Joe Biden’s withdrawal from the US presidential race marked the departure of the last “Atlanticist” in American politics and Europe is ill-prepared for what lies ahead, writes Judy Dempsey  The decision by Joe Biden not to run against Donald Trump has upturned American politics. There are so many uncertainties about who will be elected as the next president of the United States on 5 November.  Until then, America will be preoccupied with domestic politics. It’s going to demand huge effort by the departments of state and defence to keep the focus on Ukraine, Israel and what is happening in the Middle East, not to mention China.   With the exception of Ukraine, Europe is a bystander, but Biden’s decision could change the transatlantic relationship.  Few European leaders, apart from French President Emmanuel Macron, understand how this fundamental shift in transatlantic dynamics could affect Europe’s defence, security and intelligence gathering.  Biden is the last “Atlanticist.” His career, experience in foreign policy and age made him a believer in the enduring bonds between the United States and Europe. Yes, his administration complained about Europeans not taking their defence or security seriously, but intellectually and emotionally, he is an Atlanticist.  Donald Trump cares little about Europe, the EU, NATO, or the idea of “the West”. Even if Europe increased its share of defence spending to NATO, it would never be enough. For Trump, Europeans are free-riders and unable collectively to think and act defensively. For him, this is Europe’s problem, not America’s. Just as Ukraine is not America’s problem either. If a Democrat wins the US presidential election, they will likely belong to the younger generation whose past has no connection with Europe and which is more attuned to the emerging competition between the United States and China, Russia and other countries resentful of America and what it represents.  This shift also has major implications for Europe’s security, its economy and future developments in Ukraine. Yet, Europe is not prepared for the changes taking place across the Atlantic.  The post-1945 era that was built on multilateral institutions, arms control and a confident West is ending, so what can Europe do to deal with such irreversible change?  EU Commission President Ursula von der Leyen wants Europe to have a Defense Tsar and a collective defense-spending policy. Neither is likely to fly – and not just because neutral countries would not buy into them.  Germany has rejected proposals to finance new defence purchases through joint borrowing, arguing that there is already enough industrial and research funding for defence.  On top of this, because defence is such a national issue, it is hard to see member states ceding any of this sovereignty to Brussels. The real issue here is Europe. The 27 member states can’t agree on which direction the union should take. More political and economic integration would make sense, but several countries want to regain more sovereignty at the expense of making Europe capable of speaking with one voice.   As the United States and the West decline, there is a chance for Europe to step in. Unfortunately, member states and EU leaders lack the courage to do what is needed.  Judy Dempsey is a Non-Resident Senior Fellow at Carnegie Europe and Editor-in-Chief of Strategic Europe *Disclaimer: The views expressed in this column published in the August/September 2024 issue of Accountancy Ireland are the author’s own. The views of contributors to Accountancy Ireland may differ from official Institute policies and do not reflect the views of Chartered Accountants Ireland, its Council, its committees, or the editor.

Chartered Star 2024 winner Evan O’Donnell talks to Susan Rossney, Sustainability Advocacy Manager with Chartered Accountants Ireland, about the future of sustainability in the profession Evan O’Donnell was recently named Chartered Star 2024, an annual designation recognising outstanding work in support of the UN Sustainable Development Goals (SDGs).   Run in partnership with One Young World and Chartered Accountants Worldwide, the aim of the annual Chartered Star competition is to celebrate the difference-makers in the profession who are helping to combat the climate crisis by bringing real, positive change to their workplaces and communities. As Chartered Star 2024, O’Donnell will attend the One Young World Summit, representing Chartered Accountants Ireland and Chartered Accountants Worldwide, in Montreal, Canada, in September. Here, he talks to Susan Rossney about his interest in sustainability and social responsibility. Tell us about your decision to become a Chartered Accountant. What attracted you to the profession? I loved accounting in secondary school – that “yes” moment when you know your inputs are the same as your outputs! My mother was a mathematics teacher, and my father was a banker, so figures are certainly in my DNA.  I studied accounting at University College Cork, but it wasn’t until I attended a careers fair that I understood the versatility of a career in accounting and the many doors Chartered Accountancy can open.  Have you always been interested in sustainability?  I’ve been interested in social responsibility from the time I was 16 when I travelled to India and worked with street and slum children in Calcutta.  Since then, I’ve volunteered for a range of charities, including Trócaire, Mary’s Meals, HOPE, Cork Penny Dinners, Pieta, Irish Guide Dogs for the Blind, the Irish Cancer Society and Breakthrough Cancer Research.  My interest in sustainability started when I led a sustainable gardening project at college. Volunteers completed training certificates and visited local nursing homes to assist the elderly residents in planting flowers and growing vegetables. It showed me what was possible. Since then, I’ve looked for opportunities to do more and was delighted when I got the chance to host a sustainability networking event at the Apple headquarters in Cork when I was Co-Chairperson of Chartered Accountants Student Society Cork. What initially sparked your interest in becoming a Chartered Star? I heard about the Chartered Star competition during the first year of my training contract with PwC.  In 2020, I was fortunate to be part of a fantastic network, the Irish FinBiz Task Force, with 30 finance and business professionals across Ireland. It had been founded by two previous Chartered Stars and, as the years went on, more Chartered Stars emerged from the network. I was on the network’s SDG Awareness Team where Patrycja Jurkowska (2019 winner) provided us with great insight and knowledge on the topic.  I saw how the competition opened many doors for my colleagues, and I felt it was an opportunity to meet amazing ambassadors of sustainability, be part of a knowledge platform and share key learnings with my network.  I am very proud to be part of the Chartered Accountants Ireland Chartered Star family! What do you see as the greatest sustainability-related impacts, risks and opportunities for Ireland?  Ireland faces significant sustainability challenges, but also has many opportunities. Climate change is causing more extreme weather, threatening infrastructure and agriculture. Biodiversity loss, due to urbanisation and intensive farming, is reducing ecosystem services like pollination and water purification. Resource depletion, including water scarcity and soil degradation, is harming agriculture and water supplies. Economic risks include the vulnerability of agriculture to climate variability and potential negative impacts on tourism from environmental degradation.  Dependence on fossil fuels poses a risk as global policies shift towards renewables.  Social risks involve health issues from heatwaves and pollution, as well as displacement due to coastal erosion.  Regulatory risks stem from the high costs of complying with EU environmental regulations. However, through all this, there are significant opportunities.  Renewable energy development, particularly wind and marine energy, can reduce fossil fuel dependence and create jobs.  Sustainable agriculture, including organic farming and agroforestry, can boost biodiversity and resilience.  Green technology and innovation, such as circular economy practices and smart grids, can enhance sustainability and efficiency.  By implementing robust policies through the Climate Action Plan and participating in the EU Green Deal, Ireland can lead in global sustainability efforts, attract investment and build a resilient future. Where do you see opportunities for young professional Chartered Accountants in sustainability? Chartered Accountants have many opportunities to help meet sustainability challenges. We can leverage our skills in financial analysis and reporting to enhance transparency in sustainability metrics, ensuring that companies’ environmental and social impacts are accurately reported and assessed.  We can specialise in sustainability assurance, auditing environmental, social and governance (ESG) reports to provide stakeholders with credible information. We can advise businesses on integrating sustainable practices into their operations and strategies and identify cost-saving measures through energy efficiency, waste reduction and sustainable supply chain management.  We can also influence policy by working with regulatory bodies to shape sustainability standards and frameworks.  Additionally, we can drive innovation by supporting the development of green finance products, such as green bonds and sustainable investment funds.  By combining our financial expertise with a commitment to sustainability, young professional Chartered Accountants can play a crucial role in fostering sustainable economic growth and addressing global environmental challenges. Can you tell us about your sustainability role with PwC? I always had a passion for sustainability, and I wanted to incorporate this into my day-to-day life at PwC.  During my time with PwC Cork, I worked in the Assurance Department specialising in high-technology and pharmaceutical company audits along with pensions and grant engagements.  In 2019, while on placement, I was on the Corporate Social Responsibility Committee, and worked under the food pillar of PwC Ireland’s Sustainability Council, focusing on food waste reduction initiatives primarily in PwC offices around Ireland.  I also became an SDG Champion with PwC by completing ‘The Sustainable Life School’ course. This course inspired me to apply for, and later become, a Climate Ambassador earlier this year, where I have equipped myself with education about climate. What does being named Chartered Star 2024 mean to you?  Being the Chartered Star, an ambassador of Chartered Accountants, means representing my profession and country on a global stage.  Having been selected to attend the One Young World Summit in Montreal this September, I am deeply honoured and grateful to have this opportunity.  The Summit brings together young leaders from around the world to discuss and address critical global issues, including sustainability, innovation and social impact. I am committed to making both my profession and my country proud by actively participating in the Summit, sharing insights and learning from global peers. This unique experience will enable me to bring valuable knowledge and innovative ideas back to my colleagues, fostering growth and development within our community.  I look forward to leveraging this platform to highlight the pivotal role of Chartered Accountants in driving sustainable and ethical business practices, ultimately contributing to a better future for all.

Lindsay Russell, a Partner with EY Northern Ireland, talks to Liz Riley about the evolution of her career, professional inspiration and constant thirst for knowledge, variety and challenge in her working life  My interest in accountancy was first sparked as a teenager. During school holidays, while doing my GCSEs and A Levels, my parents encouraged me to gain valuable work experience, which led to a job with WHR Accountants in Armagh under the tutelage of Ken Harrison, one of the founding partners.  WHR had a fantastic team of about 15 who took me under their wing and got me started with the basics of accounting.  After writing out many cheque journals, cash books and extended trial balances manually, I learned that “balancing” numbers gave me a great sense of satisfaction. Something clicked and I realised that accountancy was a career I wanted to pursue.  This summer job continued for four years and greatly influenced my decision to study accountancy at university in Scotland. After graduating, I was fortunate to secure a position with EY Northern Ireland in 2004 and completed my professional exams in 2006. It has been a real privilege to become a Chartered Accountant, specifically an auditor in practice.  As auditors, we are afforded an insight into so many successful organisations across sectors and industries and are in a unique position to support and work with talented individuals through complex and interesting transactions and business initiatives.   The trust we provide as accountants, auditors and business advisors is something that is often underplayed, but is vital to the capital markets and the success of organisations, and I still consider myself lucky to say I play a part in that.  Almost 20 years later in this profession, and I have not looked back. Championing women In those 20 years, I have seen significant changes in the gender profile of our profession, particularly in the last decade.  I am pleased to have been part of this change personally, but what I am really proud of is being able to champion and sponsor female talent within our profession to ensure that others can share in the experiences and opportunities I was afforded early in my career.  As a female partner and leader, I am acutely aware of the responsibility I have in championing other women in our profession. In the long term, my goal is that we create a profession, industry and world in which such an active focus on gender diversity is no longer essential because we have created an environment where opportunities are afforded equally to all people and are fulfilled based on the right person for the role, regardless of gender or any other characteristics.  However, I know we still have some way to travel to make this a reality. I fully appreciate and understand that we must create the right environment for all our talented people to flourish.  For example, organisations must take parental responsibilities and flexible working into consideration. They must do all they can to provide a workplace in which working mothers know they can have a sustainable and rewarding career. I would also highlight that, while gender diversity is important to me as a female leader, I believe that diversity of thought, background and experience is the basis for excellence in any team.  It is not only the experiences of diverse groups, but also their willingness to be open to the views and experiences of others, that creates the best and highest-performing teams, delivering the most for clients and helping to build a better working environment for all.  Embracing education in your career I believe professional development is achieved via a combination of formal learning and on-the-job development.  Formal learning is very important, particularly in our changing regulatory environment, and I find it useful to check my own Continuing Professional Development (CPD) monthly and quarterly to ensure I am on track for compliance.  However, I also find on-the-job learning critical in putting all the theory we learn into practice, and developing the wider skill set that is so valuable and necessary for the accountants of today and tomorrow.  We are living in a world in which technology and the way we work is continuing to evolve, particularly with the advent of generative artificial intelligence. My advice is to embrace change and learn as much as you can from those around you.  Lastly, I would say it’s important to remember that the accountancy skill set remains as valuable today as it ever was and will remain a key part of the workplaces and businesses of tomorrow.  The fluidity of work-life balance There is no magic answer to work-life balance. For me, work-life balance is something that is fluid and needs to be reassessed and flexed regularly and continuously.  I learned an important lesson early in my career: your work-life balance will have ebbs and flows depending on what is going on in both your work and home life.  It is important to be flexible at times and, at others, to know and stand by your “non-negotiables.”  I recognise that at certain times I will have busier and more demanding times in the office, and that it is important to stay focused for the benefit of my teams and my clients.  Equally as important is the need to have planned downtime. I am protective of this downtime when it arrives so I can make sure my family and friends get a fully committed version of me. Everyone will have different styles and different ways of working. My advice is to ensure you understand your own style. Know your peak times, take time out and ensure you communicate clearly with those around you, both personally and professionally, about your work-life balance needs.  Stepping outside your comfort zone When I look back over my career, I can see that my biggest development has come about when I have embraced new opportunities (or challenges) and have been pushed out of my comfort zone.  It is very easy to stay comfortable, but trying new things, seeking out new learning opportunities and working with different people and teams is what accelerates our development, and ultimately, our career prospects.  My career advice is to say “yes” and give it your all. You will always be amazed at where it can take you! It is sometimes the tasks or roles that you think you didn’t want – or didn’t think you would be good at – that are the ones that help you progress and move on to your next role.  I also like to remind people that variety and new opportunities can come from staying in the same job or profession and do not always require drastic change.  I have been with EY for almost 20 years now, which feels increasingly rare in a world where new opportunities are everywhere. I am proof that you can have a varied career with many different roles and opportunities all with the same employer and within the same profession. My final piece of advice is to be honest and true to yourself. Someone once told me to hold a mirror up and be honest with myself about my strengths and weaknesses and what I ultimately want from my career.  I realised early on that I get easily bored and need variety in my work. I know that I am competitive, hard-working and need to feel I am adding value. I recognise that this combination of attributes means I often work too hard.  However, it also means that I am continuously rewarded with challenging opportunities for development, which keeps me motivated and stimulated.  Everyone in our profession must figure out what works for them and remember that their career path, regardless of direction, should be unique to them. Your career doesn’t have to replicate what anyone else before you has done, or what those around you are doing today.

Cormac Lucey explores the misunderstood roots of Ireland’s FDI success and questionable management of surging tax revenues against the backdrop of rising state spending Two important aspects of Ireland’s multinational success story are generally misunderstood.  The first concerns the low-tax strategy that has been the key reason many multinationals have located in Ireland.  As Professor Frank Barry of Trinity College Dublin revealed in his essay “Foreign Investment and the Politics of Export Profits Tax Relief 1956”, this low-tax strategy resulted from then Taoiseach John A. Costello overruling the Department of Finance and forcing an idea promoted by the Department of Industry and Commerce into the Budget.  Underlining the precariousness and capriciousness of life, this strategy didn’t begin to really function until the 1990s.  The second aspect of our multinational story, not generally understood, is how utterly dependent our economy is on American business.  While it is widely known that more than 85 percent of the state’s corporation tax revenues come from multinationals, their contribution to other tax headings is not so well-known.  When you consider multinationals’ 55 percent share of Ireland’s income taxes and 54 percent share of VAT – and apply this lower 54 percent rate to other tax headings – you will see that the multinational sector contributes over 60 percent of the State’s total tax revenues.  How well is the state managing the resulting surge in tax revenues? Well, it’s all being spent, and then some.  According to the Irish Fiscal Advisory Council’s Fiscal Assessment Report published in June 2024, “Excluding excess corporation tax receipts, a deficit of €2.7 billion (0.9% GNI) is forecast for this year. This comes despite a strong economy, with record high employment and historically low unemployment. The question arises: if underlying surpluses are not being run now that the economy is strong, when would they be run?” The quality of much of this spending is highly questionable. The epicentre of rampant State spending growth is occurring in healthcare. A recent Department of Health report analysed hospital activity and expenditure between 2016 and 2022.  It reported a 3.8 percent increase in overall activity, compared with an inflation-adjusted rise in expenditure of 45 percent (nominal rise of 68 percent) and a 29 percent increase in staffing numbers. The Department of Health badly needs budgetary incontinence pads. Or maybe members of the Irish public service simply need to learn how to manage.  Consequence-free management is the key obstacle to effective budgetary control. When staff are treated the same regardless of whether they perform extraordinarily well or extraordinarily badly, should we be surprised when mediocrity results?  The Republic’s governing political class is happy to bask in the reflected glory of multinational-induced prosperity. However, according to the 2023 annual report from the IDA, Ireland’s inward investment agency, the global foreign direct investment landscape is becoming “increasingly challenging and complex.”  And, if he becomes the next US President, Donald Trump plans to significantly undermine Ireland’s attractiveness to US multinationals by putting a 10 percent tariff on US imports. Even though it accounts for 69 percent of employment, Ireland’s domestic sector of small and medium-sized enterprises (SMEs) is the orphan of this story. SMEs need targeted tax incentives along the lines of those outlined by Deloitte’s Kim Doyle in the Accountancy Ireland newsletter Briefly. The SME sector also needs a systematic programme to reduce the regulatory burden imposed upon it. Under the guidance of Michael Diviney, Chartered Accountants Ireland recently published Reducing Red Tape, a detailed position paper showing just how that could be done.  The instinctive mindset of government – that ministers are in charge of a great national trainset they can play with at will – flies in the face of the reality that policy decisions involve tricky trade-offs not amenable to facile headlines.  Cormac Lucey is an economic commentator and lecturer at Chartered Accountants Ireland *Disclaimer: The views expressed in this column published in the August/September 2024 issue of Accountancy Ireland are the author’s own. The views of contributors to Accountancy Ireland may differ from official Institute policies and do not reflect the views of Chartered Accountants Ireland, its Council, its committees, or the editor.  

Ireland’s medium-sized businesses are more optimistic than their global peers but a more ambitious approach is needed to deliver their expectations, writes Patrick Dillon Ireland’s medium-sized businesses are uniquely optimistic in their outlook ahead of the upcoming US presidential elections and in the wake of the recent elections in France and the UK.  Just 17 percent see geopolitical disruptions as a barrier to growth, compared to 42 percent in the Eurozone and 49 percent globally. This confidence follows through in the main findings among the Irish respondents to our latest Grant Thornton International Business Report (IBR), which captures insights into the outlook of 10,000 mid-market firms across the globe.  Our Irish IBR respondents are optimistic about the outlook for the Irish economy in the 12 months ahead. Close to three-quarters (73%) of the Irish medium-sized companies we surveyed predict a positive future. The findings are reflective of the resilience of Irish companies that have had to navigate a polycrisis in a short period of time, trading through the pandemic, cost-of-living challenges and disruption to global supply chains. This is not just a case of looking at the world through rose-tinted glasses, however. Irish medium-sized companies are anticipating a healthy bottom line over the next year.  Close to three-fifths of the Irish companies we surveyed predict a rise in revenues (57%), profits (59%), and headcount (52%) in the 12 months ahead. While it is fantastic to see such a strong sense of confidence among this cornerstone of the Irish economy, if the last few years have taught us anything, it is that none of us knows what’s around the corner.  To this end, the companies that will continue to succeed in the future will be those that remain hyper-focused on staying one step ahead of the competition – and this is where our International Business Report makes for slightly more concerning reading.  There is a significant difference in attitudes to innovation among Irish firms compared to their international peers. Just under a quarter (24%) of Irish businesses are preparing to increase investment in research and development over the next twelve months compared to three-fifths (60%) of their global peers.  We found a similar gap in levels of planned technology investment, with just under half (48%) of Ireland’s medium-sized firms budgeting for an increase, compared to 67 percent globally. Ireland is a small pool compared to the ocean that is the global marketplace. If Irish firms are to realise their ambition and potential, then they need to look to new markets.  Investing in innovation is key to unlocking these opportunities, whether it is leveraging digital channels to reach customers in every corner of the world or developing tailored products or services for a specific customer segment internationally.  A confident economic outlook is great, but it doesn’t put money in your pocket. To paraphrase Benjamin Franklin, an investment in innovation pays the best interest.   Patrick Dillon is Head of Deal Advisory with Grant Thornton Ireland *Disclaimer: The views expressed in this column published in the August/September 2024 issue of Accountancy Ireland are the author’s own. The views of contributors to Accountancy Ireland may differ from official Institute policies and do not reflect the views of Chartered Accountants Ireland, its Council, its committees, or the editor.

Revisions to International Standard on Auditing (Ireland) 600 will result in higher-quality group audits, but more work will be required to deliver this benefit, writes Noreen O’Halloran The International Standard on Auditing (ISA) (Ireland) 600 has been revised. Issued by the Irish Auditing and Accounting Supervisory Authority (IAASA), the revised standard applies to the audit of group financial statements.  Effective for periods beginning on or after December 15, 2023, these revisions aim to enhance audit quality and address inconsistencies in practice. They bring some challenges, however.  The purpose of ISA (Ireland) 600 Revised (the revised standard) is to enhance the quality of the audit delivered, by ensuing better co-ordination and understanding  between the group auditor and the auditor of a group component.  Audit committees, along with group and component management teams, will also experience changes in how the group auditor conducts the group audit.  Roles and responsibilities Various definitions are amended within the revised standard. These include the definition of a component, which now includes entities, business units, functions or business activities, or some combination thereof, determined by the group auditor for the purposes of planning and performing audit procedures in a group audit.  This concept of the auditor’s view of a component marks a departure from the previous standard. Under the previous standard, a component was identified by the group auditor based on the level at which the group or component management prepared the financial information.  As a result, audit committees can expect to see some changes in the identification of the components for the purpose of the group audit. The group engagement partner is responsible for the work performed by the engagement team. The definition of “engagement team” within ISA (Ireland) 600 Revised includes component auditors.  Therefore, it must be clarified that the group engagement partner along with members of the engagement team – other than component auditors (i.e. the group auditor) – will take responsibility for the nature, timing and extent of the direction and supervision of the component auditor’s work and the review of such work.  To fulfil this obligation, in addition to engaging with group management, the group engagement partner will need to be more involved with component auditors and, potentially, component management.  The definition of “significant components” has been removed. This means that there is no longer a set quantitative threshold above which a significant component’s financial information must be audited.  Rather, a more risk-based approach is required. Emphasis has been given to the consideration of the risk of material misstatement at the assertion level of the group financial statements associated with components.  This will mean that more decisions are made by the group auditor in terms of the level of work that is to be performed by each component and by whom this work will be performed. Component auditors may, therefore, expect changes to the scope of their work compared to previous years. The definition of group financial statements has been clarified. The standard focuses on the concept of a consolidation process. This includes the aggregation of the financial information of business units and is wider than the definition of the consolidated financial statement in financial reporting. As a result, audit committees may see a change in the approach to auditing an entity with multiple branches or divisions, as this is now considered to be a group audit.  The standard emphasises the need for a comprehensive approach to auditing all components contributing to group financial statements, ensuring that the audit covers all relevant aspects of the group’s financial reporting. The clarity regarding the definition of a component (including the removal of the significant component), the involvement of the engagement team and the responsibility of the group auditor, may enhance the quality of the audit delivered.  However, additional time will be incurred by the group auditor as a result, who must now ensure that all component auditors are adequately supervised.  The changes to the definition of a component will provide greater flexibility for the group auditor when identifying components. However, this may result in the entity’s management receiving requests for information regarding components that were not previously in scope. Risk-based approach One of the most significant changes in ISA (Ireland) 600 Revised is the alignment of the standard with the principles in ISA (Ireland) 315 Identifying and Assessing the Risks of Material Misstatement.  This requires the group auditor to focus more on identifying and assessing the risks of material misstatement at the group level when planning and performing the group audit, rather than simply defaulting to a full scope audit at the component level.  The alignment to ISA (Ireland) 315, and the requirement for the group auditor to take a more active role in identifying and assessing the risks of the material misstatement of group financial statements, will assist in improving audit quality.  It will also require more time, resources and effort on the part of the engagement team, however, and particularly the group engagement partner.  The group auditor will be heavily involved in identifying and assessing the risks of material misstatement at the group level and planning the approach to the entire audit, rather than delegating this to the component auditor.  The additional time and effort required will be most evident in large groups with components in multiple locations. The entity’s management may also receive additional, or more granular, requests for information from either the group or component auditor to support the group auditor’s risk assessment procedures.  Communication and documentation ISA (Ireland) 600 Revised reinforces the need for two-way communication between the group auditor and component auditor to ensure that both parties are in sync.  The group and component auditor together comprise one engagement team, so a collaborative environment is essential. The revised standard also emphasises that all ISAs, including ISA (Ireland) 230 Audit Documentation, must be applied in a group audit.  In applying ISA (Ireland) 230, the group auditor must demonstrate in their documentation how they are directing, supervising and reviewing the component auditor’s work.  The group auditor must consider the scenarios where access to either individuals or information at the component auditor level is restricted and how these restrictions are overcome. Enhanced documentation and two-way communication from the beginning of the audit will improve audit quality.  However, it will also require more co-ordination and collaboration, which may be challenging, particularly for complex groups with many components.   Early communication will be essential to addressing the changes in scope, higher levels of group auditor involvement and in identifying any challenges to this involvement, including restrictions on sharing audit documentation electronically or at all, or restrictions on travel to a specific area.  To fulfil their supervisory role, the group auditor may need to navigate various obstacles, including different time zones and language barriers.  Other practical challenges may include how to ensure that component auditors are part of the discussions required by the other ISA (Ireland) standards, including the fraud discussion required by ISA (Ireland) 240. Professional scepticism The revised standard clarifies how the requirements in ISA 220 (Revised) Quality Control for an audit of financial statements – particularly the importance of professional scepticism – applies to achieving audit quality in a group audit.  The group auditor must exercise professional scepticism by remaining alert to inconsistent information from component auditors, component management and group management, regarding matters that may be significant to the group financial statements.  The group auditor must take appropriate actions when inconsistencies are identified. In addition, the group auditor must emphasise the importance of exercising professional scepticism to each of the engagement team members, including the component auditors.  Exercising professional scepticism at the component level may result in the group engagement partner needing to engage more extensively with component auditors and component management throughout the audit.  Crucial supervisory role The revisions to ISA (Ireland) 600 introduce more requirements for group auditors and their component auditors. This requires increased resources, enhanced communication, increased documentation and a greater emphasis on professional scepticism.  Audit committees and group and component management will also see an increase in the level or type of information required from the group or component auditor so that the group auditor can fulfil their requirements in accordance with ISA (Ireland) 600 Revised.  The need for greater group auditor involvement in the planning and risk assessment stages, and the two-way communication required, highlights the importance for all auditors to understand the new requirements and ensure that they have the skills and resources needed to meet them.  To align with the revised standard, group and component management may see a change in the type or nature of information requested by auditors.  The supervisory role the group auditor plays is crucial to the execution of high-quality group audits.  Both the group auditor and the component auditor will need to be familiar with the new requirements and align their audit methodologies accordingly, while group and component management should be willing to provide the additional information required by the auditor.  While the revisions to ISA (Ireland) 600 will undoubtedly increase the workload of both auditors and group and component management, it will result in higher quality audits. This will, in turn, generate greater benefits to the public interest and may avoid high-profile group audit failures in the future.   Noreen O’Halloran is Principle, Audit Quality and Professional Practice Department, KPMG Ireland

The CSRD has changed the sustainability outlook for SMEs reliant on business from larger entities in scope of the directive. Susan Rossney outlines what they can do now to keep ahead of the curve  Chartered Accountants Ireland is a global organisation with close to 33,000 members in positions of influence across society and the economy. With fewer than 250 employees, however, the Institute is also a small to medium-sized enterprise (SME). These SMEs are not often discussed in the context of climate change, but their combined carbon footprint is, on average, five times greater than that of their large corporate counterparts, according to CDP, the not-for-profit climate-disclosure organisation.  The European Commission estimates that SMEs contribute more than 60 percent of all greenhouse gas (GHG) emissions produced across Europe.   SMEs tend not to be at the forefront of sustainability discussions either, which have long been treated as the purview of larger accounting practices that have clients with sustainability reporting obligations.  This is expected to change with the implementation of the Corporate Sustainability Reporting Directive (CSRD), which introduces an obligation on (mostly) larger businesses to report on the carbon emissions of their supply chain partners.  As part of this, the focus of attention has moved to the SMEs in these larger companies’ supply chains, caught in a so-called ‘trickle-down effect’. These small businesses are expected to find themselves asked by key customers for climate-related information, often for the first time, with the risk of losing valuable contracts if they fail to do so. Despite this, Irish businesses – particularly SMEs – were found to be reluctant or unable to decarbonise, with 86 percent of Irish businesses having no set commitments or targets to decarbonise, and just 11 percent measuring and tracking performance on total CO2e emissions, according to a 2022 study.  Chartered Accountants Ireland aims to provide leadership in this area for businesses in Ireland, first leading by example in our own SME operations. Here are some of the steps we have taken to act on our central ethos, “for tomorrow, for good”. In 2020, we kicked off an Environmental and Climate Impact Project (ECIP) focused on managing carbon emissions, resources (water, paper, catering supplies, etc.) and waste.  We commissioned an energy auditor registered by the Sustainable Energy Authority of Ireland to carry out an internal energy audit for us, and we are working through their recommendations. Measures we have taken to reduce our carbon footprint include: Beginning the process of splitting our water and premises heating systems; Switching to light-emitting diode (LED) lights; Installing a roof net to prevent seagulls eating the insulation;  You can’t manage what you don’t measure, so in 2022, we invested in locally sourced emissions tracking software.  In 2022, we recorded a 13 percent decrease in carbon emissions on our 2021 baseline, and we recorded a 39 percent year-on-year reduction in carbon emissions at our Dublin headquarters in December 2023.   Similarly, there are many steps SMEs can take to reduce emissions and otherwise engage in sustainability practices. Our online Sustainability Centre signposts a variety of resources available to support businesses in these efforts.  Small steps make a big difference, but it’s a marathon not a sprint. My advice is start now, get help, measure – and keep going.  Susan Rossney is Sustainability Advocacy Manager with Chartered Accountants Ireland

Rory Mulvaney talks us through a multi-faceted career that has taken him from law to accountancy and on to entrepreneurship as the founder of his own corporate and compliance service firm  Belfast-born Rory Mulvaney, FCA, is founder and Managing Director of VANTRU, an independent provider of corporate and compliance services with a presence in Ireland, Britain and the Netherlands. Established in 2017 under the name Mulvaney, the company underwent a rebrand in 2023 to become VANTRU and employs a 20-strong team comprising accounting, tax and legal professionals. Here, Mulvaney tells Accountancy Ireland about the evolution of his career and path to entrepreneurship. Tell us a bit about yourself. Why you decided to become a Chartered Accountant? I was born in Belfast and my family then moved to Newry where I grew up and went to Abbey Grammar School. I now live in Rostrevor with my wife, Seana and our four children, Jack, Rory, Olivia and Charlie.   Starting out, I studied law at Queen’s University Belfast and, from there, undertook a Diploma in Legal Practice at the University of Law before joining Bank of Ireland and then McCartan Turkington & Breen in Belfast. At that stage, I decided that a career as a Chartered Accountant would give me the knowledge needed to one day become a business leader and I went on to train with John MacMahon & Co in Northern Ireland and undertook further training as a Tax Consultant with KPMG in Dublin. Looking back now, are you glad you made the decision to qualify as a Chartered Accountant?  Yes, absolutely! I wouldn’t say I had a career plan starting out, but I’m naturally ambitious and driven to succeed, so I always had a desire to do well and to do something meaningful with my life.  When I first decided to qualify as a Chartered Accountant, I could see that it would give me the freedom to work anywhere in the world for any type of organisation and possibly, one day, for myself.  After qualifying, I moved into industry with Bruce Shaw, now known as Linesight, a global cost management consultancy firm, where I was Group International Tax Manager for five years. What was it that prompted you to set up your own business? My first industry role with Bruce Shaw was inspirational. Working with a successful Irish business that was growing at pace and expanding overseas gave me confidence and a wealth of experience. In 2017, I decided to set up as a Corporate Service Provider (CSP) and established Mulvaney as part of Trustmoore, a global corporate services firm which had worked with Bruce Shaw on corporate services outside Ireland.  Trustmoore viewed Ireland and the UK as strategic jurisdictions for business growth. We established a two-year co-operation agreement after I pitched to the founders in Amsterdam in 2016. This was a pivotal moment in my career and a valuable opportunity to learn about the inner workings of the business. I was able to travel to global offices, attend internal academies and spend lots of time with Trustmoore’s founder and owners. Come March 2019, I established Mulvaney Corporate Services. I wanted to launch Northern Ireland’s first locally established, independently owned corporate services provider and to lead the market by providing a unique set of corporate and compliance services to foreign organisations across key jurisdictions. Today, we remain the first and only company of our kind in Northern Ireland. That makes me very proud. What prompted you to rebrand the business to VANTRU in 2023? We mainly service clients with foreign direct investment needs, both inward and outward, for trading and investment purposes, as well as clients in the capital markets space for whom Ireland is a relevant and attractive jurisdiction. As the company has grown, we have had opportunities to work with some high-profile global organisations and last year, seven years after our initial launch, I felt that the time was right to establish an identity and brand that would enable us to compete at the highest levels. What do you regard as your proudest achievements as a business owner? I am extremely proud of the fantastic team of qualified professionals who have chosen to work with VANTRU. It is also a massive achievement for me personally that VANTRU is recognised by many highly respected law firms, auditors, tax advisors and asset managers. We are in the very fortunate position of having financial institutions and CSP firms in other jurisdictions refer work on to us.  What are some of the most important lessons you have learned over the years?  Someone once told me: “people buy from people.” As a business owner, surrounding yourself with great people who can bring something unique to the table is key. In my wider career, I have had the privilege to work for and alongside people who have taught me valuable lessons. John MacMahon is a well-known Chartered Accountant from County Armagh who has built a fantastic all-island practice and property empire. John was always generous with his time, giving me plenty of valuable advice when I was starting out in my own career. Brendan O’Mara, Derry Scully and Gerard Campbell of Bruce Shaw also stand out. A natural entrepreneur, Brendan was the Founding Partner of Bruce Shaw in Dublin over 40 years ago.  Derry was the Group Chair during my time with the firm. He was both technically gifted and able to maintain a lot of key client relationships globally, including with some of the world’s biggest companies. I worked very closely with Gerry, as CEO, and learned a great deal from him also.  In my own journey, I have found myself adopting a lot of their habits, especially Gerry’s, with his little black books and knack for “getting things done”.  In the world of corporate services, I have learned a lot from two Dutchmen – Trustmoore founder Steven Melkman, who is an inspirational and charismatic leader, and Jan Jaap Kuipers, the former CEO of the BK Group.  Who do you most admire right now in business or public life? In business, it has to be Phil Knight, founder and former CEO of Nike Inc. I recently read his memoir, “Shoe Dog,” and was very inspired by his story. I found myself relating to his experiences, especially in the early days. In sport, despite being a Manchester United supporter, it has to be Pep Guardiola. I also read his biography, “Another Way of Winning,” by Guillem Balagué. Guardiola is so much more than just a football coach.  How has the role of the accountant evolved since you first joined the profession? The role of the accountant has been impacted by ongoing advances in technology, including the introduction of new and improved accounting software and cloud-based tools, which automate routine tasks such as bank reconciliations.  We are now also starting to see the impact of artificial intelligence, which will remove the need to carry out routine tasks for finance departments and accounting teams, such as data entry, reconciliations and generating reports.  The daily work patterns of accountants have also changed dramatically. At VANTRU, all of our employees have adopted hybrid working with some team members working remotely on a full-time basis. We recently hired a new team member who is based in Germany! There are many positives to this way of working for our business. We are moving towards a fully cloud-based business model, which will mean that we can hire people from anywhere in the world.   What are your plans for VANTRU in 2024 and beyond?  We have fulfilled most of the goals outlined in our 2019 business plan and we are in the process of agreeing our strategic plan for the next five years with the help of John-George Willis, our Non-Executive Director.   These plans will centre around improving our brand awareness, IT systems, processes and people. We will also consider growth by acquisition if the right opportunity arises.  Put simply, I want our company to continue to grow. I am very involved in developing new business opportunities and, every day, we talk to prospective clients from all over the world.  I am really looking forward to what we can achieve over the next decade.

A new report published by the Department of Enterprise, Trade and Employment could hold the key to unlocking crucial capital for scaling Irish companies, writes Sarah-Jane Larkin The Irish Venture Capital Association welcomes the report, The Use of Finance as a Catalyst to Develop a Scaling Ecosystem, published recently by Peter Burke, FCA, TD, Minister for Enterprise, Trade and Employment.  This comprehensive report highlights the critical role access to finance plays in the growth and development of businesses in Ireland. We commend the government for its focus on enhancing financial support mechanisms to empower Irish enterprises to scale and compete on a global stage.  We are also pleased to see the commitment to establish an implementation committee to immediately start work on recommendations to help high potential start-ups access scaling finance.  The recommendation to investigate options for pension fund participation in scaling equity funds, and encourage corporate venturing in Ireland, is particularly welcome.  This report has been published at a time when Ireland’s economy stands as one of the most dynamic and robust in Europe, comparing favourably to other small, advanced economies worldwide.  However, it has become evident for Irish companies seeking larger rounds of capital that the dramatic transformation in our economic fortunes in the last 30 years cannot outrun the impact of our longer-term economic history.  The measures suggested in The Use of Finance as a Catalyst to Develop a Scaling Ecosystem, if implemented, would contribute to rectifying the deficits caused by this history.  Ireland’s economic history has been marked by periods of colonisation, famine and political upheaval. All have contributed to some of the financial challenges we now face in terms of the capital available to our SMEs today.  During British rule, Ireland’s economy was heavily controlled, leaving little room for the accumulation of private wealth. The Great Famine further decimated the population and weakened economic structures, leading to widespread poverty and emigration.  Up until the 1970s and in the early stages of the boom in foreign direct investment (FDI), Ireland remained largely agrarian.  Our relatively recent prosperity, rooted in an open FDI-oriented economy, has resulted in a shortfall in the institutional and corporate investment typically seen in other European countries.  Unlike other nations, Ireland did not undergo a transformative industrial revolution in the late 18th and early 19th centuries, nor have we had the same opportunity to create domestic multinationals or intergenerational wealth.  As a result, there are very few domestic multinationals in Ireland that typically deploy assets in domestic venture capital funds or direct investment in start-ups. Over the last 30 years, successive Irish governments have implemented various policies to address these challenges, such as encouraging entrepreneurship, providing grants and subsidies for small businesses, investing in education and innovation and seeding a domestic venture capital and private equity industry.  These measures have met with mixed success due to deep-rooted structural issues, however, and the lack of sources of private capital. What The Use of Finance as a Catalyst to Develop a Scaling Ecosystem shows is that, while Ireland’s economic history has been shaped by a persistent lack of private funds, understanding these historical and structural challenges is crucial in developing strategies to overcome them.  The report’s recommendations to incentivise pension funds to invest in growing Irish businesses could significantly boost the available capital.  By enacting the report’s recommendations and addressing these issues head-on, Ireland could build a more robust and self-sustaining economic future.   Sarah-Jane Larkin is Director General of the Irish Venture Capital Association *Disclaimer: The views expressed in this column published in the August/September 2024 issue of Accountancy Ireland are the author’s own. The views of contributors to Accountancy Ireland may differ from official Institute policies and do not reflect the views of Chartered Accountants Ireland, its Council, its committees, or the editor.

As the new Chair of Chartered Accountants Ireland Ulster Society, Gillian Sadlier wants to demonstrate the many benefits a career in the profession can offer potential new entrants For Gillian Sadlier, the recently elected Chair of the Chartered Accountants Ireland Ulster Society, attracting and retaining accountancy talent will be a key priority in the months ahead.  A Senior Manager with Bank of Ireland UK, Sadlier was elected as Chair of Chartered Accountants Ireland Ulster Society at its 117th AGM held in Belfast on June 7. Taking office, Sadlier committed to advancing measures to address the skills shortage that is impacting the accountancy profession and wider economy in Northern Ireland.    It is a cause close to Sadlier’s heart, having trained as a Chartered Accountant with Coopers and Lybrand (now PwC) in the early nineties after graduating from Queen’s University Belfast with an economics degree. “I am immensely proud to be a Chartered Accountant and I feel hugely honoured and privileged to now hold the position of Chair of Chartered Accountants Ireland Ulster Society,” Sadlier says. “My Dad always told me that accountancy was a solid career choice and maths was my first love at school, largely thanks to an inspirational teacher. I later found myself embarking on my Chartered journey when I started applying for jobs in the November of my final year of university and went on to train with Coopers and Lybrand in Belfast.” Having trained on the small business team at Coopers and Lybrand, Sadlier moved into audit and took the opportunity to relocate to the firm’s Singapore office on a three-month secondment. Already, she could see how building a career as a Chartered Accountant could open doors and enable mobility and opportunity on a global level. “The Chartered Accountancy designation offers a wide range of career benefits – that’s very clear to me. Most of my career has been spent working in roles that have required me to hold the qualification, or an equivalent,” she says. “Though I haven’t strayed too far from home, several of my peer group took advantage of the mobility offered by the qualification to progress their careers overseas in places like Australia, the US and the Cayman Islands.” In her own early career, Sadlier chose to leave Coopers and Lybrand to join ASM Chartered Accountants in 1996. After nine years with the firm and having risen to Director level working across accountancy, audit and corporate finance, she moved to Invest NI, Northern Ireland’s economic development agency. “I really enjoyed being involved in commercial due diligence work, which allowed me to get right ‘under the bonnet’ of a business, so when the opportunity arose shortly after the birth of my second child to join Invest NI as a Corporate Finance Executive, I took it,” she says.  Sadlier spent seven years with Invest NI, carrying out commercial appraisals across a wide range of businesses. “I was privileged to work with some of the largest and most successful indigenous businesses and inward investments in Northern Ireland, something I don’t think I would have experienced working elsewhere,” she says.   “In 2012, I joined Bank of Ireland as part of their ‘challenged’ team, spending two years working closely with a portfolio of business customers with stressed borrowing, before moving into the lending team in 2014.”   Sadlier moved to her current role as a Senior Manager at Bank of Ireland’s UK Chief Executive’s Office in 2021. “Based on my career experience alone, it’s clear that the skills required for, and developed through, the Chartered Accountancy qualification are highly transferable and can open doors to a very broad range of careers right across the public, private and third sectors.” It is this message that Sadlier is intent on imparting to younger generations during her term as Chair of Chartered Accountants Ireland Ulster Society.  Against the backdrop of skills shortages in Northern Ireland, she will focus on the need to attract and retain accountancy talent, so that the profession can continue to support economic growth and development.  “Northern Ireland has so much economic potential, with unique access to Great Britain and EU markets, strong transport links with our neighbours, an educated workforce and a stable business environment,” she says. “However, the skills shortage affecting so many companies is threatening our ability to realise this economic potential.”  Recent research carried out for Chartered Accountants Ireland Ulster Society found that three-in-five (61%) of member businesses and organisations are currently experiencing skill shortages, compared to 62 percent in 2022 and 48 percent pre-COVID.  Seventy-five percent of the Chartered Accountants Ireland Ulster Society members surveyed reported difficulty finding the right people for jobs in Northern Ireland. The same percentage said they expect the shortfall in skilled labour to negatively impact Northern Ireland’s economic performance in the year ahead. “My focus in the coming months will be on promoting Chartered Accountancy as a profession. I want to show potential new entrants to the profession just how varied and full of opportunity a career in accountancy can be and to demonstrate the reality that being a Chartered Accountant genuinely allows you to become a ‘difference maker,’” Sadlier says. This work will include engaging with second and third level students and working closely with trainees and young professionals to support them in the early stages of their careers.   “Our qualification is widely regarded as an indicator of a broad range of skills and attributes, including professionalism, analytical ability, technical capability and commercial acumen,” Sadlier says.  “Taken together with the mobility of the qualification, opportunities to develop personal and professional skills, pursue related specialisms and network effectively, the qualification really can open doors to endless career options.”

AI is revolutionising accountancy by automating routine tasks, enhancing data analysis and providing valuable insights for strategic decision-making. Conor Flanagan explains how Artificial intelligence (AI) has emerged as a transformative force across various industries and accountancy is no exception. As AI technologies advance, they are reshaping the accounting landscape by enhancing efficiency, accuracy and strategic decision-making.  The emergence of AI can be traced back to the 1950s when pioneers like Alan Turing began exploring the concept of machine intelligence.  Turing’s famous “Turing Test” proposed that a machine could be considered intelligent if it could engage in conversation with a human without being distinguishable from a human interlocutor. Since the 1950s, AI has continued to evolve through different phases, including the notable period in the 1970s known as the “AI Winter” when there was a significant fall-off in funding and interest in the technology.  Since then, and coinciding with advances in computational power coupled with the development of machine learning algorithms, interest in AI has been reignited, with breakthroughs in natural language processing, computer vision and data analytics paving the way for more practical applications.  This progress, although impressive, has been somewhat dwarfed by the advent of Generative AI in recent years, with companies like OpenAI and its now infamous ChatGPT platform sparking widespread interest in the technology and its potential.  Generative AI has given rise to exciting new systems now capable of performing complex tasks, such as image recognition, language translation and content creation. And for the sceptics among us – no, this article was not written by ChatGPT. The Microsoft experience AI is revolutionising accountancy by automating routine tasks, enhancing data analysis and providing valuable insights for strategic decision-making. At the recent Chartered Accountant Technology Conference, held in January 2024, Daragh Hennelly, Senior Finance Director with Microsoft in Ireland, shared the story of how the company is unlocking business value through AI-enabled outcomes in finance. Microsoft began its AI journey over seven years ago, leveraging traditional AI to create models that could recognise patterns in data and use this to predict and act on potential outcomes, driving significant efficiency gains. Some examples include: Task automation and content creation Microsoft is using AI to automate tasks such as setting up purchase orders and logging expense reports. Streamlining processes and reducing risks Invoice approvals: AI assigns real-time risk scores to automate more than one million low-risk invoices and cuts the manual effort required for the rest by 50 percent, resulting in 125,000 hours of time saved for finance team members who can now use that time to focus on more strategic tasks. Journal entry anomaly detection: Machine learning algorithms have been built to review thousands of journal entries to detect anomalies with the aim of reducing reporting risks or misstatements.  Enhancing contract review efficiency: AI reads and scores thousands of contracts, reducing the time needed for manual review by 50 percent and allowing finance professionals to focus on high-risk contracts. The recurring theme in all these examples is how AI can be deployed to either automate manual tasks previously carried out by Microsoft’s finance team or unearth and present anomalies requiring additional review.  This demonstrates how AI can create efficiencies in finance functions and processes, but as accountants, we still need to be professionally trained to make decisions based on a smaller and more focused sample base.Over the past 18 months, in particular, the opportunity to transform business and finance processes has accelerated with the roll-out of Generative AI and its ability to create original content – such as text, images, video, audio or software code – in response to user prompts and requests. Today, Microsoft is adopting Generative AI to further enhance processes and unlock business value. This opportunity can be categorised across four main areas: Summarise information. Generate content. Recommend actions. Simplify tasks. 1. Summarise information Recap meeting transcripts to capture key points and assign actions. Distil collection agents’ call notes into actionable plans. Flag key terms in contracts related to payments, pricing and discounts. Synthesise complex workflow documents to highlight handoffs and commonalities. Summarise earnings scripts to identify significant trends and highlights. 2. Generate content Draft financial close decks and write analytical comments and insights. Write contractual language based on simple notes. Draft collection calls and follow-up emails in different languages with payment plan details. Write initial internal audit reports and investor relations earnings call scripts. Produce market sentiment analysis using transcripts from corporate earnings calls and central banking authorities. 3. Recommend actions Analyse financial close variances and recommend areas of the business to investigate variance drivers. Define collection strategy based on customer payment history. Evaluate audit workpapers and resolution disputes against audit controls.  Guide users in setting up purchase orders, invoices, expenses and payments. Recommend policy adherence within workflows. 4. Simplify tasks Accelerate financing requests by automating credit checks and policy reviews. Review sourcing contracts to ensure compliance and reduce human error.  Automate Sarbanes-Oxley Act (SOX) operational controls and summarise insights. Prioritise collection emails, tag disputes and identify resolution owners. Streamline tax and customs procedures by identifying compliance obligations from different global jurisdictions. Central to the success of this transformation of finance at Microsoft is a strong culture of encouraging and rewarding employees to leverage new technologies to transform finance processes. As Amy Hood, Microsoft’s Executive Vice President and Chief Financial Officer, puts it, “by adopting innovative technologies, finance will strengthen its business leadership through compliance, accuracy and efficiency.”   Microsoft is at the forefront of the Generative AI wave, advancing ideas of what is possible and investing in AI solutions such as CoPilot. CoPilot is integrated into Microsoft’s applications (Word, Excel, PowerPoint, Outlook and Teams), working alongside the user with the aim of helping them to work more creatively and efficiently.  It is also enhancing business application products such as Power Platform, Business Central and Dynamics Sales, facilitating advanced data analytics and the creation of complex workflows using natural language that would previously have required the intervention of a developer.  AI’s other early adopters Outside Microsoft, there are other examples of organisations that have successfully implemented AI in their accounting processes, demonstrating the technology’s practical benefits in our field.  HSBC The multinational banking and financial services company has implemented AI to enhance its fraud detection capabilities. HSBC’s AI system analyses transaction data in real-time, identifying suspicious activities and flagging potential fraud cases. This has resulted in a substantial reduction in fraudulent transactions and improved security for customers. Xero The cloud-based accounting software provider uses AI to automate bookkeeping and financial reporting tasks for small and medium-sized businesses. Xero’s AI-driven platform can categorise transactions, reconcile bank statements and generate financial reports, saving time and reducing the risk of errors for business owners. AI and ethical risk While AI offers numerous benefits to the accounting profession, it also raises some ethical concerns. These issues must be carefully considered to ensure the responsible use of AI in accountancy. Data privacy and security AI systems rely on vast amounts of data to function effectively. This raises concerns about data privacy and security, as sensitive financial information may be at risk of unauthorised access or misuse. Organisations must implement robust data protection measures to safeguard against data breaches and ensure compliance with privacy regulations. Bias and fairness AI algorithms are only as unbiased as the data they are trained on. If the training data contains biases, the AI system may produce biased or unfair outcomes. This is particularly concerning in areas such as fraud detection and financial forecasting, where biased algorithms could lead to discriminatory practices. It is essential to ensure that AI systems are trained on diverse and representative datasets to minimise bias and promote fairness. Transparency and accountability AI systems often operate as “black boxes,” making it difficult to understand how they arrive at their decisions. This lack of transparency can be problematic in the context of financial reporting and auditing, where accountability is crucial. Organisations must strive to develop explainable AI models that provide clear insights into their decision-making processes. AI and the work of the accountant The automation of routine accounting tasks through AI has raised concerns about job displacement and the future of the accounting profession.  While AI can handle repetitive and mundane tasks, it cannot replace the strategic thinking and judgment accountants bring to the table.  That said, accountants may need to adapt to new roles and develop new skills to remain relevant in an AI-driven landscape. Like electricity, the roll-out of AI will have a major impact on every industry and many professions, but only those who embrace it will learn to harness its power. Accountants must be prepared to adapt to the changing landscape by acquiring new skills and knowledge. Continuous learning and professional development will be essential for accountants to thrive in an AI-driven world. This includes gaining proficiency in data analytics, machine learning and other emerging technologies. Rather than viewing AI as a threat, accountants should embrace it as a valuable tool that can augment their capabilities. By leveraging AI to handle routine tasks, accountants can focus on higher-value activities, such as strategic planning, financial analysis and advisory services. AI is undeniably transforming the field of accountancy, offering numerous benefits in terms of efficiency, accuracy and strategic decision-making.  From automated data entry and fraud detection to financial forecasting and auditing, AI is revolutionising traditional accounting processes. Its widespread adoption also raises important ethical questions, however. To fully realise the potential of AI while addressing this challenge, organisations must prioritise ethical considerations while also investing in reskilling and upskilling their people and fostering collaboration between humans and AI.  By doing so, the accounting profession can harness the power of AI to drive innovation and deliver greater value to clients and stakeholders. If you have found this article interesting, join us for the next Chartered Accountants Ireland Technology Conference on Friday 24 January 2025. Conor Flanagan is ERP Lead with Storm Technology and a member of the Technology Committee of Chartered Accountants Ireland

The European Union’s new Artificial Intelligence Act brings opportunities for businesses but will not be without challenge, writes Keith Power Just seven percent of Irish businesses currently have governance structures in place for artificial intelligence (AI) or generative AI (GenAI). Despite this, the overwhelming majority (91%) believe that GenAI will increase cybersecurity risks in the year ahead. This is according to PwC’s latest GenAI Business Leaders survey, published in June 2024.  The European Union’s Artificial Intelligence Act (EU AI Act) is a sweeping new regulation aimed at ensuring that businesses have the appropriate AI governance and control mechanisms in place to deliver safe and secure outcomes.  Indeed, a large majority (84%) of our survey respondents welcomed the introduction of the EU AI Act, saying regulation is necessary to prevent the potential negative impact of AI in the future.  The new EU AI Act will also bring challenges, however. Its aim is to protect businesses, consumers and citizens in the EU from potential risks associated with AI in terms of health, safety, fundamental rights, democracy, rule of law and the environment.  By introducing standards and providing legal certainty, the Act also seeks to foster innovation, growth and competitiveness in the EU’s internal market.  It is the EU’s first comprehensive legal framework for AI and will level the playing field for businesses using the technology.  The Act adopts a risk-based approach, with its biggest compliance requirements applying to “high risk” AI systems.  These requirements include addressing data governance concerns, mitigating bias, ensuring transparency and implementing a system of quality management.  The Act also requires that users must be informed when they are interacting with chatbots, and that any AI-generated content must be clearly identifiable as such.   Several specific risks are particular to the EU AI Act, including failure to identify all uses of AI across a business as well as the potential for the inaccurate risk classification of AI uses.  The Act also obliges organisations to assess all of their use cases for AI. This may prove an onerous and time-consuming task given the dispersed nature of the use of AI in many companies. The risk of misclassification is high as risk classifications may change as an organisation’s use of AI evolves over time.  This necessitates the implementation of appropriate ongoing governance and control procedures to maintain compliance, bringing its own challenges. There is also a risk that the focus on compliance may lead to a drag on innovation.  The nuanced nature of some of the language used in the Act, coupled with risk classifications and role designations being subject to change, may prove problematic for some organisations.  The use of AI systems by third parties acting on behalf of organisations may also cause a degree of complexity.  There is much to be considered by Irish businesses to ensure they will be compliant with the new EU AI Act.  It will bring competitive opportunities, but complying with the new regulations will be a complex process. Keith Power is a Partner with PwC Ireland *Disclaimer: The views expressed in this column published in the August/September 2024 issue of Accountancy Ireland are the author’s own. The views of contributors to Accountancy Ireland may differ from official Institute policies and do not reflect the views of Chartered Accountants Ireland, its Council, its committees, or the editor.