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  • 5 Tips for Maintaining Audit Quality Today and in the Future
    Leaning Into Transfer Pricing Transformation Helps Manage Tax Risk
    4 Changes That Will Stick with Accounting Long After the Pandemic Is Over

  • 5 Tips for Maintaining Audit Quality Today and in the Future
    In an October 13, 2021 article in the Journal of Accountancy online, Ken Tysiac reports on a webcast sponsored by the Center for Audit Quality (CAQ) and the US Chamber of Commerce. With the pandemic still posing risks and the 20th anniversary of the Sarbanes-Oxley Act (SOX) approaching next year, experts shared insights on what will drive audit quality in the future.

    Strong, coordinated regulatory standards and independent oversight will continue to inspire confidence in audit quality in the future, said Kelly Grier, CPA, US chair and managing partner and Americas managing partner for EY, as well as chair of the board of governors for the CAQ. She said leaders need to continue promoting the values of independence, professional skepticism, and personal integrity.

    Wes Bricker, CPA, PwC's vice chair–US Trust Solutions co-leader, said one of SOX's important accomplishments was to reinforce the importance of tone at the top and culture by reinforcing the roles of the audit committee and management, and requiring certifications on the accuracy of financial reports and the effectiveness of the control system. The rise of remote work during the pandemic has important ramifications for leadership and culture, Bricker added.

    "The ability to challenge, the ability to understand different dimensions of effectiveness, to assess risk and design the right test, all of that comes together in the context of communication and culture within the audit firm and communication with the audit committee that's engaged the audit firm," he said. "And I do think that's an area for us to continue to focus on as we move forward."

    As most know by now, technology continues to provide auditors with opportunities to improve their work. For example, auditors are using technology to analyze entire sets of data rather than relying on sampling in their testing. "It's a little bit like when the tide goes out, you see everything on the ocean floor," Bricker said. "You can see everything on the ocean floor, perhaps, by sampling. And that's a relevant technique. But if you can take all the water out or identify all the transactions in your system, you can not only better identify risk … but you can also better understand the contours. What's the nature of the activity? What should we focus on? What should we be communicating about?"

    For a lot more on what the panelists had to say, see 5 tips for maintaining audit quality today and in the future - Journal of Accountancy news (journalofaccountancy.com).

    Leaning Into Transfer Pricing Transformation Helps Manage Tax Risk
    An October 4, 2021 piece posted by Jeffrey Michalak, EY Global International Tax and Transaction Services Leader on the EY Global webpage, says that The 2021 EY International Tax and Transfer Pricing Survey found that agility can help businesses prepare for rising uncertainty and controversy.

    According to the survey, there are many challenges facing transfer pricing (TP) professionals, Below the surface, the interactions between four key megatrends are driving what is likely to become an era of nearly constant change in TP strategy and operations.
    The survey says that the four forces are:
    • Global tax reform.
    • Global supply chain reconfiguration.
    • The rise of controversy and changes in enforcement behavior.
    • Digital transformation.

    The survey found that shifting government policies and a more robust enforcement posture are driving TP risk: 65% of survey respondents say they expect the number of TP audits to rise in the next three years, and 78% identify tax risk management as the most important factor driving changes to their TP model, processes and governance.

    Addressing change of this magnitude, says Michalak, “is a major ambition for most businesses participating in the latest survey, as 62% of them say they have fewer than 11 people dedicated to handling TP matters. Yet, 61% of them say they will likely act to modify their organization’s approach to TP plus their operations, compliance and documentation within the next two years.”

    “We see major forces combining that are going to impact transfer pricing in very real, immediate and significant ways,” notes Tracee Fultz, EY Global Transfer Pricing Leader. “Businesses know they have to make this function more agile, adaptable and resilient so that they can avoid the wave of uncertainty and controversy that may follow – and be in a better position to manage disputes that do arise.”

    For the full results of the survey, visit EY at How leaning into transfer pricing transformation helps manage tax risk | EY - Netherlands.

    4 Changes That Will Stick with Accounting Long After the Pandemic Is Over
    Justin Hath writes in the October 12, 2021 issue of accounting TODAY that not only did COVID-19 prompt CPA firms to work to help their clients survive economic challenges, but they were fighting their own battles as well. According to one survey Hath cited, “approximately 90% of CPA firms reported concerns for their company, ranging from health to finances and operations. Despite the challenges, firms also reported facing the challenges with innovations like using cloud technology and innovation.” In short, says Hatch, “the accounting industry was forced by COVID-19 to evolve almost overnight, and not all of the changes that occurred will be going away. Here are some of the adaptations that will be part of the industry going forward.”

    Hath points out that CPAs have learned to adapt quickly to changes in their work, whether it be major financial programs like the Paycheck Protection Program or adjusting the way they work with clients. “Clients have come to expect continually up-to-date information from their CPA anytime they need it, and there will be no going back. Customers will expect their accountants to be able to come up with solutions at the drop of a hat, whether or not there is an international crisis.”

    A lack of in-person interaction could be detrimental for some, Hath notes, “but, for CPAs, it may have actually been a boon. Trying to work remotely with clients forced CPAs to communicate more effectively. Cloud-based dashboards, video conference calls, chatting online, and sending frequent emails are the norm now, whereas both CPAs and clients may have been reluctant to give them a try before.”

    Hath also points out that COVID-19 brought about a sudden adjustment as workers moved from conference rooms to living rooms. “Though many businesses, including CPA firms, later began bringing workers back, the office landscape has likely changed for good. CPAs and clients alike learned to work with each other from a distance, and that will add a level of flexibility going forward that will benefit everyone.”

    According to Hath, “many of the changes brought on by COVID-19 were already in motion in the industry, but firms got the extra push they needed to move forward. Businesses have been seeking more advisory services from their CPAs for years, and many firms have begun to expand their offerings. The pandemic, and the severe economic impact it had across industries, helped move the transition along.”

    CPAs have fought alongside their clients through the COVID-19 pandemic, Hath concludes, “and their work has been vital to businesses’ success through the crisis. The lessons learned from the pandemic will have a long-lasting impact on the profession as CPAs continue to adapt and grow for the benefit of their clients.”

    For more, see 4 changes that will stick with accounting long after the pandemic is over | Accounting Today

  • CPA Firms Lay Out Top Issues In 2021 And Beyond

    An October 7, 2021 article written by Mark Friedlich describes the findings of a recent AICPA survey on the top issues CPA firms say they face in 2021 and over the next five years.

    Finding and retaining talent: Friedlich says that three trends that have escalated during the last 18 months have resulted in employers in most industries facing greater difficulty in finding and retaining talent. "The substantial increase in staff working from home, the so-called 'great resignation' and the increase in retirement of baby boomers have all contributed mightily to all but the smallest CPA firms." 

    Keeping up with tax law and regulatory changes and COVID relief programs: Staying current on the continual and ever-increasing complexity of tax law and regulatory changes, including COVID relief programs, was among the top three issues faced by firms of all sizes. 

    Emerging technologies and managing a hybrid workforce: Emerging technologies surfaced as a top issue for every category of CPA firm over the next five years. Managing a hybrid workforce (remote and in-person), was No. 2 for firms. Emerging technologies have changed the way firms do business. This trend is expected to increase at an even more rapid pace over the next five years.

    Friedlich quotes Lisa Simpson, vice president of firm services at the AICPA, as saying that “Finding the right people with the right skills who are comfortable with these developing technologies will help firms adapt to changing client needs. Clients want more from their CPA than just the historical data. They want insights into trends and underlying data. 

    Friedlich concludes that "The need for acquiring and retaining talent, keeping up to date with legal and regulatory changes and adopting emerging technologies will only become more important and more challenging in the years ahead."

    For the details, check out CPA firms lay out top issues in 2021 and beyond | Accounting Today.

    KPMG Launches Multi-Year Program to Accelerate Global Solutions for ESG Issues

    In a recent press release, KPMG International announced that, as part of its ongoing multi-billion-dollar investment program, it plans to spend more than US$1.5 billion over the next three years specifically to focus on the Environmental, Social and Governance (ESG) change agenda. The ESG strategy is designed to support KPMG firms’ clients in making a positive difference. Importantly, this strategy is underpinned by KPMG’s recognition of its responsibility to improve its impact on the world and the ESG commitments outlined in KPMG: Our Impact Plan.

    The collective investment will focus on training and expanding KPMG’s global workforce, harnessing data, accelerating the development of new technologies, and driving action through partnerships, alliances and advocacy. The key to the transformation will be embedding ESG in the organization and client solutions to drive measurable change.

    The new global ESG strategy focuses on five priority areas: 

    Solutions: Five newly dedicated Hubs are to be established to provide world-class expertise and solutions on key ESG issues.

    Talent: ESG training will be provided to all of the KPMG organization’s 227,000 people to ensure that everyone is empowered to be an agent of positive change. As part of this training, KPMG is working with two leading global academic institutions, University of Cambridge Judge Business School and NYU Stern Executive Education:

    Supporting developing nations: KPMG will launch KPMG Emerging Markets Accelerators for developing nations in the Eastern Mediterranean, Africa, Asia Pacific and Latin America, with the goal ensuring that areas of the world lacking expertise and resources will have a trusted advisor to support their economic and social development in line with the UN Sustainable Development Goals.

    Collaborations and alliances: KPMG recognizes that the world’s issues will not be solved by any one organization alone, which is why the global organization is building on its collaboration with external organizations including UNESCO, Enactus and the Global Reporting Initiative. Through alliances with Google Cloud, Microsoft, Salesforce and ServiceNow, KPMG is co-creating new tools and solutions that will provide critical insights based on data that clients can use to map their ESG journeys and implement vital changes to meet their commitments.

    Listening and taking action: To help support the engagement pillar of its global ESG strategy, KPMG is also launching a new campaign called "Voices for a Sustainable Future," offering a platform to amplify the views of established and new thinkers, giving voice to critical issues — from climate change to gender and race equality."

    How you grow matters," says Thomas, "and what worked for us and other businesses in the past will not work in the future. The world faces crises on multiple fronts, which is why we’re putting the Environmental, Social and Governance agenda at the heart of everything we do."

    For more on KPMG's plans, see KPMG program accelerates solutions for ESG issues - KPMG Global (home.kpmg).

    Burnout: Are You Vulnerable and How Can You Prevent It?

    Oliver Rowe says in an October 8, 2021artticle in FM Financial Management that "burnout" has become a critical issue for businesses and their leaders. He quotes author, executive coach and clinical psychologist Mike Drayton as saying that "it undermines effectiveness — people are not very innovative when they are burnt out, and sustainability is an issue as people leave and go off sick for three or four months. You lose a lot of value as burnout attacks intellectual capital." 

    So, who's vulnerable? According to the article, it's people who are highly conscientious and areperfectionists; those with high introversion, especially introverted high achievers; people who hate conflict; those who over-identify with their job role; and folks with high idealism, perhaps with unrealistic expectations.

    Drayton described burnout as "a systemic issue" that arises from chronic workplace stress that is poorly managed, rather than a reflection of personal weakness. Unfortunately, it can lead to depression, and people can become apathetic, exhausted, and anxious and have a sense of hopelessness and helplessness.

    What to do? Drayton suggests five ways to avoid burnout, especially when working remotely:

    Develop a disciplined way of managing your day. Put in place clear boundaries and have a proper start and finish time for your schedule. It is critical to switch off at the end of the day.

    Block out time in your calendar for certain tasks. This is preferable to the to-do list, which can be overwhelming and never achieved.

    Take regular breaks and minimize work interruptions. The most effective way of working is in short intense bursts of communication, followed by longer periods of deep work.

    Take on volunteer work. As well as developing new skills and broadening your network, working as a volunteer outside the workplace can help anti-burnout efforts. 

    Increase your resilience. There are many ways to do this, including finding the meaning, purpose and value in your work, which increases resilience and minimizes the probability of burnout.

    For the fine details, read Burnout: Are you vulnerable and how can you prevent it? (fm-magazine.com).

  • What Is Ethical Intelligence and How Does It Benefit Workplaces?

    A September 30, 2021 article in INTHEBLACK, the magazine of CPA Australia, points out that ethical intelligence is the personal code that dictates how we work and the ability to make ethical decisions when faced with moral challenges. Author Megan Breen says that “on any given day, we make ethical decisions in our workplace, often without consciously thinking about them. For example, is our relationship with our staff and colleagues nurturing or exploitative? Are we misusing company time? Are we being entirely honest and open in every situation?”

Breen quotes  Bruce Weinstein, a US-based ethicist, as arguing that ethical intelligence is grounded in five key principles that need to be embedded across an organization: do no harm, make things better, respect others, be fair, and care. It comes down to asking yourself whether something is “the right thing to do,” he adds.

The first step is to promote your values to the world and within your organization, Weinstein says. The next step is to “hire for character,” which means embedding references to your values in the job description. Then you need to ask questions that are character focused in job interviews.

“Ask a candidate about a time when they had to tell an uncomfortable truth to someone at work, for example. That would reveal two crucial qualities of high character employees – courage and honesty.”

Second, advises Weistein, “there is an implication that the first question we should ask before we do anything is ‘is it legal?’ Well, that is the first question, but it’s not the last question, because there are plenty of things that are legal to do that are unethical or ethically questionable. The question the ethically intelligent CPA should ultimately ask is, ‘Is this the right thing to do?’”

“Accountants do tend to stick to the law, “Weinstein says, “but ethical behaviour takes a further step, and that’s the step people will need to be looking at.” 

For more, check out What is ethical intelligence and how does it benefit workplaces? | INTHEBLACK.

How CEOs Can Incorporate Resilience in their Infrastructure Plans
Portia Crowe, writing in the September 21, 2021 issue of FM Financial Management, says that when the pandemic hit, “many organizations reacted quickly and found ways to adjust to new realities in the short term. To enable social distancing, a common solution was to switch to remote work or break up employees' schedules into shifts.”

But, adds Crowe, these strategies and similar quick-fix approaches may not be sustainable over the long term. “Rather, organizations must transition to longer-lasting resilience. When it comes to workspaces, finance professionals must find ways to invest in more resilient physical infrastructure, which will ultimately support resilience in the workforce as well.”

Crowe believes that, for CFOs, “an important part of securing more resilient infrastructure is investing in adaptability. That will mean adjusting capital investment plans and setting aside resources to transform a space when need be. That way, they can be prepared for future situations where the existing infrastructure suddenly stops working well.”

In traditional office buildings, for example, says Crowe, many workers now prefer individual offices rather than open-plan layouts. Meanwhile, in manufacturing spaces, assembly lines will need to be adapted to allow for physical distancing. She notes that Darren Comber, CEO of global architecture and design firm Scott Brownrigg, predicts that offices will become more like university campuses, where people come together to create and exchange ideas, before returning home to do focused work.

Crowe explains that, according to the architecture firm Gensler, key themes in design now are health and wellness, equity, and sustainability. Genzler designed a model workplace of the future in San Jose, California, comprising low, horizontal buildings allowing for multiple entry and exit points to reduce congestion, and encompassing large open spaces filled with natural daylight. Other important health and safety features included touchless technology and air filtration.

To enhance resilience, she adds, “Gensler recommends designing mudrooms and multipurpose entries, where people can clean off before entering the workplace; corridors with large circulation paths and ‘programmed’ areas to create separation; hybrid office-cubicles (‘officles’) to allow for semiprivate workspace while still enabling small meetings in an open, touchless environment; gender-neutral restrooms to simplify cleaning for maintenance staff; and separate entrances and exits, at least for the near term, which could be adapted down the road.”

For many more ideas on building resilience in the new environment, see How CFOs can incorporate resilience in their infrastructure plans (fm-magazine.com).

This topic is explored more thoroughly at ESG Targets Gain Foothold in Exec Comp Plans - CFO.

Accountants Face Challenges with ESG Reporting
A new survey from Financial Executives International, carried out by their Financial Education and Research Foundation, which polled 53 chief accounting officers and controllers from some of the largest U.S. companies, found that 53% of the respondents indicated they had not yet started to integrate ESG reporting with their financial reporting, while 43% said they had only just started to do so.

An article by Michael Cohn, and published in accountingTODAY September 24, 2021, noted that, according to the FEI survey, “Data is the biggest single challenge to ESG reporting, with questions related to collection, collation, analysis and control among the biggest ESG-related data questions. The plethora of competing standards and frameworks is also a big challenge, with 85% of companies using multiple ESG reporting frameworks. Finance professionals reported they had a hard time hearing through all the noise and providing relevant, concise ESG metrics in telling their organization’s ESG story.”

The finance team’s involvement in ESG reporting is still in its early stages, Cohn writes, but 53% of the FEI members surveyed said they participate in broad “reporting oversight” of ESG. “Our members always seek to take a mindful approach to all financial leadership initiatives,” said FEI and FERF president and CEO Andrej Suskavcevic in a statement quoted by Cohn. “Inarguably, they are hearing more calls for high-quality levels of ESG integration into financial reporting. While there are still many questions surrounding exact guidance, our report is designed to help them understand what their peers are considering so they can incorporate this information into their own efforts. We see this report as a useful tool to help all financial professionals deliver high-quality financial reporting.”

For more on the report and where to access it, see Accountants face challenges with ESG reporting | Accounting Today.

Boardroom Climate Competence: Getting Ahead of the Curve
According to a new KPMG publication, the clamor for attention to climate change as a financial risk has become more urgent, and boards of all companies, irrespective of size or industry, need to take note. “The urgency is driven by a confluence of factors, most visible of which are the accelerating physical impacts – manifested in increasingly frequent and severe floods, wildfires, rising sea levels, and droughts – as well as concern by many experts that the window for preventing more dire long-term consequences is rapidly closing. Investors are keenly interested in understanding whether boards have the knowledge and processes to oversee management’s navigation of climate-associated financial risks and to provide informed, proactive guidance as stewards of long-term value.”

Other stakeholders, says the introduction to the publication, including employees, customers, and communities, “are voting with their wallets and their feet against companies they perceive as contributing to the problem. And spurred by increasing public demand, both U.S. and international regulatory bodies are working to drive change.”

According to KPMG, “The COVID-19 pandemic has demonstrated that boards that are informed, communicative, and bold in their leadership can guide their companies to not only weather the storm but also grow stronger and more competitive. The tectonic shifts in the business landscape driven by climate will demand similar board skills. With current and longer-term climate realities in mind, boards can guide their companies to adapt, mitigate risk, and uncover new opportunities for value creation.”

But with such a complex topic, where should boards start? Boardroom Climate Competence: Getting Ahead of the Curve, coauthored by the KPMG Board Leadership Center (BLC) and Plan C Advisors, addresses six climate-related areas that are critical to board oversight. It presents a framework for board oversight, as well as insights from current board directors and business leaders in a range of industries. “We hope that this paper is useful in framing your board’s guidance and oversight – for the good of your companies and all stakeholders.”

To get a copy of the report, head to Boardroom climate competence: Getting ahead of the curve (kpmg.us).

Canadian Securities Regulators Outline Expectations for Advertising and Marketing by Crypto Trading Platforms
In a press release dated September 23, 2021, the Canadian Securities Administrators (CSA) and Investment Industry Regulatory Organization of Canada (IIROC) said it has published guidance to help crypto trading platforms understand and comply with requirements under securities law and IIROC rules for advertising, marketing and social media use.

According to the press release, securities regulators have noticed a recent increase in advertising and marketing by crypto trading platforms. “In several cases, CSA and IIROC staff have observed statements in crypto trading platforms’ advertising and marketing materials that could mislead investors. Staff are also concerned about crypto trading platforms’ use of gambling-style promotions that may encourage excessive and risky trading by retail investors.”

Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers, pointed out that “misleading advertisements and improper marketing strategies may encourage investors to take on risks they would normally avoid, and not respecting the requirements under securities law and IIROC rules may raise concerns about a crypto trading platform’s fitness for registration.”

The new guidance is intended for registered crypto trading platforms, platforms that have or will be applying for registration and other registrants that may be considering establishing a platform as a new business line. The publication includes examples of misleading statements in advertising and marketing materials, and outlines the concerns of CSA and IIROC staff over the use of improper gambling-style contests, promotions and schemes. Additionally, the guidance outlines regulators’ compliance and supervisory expectations for firms using social media.

“Crypto trading platforms should consider their advertising and marketing strategies in the context of their obligations to treat clients fairly and honestly,” said Andrew J. Kriegler, IIROC President and CEO. “IIROC will continue to work closely with the CSA to ensure investors are protected.”

The new guidance can be found on CSA members’ websites and on IIROC’s website.

Clients’ Expectations of Accountants Are Evolving
Derrick Lilly, communications director for the Illinois CPA Society, writes in the September 13, 2021, edition of accountingWEB that a recent report, which surveyed more than 3,200 accountants around the globe, found that 82% of respondents said that their clients’ expectations have widened to include the provision of business advice. “Simply put,” says Lilly, “the days of CPAs thriving simply as trusted number crunchers are over. The Illinois Society says companies and clients will need and expect their CPAs to proactively provide strategic guidance and insights in all areas of their business based on their unique needs and goals.”

Many CPAs argue that they provide these types of insights now, but Lilly suggests that they consider this: “According to a survey of accountants and business professionals across the nation, the top challenges for business leaders include planning for growth and expansion, getting expert financial insights, maximizing cash flow, minimizing overhead costs, staying in compliance, finding time to focus on accounting and financial matters and maximizing profit margins. However, less than 40% of the business leaders interviewed reported that their accounting firms had ever conducted an assessment of their organizations and offered tailored recommendations to them.”

According to Lilly, “The takeaway is that CPAs have almost unlimited access to company and client data at their fingertips, and they must use it, interpret it and communicate its value to stakeholders if they’re going to be the most trusted and strategic advisors of tomorrow. As Illinois CPA Society President and CEO Todd Shapiro advises, ‘It’s time to get in the driver’s seat, take the wheel and steer companies and clients toward greater profitability and wealth.’”

For more, go to How Clients' Expectations of CPAs are Evolving (accountingweb.com).

The Bot Revolution: Chatbots in Automation
A July article on RSM’s global webpage, written by Paul Herring, Global Chief Innovation Officer, says that a growing application in the world of automation is the use of chatbots. “With myriad uses,” he says, “chatbots have the potential to save organizations considerable financial and human resources. This new army of digital workers have become critical to ambitious, growth focused businesses as they look at how they can incorporate chatbot technology into their own strategic models.”

Herring points out that a chatbot is a type of software application that enables online conversation in place of a live human discussion. “The idea behind the concept has existed as far back as 1950, with Alan Turing’s proposed Turing Test for testing the ability of a computer program to impersonate a human. The modern application of this concept has since been used to help streamline interactions between humans and information systems. Chatbots can be used to aid with customer support, human resources and many other services. In the ever growing digitally connected world, the use of chatbots has proven to be useful for many organizations in providing relief in time consuming, mundane tasks. At the highest level, there are typically three types of chatbot that consumers are likely to see today.”

Rules-based chatbots are “simple chatbots that follow pre-determined rules using a graphical user interface that has paths built on a decision tree. This is a similar process to a flowchart with varying degrees of complexity that enable an outcome to be reached through input from the user.”

AI chatbots “use data to build a comprehensive understanding of the type of questions people ask. The chatbot then analyses this data in a learning period to determine the correct questions and finally uses machine learning to develop contextual understanding to continually get better at answering these questions in the future.”

Live chatbots “are among the most simplistic in application and are most often used by sales and support teams to answer questions in real-time. Adding natural language processing to the chatbot, allows for smarter interpretation of the user’s spoken or typed question, taking us one step closer to mimicking a human-to-human conversation with multiple exchanges, each dynamically building on the one before. This new area goes way beyond the navigation through a pre-scripted set of responses.”

For more on their benefits and applications, see The bot revolution: Chatbots in automation | RSM Global.

Leading Under Pressure
A blog posted by Theodore Kinni in strategy + business September14, 2021, points out that, whether it arrives in the guise of a burning platform or a project deadline, a strategic goal or a performance target, a high-stakes deal or an aggressive competitor, pressure can help leaders attain new heights of performance and achievement. Unfortunately, it can also overwhelm a leader and result in missteps that torpedo companies and careers.

According to Kinni, “being connected to the importance of whatever you are doing inspires and directs action.” He quotes Dane Jensen, author of the book The Power of Pressure, who contends that, during peak pressure moments, say, a corporate crisis, “importance can ratchet up to a level that is not healthy and is not a performance enhancer. It is actually something that is a real derailer.”

How do you manage importance during these peak pressure moments? The secret is to understand that how you perceive the stakes in any given situation can be controlled. “When you get into peak pressure moments, all you can think about is how important [the stakes are], what you might gain, what you might lose,” said Jensen. “Somewhat counterintuitively, as you approach peak pressure moments, your job shifts from pulling importance close to making sure that you are not carrying it with you into the moment.”

Kinni’s article offers a four-step technique for defusing the stakes in peak pressure moments:

Ask yourself what’s not at stake. “What are the things that are going to be there regardless of how the presentation to the board goes?”

Avoid the anxiety spiral. Seek evidence for the stakes you associate with a challenge, being objective by asking yourself how you would view someone who didn’t succeed in meeting that challenge, and, if you’re still unsure whether a stake is real, giving yourself the benefit of the doubt.

Let go of ego-driven stakes.  According to Jensen, you only need to own how you acquit yourself. All the other stuff – a share price, revenue, profits – are only partly within your control. If it’s only important to your ego, let it go before peak pressure moments.

 Gauge what is truly urgent. Manufactured urgency distracts from performance in peak pressure moments. If the situation suggest that a peak pressure moment just feels urgent and could be better dealt with at a later time, give yourself a break and postpone it.

For the fine details, consult Leading under pressure (strategy-business.com).

Climate Change Information and the 2021 Reporting Cycle
September 7, 2021, the International Federation of Accountants (IFAC) released a statement that said among other things, “Given the current significant attention paid to the impact of climate risk on society and financial stability, many companies and investors are more closely scrutinizing the potential material impacts of climate change on companies in the context of a 2-degree Celsius or lower (ideally 1.5-degree Celsius) global temperature rise scenario. This is the basis of the international Paris Agreement. Companies that have set net-zero emissions targets to meet the Paris Agreement, which is the case for at least one-fifth of the world’s 2,000 biggest listed companies, will now be establishing targeted strategies and short- and medium-term targets to decarbonize their business models and reduce emissions. If these actions result in material financial implications, they will need to be reflected in a company’s financial reporting.”

In this current environment, says the statement, professional accountants will need to keep in mind two important points:
• “First, despite the issuance of various guidance and educational materials by standard-setters (described below), professional standards have not changed for the 2021 reporting cycle as they relate to the reporting and assurance of climate and sustainability information.
• “Second, materiality in financial reporting remains an entity level decision and the development of accounting estimates is specific to a company’s facts and circumstances and reporting requirements. Climate-related matters will not be financially material to all companies. In addition, alignment with scenarios consistent with the Paris Agreement, or the UN’s Sustainable Development Goals, is not a requirement under either IFRS or US GAAP.”

Accordingly, in preparing their 2021 financial reports in the context of changing expectations about climate-related disclosures, companies must evaluate what some stakeholders would like companies to report and where they would like it reported (in the financial statements versus the “narrative” sections of annual, integrated or sustainability reports, or elsewhere) in the context of what is required/allowed under current professional standards (i.e., financial reporting standards and audit and assurance standards) and regulatory requirements.

Professional accountants in business and in public practice, emphasizes the statement, “have a critical role to play in assisting companies reconcile these different perspectives while complying with existing reporting obligations, regulatory requirements, and their professional responsibilities.”

For much more on this critical topic, and some guidance on what to do, please see Corporate Reporting: Climate Change Information and the 2021 Reporting Cycle | IFAC

Are You Ready for the ESG Revolution?
A PwC publication, released a few months ago, says that it is often heard in today’s boardrooms and C-suites and their virtual equivalents: a mixture of anxiety and enthusiasm about environmental, social, and governance (ESG) issues. “What risks are we sitting on?” leaders (and investors) are asking, as pressure for ESG disclosures mount. “How do we measure and manage them when there are no common standards? Where should we focus, when the list of potential issues is a mile long?” And, critically—which is where the enthusiasm comes in—“As we take a hard look at our business, what opportunities can we identify to solve big problems and create value in new ways?” According to the authors of this piece, Peter Gassmann, Casey Herman and Colm Kelly, the answers to these questions are interrelated, as are the initiatives those answers will motivate: reimagined reporting, strategic reinvention and, ultimately, wholesale business transformation.

The underlying forces at work are well known, say the authors. “Investors, lenders, and rating agencies expect greater visibility of an ever-broader range of nonfinancial metrics to better understand diverse social and environmental risks. Governments’ ambitious, top-down commitments to limit carbon emissions are increasingly backed by new regulations and new taxes. More—much more—can be expected. Activist shareholders, among many other stakeholders, are advocating for net-zero policies and for tighter linkages between ESG targets and executive compensation packages. Socially conscious consumers are more inclined to vote with their wallets, encouraging businesses to reappraise their products and purpose, including their role as employers of diverse, engaged workforces. And the global pandemic has created significant additional momentum for change.”

Against this backdrop, the ESG maturity level of companies varies widely, the authors ay. “When PwC segmented executives responding to a recent survey according to their awareness and prioritization of ESG issues, their personal commitment, and their belief in the potential for business to positively impact society, it became clear that leaders in most organizations (nearly three-quarters) were in the early stages of their ESG journey. A few companies, though, have begun reorienting their business toward a value creation ecosystem that adds environmental sustainability, employee engagement, external partnerships, and broader societal impact to financial imperatives as measures of success. Companies that have earned top ratings on ESG indexes and that also produce solid investor returns include asset managers such as Norges Bank; tech companies such as Adobe, Salesforce, and Microsoft; and consumer-oriented firms such as Procter & Gamble and Best Buy.”

Whatever the starting point for the ESG dialogue, believe Gassmann, Herman and Kelly, the project will result in changes in all dimensions of a business, including strategic decision-making, implementation of the new direction, and reporting of progress and outcomes.

For many intriguing insights, please read The ESG movement: Are you ready for the ESG revolution? (pwc.com).

CAQ Highlights How Climate-Related Risk Considerations Intersect with Audited Financial Statements
A September 9, 2021, press release from the Center for Audit Quality (CAQ), explains that its new publication Audited Financial Statements and Climate-Related Risk Considerations, provides investors and other stakeholders with a foundational understanding of current climate-related reporting and auditing requirements in the U.S. and how they are applied. The CAQ says it is releasing this report “at a pivotal moment for climate-related and other environmental, social and governance (ESG) reporting, as investor and other stakeholder demand for this information continues to increase.”

Currently, says the press release, climate-related risks are considered and assessed by management and auditors during the preparation and auditing of financial statements. “Under current US accounting rules, climate-related risks may have a direct impact on the financial statements, an indirect impact, or in some cases no impact at all. Understanding current financial statement requirements can be a useful starting point for investors and others as they consider how and where to obtain their desired climate-related information to make capital allocation decisions and bridge any information gap that may exist today ahead of future rulemaking by the SEC or others.”

“Investors are increasingly using climate-related information to inform their investment decisions,” said Dennis McGowan, Vice President, Professional Practice at the CAQ. “The current disclosure system is market-driven rather than based on regulatory action, so it is important for investors to both consider what public companies voluntarily report as well as to understand what they are required to report in the financial statements under US GAAP.”
In June, the CAQ led a roundtable discussion with investors, board members, auditors and public companies to discuss the SEC’s request for public input on climate change disclosures, and found that the majority of the participants were supportive of climate disclosure requirements.”

The public company auditing profession is supportive of the SEC’s exploration of climate-related disclosures, added McGowan. “We look forward to ongoing dialogue on this topic as regulators and standard setters assess whether rules and regulations need to be adapted to meet the needs of investors.”

Read the full publication at caq_climate-related-risk-consideration_2021-09.pdf (thecaq.org).

Practical Ways to Support Workplace Mental Health
An article by Tea O’Connor, posted September 3, 2021, in INTHEBLACK, the magazine of the Australian Institute of CPAs, points out that, as we all know, feelings of isolation and burnout have become common products of the current environment of prolonged lockdowns and remote working.

But, notes O’Connor, demonstrating care for employees need not be expensive to be effective, and organizations are putting more thought into practical ways of supporting workplace mental health.

At Deloitte Australia, she says, one of the main areas of focus has been flexibility in terms of work hours, break times and leave, to suit the needs of its 10,000 employees. “Trusting and empowering our employees to work in a way that works for them, their clients and their team, is key to staff’s mental health and wellbeing,” she quotes Tina McCreery, chief human resources officer for Deloitte Australia, as saying.

“It’s also critical to engagement and productivity, recruiting top talent, and supporting work–life balance.”

For linking platform Linktree, a similar, customized approach to wellbeing has meant that its global base of 120 employees has a range of wellbeing benefits to choose from.

Isa Notermans, Linktree’s global head of people and culture, explains that the organization put in place its wellbeing measures earlier this year to help staff cope with the double demands of the pandemic, as well as the start-up’s recent growth spurt. “We knew we couldn’t fulfil every person’s individual needs, so we decided to offer a range of benefits people could pick and choose from,” Notermans says.

O’Connor’s article then offers up nine practical mental health support measures that have been implemented by Deloitte and Linktree. See what they are at 9 practical ways to support workplace mental health | INTHEBLACK.

Gender Parity in Financial Services
According to a post on the Grant Thornton Global webpage, apart from the disruption wreaked by COVID-19, diversity and inclusion (D&I) is a key area of focus for financial services businesses. “There is growing regulatory pressure for firms to respond to, and greater stakeholder demand for, leadership that reflects the market and their clients.” According to Grant Thornton’s 2021 International Business Report (IBR), which surveys the global mid-market, 72% of businesses in financial services believe stakeholder pressure to improve gender balance is set to increase.

Many financial services firms are already acting on these external and internal influences, the article says. “Our IBR data reveals that financial services and banking businesses are a short step ahead of the curve when it comes to diversity, compared to the cross-sector aggregate. The percentages of women in senior leadership are higher in both financial services and banking than the global average: 33% and 37% respectively, compared to 31%. For financial services, this represents a three-percentage point rise since 2020.”

But despite this improvement, there is still a long way to go in achieving gender parity at the top, with research from Catalyst showing that, in 2019, women’s global representation on executive committees in major financial services firms stood at just 20%.

Propelled by the pandemic, the article points out, “the rise of female leaders in financial services has the potential to accelerate. The impact it has had on the way staff are able to operate is striking. Three-quarters (75%) of IBR respondents in financial services believe new working practices as a result of COVID-19 have enabled women in business to play greater leadership roles, while 82% believe these will benefit women’s careers in the longer term.”

“The lockdown restrictions have demonstrated that you can work effectively in an agile manner from home,” says Sarah Talbott, partner and head of financial services key (strategic) accounts and gender diversity lead for Grant Thornton UK. “This virtual and flexible way of working has people to be more productive with their time through hybrid working – splitting time between home and office – will drive a better work-life balance, increase staff performance, and attract a broader talent base,” Talbott says. “Agile, flexible working creates a more inclusive culture, allowing firms access to a more diverse talent pool, which in turn will lead to strong business outcomes.”

For much more, go to Gender parity in financial services | Grant Thornton insights.

Habits That Help Successful People Maximize Their Time
An August 31, 2021, article in Entrepreneur, written by Blake Johnson, points out that everyone gets the same 24 hours in a day, “but it's what we do with those 1440 minutes that separates the successful from the stagnant.” If you want to edge out the competition, hit your goals and achieve more than the week should allow, Johnson suggests the following habits:

Think like a lazy person: Is it quicker to load a dishwasher or to personally scrub every single utensil?, Johnson asks. “The result is the same, regardless of how you get there, but the effort involved is drastically different. Instead of simply sitting down to do tedious work, see if you can find a way to make the work less tedious. Create workflows, automations and innovations that allow you to do more with less effort, then use that time tackling the next problem. By the time you take a break to look back you will realize that you are miles ahead of the competition.”

Don't do your tasks in order: Johnson believes that the risk with to-do lists is that most people assume they must be completed linearly. “When it comes to these chores, it isn’t wise to simply start at the top. Instead, apply time estimations to every item. Find yourself with ten minutes between meetings? Knock-off a tiny task. Plane delayed by two hours? Tackle a larger item. Do what you can when you can and be amazed by what you can accomplish throughout the day.”

Maximize transit time: Instead of staring out your cabin window on a plane, scrolling through Instagram in an Uber or people-watching on the subway, Johnson suggests making travel work for you. “Commuting can be great for replying to emails, prepping for upcoming meetings and, when all else fails, continuing education. Skip the in-flight movie and listen to a podcast, make your way through a leadership book or read some articles written by experts. The idea is to treat every moment spent sitting as an opportunity.”

Consider the ROI: Every time you think about committing to something, Johnson advises considering the potential return on investment. “Grabbing a drink with an old friend may sound like a good use of time, but is it really? If getting buzzed with a buddy takes away from your work, family or education, it may not be worth the investment. Ask yourself if the reward justifies the cost. Rest and relaxation are, of course, important – but anything you do strictly out of obligation may not be worth the time spent, and it is ok to say ‘no’ when the ROI is not favorable.”

For more ideas, head to 6 Habits That Help Successful People Maximize Their Time (entrepreneur.com).

How to Avoid the Pitfalls of Binary Decisions

Eric J. McNulty, associate director of the National Preparedness Leadership Initiative in the US, writes in the August 23, 2021, edition of strategy + business that, usually, when we are asked to choose among different options, we do. This tendency is an example of what Nobel Prize winner Daniel Kahneman calls WYSIATI: what you see is all there is. According to McNulty, “we tend to respond to what’s presented to us. It takes extra effort to stop and ask, ‘What’s missing?’ Our energy-conscious brains like to be efficient. The problem is that not having all of the information we need can lead us to make a poor decision.”

McNulty points out that Dr. Mazahrin Banaji of Harvard University and her colleagues have researched implicit bias by exploiting this quick-response tendency. “One of their well-known findings is that people more quickly associate positive words with white faces and negative words with nonwhite faces. But a lesser-known finding is that test-takers never pause to ask for more detail. I have found similar results when using my own associative test in leadership seminars. Asked whether someone will be a great or not-so-great leader based only on a photograph, participants render judgment and can articulate their reasons. Rarely does someone say, ‘I don’t know’ or ‘I need to know more about this person.’”

McNulty believes that it is critical for executives to overcome this cognitive tendency to quickly make insufficiently informed binary choices. “A decision to buy or sell, keep a project in-house or outsource it, work in the office or work from home, to name a few examples, can make or break a business and a career. And an in-between or hybrid option might be best. For instance, designating someone a leader versus manager artificially limits the person’s potential because executive roles require both skill sets. And the sharing economy was built by injecting alternatives into binary decisions, such as whether to own an automobile. Moving beyond binary choices creates a nuanced perspective on potential risks and opportunities.”

McNulty then presents five ways to overcome binary blind spots and increase your chances of making better decisions. Find them at Five ways to avoid the pitfalls of binary decisions (strategy-business.com).

PwC Reports on Its Latest Audit Quality Efforts

Michael Cohn writing in the August 23, 2021, edition of accountingTODAY, notes that
PricewaterhouseCoopers has issued its 2021 audit quality report, pointing to progress that the Big Four firm has been making on auditor independence, along with issues such as diversity and inclusion.

Cohn points out that PwC reported that 98% of its assurance professionals received consistent messaging on the importance of audit quality, and 97% understand the firm’s audit quality objectives. The Public Company Accounting Oversight Board inspected 58 of PwC’s audits in the most recent inspection cycle, and the firm anticipates that only one of the audits will be singled out in Part 1.A of the report, which spotlights significant deficiencies. In the most recent PCAOB report for 2019 inspections, 18 audits out of 60 inspected were included in Part 1.A.

PwC also pointed to a 96% compliance rate of issuer audit engagements selected for internal inspection by the firm. The number of issuer audit engagements selected for internal inspection was also 96. Audit partners’ average years of experience at PwC is 23 years.

The report comes at a time when large audit firms have come under fire for lapses in quality. In response, PwC has begun offering regular reports on its progress on audit quality, issuing an updated report earlier this year in January.

For more on what the report contains go to PwC reports on latest audit quality efforts | Accounting Today or the report itself, 2021 audit quality report.

Five Steps to Successful ESG Reporting

An article in FM Financial Management posted by Alexis See Tho August 27, 2021, says that, because the current ESG reporting landscape lacks agreed-upon standards, it results in reports that are inconsistent, unreliable and incomparable with those of other organizations. “But that’s not stopping companies from disclosing on sustainability matters, whether it’s labelled as ESG, corporate social responsibility (CSR), or something else. A report by the Governance & Accountability Institute last year found that 90% of companies in the S&P 500 publish sustainability or corporate responsibility reports.”

So, until we have those standards, Tho advises, there are five stages — establish, assess, design and implementation, sustain and assure — in an ESG reporting journey.
1. Establish: A company’s support for ESG issues doesn’t come from a report, but from its strategy. However, the reporting of the strategy is crucial to communicating how that strategy will be implemented. “To get started, companies typically start with a stakeholder materiality assessment. In the assessment, a company engages with all its stakeholders to understand what is most important to them and how those priorities align to its business. Following that, the company will need to define its metrics, goals, and targets, and a reporting standard to follow.”
2. Assess: In this second phase, companies should look at current processes and procedures to determine if there are controls in place and where control gaps may be present. The end destination for the information may drive the process. “During this phase, it’s also really important to be thinking about technology. How you can utilize technology to create efficiencies and effectiveness, and create quality data throughout your process.”
3. Design and implementation: This phase, says Tho, is about deciding how to implement controls and who will act on those controls. “It’s also about figuring out how to connect ESG issues with financial reporting. Here, companies should find out where they might need different policies and procedures.”
4. Sustain: Once a company begins collecting ESG data, it needs to ensure continuous monitoring. “This may include having controls tested throughout the year and making sure there is evidence to support audit trails or certifications.”
5. Assure: Ultimately, when you have all of your data in order and you know that you have that audit trail, you can begin to seek assurance. “Besides increasing regulations, companies are assuring their ESG data for two other reasons: to lower borrowing costs and to spotlight ESG achievements to investors and the market.”

For more advice, have a look at 5 steps to successful ESG reporting - FM (fm-magazine.com).

Professional Ethics in An Era of Complexity and Digital Change
As the world becomes more complex, maintaining ethical standards becomes both more challenging and increasingly important. To help guide financial professionals, the Chartered Professional Accountants of Canada (CPA Canada), the Institute of Chartered Accountants of Scotland (ICAS), and the International Federation of Accountants (IFAC) have released Complexity and the professional accountant: Practical guidance for ethical decision-making, the first in a series of four thought leadership pieces.

“We’re on a journey to reimagine the future of the accounting profession,” says Charles-Antoine St-Jean, president and CEO, CPA Canada. “Digital disruption and shifting societal expectations are redefining the role of professional accountants around the world. Our collective response to these opportunities, challenges, and ethical implications will impact our ability to remain trusted leaders, on the forefront of change. This paper, and those to follow, contribute to important conversations as we adapt and help shape the future.”

According to a CPA Canada press release, dated August 19, 2021, this publication, developed by CPA Canada, builds on a collaborative exploratory paper and global roundtable event, called “Ethical Leadership in an Era of Complexity and Digital Change,” held in conjunction with ICAS and IFAC. It is the first of the series and addresses key themes presented in the exploratory work.

“As the accountancy profession adjusts to dramatic change brought about by the rapid advance of technology and an increasingly complex world, I am keenly aware of the ethical core, embedded in our profession, that differentiates us,” notes Kevin Dancey, CEO of IFAC. “It is this core ethical foundation, and our skills and competencies, that enable the millions of professional accountants worldwide to navigate the digital age and help organizations through the multiple challenges and opportunities, while reflecting the profession’s recognition of its public interest responsibility.”

“The accounting profession needs to continually evolve to address changing stakeholder needs while continuing to meet its’ public interest responsibility” explains Bruce Cartwright CA, ICAS CEO, adding: “The only certainty is that there will be more regular advancements in technology. It is therefore imperative that we properly consider the associated ethical implications of technology and help shape the future.”

Complexity and the professional accountant: Practical guidance for ethical decision-making, along with the collaborative exploratory paper, a summary of the February 2021 event, including an on-demand recording and additional resources, are all available on the IFAC Knowledge Gateway.

The upcoming papers in the series will cover the following interconnected but distinct topics:
• Technology is a double-edged sword
• Identifying and mitigating bias and mis-/disinformation
• Mindset and enabling skills.

ESG Assurance a Promising Opportunity for Auditors
An article posted August 10, 2021, in the Journal of Accountancy webpage, just 31 of the S&P 500 companies use public company auditors to perform assurance on their ESG reporting, according to a recent study by the AICPA’s Centre for Audit Quality (CAQ). Meanwhile, says author Ken Tysiac, 235 members of the S&P 500 used a non-audit firm assurance provider, and 236 did not get assurance on ESG information.

Other findings from the CAQ study included:
• Multiple frameworks used: Many S&P 500 companies referenced multiple reporting standards and frameworks, which they used to varying extents. The CDP (formerly known as the Carbon Disclosure Project) had the most commonly referenced framework with 371 mentions, followed by the Sustainability Accounting Standards Board (362), Global Reporting Initiative (328), Task Force on Climate-Related Financial Disclosures (239), and Integrated Reporting (13).
• Level of assurance: Of the companies that received assurance from public company auditors, 25 received just limited assurance; two received just reasonable assurance; three received some limited and some reasonable assurance; and one had a level of assurance that could not be determined from the company’s documentation.
• Assurance standards: Twenty-seven of the S&P 500 engagements completed by public company auditors were done under AICPA standards. Four were done under ISAE 3000 standards, and the standards for one engagement were unable to be determined. (One report referenced both AICPA and ISAE 3000 standards).

A recent global survey by AICPA & CIMA and the International Federation of Accountants showed that the United States is an outlier in this area, Tysiac points out. In many other countries in the Americas and Europe, an overwhelming majority of sustainability assurance is provided by audit firms. “That’s probably at least partly because these countries have more stringent regulations around ESG issues, whereas regulations in the United States are less mature. But that may be changing.”

The SEC is exploring the possibility of proposing ESG requirements for public companies that would presumably include penalties for companies not in compliance. SEC Chair Gary Gensler has asked the Commission staff to develop a mandatory climate risk disclosure rule proposal by the end of this year. The SEC also endorsed Nasdaq’s move to require board diversity disclosures from companies listed on the exchange.

Ultimately, says Dennis McGowan, CPA, vice president, Professional Practice for the CAQ., “public company auditors stand to provide excellent investor protection in ESG assurance because of their robust independence framework, professional skepticism requirements, skills at understanding a company’s business, and audit firm quality control systems.”

For more, have a look at ESG assurance an elusive but promising opportunity for auditors - Journal of Accountancy.

Mining Firms with Higher ESG Ratings Outperform the Market
Mining companies with higher ESG ratings outperformed the broader market during the peak of the COVID-19 crisis, delivering 34% average total shareholder return over the past three years — 10 percentage points higher than the general market index. This according to PwC’s 18th Annual Review of the Top 40 Mining companies: Mine 2021, which examines the global trends in the mining industry. Net profit in the sector was up 15%, cash on hand rose 40%, and market capitalization rose by nearly two-thirds to US$1.46tn.

There are further signs of optimism for 2021, says the publication, “with forecasts indicating that the Top 40 will report record-high revenue and EBITDA levels and the second highest net profit. Alongside this, the demand for the minerals that go into clean energy technologies is expected to increase six-fold in the next 20 years.”

The survey also reveals that Top 40 coal production fell 12% in 2020. Deals fell from five in 2018 to zero in 2019 and 2020, highlighting the sector’s continued shift to net-zero.

According to Paul Bendall, Global Leader, Mining & Metals, PwC Australia, “The global mining sector has demonstrated both resilience and agility in adapting its operations during the pandemic. Coupled with this, the drive towards environmental sustainability has created a volatile landscape for mining companies, but is also presenting an opportunity for genuine, transformational change.

“The past year has demonstrated how putting ESG at the core of a strategy is crucial for delivering growth. Looking forward, it’s clear that investors in this sector will continue to be increasingly drawn to companies that actively embrace ESG policies.”

For more information, see Mining firms with higher ESG ratings outperform the market (pwc.com).

9 Simple Ways to Transform Your Morning Routine and Boost Productivity
The way you start your morning often dictates how the rest of your day goes, says John Boitnott, Entrepreneur Leadership Network VIP, in an August 10, 2021 post in Entrepreneur.
“Smart entrepreneurs know they need to take advantage of this important period of time to maximize their energy levels, maintain focus, increase their productivity and prime themselves for a busy day.”

According to Boitnott, “a great morning ritual actually begins the night before. Make it as easy as possible to stick to the routine you create. Lay out workout clothes, and set up the coffee or tea brewing equipment the night before. Put your journal and favorite pen on the bedside table if you want to start a morning journaling habit.”

Boitnott advises anticipating any practical obstacles to adhering to your new morning ritual, “then create workarounds to reduce any distracting tasks. That way, you'll have as much time as possible to focus on the meaningful parts of your morning routine.”

Drinking a full glass of water first thing in the morning can help improve digestion, he says, adding that “it is important to maintain a healthy weight, improve your mental focus and mood and more. One study even suggests that increasing the amount of water you drink will help improve your cardiovascular health.”

And you might want to save the coffee or tea for a bit later in the morning, he adds. “Science shows our cortisol levels (and hence our natural alertness levels) are highest between the hours of 8 and 9 a.m. To make the most of the caffeine you’re imbibing, hold off until 9:30 to 11:30 a.m.”

Boitnott also suggests starting your day by making your bed, “and you’ll begin every day with a sense of accomplishment. That can in turn create a sense of momentum and increase your interest in getting the next thing done.”

He also advises working out in the mornings, as that can actually increase your physical energy throughout the day. “And just as with making your bed, some morning movement helps instill a sense of accomplishment that will help keep you performing at a higher level.”

For more of Boitnott’s suggestions, check out 9 Simple Ways to Transform Your Morning Routine and Boost Productivity (entrepreneur.com).

How Accountants Can Lead on Climate Action
In a recent article on EY’s webpage, Ruchi Bhowmik, EY Global Public Policy Vice Chair, writes that he world’s current yearly total greenhouse gas emissions is approximately 51 billion tons. “Climate science tells us the largest carbon emitters must get to net-zero emissions by 2050 to avoid a climate catastrophe. Getting to net zero will require major commitments from government and businesses and will only be possible if the human activities that cause the emissions are accurately documented to fully reflect the environmental damage they do.”

In their June communique, G7 Finance Ministers and Central Bank Governors called for mandatory climate-related financial disclosures based on the Task Force on Climate-related Financial Disclosures (TCFD) framework. In their letter, they emphasized “the need to green the global financial system so that financial decisions take climate considerations into account. This will help mobilize the trillions of dollars of private sector finance needed, and reinforce government policy to meet our net zero commitments.”

Fortunately, Bhowmik says, “dramatic progress has been made toward setting explicit standards for climate and broader sustainability reporting. This includes the SEC’s call for input on climate change disclosures, the European Commission’s proposed Corporate Sustainability Reporting Directive (CSRD) and the IFRS Foundation’s proposed creation of a sustainability standards board.”

“As the global standard-setting process for climate reporting and disclosure continues to evolve, many questions remain,” she continues, “including which information should be subject to voluntary vs. mandatory reporting, what information is considered material, and whether climate reporting should be integrated into the management report or remain in a separate sustainability report. The contributions of accounting professionals to this process will be vital to achieving globally consistent metrics and disclosures that are reliable, comparable and relevant.”

To learn just how you can contribute to this important process, go to Three ways accountants will lead on climate action | EY - Global.

Supporting Clients Through Life Transitions
It can feel like big life changes come out of nowhere: a promotion, divorce, pregnancy, or even losing a loved one. But transitions — both good and bad, planned and unplanned — are how lives are shaped, says Megan Hart in an August 9, 2021 article in the CPA Insider. And, she adds, “clients might look elsewhere if they don't think they're getting strong leadership through a transition.”

Hart then offers a number of tips for helping clients through change:
- Strike the right tone. During the first meeting or two with a new client, things can get emotional, Sullivan said. Expressing your feelings — even tearing up — isn't unprofessional, but keep the conversation focused on the client and the financial expertise you can offer.
- Listen. Listening is paramount. Focus on listening rather than thinking about what you're going to say next, she said.
- Ask thoughtful questions. After listening, it can be helpful to make a list of everything you've heard, and then clarify each point with your client. This technique will help your clients feel engaged. It can also help you confirm what you heard is exactly what your client was trying to convey, which is important because stress can cause people to lose some of their cognitive function during a transition.
- Meet clients on their level. Clients will have different responses to transitions. Some clients think they know all the answers, while others are scared or angry when they first meet with her. It’s important to remember that every client will be entering the discussion with a different level of financial knowledge and a different outcome in mind.

For more detailed advice from Hart and various experts on handling such situations, see 6 tips for supporting clients through life transitions (journalofaccountancy.com)

Data Analysis and Forecasting Software: Taking A Look into The Future
Unless you know a bona fide psychic, no one can claim to really know what the future holds, says Ted Needleman in an August 4, 2021 article in accountingTODAY. “The pandemic is proof of that. But in business, it’s important to know what the future might be, hopefully as accurately as possible, and to have a plan to move your practice and clients toward those future results. And one of the most popular approaches to achieving this is using data analysis and forecasting techniques to model possible outcomes given present and past financial and operating data.

While there are some very sophisticated techniques out there that you may be able to apply to your clients’ businesses, says Needleman, as well as to your own practice, “the truth is that both accountants and business owners have been doing forecasting forever. What’s different these days is that there are now stochastic techniques to perform these tasks more effectively and, hopefully, more accurately. Many of these techniques come to us through the operations research discipline that evolved from the logistical planning needed during wartime. And chances are you were exposed to such techniques as multiple regression at some point in pursuing your accounting degree.”

And, he adds, “in today’s world, many of the apps and software solutions in use employ techniques that you may not be able to detail step by step, but that produce results that are probably a quantum level above those that could be achieved a decade ago. And that’s a very good and profitable development.”

Needleman quotes Blake Oliver, a CPA and marketing director at Jirav, as saying that, “demand is high for advisory services, and services that fall into the FP&A category lead the pack. Business modeling (a.k.a. forecasting) and budgeting are first and second, respectively, in a June 2020 survey by CPA.com.”

Oliver continued that “FP&A software helps accounting practices automate client reporting so they have time to add the forecasting and budgeting services their clients need and want. Existing clients are willing to pay more for these services, so it is a win-win for firms and their clients. Firms may be offering some of these services already, but often it is ad hoc on an hourly basis, and is not a large proportion of firm billings. That’s because forecasting and budgeting is traditionally done in spreadsheets, which takes a high level of experience and skill, and leads to a lack of standardization. FP&A software standardizes the process of providing these services, which saves time, enables more junior staff to do the work, and allows firms to offer these services at a more appealing fixed monthly fee to more clients.”

And Val Steed, a CPA and director of accountants at Zoho, pointed out, “Adopting an analytic software can help increase firms’ revenue and practice range because you can easily connect all your financial data into this application to slice and dice data and derive insights quickly.”

For much more on this important topic, please read Data analysis and forecasting software: Taking a look into the future | Accounting Today.

How Accountants Can Use Creative Thinking at Work
Encouraging or reawakening creativity among employees has become key to a company’s competitive advantage, according to an article written by Amanda Woodard in CPA Australia’s INTHEBLACK magazine and posted August 1, 2021. “Just take a look at the Creativity Index measure, developed by management consultants McKinsey, which shows that businesses that score highly outperform their competitors in two areas, an appetite and aptitude for innovation and shareholder return – in other words, growth and profit.”

Despite this, notes Woodard, “there is a perception that a culture of innovation is hard to instill in traditional accounting and finance firms. Bureaucracy and a methodical approach conducive to compliance-based work are sometimes seen as roadblocks to creativity.”

Darren Chua, who leads innovation for EY in the Oceania region, believes that the risk taking that accompanies experimentation can be much harder to swallow in large organizations, where it might be exacerbated by the focus on short-term performance and individuals’ fear of failure. “In finance and accountancy, we are by nature very precise individuals. So, being allowed the ‘right to fail’ is typically incongruous with the way business is organized and run. If you are trying to hit your quarterly goal, how lenient can you be about failure?”

Chua’s advice is to be smart and deliberate in how companies frame innovation. “I can afford to fail fast, as long as I have a clear vision, a broad innovation portfolio and a mix of short, medium and long-term goals. In that context, if we fail fast and have some space to shoulder occasional losses, we can then learn and move on quickly to the next opportunity.”

For more on Woodard’s findings, check out How accountants can use creative thinking at work | INTHEBLACK.

Unlocking the Power of Your Information
Clearly, the Information Age hasn’t lived up to its promise for many organizations, says an article contributed by RICOH to the August 2021 edition of Finance and Accounting Review. Which is a shame, it adds, “because if you manage your information well, it can transform your organization into an agile, quick-thinking machine that develops the products tomorrow’s customers want and gets them to market faster than competitors.”

But to do that, it points out, “you must first unlock the information – get it out of silos and create a robust system to manage it. Once you’ve done that, it can serve as a beacon to identify everything from supply bottlenecks to gaps in customer service.”

Unfortunately, many organizations don’t have a clue how to unlock their information, so, the article provides a road map:
1. Set up an enterprise-wide information management system with a high-level executive in charge (think Chief Data Officer). Gartner recommends that you also appoint a lead information steward for every business unit to help create risk controls for the information they use.
2. Conduct an audit of your company’s information to find out where the costs and bottlenecks are coming from. Legacy systems and paper documents are often culprits. Converting documents to digital makes them accessible and searchable. That will not only save money and help your employees be more productive – it can lead to new business insights.
3. Eliminate unnecessary storage space. Physical and digital storage both cost you money. Are you using the optimal combination of on-site and off-premises solutions, or is it time to make changes? This shouldn’t be a one-time exercise – technology advances quickly, and you should regularly review your systems to see if a new arrangement might work better.
4. Use an enterprise content management or data management system to shed light on the 80 to 90% of your data that is unstructured. That includes Word and Google documents, emails PDFs, PowerPoints, videos, audio files, images and even social media posts on Facebook and Twitter. Conventional spreadsheets won’t aggregate and analyze this kind of information; instead, you would need to employ a business intelligence data mining solution.
5. Apply big data analytics to your company’s information to spot trends and make predictions. With the enormous volumes of information available to be analyzed, it’s important to ask the right questions and focus on areas where you can save on costs or develop new revenue streams. Are you having delivery problems? Analyze the supply chain. Want to know what your customers really think of you? Don’t just rely on surveys, analyze data from your social media channels.

Once you unleash the power of your information, concludes the article, “there’s no going back. With all improved efficiency and insights, you’ll gain from optimizing your information and unlocking its full value, you’ll wonder why you didn’t start sooner.”

For much more detailed advice, see E-Newsletters | FEI Canada.

Canadian Offer to Host International Sustainability Standards Board Is Well Supported
CPA Canada) is pleased to be among many the private and public institutions, including the Government of Canada, backing Canada’s offer to host the global headquarters for the new International Sustainability Standards Board (ISSB).

Backed by support from both the country’s public and private sectors, the Government of Canada has formally submitted the Canadian offer letter to the IFRS Foundation. The bid incorporates an extensive collaborative effort, known as Canadian Champions for Global Sustainability Standards and facilitated by CPA Canada, that includes the largest pension funds, financial institutions, securities regulators, a leading First Nations organization, accounting firms, insurance companies, and other large Canadian companies, along with the support of the country’s six largest municipalities and a broad cross-sector of Canada’s leading business, academic and environmental stakeholder organizations.

The Canadian offer includes financial contributions for the successful start-up and operations of the ISSB, should the IFRS Foundation decide to take Canada up on its offer.

“The overwhelming support associated with the Canadian offer clearly demonstrates the breadth and depth of this collaborative effort,” says Amanda Whitewood, who chairs CPA Canada’s board of directors. “Collectively, there is strong recognition that sustainability considerations are increasingly driving investment and policy decisions both domestically and internationally.”

Once established, the ISSB will develop a much-needed set of global standards for reporting on environmental, social and governance matters. This is critical, according to a CPA Canada press release, dated July 28, 2021, because there are currently multiple reporting frameworks and standards related to sustainability. “The business landscape has evolved to the point where a consistent approach is required. As the provider of international financial reporting standards in more than 140 jurisdictions around the world, the IFRS Foundation is well-positioned to create a global set of international sustainability standards through the ISSB.”

The press release notes that Canada has long been known both for the quality of its standard setting and for its independent, objective and transparent structures responsible for the delivery of those standards.

The Trustees are expected to officially announce their decision on a new ISSB by the United Nations Climate Change Conference, COP26, in November 2021.

Rethinking Total Reward Strategies
An article in a recent issue of strategy + business, a PwC newsletter, notes that “our proprietary analysis, which uses data collected via TrueChoice Solutions, a preference analytics company headquartered in New York, shows that the relative importance of financial compensation has declined by 11% over the past decade. The importance of other types of benefits – medical, dental, vision, and life insurance; wellness and supplemental health benefits; and child care – has doubled. Work-life balance options and training and career development have tripled in importance. But HR departments, overly concerned with what other companies are doing or what benefits are most cost-effective, are not keeping up.”

According to the article, written by Andrew Curcio and Alastair Woods and posted July 27, 2021, companies need a new approach to understanding the big picture of reward that will allow employees to tailor their options. “Our data suggests that this will cost companies less than their current blanket reward packages while yielding measurable improvements in engagement, satisfaction, retention, and performance. We suggest a four-step approach to designing reward packages that are fit for today’s changing world: start with the data, customize, communicate, and continually monitor.”

In the current squeeze for global and local talent, PwC Australia decided to take a new look at its rewards and benefits options to understand what influenced people to work for the firm and stay. “Like many [other] organizations, we have been challenging ourselves to reimagine how we do things in response to the uncertain global environment,” said Catherine Walsh, head of people and culture at PwC Australia. “This drove us to consider something beyond the usual market analysis, benchmarking, and tinkering with our old systems.”

The resulting data showed clearly that, although financial reward remained important, career development, skill-building, mentoring support and well-being were much more than afterthoughts for most people, Walsh said. The analysis looked at the “whole person” and not just the “person on the job,” taking into account employees’ stage of career and stage of life. Then, using predictive analysis, the organization can restructure the menu of benefit choices.

This approach, she noted, can yield a return on investment that is up to five times by giving people what they want and not paying for things that are not valued. “From pay, bonuses, recognition, career paths, promotions, development, flexibility, and hybrid work to social inclusion and personal impact, our new model truly reflects what our people value most, depending on level and stage of career,” Walsh explained.

Curcio and Woods stress that today’s total reward offerings need to keep up with the dynamic and increasing heterogeneity of preferences and perceived values of employees. “Competitive salaries are important, but they are only one piece of the puzzle. It is critical that companies focus on the needs of the whole person and not the requirements for the job, and offer the benefits employees value.”

For much more advice, check out https://www.strategy-business.com/article/Rethinking-total-reward-strategies.

Why Cryptocurrency Transactions Matter
With the price of bitcoin in the headlines daily, and Tesla very publicly making major investments in cryptocurrencies, CFOs may be wondering if there is an opportunity here for their organization. Justin Wilcox, writing in CFO July 14, 4021, thinks yes, there are two areas where it might be useful for some companies.

Wilcox says that, for companies targeting young, affluent customers with goods such as jewelry, cars, and high-end electronics, “accepting cryptocurrency for payment can be a savvy move.” This market might appreciate not having to convert to a traditional currency to make major purchases.

Payment service providers specializing in cryptocurrencies function almost like credit card processing companies, Wilcox says, “and can enable businesses to accept bitcoin and other digital currencies for payment without having to hold them in a digital wallet. That eliminates exposure to market volatility and greatly simplifies bookkeeping.”

In addition, he points out, “the processing fees charged by cryptocurrency payment service providers are often quite low, typically 1%. That is substantially lower than the rates for credit card processing and just as easy to use once it is set up.”

You might also consider using cryptocurrencies to make payments. Wilcox writes that one of the primary use cases for cryptocurrencies is that they are not subject to foreign transaction fees. “Companies with suppliers and vendors around the world who accept bitcoin for payment may find savings by using digital currency to pay their invoices.” However, he cautions, “doing so doesn’t alleviate reporting requirements and likely means the company will have to keep some cryptocurrency on hand, which presents security and financial risks.”

Whereas banks can reverse fraudulent transactions, Wilcox explains, there is no recourse other than the legal system if cryptocurrencies are stolen. “Closely managing who has access to the company’s digital assets is crucial because, if they are stolen, they won’t be retrieved. For this reason, cybersecurity measures to protect your accounts from hackers are paramount.”

For more advice on what you need to know, see Why Cryptocurrency Transactions Matter - CFO.

AICPA And CIMA Support Expanding IFRS Foundation Constitution to Include Sustainability Standards
The American Institute of CPAs® (AICPA) and the Chartered Institute of Management Accountants® (CIMA) support the IFRS Foundation’s intention to amend its constitution to include the development of globally accepted sustainability standards. As outlined in their response to the IFRS September 2020 consultation, the two bodies believe that “this is an important step forward. We are broadly in favour of the proposed amendments and the consequential changes that are suggested in your consultation document of 30th April 2021.”

In a letter date July 22, 2021, the AICPA and CIMA note that it is their long-standing view that, for any new standard setter to be a success, including the yet to be constituted International Sustainability Standards Board (ISSB), it must adhere to the following criteria:
• Independence – The body should be independent from the undue influence of its constituency.
• Due Process and Standards – The body should follow a due process that is documented and open to all relevant aspects of alternatives. The body’s aim should be to produce standards that are timely and that provide for full, fair, and comparable disclosure.
• Domain and Authority – The body should have a unique constituency not served by another existing Accounting Principles Rule standard-setting body. Its standards should be generally accepted by its constituencies.
• Human and Financial Resources – The body should have sufficient funds to support its work. Its members and staff should be highly knowledgeable in all relevant areas.
• Comprehensiveness and Consistency – The body should approach its processes comprehensively and follow concepts consistent with those of existing standard-setting bodies for analogous circumstances.

According to the letter, “reporting standards derive their legitimacy from the confidence that they are established, interpreted and, when necessary, modified based on independent, objective considerations. The development process must be free – in both fact and appearance — of outside influences that inappropriately benefit any particular participant or group of participants in the financial reporting system. Even the appearance of outside influence could create doubts about the integrity of the system. That’s dangerous because once confidence in the process is lost, then confidence in the standards themselves and the willingness to follow them will erode as well.”

In revising the constitution, the letter continues, “IFRS Foundation Trustees need to ensure that its remit and purpose is expanded to include the creation and work of the ISSB while maintaining adherence to the above criteria. We therefore agree that the expansion of the remit suggested reflects the intended new dimension of the Foundations’ work.”

For a little more, see the whole letter at Comment letter on proposed amendments to IFRS Foundation constitution | News | AICPA.

Keys to a Psychologically Safe Workplace
Employers who recognize and prioritize psychological safety alongside physical safety in their post-pandemic operations can help employees’ mental health and their own efforts to cultivate inclusive workplaces. According to a post on the McKinsey and Company’s webpage July 15, 2021, “this support can have concrete effects on critical workplace outcomes, including employee well-being, satisfaction, productivity, and absenteeism. Employers can take immediate actions to support employees’ safety concerns and need for flexibility in the return to on-site work; over the longer term, they can continue to evolve operating models and workplace culture to support mental health, belonging, and flexible ways of working.”

Consumers who expect going back will have a negative impact on their mental health overwhelmingly attribute it to concern over safety and protection from catching COVID-19, as well as to concerns about scheduling flexibility. These pre-return concerns, says the post, “largely align with the experiences of those employees who have already returned to on-site work. Among those who have experienced negative mental health impacts of returning on-site, the top drivers have been concern about their own safety due to COVID-19 (45 percent) and risk of contracting COVID-19 and transmitting it to unvaccinated or at-risk children and loved ones (29 percent).”

As employees return on-site from remote work, the post cites the survey findings that COVID-19 safety and flexible work arrangements could help alleviate stress. “Among safety interventions, improved air filtration was a core request, with 62 percent of respondents reporting that it could decrease the stress they experienced from returning on-site. Employees also request autonomy in determining when and where work gets done: of those who have returned on-site, a majority report that flexible work schedules (60 percent) and hybrid work arrangements (57 percent) could reduce stress. Overall, in an era characterized by increased demands at work, at home, and in society, the request that employees make most often is more time. Close to two-thirds of employees (62 percent) report that additional time off could alleviate stresses associated with returning to on-site work.”

For more on the survey findings and suggestions as to how employers can design their return-to-work plans to foster the positive impacts of on-site work, see Return to work in a psychologically safer office | McKinsey.

What Are Non-Fungible Tokens (NFTs)?
Increasingly, it's crucial for accounting professionals to be at least somewhat familiar with blockchain, cryptocurrency and other forms of future-focused technology that are quickly changing the way the world does business. In a post on accountingWeb July 22, 2021, futurist Ian Khan encourages you to learn about non-fungible tokens, or NFTs, which are based on blockchain technology.

“An NFT, or Non-Fungible Token, is something that I expect accountants to jump on and understand without being asked,” Khan says near the beginning of his post.

NFT marketplaces offer the ability to create a non-fungible, tokenized version of anything, he explains. “A photo of something is a good example. You could create a painting or take a picture or maybe have a digital piece of art (that was created digitally in the first place). This art can then be sold on the NFT marketplaces as a unique item. Every time you sell a piece of your art, it will be paired up with and tagged with a unique entry on a blockchain, generating a unique digital string that can never be duplicated. This unique string can then be traded for cryptocurrency, and NFTs are born.”

Professionally speaking, Khan says, “my guidance on NFTs is to study the market and understand how digital technology is growing and impacting multiple things, such as virtual reality, cryptocurrency, artificial intelligence and more.”

He also highly recommends that accounting professionals “be aggressive and position themselves as NFT Industry Specialists to gain an edge when attracting new customers and building trust with existing ones. As an accounting professional, your expertise is not just crunching numbers but helping client s understand the disruption in various industries when it comes to numbers. Traditional accounting roles will be taken over by technologies such as AI in the next decade or so, and you will need to start working on acquiring new skills right now to be future ready. Why not start today with NFTs?”

For the fine details, please check out What Are Non-Fungible Tokens (NFTs)? (accountingweb.com).

 

Strengthen Your Business While Preparing for Future Slowdowns
In the aftermath of COVID-19, what should owners and operators do to not only adjust and compensate but to strengthen their businesses while also preparing and being flexible for any future slowdown or shutdown? That’s the big question asked by Kevin Clancy and Cynthia Romano in the July 13, 2021 on-line issue of CFO. They then go on to make some useful recommendations, such as:

Resize operations: As lockdown restrictions lift, CFOs first need to determine, based on current indicators, what demand will be, how much and for what offerings, and resize operations to account for the fact that they may be operating a different size or different model business post-COVID. Importantly, companies need to optimize their cost structures to account for current and near-term demand, not 2019 demand.

Refocus products: The question is, will shopping and consumption habits revert to what they were pre-pandemic? The answer is, probably not. For example, with movie production companies offering consumers in-home streaming of first-run movies during the pandemic, will people be clamoring to go back to the theaters? Nobody knows. But, at least for the near term, it is unlikely that behavior required during the pandemic will immediately (if ever) be abandoned in favor of pre-pandemic patterns of living. So, businesses need to take a close look at their products and services pre-, during, and post-pandemic. Many businesses will find that their value proposition has changed.

Reduce Risks. Many companies that faltered or failed during the pandemic were already unstable. Now is the perfect time to conduct an internal assessment with the results incorporated into a go-forward program that focuses on lowering risk and increasing stability.

We recommend an in-depth financial analysis to reduce balance sheet liabilities, improve P&L bottom line, and maximize free cash flow. This would include an examination of the risk factors connected to each item of each statement with appropriate mitigation steps put in place.

Reanalyze capital: While capital generated from efficient operations is ideal, working capital and expansion capital are often necessary for getting a business up to its flying speed. Whether the business is simply looking to normalize its operations or seeking expansion opportunities post-pandemic, a capital markets transaction may be an ideal approach. Traditional financial sponsors such as private equity firms have been sitting on dry powder for years and, since the middle of 2020, deal-making activity has ramped up considerably. It is presently a very frothy, very busy seller’s market. Take advantage of the timing to divest what is non-core but valuable to someone else. Look for good deals, usually with some hair on them, where the seller’s need to transact drives a more reasonable purchase price.

For all the useful details, go to Your Business Survived the Pandemic – Now What? - CFO.