The following content is a detailed outline of Episode 5 of the GAAP Chats podcast. It does not represent a full transcript of the show. You can listen to the full audio here.
Mike: We’re shaking things up a little bit on today’s episode of GAAP Chats. We’re hosting our first guest and we didn’t have to look too far to find her! It’s our colleague, Vicky Hale, Chief Learning Officer of GAAP Dynamics. Chris, Vicky, and I will discuss current learning & development trends for CPA firms by looking at some of the recent training projects that we’ve been working on with accounting firms of all sizes. We’re doing this because, as we’ve learned over the past 20+ years, if one firm is doing it, there’s a pretty good chance that other firms should be doing it too! As they say, “sharing is caring” and we here at GAAP Chats want to share our experiences to help you help your professionals be AUDIT they can be…see what I did there?
Welcome to GAAP Chats, the podcast dedicated to all things accounting brought to you by GAAP Dynamics. I'm your host, Mike Walworth, and with me, as always, is my faithful partner, Chris Brundrett. We hope you'll join us on our journey today as we share our passion for accounting, and help change the way you train.
Good morning, Chris. How are you today?
Chris: I'm doing great, Mike. How are you?
Mike: I'm doing good. Exciting time here at GAAP Chats. We're inviting our first guest. It is our colleague, Vicky Hale. Vicky, why don't you say hello to the audience?
Vicky: Hello, audience! Thanks for having me, Mike and Chris. I'm happy to be here!
Mike: Oh, it's our pleasure. Vicky, before we get started, why don't you just give people a little rundown of your experiences, and kind of what you do at GAAP Dynamics?
Vicky: Yeah, absolutely. So, I've been at GAAP Dynamics for ten years now, and I started as a training specialist, and I've gotten my hands in all the cookie jars here at GAAP Dynamics. So, I developed training, facilitate training. I head up our e-Learning programming team, and just love to dabble in all things learning.
Chris: So Vicky, you have quite a lot of insight into what's going on these days with not only our projects internally, but really what's impacting the audit firms that we work with. I think that's what we're going to focus on to start is this idea that there is a renewed focus out there on audit quality. I know we've been working on some projects related to audit quality, but we've been hearing a lot out there from our former colleagues that work for audit firms, as well as various audit firms that we talk to at conferences and things like that. So, what are you seeing out there, this renewed focus on audit quality? Why is this happening now, and what are firms doing about it?
Vicky: You know what? I actually might kick it over to Mike. He brought me on the podcast, so I think I might throw him under the bus first. Mike, I'll kick it off to you to start us off.
Mike: Well, just a disclaimer here. Neither Vicky nor Chris actually know what we're going to talk about today. We certainly have some bullet points, but I will kick us off. As Chris mentioned, it is this kind of renewed focus on audit quality. So, why are we here? And, this is just my opinion. we have seen, because we look at PCAOB inspection reports of the firms that get inspected annually, and we have seen the PCAOB take their pound of flesh out of the Big 4. Big 4 deficiency rates spiked up in some cases almost 50%. These firms spent millions, tens of millions of dollars addressing these PCAOB deficiencies. Now, they are at a point where those deficiency rates for the Big 4 are coming down quite substantially. The last time I looked, I think there were two of them that have single digits deficiency rates. Am I remembering correctly, Vicky?
Vicky: Yes, that's right.
Mike: Yeah, so the PCAOB has kind of had their pound of flesh from the Big 4, and then COVID hit. Chris, you and I were talking about this earlier, but do you think people took a pause a little bit?
Chris: I think the whole world took a pause. And certainly there was a lot of focus on just daily life and other things. We had the transition to “work from home”, and then a lot of people came back into the office. It certainly had a major impact on the audit world, trying to do audits remotely. But it also impacted the PCAOB themselves. I mean, looking at the inspection process, that certainly changed quite a bit during COVID. So, I feel like we're kind of getting back to normal, or the new normal now. We're seeing that might be part of the renewed focus. You know, Mike, if I might add, you were mentioning that the firms had their “pound of flesh” from the Big 4, and now they're moving to outside of the Big 4. I think another reason for that may be because we're seeing more PCAOB audits taking place at smaller firms than before. Some of that is because the PCAOB had such an impact on the Big 4 that we've seen Big 4, in some cases, shedding some of their smaller public companies because of all of the processes that they have to do. With all of this focus from the PCAOB it's almost like, well, let's maybe shed some of these smaller, less profitable, public companies. Well those companies still have to be audited. So we're seeing some smaller firms picking those audits up, and getting into the PCAOB space where they may have not been before. That's certainly going to catch the eye of the regulators.
Mike: Yeah, it's interesting you say that, Chris, because one of the firms that we recently did an engagement for is a top 30 firm, and they want to get bigger. They want to move in the top 25 or top 20, and they are actively soliciting PCAOB engagements. That’s funny because firms can go either way, right? They can say, “ Nope, I'm not going to do them”, or “I want more of them.” This firm wanted more of them. With the renewed focus by the PCAOB, the PCAOB inspectors are certainly going to come into these firms that are not the Big 4.
So, the PCAOB inspectors are coming in. What we're noticing among some top 30 firms in the last month and a half is unprecedented. I mean, GAAP dynamics is focused on accounting. I would say that based on what we're seeing, we as a company have decided that one of our main clients is accounting firms, and they do audits. So, we should probably be in the audit game as well. Now, we've always done an audit update and we've always done PCAOB inspection findings and stuff like that. But I think, really, there's a renewed focus on audit quality and audit training. One of the biggest areas is internal controls and risk assessment. Why do you think that is, Chris? Why do you think they're focusing on internal controls and risk assessment?
Chris: Well, it's certainly been one of the top areas of PCAOB inspection findings over the years. I think that's part of it. As firms are gearing up to do PCAOB audits, or more PCAOB audits, they really need to focus on that part of the process.
Mike: Yeah, I mean, it goes even a step further. So for one of these firms, I actually had to get my hands dirty again and get up into internal controls. Understanding the entity, including its internal controls and the risk assessment process accounts for 45% of all audits that were nonconforming. The AICPA did a peer review and 47% of all audits were non conforming. That means that they weren't in compliance with GAAS, mainly because of internal controls and risk assessment. So, this has become a huge factor. I think the important point here is it's not just PCAOB, peer reviewers are also getting into this. Accounting has had peer review since before us even. It always used to be kind of, and I don't want to disparage the profession, but it was a little bit like, “Hey, I'm going to review your audit. I'm going to tell you some things that are like glaring instances, but I'm not going to bust you too much because I know then you're going to bust me.” It was a “I'll scratch your back, you kind of scratch” mine sort of thing. Well, the PCAOB turned that on its head, right? They said, listen, we're going to do a regular inspection and if it's deficient, it's deficient. Peer reviewers are catching on to the memo now.
Chris: I certainly don't think there was ever any malicious intent, right? I mean, we're not saying that, but just by its nature, the peer review program wasn't super independent, especially as you had consolidation of the bigger firms over the years. I mean, it was the Big Eight and now we're down to the Big 4. So, it really becomes a less independent group. The PCAOB being around now for 20 years or more at this point you know, that is truly an independent organization to provide these types of inspections. We've talked about PCAOB, we've talked about peer review, I know we've been talking a lot about outside of the United States and some of the rules on an international level. Then there is this idea of ISQM. Mike, can you tell us a little bit about that?
Mike: Sure, that's the International Standards of Quality Management. But, I've got to take a step back because as I've gotten back into audit I realized that the international standards on auditing, and generally accepted auditing standards (GAAS) are more or less converged now. Which is good news for us, Vicky, by the way, because that means we're not going to have an international audit library and a U.S. audit library. We don't need that anymore. We can just have one audit library, and I think you're going to need some stuff for PCAOB but that needs to be extra because PCAOB has extra stuff in it. But generally speaking, to answer your question, Chris, the International, the IAASB and the Accounting Standards Board (ASB), which is an arm of the AICPA, have really kind of come together and converged. All the old standards and any new standards that come out are converged. One of those things is the International Standard on Quality Management, ISQM. Basically, if I had to describe it, I would say it's going to be like Sarbanes-Oxley (SOX) was for public companies, right? Accounting firms need to have internal controls and quality management in place to make sure that they're doing quality audits. ISQM is effective now, I believe, for international accounting firms. International accounting firms are having to comply with that now. We have a similar standard in the United States, the SQMS, Standards of Quality Management System, that's applicable for audits ending on or after December 15th, 2025. So, the audit firms in the United States have a few years to get their “houses in order.” I think that is why we're seeing this tremendous influx in wanting auditing training. Companies are thinking this is going to be one more thing that the PCAOB and peer reviewers will make sure we have in place. That inevitably means training. You know, I think all the inspectors are saying, listen, your people need to understand the rules of the audit and the rules of the applicable accounting framework, which is GAAP.
Chris: There also needs to be proof or a record that there has been proper and official training that's taken place. I asked you about ISQM, and that has impacts all the way across the firm from a quality control perspective, as you mentioned, but it trickles all the way down. We're in the training world and our clients, the learning and development departments, are also having to deal with ISQM when it comes to training. I mean, there are certain parameters around training and review of training materials and things like that. So this is pretty extensive stuff, and it impacts the firm in many, many different ways.
Mike: Yeah, I mean, you're right. We did one this year, right? It's been a long time client member firm of a Big 4 network that we've done for years. They actually required us to review our training materials to make sure it was all related to ISQM.
Chris: Review our training, which was something we'd never done before, right? No, I'm just kidding.
Mike: We review it internally and we're all CPAs and we have to follow the NASBA process. But, they had their professional development department review our training materials to give them the “blessing.”
Chris: Sure. And that was great. I mean, it's always great to have another set of eyes on things that people come from a different perspective.
Mike: Definitely. So, that's the first trend: renewed focus on audit quality, and renewed focus on audit training. Like I said, there's been at least four firms in the past six weeks that have kind of come to us about that, and I expect many more. So, we have this special guest here with us. So, Vicky, I'm going to ask you, what's a trend in learning and development for accounting firms that you're sort of noticing, or that you want to alert to our listeners?
Vicky: Yeah. So, if I think about it kind of holistically, first, I think the biggest thing I notice is a shift over the past few years is the modalities by which training firms are offering training. So, if I think about how our company started and how we existed pre-pandemic, it was almost all live classroom training. Nobody knew so many different webinar platforms existed. People were just beginning to dabble in eLearning, but it wasn't a big deal. Everything was pretty much classroom-based, and you brought everybody together for these big week long boondoggles, etc. Obviously, when the pandemic hit, that shut down fast and people had to find a way to still get their learners, their auditors, the CPEs that they needed to maintain their accreditation. So, everyone quickly shifted and jumped on the webinar bandwagon that we all now probably love so dearly. I think now what I see is most people expected that we would shift back into the classroom post-pandemic. As we're talking to our clients and our prospective clients and we're asking what is your current training environment, we're seeing that shift just quite simply isn't happening. If anything, what we're seeing is more variety in the ways that training is being offered. You might see some classroom training, if it strategically makes sense. But more often than not, what you're going to see is that most accounting firms have really embraced this new world of online training and especially live training via webinars and even a little bit more into this eLearning realm.
Mike: Yeah, I got to so I got a question for Chris first. Chris, do you like going out in the classroom?
Chris: I love it. I mean, it's one of the reasons I joined this company 17 years ago. You know, as Vicky said, that's predominantly what we used to do. Thankfully, we're getting back into it and we are doing some classrooms. So I get to do that sometimes.
Mike: But how much have we got? I mean, is it back to normal for us?
Chris: Absolutely not. Absolutely not. I mean, there were years where we did, you know, 500 plus training days out on the road. Obviously not just me. That's more days that are in a year. But, you know, I think this year we probably did, if I had to guess, less than 20 days in the classroom. We definitely have seen a longer-term effect, I think, of COVID and the shift to webinars. And that's okay. I love doing webinars as well. It is convenient, and as the instructor, you don't have the travel to worry about, but for companies you don't have to bring people together. It's been very convenient for companies or firms that have people spread out in different areas. It's convenient to bring people together virtually and also cost savings. I mean, let's face it, flying everybody in for a boondoggle at a hotel and training costs a lot of money. What we're seeing with some clients is kind of a combined approach, because there is value in that classroom environment. Younot only get the one true in-person interaction, but you also get the ability to network. For a lot of companies and firms, it's the after class activities that are really important to them. So, I think going forward we're going to see kind of a hybrid approach. Maybe for cost savings for some training we'll do webinars, and then maybe do some strategic, in classroom training. So, you know, it's been kind of an interesting trend as we continue to come out of COVID.
Mike: Now, Vicky, as Chris talked about, webinars and live training and webinars I think are here to stay. The other thing I just realized is you were talking, Chris, I hadn't even thought about this, but webinars by their nature are chunk-able. A more-than-two-hour webinar is just a no go, right? I mean, so people, if you're listening to me, if you're planning a webinar, it needs to be like an hour, hour and a half max. Really, anything more is just you're going to get people multitasking and such. Vicky, as you know, we have a third “modality” as well, and that's eLearning. And as I understand you had an interesting conversation with a Big 4 firm regarding live or classroom training versus eLearning versus whatever. What did that firm tell you?
Vicky: Yeah. So, I mean, you've got to think about the scenarios that your people are in. A lot of firms still have people that are working remotely and can't come together, maybe for live classroom training for some of the reasons that Chris has talked about, or aren't comfortable being in that live setting yet. So for some scenarios, you need to be able to accommodate both types of people because there is value in both types of training. Some firms will have the same content offered, kind of dual modality. So, there is a live option, but there's also this self paced eLearning version available too for those who can't attend live, or are working in a different way that makes more sense for them. Also there's a fourth way out there too. It’s this blended learning, which I think is what we will really see as we move forward. So, thinking about how people live and work now and also what the best way is to offer that content you're trying to teach. Some of the firms we work with will actually take some of the eLearning courses that, in nature, tend to be a bit more basic in terms of the structure of their content, and have their learners take that at their own time when it's convenient to them. They save that live training that is a little bit more costly, that is more interactive, for when you're talking about more complex issues. So, okay, you've now reviewed the basics of Fair Value. Let's now shift to this conversation. How do we audit this estimate? We can get into a more structured conversation there.
Mike: Chris is raising his hand via Zoom. What are your thoughts, Chris?
Chris: So, as Vicky was talking, and I was sort of reflecting, there's actually two projects that we're currently working on that I think really highlight these trends. The trends that Mike brought up, as well as what Vicky is bringing up. One is for a large member firm of a Big 4, and it's audit training. It's audit training for new hires up through their third year with the firm, and it's being done virtually via webinar. To your point, Mike, of not having webinars too long, they meet in the webinar platform and then they go off and they do group work or self work and then they come back. So, while it's a whole day, they've got sort of the mixed modality that you were mentioning, Vicky, to kind of keep these short. We discussed with them whether they were going to go back to live. The reason they went to this webinar based format was COVID. As we mentioned, it used to be live training. Well, guess what? They have so many people that they have to train across a pretty wide geographic area that they can't possibly do it live.
They could not train that many people in the time frame that they need to train them by going back to the live. So, it's kind of interesting. We always expected it to go back, but this is truly a constraint of time that's causing this issue. Then the other one, which is really a development project that we're working on and helping facilitate. This development, to your point, Vicky, is a future program for a Big 4 firm, but it's totally mixed modality. There's e-learning components for the basics, then a live component for some of the more detailed and nuanced stuff. Then there's going to be a webinar component for some sort of add ons and things like that. So it's just to me, I'm a training accounting nerd, I guess, if you will, but it's just sort of fascinating to see how things have evolved, you know, forced by COVID but now evolving because we've sort of seen the light of other ways of doing training.
Vicky: And I will say, you know, for anybody who's listening, who's thinking, well, great, we'll just get rid of classroom training altogether. I have heard from some firms that they're starting to bring it back in certain circumstances. For instance, if you've got associates who started a few years ago, they might not even have met the rest of their teammates yet because they could have been all remote. So, in some strategic instances, you're actually seeing a shift back into the classroom very purposefully so that you can make those human connections.
Mike: I have questions for both of you. To your point Vicky, a very good friend of ours, former Big 4 colleague of ours, has now raised the second generation of accountants. His daughter started with a Big 4 firm. She's been there six months, nine months now, and hasn't even been in the office once. My brother, who works for a Fortune 500 company here, and one of his colleagues has a daughter working for a different Big 4 firm here in town. She also hadn't been in the office, and was being sort of body shopped to other firms. Right, to just work remotely, and she never met her teammates. This is what you were saying, Vicky. Guess what? Both of them are considering quitting. So, the question is, do we get back to the office? Do we not? I'm telling you, these young kids, they ain't scared of the virus. In my personal opinion you need to get back in the office because you're going to lose all those people, or a lot of the people. Now again, we can talk about a blended approach there, too, right? I mean, you know, this idea of work from home, or work from where you're most efficient, I got it.
But think about our Big 4 careers guys, what would we have been if we'd have been sitting at home every day? You wouldn't learn. I learned by being with the partner, and I learned by being with the manager. So that's my first sort of take on this. You said it yourself, Vicky, companies purposely trying to bring people back together again. So, I think that is sort of indicative of what I'm saying now.
Chris, on yours, I have a question for you. You talked about these two projects, and I am going to focus on the one where they're doing this audit training and they train all these massive people. My question for you is: Audit training typically has been an internal thing. So, if I think back to my days at KPMG, the audit methodology training was done by KPMG employees. So, why is this Big 4 firm or member firm of a Big 4 network hiring us? Like, what's what's going on? Do they not have the staff or what?
Chris: Well, that's a great question. There are staffing issues, number one, because of turnover, and the great resignation. We've all heard about it. We've read about it. We don't think we need to tell our podcast listeners what that all is all about. But, certainly coming out of COVID, when the great resignation started, that created an issue for this firm. They were losing some of the seasoned or people with experience that could teach these courses. There’s also cost and reliability. What I mean by that is there is a cost of using an internal person at an audit firm, and taking them out of revenue-producing work especially when there's a limited number of people because you do have constraints on resources. It doesn't make sense from a cost perspective. In the long run it becomes cheaper to hire someone from the outside.
The other issue is reliability. I'm certainly not trying to be critical of the people, but we've seen this with all of our clients for years pre-COVID. This has always been an issue where if you have people that are normally in the field, you know, audit professionals and you designate them to do some training, oftentimes they get pulled back into the field. You know how it goes. They’re on a job, it's taking longer than they expected. There's a crisis at a client. The client does a transaction of some sort. The partner doesn't want them to leave anymore, so they get pulled at the last minute. That creates a real issue for the people, right? Because they've scheduled the training it needs to happen and they don't have someone there. So, you know, that's the other reason why they're looking outside is that element of consistency and reliability.
Now to round out with this project, it's actually a combined approach. It's someone from our team that's the constant. Then there are people from the field that are co instructing, but there's at least one person that will always be there no matter what happens. So, it's kind of a neat combined approach that we're doing there. And you get some of the professional training experience along with the real world experience and that makes for a pretty cool model.
Mike: Yeah, and that co-facilitation model sort of helps with the firm's own methodology, and the firm's own technology and resources to sort of make sure that they have a firm-voice there along with our voice. If you're thinking about any training, that co-facilitation model does work well. Last topic, Vicky. I know there's one that you want to talk about and it's and it's not specifically a trend for CPA firms, but it is a trend for all companies that do training. And it's this idea of accessibility. What are we talking about here? So like, if you can just talk to us a little bit about accessibility and then what you're seeing out there in the market.
Vicky: Yeah, absolutely. So, you know, we do a lot to try to keep up with L&D trends in the virtual space because we do a lot of virtual training. In accounting, maybe it hasn't picked up as much traction, although certainly with the Big 4 firms it has. But as you look holistically across the L&D community, the hot buzzword right now is really going to be accessibility. That can sound probably a little scarier than it in fact is in practice. But it's really just making sure that as you are designing training and facilitating training, you think about the kind of people who are going to be consuming that. It can run the gamut really in terms of how much changeyou're willing to invest in what you're doing currently to make things more accessible. But even if you think about this podcast right now, if all we were to do was just record this audio, it is only going to be accessible by somebody who is hearing enabled. You know, if you can't hear, you can't listen to this podcast because all we're doing is recording voice.
However, we can transcribe that audio, which we do, and make it available with the hyperlink on the page where we host this podcast then it’s accessible by a larger audience. That applies to really all of the training that we do. There are some changes that you can make that are very simple. For example, looking at the contrast between colors. You don’t want red text on a gray background because it’s not going to be readable by someone who is red/green colorblind. They won’t be able to make that distinction. Thinking about how people navigate in an eLearning. There are certain activities like drag and drops with instructions like “drag this into the right bucket.” That is really something that only a sighted person is able to truly do. If you are navigating with a keyboard there is no way for you to click that element to be able to drag it and drop it into the right bucket. So you might have to design that element differently.
Mike: So Vicky can you explain how some companies are dealing with this to make their eLearning more accessible?
Vicky: First all it depends who you are. If you work for a government agency, this is something that has been required for quite some time. But accounting firms are probably just getting up to speed on accessibility rules and requirements. Most of the big firms now are pushing to make all of their materials 508 compliant. That is sort of the bar that you seek to achieve is you are trying to make things accessible. Not a requirement at this time, but it is something to think about. For most of us what this means is looking at the colors that we are using, the combination of colors, even if it is just a powerpoint. Text color, background color, box colors, things like that. There are online checkers that you can use and enter in the colors and it will tell you if the combination is sufficient for someone to use if they have visual problems. Quite honestly, as some of us are getting a little older it’s easy to see that just naturally. I can look at something and say that “font is too small”, or “that color doesn’t go well with that other color.” So those are easy changes to make. Another thing if you are in an eLearning space is thinking about the ordering of the elements on the slide. So knowing how many people will navigate through the course using a tab key, if they are navigating the keyboard or arrows. Or, something that we have done for another client, who wants their course to be fully accessible, but maybe not in the actual eLearning course so we can keep some of those elements like the drag and drop. We create what we have termed the Accessible Course Index. It's a PDF document that is readable by a screen reader and takes you through all of the content and interactions of the course, but obviously in a different way than a traditional eLearning course would. So, this would be for a non-sighted person to navigate with a screen reader but they could still answer all of the questions, complete the PCA, and get their certificates, and to be honest, it is a great resource for a sighted person too. It's a PDF that you can also attach with the eLearning so they have the content to take with them as they go.
Mike: I know that there is a lot of technology too. So, we use Storyline and they have accessibility in mind. Is that true?
Vicky: Yes so, they have made a lot of advancements in the past few years. If you are someone who creates eLearning in-house, or contracts with vendors to access to accounting eLearning, definitely be aware of that. There have been a lot of changes. Push back on your vendors and look at your own products and see what updates have been made that will enable you to think better about the other people who are using your training.
Mike: So, is GAAP Dynamics eLearning accessible yet? No. But we are going to talk about that. What plans do we have in place?
Vicky: Yeah, so one of our digital eLearning specialists, Patrice, has been doing a lot of research on accessibility. She has a whole suite of suggestions on how we can improve our eLearning going forward. So we will definitely be implementing more of those changes in our Audit training we are about to release, and in our IFRS training we’ll be adding to our library.
Mike: Vicky, thank you so much for joining us today. We’ll have to have you back. Chris, I know you had your doubts about this podcast episode. What are your thoughts on how it turned out?
Chris: I’ll just leave that up to our listeners. That’s all for this episode of GAAP Chats, your source for all things accounting. Notes and resources from today’s episode are linked in the description and as always you can find us online at GAAPDynamics.com, and @gaapdynamics across social media. It’s never too late to become a GAAPologist! Head over to our website and subscribe to our blog so that you’re the first to know what’s new with GAAP Dynamics.
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