal processes include: A review of the existing operational model, and determining whether it is centralised or decentralised; A review of the organisation’s governance and control procedures; Analysis of the processes and services that are supported in-house versus outsourced along with their interfaces and management; Analysis of the level of outsourcing, including the types of outsourcing and whether outsourcing is single-vendor or multi-vendor; Analysis of any shared service centre(s) supporting the organisation; In a bank-owned leasing entity scenario, an analysis of any processes and services supported centrally by the bank; A review of any flow business processes, mass customised processes, and any bespoke solution processes; and A review of the customer interfaces and aspects of online/offline elements of the customer journey and their interfaces. Technology The chosen business model must have the necessary technology infrastructure to support both people and processes. There is a requirement to identify and implement the technological and digital systems required for the optimum delivery of products and services to customers. Areas for consideration include digitalisation, data analytics and services automation. Taking the scenario of a bank-owned leasing organisation, areas for review before deciding on the optimal technology platforms include: A review of the core supporting systems/platforms covering front-end, back-end, CRM (customer relationship management) and reporting; A review of the level of integration, if any, of lease entity systems with bank systems; Analysis of the level of end-customer and intermediary systems linkage and automation; Analysis of the systems for quotation, credit approval and asset management; Analysis of technology capabilities and the technological ecosystem to support new products, especially in the areas of ‘X as a service’, and pay-per-usage models; and A review of the extent and quality of both internal and external data sources and the analytical techniques used to support better decision-making, as well as unlocking economic value and generating customer insights. The ‘Triple S’ approach The design of an effective TOM that supports your business should incorporate the essential elements described above. At the outset, we recommend that you consider what we call the ‘Triple S’ approach. Strategy: what is the overall business strategy, and what are the key underlying elements supporting the strategy? These elements should include the offer (products, solutions and services); go-to-market (the segment/category of clients to whom the offer is addressed); and channel (the route through which the customer will be serviced); Structure: what organisational and operational structure is required to support the strategy? This is the framework of the operating model; and Systems: what operational procedures and IT systems are required to make the structure work effectively? This is the detailed design and implementation of the TOM. Considering that the TOM is the combination of structure and systems, this approach should ensure that the TOM is aligned to a specific business model. However, variations of the model may be required within an organisation to support individual business lines.The benefits An optimised TOM enables your business to implement its vision and business strategy effectively. Working towards the right TOM for your business will identify deficiencies and gaps in your organisation that require remediation, such as redundant roles and role duplication. It provides an opportunity to optimise your business operations and reduce your operating cost by looking at various insourcing/outsourcing alternatives. It also provides a significant level of internal transparency to your staff, giving clarity around roles and decision-making and often accelerating customer outcomes. Before embarking on a significant TOM review, it is worth completing an independent evaluation of the TOMs employed by your peer entities. This can provide invaluable insights into your competitors’ operations and allow you to focus on the ‘best in class’ elements for adoption in your organisation. But beware – making changes to your organisation’s TOM can result in major transformational projects, which requires a robust governance structure. In summary, designing a new TOM provides an opportunity to optimise the size, structure and shape of your business and ultimately, deliver on your organisation’s strategies.Kieran O’Brien FCA is Executive Director at Invigors EMEA Limited (part of The Alta Group).

Jun 02, 2020

With fintech innovation transforming the financial services sector, banks must undergo a strategic revolution – as IBM did in the 1990s – to survive and thrive. When your Irish mammy says she’ll “Revolut ye some money” for her grandson’s birthday, you know that fintech has moved mainstream. Leading fintech firms now have market cap valuations to rival the banks, with investors (or speculators) pricing in significant growth expectations at the expense of incumbents.  As banking boardrooms grapple with their response to the fintech onslaught, they could do worse than look through the lens of history to find inspiration from a similarly disruptive period in the IT sector in the 1990s.    Sword to a gun fight Gary Hammel, who is one of the most significant strategic thinkers of the 20th century, once prophesied that “in the new economy, those who live by the sword will be shot by those who don’t”. He observed that, when technological disruption occurs in a mature sector, dominant incumbents often suffer from the “tyranny of success”. They rigidly stick to the business model that delivered decades of success in the misguided belief that it will sustain success into the future. Before they know it, they become irrelevant and decline. Roll forward to 2020 and observe the vast sums of global capital that have been invested in fintech organisations over the past decade, as investors believe they can tap the vast profit pools (and data) that banks have had to themselves for centuries. While global bank CEOs were at first in denial, and even complacent about the fintech threat, many are now concerned by the exponential disruption to their core revenue lines. In considering a response, bankers could do worse than study IBM’s resurrection in the 1990s and how it underwent a strategic revolution to renew its lease on success. But before we go there, let us delve deeper into the disruption that is happening in financial services in 2020 and the banks’ response thus far. Fintech disruption A holy trinity of tailwind forces are driving fintech’s disruption of banking: A technological revolution (e.g. data and artificial intelligence); A paradigm shift in customer expectations (e.g. those who demand low effort and excellent user experience banking); and Favourable regulatory changes (e.g. the second Payment Services Directive (PSD2), which has opened up banks’ transaction data to fintech companies). Fintech companies have developed superior value propositions across nearly every product line. This allows consumers to send and convert money more cheaply, pay for goods and services much more easily, borrow money in an instant (no form-filling), and invest money smartly at a fraction of the cost charged by incumbents. They have perfected these propositions with helpful feedback from digital-savvy early adopters and now have their focus set on acquiring the banks’ core customers. Bank executives attempt to counter the fintech threat by allocating finite investment resources to one product line under massive attack (payments, for example), leaving other product lines open to disruption (business lending or investments, for example). The multi-flank offensive is stretching banks beyond their capacity to respond, but the fintech companies are only getting started. The greatest corporate turnaround of them all Before a mortal blow is delivered, banking CEOs should learn from the greatest corporate turnaround of them all. When Lou Gerstner took over as IBM CEO in 1993, he inherited a sprawling, rigid, loss-making organisation in rapid decline. They could not match the pace of product innovation from a new breed of agile competitors. Each competitor’s specialist focus on a part of the IT value chain enabled them to develop value propositions far superior to the ‘jack of all trades and master of none’ IBM. Within a decade, Gerstner had led IBM through one of the most successful corporate turnarounds and reinventions of all time. Gerstner and his team observed that, while corporate CEOs/CIOs were choosing IT products from competitors, the result was an IT architecture stack encompassing many different suppliers, which brought huge frustrations. These same corporations now needed a ‘technology integrator’ partner with a whole-market knowledge who could help them select, integrate and manage their portfolio of IT suppliers. For Gerstner, this was the eureka moment. This significant emerging customer need showed him that the future of IT would be services-led, not product-led. IBM’s perceived greatest weakness became their most significant asset, as they had the market knowledge needed to win in this lucrative new services market. How could this play out for banking? Let us imagine how this could play out for banking. We are in the year 2030 and the ‘platformification’ of financial services has occurred, with a handful of trusted financial platforms banking all of Europe’s consumers and offering any banking/fintech product these consumers could need. Think Amazon, but for financial services. 90% of incumbent banks will have missed the boat by 2030. They either went bust or are now operating as a utility company, offering commoditised financial products through these platforms. Fintech companies are also resigned to offering their products through these platforms, as the cost and effort involved in customer acquisition became too high. ABC Bank is the exception and has become the dominant consumer financial services platform player in the UK, Ireland, Benelux and the Nordics with 50 million customers. In 2020, ABC Bank saw an emerging market need for a trusted ‘financial integrator’, one that could make sense of – and harness – the multitude of great fintech offerings for the benefit of the consumer. The bank was brave and decisive, investing heavily in the right capabilities to become the Amazon of financial services. In particular, it invested in its digital front-end, third-party management capabilities, and data analytics capabilities. Consumers in these markets know that ABC Bank’s intuitive and secure platform can help them find the leading and best value fintech product offerings on the market. Customers are reassured that ABC Bank has properly scrutinised any fintech offering listed on the platform before giving the green light to offer their services. They have no worries, therefore, about their data or the security of their money. As consumers’ financial affairs (and data) are managed within one platform – cash, investments, pension and expenditure – ABC Bank has a holistic view. Remember, data is more valuable than gold. ABC Bank is, therefore, in a unique position to provide higher value in-house services, such as holistic analysis and advice to help consumers make better-informed financial decisions. If all this seems a bit far-fetched and futuristic, it is worth noting that this change has already occurred in Asia with the meteoric rise of Ant Financial. This financial services platform did not exist five years ago and is now worth $150 billion. Conclusion As banking boardrooms regroup following the pandemic and look once again to the future, perhaps they can dust-down the IBM playbook. They can position themselves at the centre of their customers’ financial lives as the financial integrator, making sense of – and harnessing – the power of fintech innovation for their customers’ benefit. Those who move swiftly and decisively can seize the day. Those who procrastinate and live by the sword will be shot by those who don’t. Vincent Colgan is a financial services strategist with expertise in banking and fintech collaboration.

Jun 02, 2020

Although the weeks and months ahead will undoubtedly be challenging, quality should not be compromised argues Fiona Kirwan. Full-year and interim year reporting deadlines are fast approaching for accountants both in industry and practice. Companies’ financial reporting functions and their auditors are getting used to working in ‘new normal’ circumstances. However, these changed circumstances must not compromise the quality of the work we all deliver day-to-day. Here are some issues Chartered Accountants should consider as they seek to maintain the highest level of quality in all aspects of their work. People COVID-19 has transformed the way we live and work. We have heard this phrase a lot in recent weeks, but it remains true. Almost instantly, employees who are used to the rhythm of the workplace became remote workers – many without the chance to prepare adequately. This creates challenges for managers of both finance and audit teams in leading teams remotely. It is more challenging to coach and supervise people who are not physically in the same location. It is therefore important to stay in touch and stay close to your people. Connecting as a community during this time takes imagination. It could mean developing new channels or social tools for employees to share stories; it could mean embracing video calls to create a sense of physical presence. Virtual social events are becoming the norm. Even small investments in building a genuine community can have a significant impact on your employees’ morale. This sense of community helps when coaching teams. People who are closely aligned on a personal level will find it easier to communicate complex information simply and team members will feel more comfortable asking questions and querying essential messages. Teams must be aware that some colleagues may not have optimal ‘work from home’ environments; some are juggling home-schooling with office hours; others are working from their bedrooms in shared living spaces. Organisations should implement flexible working structures to allow teams to deliver quality work while maintaining processes to ensure confidentiality and transparency. Such flexible working structures mean that everyone in the financial reporting process, both finance teams and auditors, must allow extra time to execute tasks remotely. Technology Almost all finance functions and accounting firms transitioned to remote working arrangements overnight, and the quality of an organisation’s technology is critical to day-to-day operations and ensuring business continuity in this scenario. Some organisations may have challenges arising from the fact that their teams are heavily reliant on desktop computers, second screens, or printing facilities that are not available in the home environment. The move to remote working could also leave team members isolated, but this is where the ability to host video conferences, share screens, and collaborate in files in real-time has become vital. Not only do these technical solutions allow teams to communicate internally, they have also become critical channels for communication between auditors and their clients. At PwC, we utilise our combined suite of audit tools – Connect, Aura and Halo – to communicate with our clients and colleagues across the globe. We also use Google’s G-Suite of collaboration tools, and Datashare to help us work with the data of clients with less complex IT systems. The recent uptake in the adoption of these technologies has seamlessly transitioned a lot of this work, which was historically done in person, into the digital realm.  Controls One area where the successful application of technology solutions has become essential is the implementation of internal controls over financial reporting. The appropriate tone from the top is vital; managers need to remind people that remote working might change how controls work, but it does not lower the bar. How companies operate their controls has been amended to allow for remote working. For example, a manual sign-off may now be replaced with a confirmation by email. In these uncertain times, companies will want to ensure that shortcuts are not being taken and rigour – both in procedures and the provision of appropriate evidence to support the implementation of controls – are maintained. Auditors will need to consider whether the controls, as they currently operate, remain fit for purpose and any increased risks that may have arisen from recent changes. Financial reporting The COVID-19 outbreak, and the measures taken to mitigate its impact, are having a significant effect on economic activity. This, in turn, has implications for financial reporting. Companies and auditors must work together to ensure that quality is not compromised – even in challenging circumstances. The following is a sample of the wide range of accounting issues that companies and auditors have considered in recent weeks: Going concern and viability statement: companies must assess going concern at each annual and interim reporting period, with a look-forward period of one year from the financial statement issuance date. Companies impacted by COVID-19 have had to update their forecasts and provide appropriate disclosures to alert investors about the underlying financial impact and management’s plans to address it, including if conditions give rise to uncertainties about the company’s ability to continue to operate; Subsequent events: the consensus is that COVID-19 was a non-adjusting post-balance sheet event for 31 December 2019 reporting. However, the appropriate disclosure of impact on the overall financial statements is a critical element of the financial statements; Measurements of assets: for year-end reporting and interim statements after December 2019, companies and auditors must assess the timing of COVID-19-related events to determine the impact on assets, including goodwill and indefinite life intangible assets, inventories, and deferred tax assets. Companies and their auditors must consider disruptions to the entity’s business or the broader market in determining recoverable amounts of assets. Careful consideration must be given to the net realisable value of inventory and, in the event of a price decline, whether prices will recover before the inventory is sold; Revenue recognition and receivables: identify the appropriate sales price given increases in expected returns, additional price concessions, or changes in volume discounts. Companies and auditors should be mindful that revenue can only be recognised for new sales if payment is probable under IFRS 15; Alternative performance measures: the European Securities and Markets Authority (ESMA) has provided guidance relating to the use of Alternative Performance Measures (APMs) in the context of COVID-19. Consistent with previous guidance relating to the maintenance of consistency of APMs from one reporting period to another, ESMA advises that rather than adjusting existing APMs or including new APMs, issuers should improve their disclosures and include narrative information in their communication documents to explain how COVID-19 impacted and/or is expected to impact on their operations and performance; the level of uncertainty; and the measures adopted – or expected to be adopted – to address the COVID-19 outbreak; and Internal consultations and reviews: audit teams face significant additional internal consultations and reviews in the current environment. Early agreement on timetables and collaborations between companies and auditors will ensure that quality is not compromised. As events continue to unfold, the challenges faced by accountants both in industry and practice are mounting. The weeks and months ahead will undoubtedly be challenging. However, quality should not be compromised. Supporting our colleagues and utilising our technology capabilities will ensure that control frameworks continue to operate, financial reporting will be clear and transparent for all users, and audit quality will not be compromised. Fiona Kirwan is a Director at PwC’s Assurance Practice.

Jun 02, 2020

After lockdown eases, will the economy face ‘revenge spenders’ or ‘tentative consumers’? Either way, warns Andrew Webb, ‘business as usual’ is going to look very different and businesses will need to adapt hard and fast. As lockdown restrictions begin to ease across the island of Ireland, it is natural that we start to think about the shape of the economy into which we are emerging. Will the various measures taken to protect jobs and businesses succeed in cocooning the economy from a sharp and protracted downturn, or are we facing into a long decline? The hope as we entered lockdown was that the economy would go into a deep freeze and then would pick straight back up from where it left off after the thaw. This is the much hoped for V shape decline and immediate bounce back. While that remains the hope, there is a growing body of emerging data to suggest that some lasting damage is being inflicted, and a longer recovery might be more likely. Astounding decreases in employment and vacancies, coupled with reduced consumer and business confidence, is leading economists to think about whether the path over the next couple of years is a U-shape, where output wallows in a trough before climbing back to pre-pandemic trends. While not an ideal scenario, it would be a much better outcome than the feared L-shape which sees output declining and remaining permanently below where it would have otherwise been. Regardless of the path the economy takes, the pandemic and subsequent lockdown have prompted consumers and businesses to make dramatic changes in behaviours and practices. Consumer behaviour will now go one of two ways – ‘revenge spend’ for all the leisure and socialising that we missed would be a considerable economic boost, whereas the opposing ‘tentative consumer’, fearful about job security, will likely save more, thus reducing demand and prolong the recovery. For businesses, there is much to consider. That dangerous phrase which can hold new and better processes back – ‘we’ve always done it this way’ – can surely never be uttered again without robust challenge. We recently had to try new things at a pace, and we pushed our technology hard. In most cases, it held up and should now embed into ‘business as usual’. At a more macro level, business (and indeed country) resilience and contingency planning will come to the fore like never before, and I would expect this will lead to fundamental shifts. There is increasing talk of the end of globalisation as firms that were reliant on suppliers from thousands of kilometres away faced massive disruption, and countries without key capabilities in certain manufacturing sectors experienced difficulty in obtaining PPE, ventilators and testing capability. A quickening of the pace on automation across the economy is likely to follow, building in efficiency gains and more resilience to any future lockdowns.    Of course, it isn’t just consumers and businesses that drive the economy. The Government’s role, particularly around providing job/income support, has come into particularly sharp focus. How we pay for the large public spending increases will come to the fore in due course. Given the austerity and public sector cuts that remain in our collective memories, I sense no appetite that an austerity agenda will fly again. That’s a discussion for another time. For now, the consensus view accepts that the economic and social cost of mass unemployment far outweighs the financial cost of supporting people to remain in work and supporting businesses remain viable. Andrew Webb is the Chief Economist at Grant Thornton NI.

May 21, 2020

How can SMEs prepare for the severe economic shock that is going to hit? Ger Foley outlines how businesses can adapt and continue in a different way. I will not pretend to be an advisor who has all the answers for business owners on this. I absolutely don't. However, as a business owner myself, I can relate to all the uncertainty that business owners are facing. Short-term actions Things are clearer when viewed in front of you – on a spreadsheet or even just on paper – it doesn't matter what you use, but it is essential for business owners to make the financial state of their business visible. This will help with the decision-making process and will continue to be critical in the future. You should approach this by: Determining the cash reserves of the business. Finding out how much is owed to you from customers, and what exposure you have to debtors that are unable to pay in the short-term. Finding out the sales pipeline or order book for the short-term (three to six months). Risk profile this pipeline based on the customer, their industry and how their business might be impacted. Determining what the profit margin will be on certain sales. Finding out the current fixed weekly/monthly costs of the business – rent, lighting and heating, insurance, etc. Ignore wages/loan repayments for now. Establishing your payroll cost on a weekly/monthly basis. Determining business loan repayments on a weekly/monthly basis. You are now armed with data to allow you to make decisions. It may be possible to defer or get some extension from suppliers concerning the fixed costs mentioned. The banks will help, although this situation is evolving clarity is needed on exactly what this help will look like. Contact your bank and tell them you are trying to understand your position and will need support. Request a holiday or some other short-term reprieve from your loan repayments. Have a very transparent and open conversation with your team regarding payroll. Allow them to look at the numbers and ask for suggestions or input to the discussion. Longer-term actions We are in for a severe economic shock in the short-term. We are all in the same boat. All we can do in the immediate term is to survive but, more importantly, help each other and our communities. Business owners need to have practical positivity and approach the next chapter with the same level of enthusiasm they had when they started their business. Businesses have been built to where they were pre-COVID-19 so they can be built again. Will they look the same? Possibly not, but the SME sector is excellent at being agile. There are certain approaches that can be followed by the business community: Show leadership as business owners in following HSE advice and return to work protocols. Support their local economy where possible by using local products and services. Local businesses able to operate also need to support the community, e.g. ease of access, quality of service, coming up with innovative ways of ensuring the community has access to the products and services they want. How do you make your product or service relevant in these new circumstances? Businesses that remain strong have a responsibility not to take advantage at this time. They need to pay suppliers quicker than they have previously. Local and national government need to continue to help business owners with whatever supports are needed. We need a period where SME owners can focus on reinventing and adapting their business without the immediate pressure of cash flow and liquidity concerns. Over the coming weeks, as we understand more about what the medium-term future environment will look like, all business owners are going to have to consider their business models and how they can adapt to a new environment. Ger Foley is a Partner at Comerford Foley.

May 21, 2020

The hospitality sector has been hit hard by the COVID-19 pandemic. Adrian Crean explains how, with innovation and forward-planning, this sector can overcome the challenges it faces. As a well-known boxer once said, “Everyone has a plan until they get punched in the face”. March’s lockdown announcement saw the hospitality and food service sectors decimated, a sector that employs 260,000 people, over 10% of total employment, and significantly supports regional employment. According to the CSO, 70% of these businesses ceased trading temporarily or permanently. Protecting staff, minimising ‘cash burn’ and managing liquidity became the immediate priorities. Even with the phased re-emergence from lockdown, it’s clear that things will be much different to before. The health crisis has become an economic crisis, and many businesses will not see a return to their 2019 levels until 2022, at earliest. Others will not return at all. Businesses are having to think, plan, adapt and act fast. The impact of COVID-19 Higher unemployment, less disposable income, reducing consumer confidence and much lower overseas tourism numbers will have a significant impact on the hospitality and food service sectors in the months ahead. If our own domestic travel restrictions could be safely lifted during June rather than July, it could provide a meaningful and much needed domestic tourist season. As it stands, however, significant planning and investment is being invested to give customers and staff the reassurance needed that the sector will be employing the highest operating standards in a safe, hygienic and welcoming environment – even if it comes at a cost. For example, the implications of social distancing on businesses are enormous. Michelin starred chef, JP McMahon, recently highlighted that at his Aniar restaurant in Galway, setting a two-metre distancing rule in the restaurant will see capacity reduced by approximately two-thirds. Even a one-metre distance will see capacity reduced by one-third. Social distancing in restaurant kitchens and back of house will result in simpler menus and reduced staff numbers. These SMEs will have accumulated four months of debts without any trade and face many more months at subdued levels. Businesses will not be financially viable without burden-sharing on fixed costs, especially rent and rates. Landlords, local authorities, government, and business will all need to participate. Innovating In times of great crisis, we also see great innovation. Customers will need to see a renewed emphasis on value for money. People will be more careful where and how they spend their discretionary income. All businesses should be considering three tiers to their offer – value, mid-tier and premium. The adoption of click ‘n’ collect, curbside collection, grocery and delivery are great examples of channels that hospitality and food service businesses have opened to allow them to reach their customers, but partnering with delivery aggregators is expensive. Charges typically range between 20% and 30% of sales value. This might be manageable of it’s 10% of your business but not at 50% of it, as businesses are now facing. Home working is here to stay. With office capacities reduced by 30% to 40%, expect businesses to rethink their location strategies. This will benefit more suburban and regional locations. Also expect to see leases with rents pegged to turnover becoming the norm. They are a far more equitable solution. Lastly, businesses must invest in their brands. Authentic and memorable storytelling that excites and engages their customers communicated across the right platforms has never been as important. As CS Lewis said, “You can’t go back and change the beginning but you can start where you are and change the ending.” Adrian Crean is a non-executive director with LEON Ireland.

May 21, 2020

How can charities, especially smaller ones, deal with the many challenges they are currently facing? Kathya Rouse identifies key areas where accountants may be needed to help charity clients. Like everyone else, charities are struggling to come to terms with their new normal. The unprecedented situation we find ourselves in, and uncertainty around the short-term outlook, makes planning for the future exceptionally difficult. Some charities are continuing to provide ongoing services, while other charities are operating limited or no services due to the current government restrictions. It seems likely that some level of social distancing will be in place for some time and many charities will need to come up with new ways to continue/recommence providing their services while adhering to the relevant government restrictions. Amid all this uncertainty, how can we, as accountants, help? Many smaller charities do not have the expertise among staff or trustees to deal with many of the challenges they are being faced with. We are more than “just” accountants to these clients – we are their trusted business advisors who can be relied on to provide independent advice. I have identified a few areas where you may be needed to help your charity clients: Provide a sounding board and listen to their concerns Despite many similarities between charities, each one will have different requirements right now, so aim to provide a bespoke solution for each charity.   Encourage them to develop a contingency plan to guide them through planning for their organisation during the life cycle of the current pandemic There are various free templates and guidance issued by some of the main charity sector support organisations, such as The Wheel and The Carmichael Centre, which you can direct clients to. The contingency plan should be a live document which remains under regular review. Advise charities around their governance requirements and their AGM There is conflicting advice around whether AGMs can be held entirely virtually under company law except where specifically allowed by the company’s constitution. You can play a key role in helping the charity figure out its position re quorum and use of proxies to overcome this hurdle. Get involved in the budgeting process Budgeting has never been more important, and you can provide your expertise through assisting in, or reviewing, the budgeting process. Like the contingency plan, the budget should also be a live document updated regularly. Empower the trustees Empower the charity trustees to make decisions around whether they can use their current accumulated reserves to make up for a temporary deficiency in resources by assisting them to ascertain their restricted and unrestricted funds. Stay up-to-date Ensure you stay on top of the various funding streams available to charities, such as the Temporary Wage Subsidy Scheme and the new €40 million COVID-19 support fund, and make sure to keep your clients abreast of any available funding. Keep up to date with ongoing regulatory, professional and other guidance which may be of use to your clients. Chartered Accountants Ireland have collated a list of various guidance documents which are available on its website and is open to everyone, not just members. Make use of any reputable free resources available to you and your clients. Kathya Rouse is a Partner at McMoreland Duffy Rouse and a CA Support Board member.

May 14, 2020

In these uniquely challenging circumstances, how can accountants support non-profits? Patricia Quinn and Paula Nyland tell us that thoughtful and clear-eyed planning is needed to mitigate the challenges facing these organisations. Stories from the non-profit sector can paint a bleak picture of services threatened, vulnerable people at risk, fundraising decimated, and mature non-profit businesses facing unprecedented challenges to their viability. The emergency €40 million funding package provided by Government for the non-profit sector will go a ways towards buying some much-needed time, allowing these non-commercial businesses to take stock, regroup and renew their operations. If you look at the thousands of non-profits listed on Benefacts public website, you can see that the sector is highly diverse. At one end, there are heavily staffed health and social care service providers that derive most of their funding from the State in exchange for providing essential services. At the other end, there are thousands of small, local associations and clubs that rely mostly on donations and volunteer effort. These are uniquely challenging circumstances for non-profits and accountants have an important role to play in supporting them – whether as professional advisors or as voluntary Board members. As analysts of sector data, these are the kinds of situations Benefacts has encountered: Dependency on fundraising and donations is high, with almost €0.9 billion reported in the most recent financial statements of all the companies in Benefacts Database of Irish Non-profits. The pandemic has decimated traditional interactive fundraising in its many forms – whether event-driven, church gate collections or calling to homes to sign up to direct debits. Some high-profile campaigns have mitigated this, such as Pieta House, which raised €2 million after a push on social media, but this is only a third of the €6 million raised by last year’s ‘Darkness Into Light’ walk, with no alternative project to fill the €4 million gap. Online fundraising simply does not have the same impact. Many non-profits do not hold an adequate level of reserves. A good rule of thumb accepted by some Government funders is 10 weeks of operational expenditure. Sadly, few non-profits enjoy this level of security. In fact, many Government funders actively discourage the holding of reserves, with the result that several non-profits operate a ‘hand-to-mouth’ existence in terms of cash. Although the cost base of larger non-profits reflects the labour-intensive nature of their work, Benefacts analysis shows that in the case of many smaller non-profits (i.e. less than €250,000), non-payroll expenditure amounts to some 70% of their cost base. This means the COVID-19 subsidy will be of limited value. The demand for services is higher, and the costs of delivery will increase with the cost of delivering care with social distancing restrictions still active. This will have far-reaching effects in homelessness services, respite, residential care, and many more service areas dominated by non-profits. In the voluntary housing sector, income support payments have helped maintain rent payments but, without a further injection of funding, it will become harder to meet the demand for housing given the likely consequences for the coming recession for the building sector. Inevitably, the current focus is on the immediate issues, but for the medium-term, thoughtful and clear-eyed planning will be needed. Directors and trustees need to be looking at cash flow projections, potential increases in demand, and commitments to continued government support. Without this, sector leaders are telling us that tough decisions may be needed to cut services as early as Q3 2020. Although the emergency fund is very welcome, many organisations will need an early commitment of future government funding into 2021 and beyond to maintain essential services. The alternative could be closures, with all the unthinkable consequences for the most vulnerable in our society.   Patricia Quinn is the Managing Director of Benefacts. Paula Nyland is the Head of Finance at Benefacts.

May 14, 2020

How can charity trustees continue to safeguard charities during this tumultuous period? Michael Wickham Moriarty gives us three top tips on how to safely guide your charity through these uncertain times. The COVID-19 crisis has now been impacting Irish charities for at least two months. What should charity trustees be doing for their charities now and for the future? Keep meeting, but be flexible Board and committee meeting schedules may have been disrupted, or even paused, during the introduction of restrictions in March and April. This is entirely reasonably as management focused on facilitating remote working and core business continuity during the initial stages of the crisis. If meetings have been on hold, look to restart them now. All the governance functions of charity trustees are just as important during this crisis as they are during normal times. Undoubtedly, the agendas and board calendars will need to shift to focus on business continuity, crisis management and other COVID-19 related risks. All meetings should be remote rather than in-person. They may take place at different times to facilitate either board or management. Some meetings for board and committees may be called at short notice as the charity responds to a rapidly changing situation. The papers prepared by management may be less polished and punctual as the executive team focuses on crisis response. Going forward, charity trustees should continue to meet and focus on their core governance roles of strategic direction, oversight and risk management. Think of all stakeholders Given the serious impact of COVID-19, management may focus their energies and attention on specific stakeholders or critical areas. Charity trustees should ensure that all stakeholders are considered during the crisis. For example, the management team may be focused on serving and protecting their vulnerable beneficiaries without giving sufficient attention to staff welfare, including their own. In many charities, the funding and financial crises could take all the attention away from the critical work of the organisation. Institutional donors are a stakeholder that can dominate the attention of charities, but many of these funders are currently being flexible with their grants, allowing charities to focus on other stakeholders. Trustees should ensure due consideration is given to the needs of all stakeholders, as well as organisational sustainability. Be a critical friend to management Most charities are dealing with multiple complex risks with a high-level of uncertainty over the future operating context for funding, staff and beneficiaries. This level of uncertainty is likely to persist for the remainder of this year and beyond. Charity trustees must always balance their relationship with management between challenge and support. As a trustee, you may have access to networks, expertise and experience not available elsewhere within the charity. Use this information to test the assumptions that management use for their COVID-19 response plans. Examine the scenarios and decision points set out. This trustee perspective can really add value as you collaborate with management in agreeing how to chart your charity’s path through these unprecedented times. Good luck! Michael Wickham Moriarty FCA is a Governor and Vice-President of the Rotunda Hospital, and he is the Director of Corporate Services of Trócaire.

May 13, 2020

How can business leaders and entrepreneurs take pole position after COVID-19? John Stapleton explains how they can thrive in uncertain times and drive competitive advantage from the emerging new normal. The Irish Government issued its Roadmap for Reopening Society & Business over a week ago. So, Ireland has a plan. Sometimes plans raise more questions than answers – but it is a plan nonetheless and a lot more than many other European countries have in place. For business leaders in general, particularly entrepreneurs, any form of a plan is a good thing. A plan delivers clarity. A plan removes (at least some) uncertainty. This plan comes with lots of caveats (e.g. that infections and death rates remain under some degree of control) but businesses can at least now figure out some scenarios of how to prepare for recovery and re-instigate their businesses given the enforced eight-week hibernation. I can imagine financial directors and controllers up and down the country have been pumping out spreadsheets outlining scenarios ‘X,Y,Z,’ given the different effects the lockdown relaxations will have on their particular business and how quickly they can take advantage of the new business and market ‘freedoms’. While some industries have been more affected than others, all our feeling the impact of COVID-19. My industry is food and drink. Many think this has been booming during COVID, but it depends on your route to market. If you supply food service (e.g. hospitality/restaurants/events), you have been in a very deep hibernation. If you supply retail, it is a mixed bag. It’s all going to be a different story for each business across all sectors. One thing for sure is business will not return – ever – to what it was like in January or February. Everyone’s behaviour has been significantly and suddenly affected. While the rules are about to relax and, with them, our behaviours, many new attitudes will stick, at least in part. Just like empty retailer shelves in March were not really driven by panic buying, but rather by every shopper placing a few extra items in their basket (because everyone was cooking at home significantly more). This shows that a slight shift in behaviour by many people can have a profound effect; ultimately, we all need to figure out what this means for our industry and our business going forward. Working within the new normal One thing that unites all entrepreneurs, however, is that we are used to adversity. We court adversity – even in the good times. Entrepreneurs also tend to be quite good at seeing the opportunity in uncertainty and turning that uncertainty into competitive advantage. The status quo favours the corporate, who has the resources to drive efficiencies and growth in more certain and predictable times. Entrepreneurs are much more agile and can react and take advantage of new market forces. The real trick for entrepreneurs now is to understand what is coming round the corner – to begin to define the “new normal”. How many people will continue to work from home – just one day per month more than they did before? How many people will continue to work out at home to something they streamed on YouTube in the last few weeks? How many businesses will decide they don’t need such a large, swanky office in the centre of town and down-size, move to the suburbs or decentralise? How many businesses will reduce travelling to physical meetings and move to web-conference? Do you really need to physically be at that quarterly meeting in New York, or will an annual visit do just as well while the rest are held on Zoom? You only need many people doing a few of these things 5% of the time to move to a “new normal”. These days, I work with a range of small, early-stage businesses. My message to them is that the Government’s plan is great (and it is great), but the Government doesn’t run your business. That’s your job. This is the time to take control of your business’s destiny. Take the time to define what the “new normal” means for your industry and position yourself to take best advantage of this shift. Entrepreneurs are agile, so play to this strength. Entrepreneurs thrive in uncertain times, so take the opportunity this presents to get to into pole position to be able to kick on purposefully and drive competitive advantage from the emerging new normal. You don’t need to be the best in the world; you just need to be better than your competition (who haven’t recognised the new normal yet). John Stapleton is an entrepreneur and speaker. He is also a business adviser for Bord Bia.

May 08, 2020

As exit plans for the COVID-19 lockdown start to emerge, businesses need to focus on how best to manage the ‘new norm’, says Teresa Campbell. Remote working became normal for thousands of office workers in recent weeks as businesses turned to modern technologies to continue operating during the COVID-19 lockdown. As restrictions are lifted, a priority for businesses in the coming months will be to provide a safe environment for employees and customers. However, it will also be important to not lose sight of the overall culture within the business. Undoubtedly, the quick shift to remote working has caused anxiety within workforces. The right culture within a business needs to embrace this change, recognise the new challenges employees are facing and provide the right level of support and encouragement. As working from home is likely to continue, at least for some workers, this will be a new challenge for businesses whose culture up to now may not have involved managing remote teams. Good communication will be more important than ever with regular check-ins between managers and their teams. Team engagement mechanisms will also be needed – for example, virtual team meetings, virtual coffees and other social interactions. This is important to ensure that staff do not feel isolated and everyone feels part of a team. While technology is the key enabler of remote working, it also presents risks that need to be identified and managed. Homeworkers may be targeted by cybercriminals seeking to gain access to an employer’s network, routers may be attacked, data may be compromised, or video conferencing security may be breached. IT teams will likely need additional resources to protect data, defend against cybercrime and ensure policies are up-to-date and communicated to staff. Returning to the workplace Employees may feel anxious about returning to work while there are still cases of COVID-19 in the community. Employers will need to be sensitive to these concerns and put procedures in place for a phased return of staff. At a practical level, office spaces may need to be reconfigured to accommodate physical distancing between workstations, in meeting rooms and common areas like canteens and coffee stations. Perspex screens between workstations may need to be installed along with hand sanitising stations. Staggering return dates and working hours may also be necessary, depending on operational needs.  Looking to the medium- and longer-term, businesses may need to move away from open plan, accelerate the adoption of new technologies, and introduce processes such as thermal screening to monitor employees and visitors and keep workplaces safe. Changeable working environment Retaining culture within the “new normal” workplace will have to recognise that the new working environment will be a mixture of home, office and online. Interacting with staff through the use of collaborative tools, supporting staff with more flexible work patterns, and communication practices will all be key to enable staff to adapt their personal work structure and routine, which will ultimately be productive and effective. The most successful businesses will adapt quickly to the new norm and the challenging demands COVID-19 presents, by putting measures in place over the coming days and weeks, positioning their business to respond faster than competitors to the rise in demand, once restrictions are lifted. Teresa Campbell is the People and Culture Director at PKF-FPM Accountants Limited.

May 08, 2020

Business is never going to be the same after COVID-19. How can we prepare for the aftermath? Eamon Murphy offers us lessons to cope with the future ‘new normal’. I was working in Milan when the authorities announced the lockdown of a few small towns in the Lombardy and Veneto regions in late February. The action was designed to prevent the spread of the virus to the industrial north of the country and beyond. It was a sunny Sunday afternoon and the square outside Milan’s famous Il Duomo cathedral was filled with tourists (some masked) and well-fed pigeons. The Milan fashion week and three Serie A matches had just been cancelled. I did not feel that I was sitting in a front row seat watching the start of a pandemic outbreak, but I was. Since then, I have returned to Ireland and have witnessed how this most democratic, pernicious virus has planted itself among us without any sign of leaving. Governments around the world have struggled to respond to the scale of the health and economic collapse. It is a wartime endeavour with the frontline shifted to attack the most vulnerable ­­– the elderly in nursing and care homes and those who are already dealing with health concerns. The economic impact has been swift and brutal. Thriving enterprises have seen turnover fall to zero overnight. In Ireland, the numbers dependent on state support has rocketed to over one million. All conventional economic forecasts have been jettisoned in favour of scenarios – educated guesses as to how bad the deficit, unemployment and contraction might be. This is where we find ourselves in early May – just two months after the first tentative Italian lockdown. We are unsuspecting innocent travellers who find ourselves caught up in this terrible car crash of history. As professionals in business, we have no choice but to confront our historic appointment. There will be a post-COVID phase and it’s time we prepare for our ‘new normal’. I have been working remotely for the past few months and would like to offer the following lessons from lockdown: Do not assume that your business post-COVID future will be just like it was in the past. Events of this scale always leave behind great change. Even if you think your business will not change, your customers and supply chain will. Act now. Do not wait for the crisis to end. Normal business rules have been suspended. Be bold, imaginative and innovative. Create your own future. ("What did you do in the Great War, Mr Joyce?" "I wrote Ulysses. What did you do?") Help is available. Maximise assistance from the Government schemes and agencies – wage subsidy, unemployment support, Strategic Banking Corporation of Ireland loans, Sustaining Enterprise fund and financial planning grants. Find someone to talk to. Cash trumps everything. Forecast early and often. Remote working works. Trust your staff to work from home. (Right now, you may have no choice). Ask yourself if you really need all that office space when this is over. Online meetings are not the same as in-person meetings. They are filled with peril for wafflers and the unprepared. We miss the social interaction cues. These meetings require more than an effective broadband and technology. Above all they need an effective chair with excellent listening skills. Go online and find Andrea Bocelli singing on Easter in the empty Duomo di Milano. Soul music. Eamon Murphy is a member in business and of Chartered Accountants Interim Managers.

May 06, 2020

While the CAP 2 Auditing and Assurance interim exam is cancelled, and the main exam is not taking place until mid-August, candidates must still prepare properly for the challenge ahead. Garret Mulvin reviews the main components of the Auditing and Assurance competency statement. The cancellation of the 2020 CAP 2 Auditing and Assurance (AA) interim assessment means that most candidates will now be assessed entirely based on the final exam paper. The CAP 2 AA summer exam is scheduled to take place on 12 August 2020. Regardless of the interim assessment cancellation, the revised exam timetable or even a shift in work or study norms – candidates are reminded that the challenge that is the final AA exam remains unchanged. There will be no change to the AA examiner’s expectation of students or to how their attempts will be assessed. As per recent examinations, the paper will consist of a compulsory case study question and three further questions of which students should attempt two. The AA syllabus is broad. Candidates should review recent examiner reports, work through past questions and review the solutions. Below are reminders of some of the significant parts that feature on the AA competency statement. Ethics Ethics is an intrinsic part of the life of a professional accountant. Candidates should be able to demonstrate an understanding of how ethical issues can occur when preparing and auditing financial statements. It is important to be familiar with the ethical principles and the risks involved, as well as the safeguards or actions that can counteract such issues. Familiarity with the relevant sections of the Ethical Standard for Auditors is expected. Risk Risk is a cornerstone of the audit process. At a minimum, candidates should be prepared to identify business and audit risks based on the background information with which they are presented. Transcribing generic risks from notes which have been brought into the exam hall will not be sufficient. Audit evidence and procedures Substantive and analytical testing and testing of controls are central to the audit and assurance process. It goes without saying that knowledge of the applicable International Standards on Auditing is important. It is also difficult to audit the financial statements without a firm understanding of the financial reporting standards which underpin the numbers in these financial statements. Candidates should be prepared to bring their accounting knowledge into the AA examination and ensure they are prepared to make adjusting journal entries that may be required. A questioning mind is an asset to any auditor. Students should be prepared to demonstrate sufficient levels of professional scepticism when assessing audit evidence that is provided to them.  Audit reporting Audit reports comprise eight to 15 marks of the AA competency statement and students should expect this to be reflected on the exam paper. Candidates should understand the principles underpinning audit reports and be able to distinguish between unqualified, modified and qualified audit reports. It is important to use the information provided in the question scenario in order to support your conclusion as to the type of audit report that is required.

May 01, 2020

Staying motivated during these extraordinary circumstances is hard, but Louise Molloy has good advice on how we can retain our drive during this trying time. Working with professional clients at the moment, it appears as though we’ve been recast as the 80s hero MacGyver, expected to resourcefully apply our knowledge to ordinary items and extraordinary situations to save the day every day. We need to be professionals, leaders, carers, community support, teachers, an IT department and household expert all rolled into one. You’d need to be superhuman not to suffer motivation lags. Motivation is the drive that puts you in motion. Here are some tips on motivation when the tasks around you seem overwhelming and the purpose is unclear. Constant risk assessment You are working in extraordinary circumstances. As a client observed: “Rarely in work when I’m completing a scenario analysis does someone shove Lego in my face.” Equally, being locked alone all day every day is not a normal human state. The stress of managing work and personal pressures with an absence of feedback can be emotionally draining. Recognise that and move to mitigate, involving others as necessary. Put yourself in motion and keep moving Whether you’re in control of your timetable or not, set the timer on your phone and rotate every time it goes off. 30 minutes is ideal. It takes the human brain 20 minutes uninterrupted time to get ‘into’ a task, so gift yourself that. Ignore emails; family etc and run to the deadline. After 30 minutes; rotate to another activity (on timer). Tune in to your emotional landscape Sometimes we just need other people – their voices and thoughts help turn off our own. If you’re stuck, get outside or go somewhere else and do something visible – weed, sweep the leaves, clean the shower – anything with a tangible output. Learn to love lists Lists are your friend. They’re the only way record? how productive you are and will help keep you motivated. No job is too small for a list. Create symbols that represent your state of mind Put on a work hat – a literal hat if it helps you feel like you are in a work mindset. It’s especially good if you have kids who can see your change in schedule: hat on means their parent is at work. Be sure to shower, put on clean professional (-ish) clothes and shoes. These rituals trigger the associations with work. Have fun and embrace your inner rebel The brain is excited by difference. Walking a different route, doing tasks in a different order, – these changes ignites our interest and create energy and, in turn, ups our motivation. I challenge you to play with some of these and watch the impact. Look for what works and what doesn’t. Make this time count because it will pass. Applying these steps helps to ensure? successes. Before you know it, you’ll be your own modern-day MacGyver, able to inspire and motivate others. Louise Molloy is Director of Luminosity Consulting & Coaching.

Apr 24, 2020

One of the biggest challenges to productivity while working from home is being constantly distracted. Moira Dunne shares three tips on how to stay focused. Our working lives changed suddenly in March when the COVID-19 restrictions were put in place. Most people are now working from home and many are juggling family responsibilities, too. It can be hard to stay focused and get your work done each day while dealing with home life. Here are three tips to help you be productive while surrounded by distractions. Protect your focus First, think about what is affecting your ability to stay focused. Then change anything you can control and try not to worry about the things you cannot control. The most obvious thing we can control is the amount of time we are distracted by notifications. Switch off or mute anything on your device that is not essential. This can be done easily by switching your phone to do not disturb or airplane mode for blocks of time when you want to focus. Or, even simpler, just leave your phone in another room. Examine the alerts coming in on your laptop, as well too. Can you close Outlook or Messenger at certain times during the day? Realise that there are aspects of this situation that you cannot change – you cannot change the current status of the virus or how we are going about keeping each other safe. Try to accept that. Use time blocking Accept that your house may be busy and noisy with other family members around. Try not to let this become a stress as other people may need your support. Decide the best way to work around these demands. Can you identify blocks of time to work rather than trying to work all through the day? If you need to do home schooling, try doing an early morning time block when the house is quiet, break to attend to family, do another time block later. The important thing is to plan a specific piece of work for each time block. This increases your ability to stay focused and drives you to achieve the target by the end of the time allotted. Group tasks together If the day is constantly broken up by meetings and calls, there will be no time to concentrate and make real progress with your work. Take control of your day instead of doing a bit of everything all day in responsive mode. If you can, group tasks together to maximise your productivity, i.e. Zoom calls or phone calls. This helps clear other parts of the day for your solo work. Moira Dunne is the founder of beproductive.ie.

Apr 24, 2020
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