Vice President International Advocacy – The Association of International Certified Professional Accountants
This year’s pandemic has meant that many companies had to fundamentally change their business model and accountants are proving to be critical in helping them do that. Samantha Louis highlights the vital role that the AICPA plays in supporting the modern accountant.
CIARAN RYAN: This is CFO Talks and today we’re speaking with Samantha Louis. Samantha has been cited as one of the top ten most influential people in public relations, and with good reason, she’s involved with public advocacy on behalf of the Association of International Certified Professional Accountants. She’s also a fellow of the Chartered Institute of Management Accountants and has an MBA from the Gordon Institute of Business Science. She’s got extensive experience in advocacy on behalf of professional bodies, such as the Association of International Certified Professional Accountants. First of all, welcome Samantha, I know that normally you are in London but at the moment you happen to be in South Africa, explain to us why do you end up back in South Africa?
SAMANTHA LOUIS: Thanks so much and it’s great to be with you today. Well, as we speak, London is going into a lockdown because of Covid and I was planning to come and visit my family over Christmas, so I thought given that we’re working from home, it would be great to just come a little bit earlier. So I managed to get out of London two days ahead of the lockdown, which was great.
CIARAN RYAN: And where are you, in Johannesburg?
SAMANTHA LOUIS: I’m based in Johannesburg at the moment, working from home.
CIARAN RYAN: Okay, we’re also joined by Nicolaas van Wyk, who is the Chief Executive Officer of the South African Institute of Business Accountants. Hello, Nicolaas, how are you?
NICOLAAS VAN WYK: Hello, Ciaran, hello, Samantha, nice sharing the platform with you today. CIARAN RYAN: Samantha, your job involves articulating policy positions of the association on a number of issues and these include trust, technology, tax, talent, transparency. There are a lot of T’s in that. Explain why accounting professional bodies need advocacy units.
SAMANTHA LOUIS: No problem at all. So why advocacy? Well, really there are three things that we do as a team, it’s about softening risk, seizing opportunities and sustaining relationships. One of the key things we’re involved in is thinking about the law of unintended consequences. We cannot expect parliamentarians around the world to be experts in all subjects, and particularly in accounting and auditing profession, some of it’s pretty technical. So we’re able to provide independent research and thought leadership that helps them to put together laws and regulation in a way that does not have unintended consequences that could hurt individuals or the economy. The profession really is here for good, it tries to [indistinct] trust, opportunity, and prosperity for its members, their employers, and the wider economy and society. Now, our T’s, which everybody teases me about, is about really the sorts of issues that we are thinking about as a profession. One of the primary ones is talent, and every organisation in the world is thinking about how do they get the most competent, best qualified people to work in their organisation and how do they develop them to give them that productivity and skills edge. There are a few things that we look at from an advocacy point of view, just to give you a bit of a flavour of what we might do. We look at issues around skills development, making sure that legislation in the country allows skills development to happen. One of the things we’re thinking very carefully about is retraining, as we’re seeing the kinds of skills needed for business and in the profession changing. We also do a lot of work around apprenticeships, or learnerships as they’re called in South Africa, which is a really important tool for social mobility because students can study and earn at the same time, they don’t need to get into debt through student loans. After three to four years, not only are they qualified, but they also have demonstrable quality competencies in the workplace to do the job. So those are some of the things we look at, recognition of the qualification, global mobility and skills development to boost productivity, and that’s just one team.
‘Accountants need to be really careful of deals that seem to be too good to be true’
CIARAN RYAN: What are the big issues that are concerning you at the moment in terms of your advocacy work? Internationally there’s a lot going on, as you said, there’s a need for re-skilling of accountants – and Nicolaas, I’m going to ask you that same question in a minute as well – but first of all, Samantha, what are the big issues at the moment?
SAMANTHA LOUIS: Well, one that we absolutely can’t escape is technology. So we are seeing massive changes in big data, cyber security, blockchain, artificial intelligence, and all of those are really impacting on how businesses are run, how they are able to project themselves and, indeed, even survive and thrive during the Covid-19 crisis. So technology is one of the big issues that we’re really thinking about. Tax is another one, what makes for good and efficient tax administration. We know that governments around the world have been borrowing money to support their economies, at some point there’s going to be a payback required. So what are the principles for good taxation. Things like equity and fairness, certainty, and simplicity, neutrality. So we look at issues around tax efficient administration, and one of the big issues that’s occupying government minds around the world is the issue of digital services tax. So this is a global issue because countries are grappling with how to get an equitable share of digital services sold in their country. We also see countries that compete on tax regimes in order to attract business and inward investment. So we’re fully supporting the principles being developed by the OECD, which are due for release late this year, early next year, in terms of how governments around the world could cooperate on international digital services tax.
Another key issue is transparency and trust. We’re doing a lot of work around money laundering, making sure that our members are up to date with anti-money laundering rules and regulations, we’re a supervisory body in terms of anti-money laundering. Often accountants need to be really careful of deals that seem to be too good to be true because they probably are. Ethics remains a key component in our work, of course. Then in corporate reporting we’re seeing real fundamental changes to how people are thinking about corporate reporting frameworks, particularly with regards to sustainability and ESG and integrated reporting. One real growth area, which is not a T, is non-financial information and reporting. We’ve seen this develop hugely quickly as the business world seeks to really understand how to report on more than just the financials of a company because we’re seeing the really big investors like BlackRock look very carefully into the purpose of a company in conjunction with how value is created by the business model. South Africa has been a pioneer in this field but right back to probably the King II committee reporting to corporate governance. So we’ve got a really good track record here.
CIARAN RYAN: Nicolaas, maybe you can jump in here. I want to pick up on that point that Samantha raised about the need for re-skilling accountants. Now, as head of the South African Institute of Business Accountants, you’ve put a lot of effort into continuous professional development and also providing these licenses, these additional skills like business rescue, independent review and so on. Just talk about that for a minute, where are these skills gaps, in your opinion?
NICOLAAS VAN WYK: Like Samantha has said, there’s a whole change now with Covid and the lockdown, so everybody had to relook at their business models. We are quite fortunate in South Africa that we have as an organisation a relationship with CIMA. I think they are the standard setters when it comes to identifying skills gaps and fulfilling them with their curriculum. So we learn a lot from them and, as I said previously, we also partner with them on making available the online education tools for local accountants. So what we what we see happening is because the environment is changing so fast, accountants have to up-skill themselves really, really quickly. So they need access to our range of CPD courses or licenses to develop and specialise into that area. It’s also for that reason that we developed our designation CFO (SA) because what we’ve seen is that at the FD level there are also significant changes, developments. So you need a designation reflecting your accomplishments. But I think what’s important from an association’s perspective is closer cooperation, support and the work that CIMA is doing at the OECD level, influencing policymakers is quite significant because as they do it, as the European Union discussed their policy issues, it obviously has an effect in Africa and South Africa specifically, and government needs all the assistance they can get.
The Brydon Report brought out a redefinition of what audit should be
CIARAN RYAN: Samantha, I want to just bring you back to the advocacy issue here. Presumably you’ve seen the Brydon Report that was issued more than a year ago, which proposed some fairly serious reforms within the accounting profession, including the separating out of audit functions from other functions, such as consulting, and it also recommended training around forensic accounting to detect fraud. Brydon also advocated more scepticism in the profession, he wants professional scepticism. How has the industry reacted to this, what reactions have you seen?
SAMANTHA LOUIS: I think it’s good to put the Brydon Report in the context of audit reform, the whole audit reform process that’s going on in the UK. So there are four elements to it, if you like, the first is really who is going to provide oversight of independent assurance of business, and this was really strongly bought about by the collapse of a company called Karelian, which is the second largest construction company listed in the UK, and then there’ve been a couple of other high profile cases. So parliament has a business energy and industrial strategy select committee, and they have launched several inquiries into the future of auditing and they are really providing oversight to this process. Under this we’ve got a review of the regulation of the profession, which is the Kingman Review, and they looked into the Financial Reporting Council or FRC, which regulates accountants and auditors Then there was a review of choice in the market and this was done by the Competition and Markets Authority, and they released their report in April last year. They brought about the recommendation around the split between audit and non-audit practices, it came out of the CMA review. Then, finally, you have the Brydon Report, which really looked at the scope of audit, so what does audit to do, and he brought out a redefinition of what audit should be, and he talked about the quality of audit and makes some recommendations there, as well as the scope of audit. What we’re seeing now is we’re expecting at the end of this year, out of all these reviews, there were 220 recommendations, and we’re expecting in roundabout December the government to release a full review of these 220 recommendations for public comment, and I understand that they’ve put them into a couple of themes. One of the things we’re advocating for very strongly is that the FRC, which is currently an independent body, gets its own statute, so that it gets regulatory teeth and that it’s scope is extended to look at not just the financial role of the auditor and the CFO in the business, but indeed the role of the independent directors as well because really, all of the directors of a company are responsible for what happens in that company, you can’t just put it on one person. But typically you will find that the CFO is a member of a professional body and so not only might he or she face consequences in terms of the Companies Act but they’d also face consequences in terms of their professional regulation, which may take away their licence to practice. But, in fact, the other directors at best would have some consequences under the Companies Act but would have no other professional consequences. So we believe that there should really be oversight of all directors and governance rather than just the CFO and the external auditors, and we think that that’s about better governance in general. [Indistinct] that the European Commission is moving into thinking about how an audit should be regulated within the EU. They’re in analysis mode at the moment and wanting to understand the facts of why [indistinct] particular before acting. But we expect the upcoming months to be of exceptional importance regarding the number and magnitude of EU policy changes because their audit regulations were up for review this year in any event. So we’ll see what happens.
CIARAN RYAN: I get the sense that we’re looking worldwide at tightening regulations but if you look at the South African experience, where you had auditors at VBS Bank, for example, who were signing off on bogus statements, and then there was R2 billion, which went down the hole as a result of that. You also had auditors involved in state capture, this has been very, very well reported. So there has been a look at accounting legislation in South Africa and there at the moment is the Audit Profession Amendment Act, which is basically giving the regulatory body, IRBA, more powers of search and seizure. It’s also raising penalties, at the moment the maximum fine for wrongdoing is R200 000. There’s a body in Cape Town called Open Secrets saying basically that this is perceived by the accounting profession as the cost of doing business. SAA, for example, the auditors there were collecting close to R20 million but they’re only going to get fined R200 000, so okay we’ll put up with that because there’s really no penalty. So this is changing, and I think, Nicolaas, maybe you can jump in here as well because SAIBA was recently asked to make some recommendations on changes to the Companies Act and there were a few things there that were identified as weaknesses. I guess my question is, are we getting too regulated, is regulation really going to solve the problem if you’ve got a bad Apple, an auditor who’s a bad Apple, it’s always going to exist. What do you think? NICOLAAS VAN WYK: You are making a few good points and it’s one of those things where there are not easy solutions. But I agree with Samantha on the movement in the EU or the UK. South Africa also has a Financial Reporting Standards Council, the FRSC, but that council has been inoperative now for quite a while, which is really a sad situation for South Africa, given all the challenges that they’re going through. So we are making strong recommendations, similar to the ones Samantha just noted, to strengthen the FRSC, empower them to properly review the standards that are adopted in South Africa and monitor their deployment. Something that we feel strongly about is obviously the auditor independence, and it’s always a question about who pays the auditor. We favour a system that a company shouldn’t be paying the auditor, it should be either a listing fee, and the independent body appointing them, because I think in that case that’s the only way you’re going to address the current shortcomings. But one should be careful about overregulation, that is true, so it’s a tightrope that has to be walked. As you said, the penalties are very low, the fees are very, very high and what we also see is the market isn’t really open and fair for everybody, so we have strong accounting bodies dominating but there has to be more accessibility for everybody because competition is also a good measure to prevent future collapses.
CIARAN RYAN: Samantha, one of the points in the Brydon Report was the separation of audit from consulting. Now, this has always been a very big bone of contention in the accounting industry. If you go back to the Arthur Andersen days and the collapse of Enron, one of the recommendations that came out of that collapse was that there should be the separation between these two because the big four were treating the auditor as kind of a loss leader, get your foot in the door and then you make much more money from the consulting services that you provide. Now, Brydon, he really hammered on this point quite a lot. But what do you think when the UK releases this report that you mentioned, is this going to be one of the things, are they going to force the separation?
SAMANTHA LOUIS: Well, it’s really interesting because as a result of the competition and markets authority report, the big four in the UK have already agreed to do an operational split between their audit and non-audit practices. So the audit practice will be ring-fenced and will have their own reward systems, partner profits, so there’ll be totally ring-fenced away from the consultancy services, and they voluntarily agreed to do this. The FRC has put out guidance and put out clear steps, and it’s anticipated that this will be done I think by the end of 2022, if I’m not mistaken. So we’re going to see that coming, that’s been agreed by the big four. I think there’s some detail that needs to be finalised and worked out, and I think that will be a substantial change to the market. But they have retained the name of the brand that they work under.
CIARAN RYAN: Okay, so you’ll have kind of a Chinese wall between the two, between the audit and the consulting.
SAMANTHA LOUIS: I think it’s going to be more stronger than that, but yes, it’ll be a complete operational split.
‘Companies do fail, and I don’t think that they generally fail as a result of audit’
CIARAN RYAN: What’s your view generally of the accounting profession, is it in crisis because of the number of scandals that we’ve seen. You’ve had quite a few in the UK, the Wirecard one, and that was really out of the EU but that was fairly surprising, and there’s been a number of these scandals in China as well, I think Luckin Coffee being one of them. What’s your opinion of the accounting profession, has it suffered a dent in its credibility?
SAMANTHA LOUIS: Well, I think the profession is evolving and I think that it’s good and it’s right that it evolves, it takes into account latest developments, things that are changing. But companies do fail, and I don’t think that they generally fail as a result of audit, there’s a whole complex system that needs to be in place. So one of the things we completed last year was a major research project into the future of finance. We did qualitative and quantitative research, and we use this to inform a complete update of our competency framework, bringing in a competency around the ability to deal with data because that’s a really new skill and the technology is evolving really, really quickly. That’s also informed an update of our CGMA qualification, bringing those skills into the initial professional development of accountants. Something similar is happening in the public accounting space because when you’re going in to audit a company that’s just swimming in data, how do you find that data? How do you drill down? How do you test it? So you mentioned earlier Enron, one of the things that came out of that was a restructuring, and people have talked a lot about the Sarbanes-Oxley Act, we’re seeing a lot of discussion in the UK about bringing in something similar, which looks at, for example, internal controls and thinking about the whole system of how businesses govern, rather than just the financial aspects of it. I think it’s good and right that there’s change and that’s there’s
evolution because we need to create professionals for today and the future, and we need to make sure, and I think this is what makes professional bodies so unique, we need to make sure that they are really educated in the ethical issues of the profession, and indeed we do that. That’s an important thing to put in place.
CIARAN RYAN: There are these new technologies that so many of these functions that are being done today by accountants and even senior accountants that have been done fairly manually, they’re going to be automated in the next few years. The audit function is one thing that lends itself to automation, where you’re doing cross checks on transactions, that can be verified, they’ve been talking about doing it on the blockchain. So you mentioned that coming up through the ranks, an accountant, who’s preparing themself for this new world in which they find themselves in, and they’re going to have to have a lot of knowledge about IT and data. But at the same time we as accountants, we’ve got to get back to the core, and what is the core of the accounting profession is ethics, I’m glad you mentioned that there. So maybe, Nicolaas, you can just give us an opinion on that, is the accounting profession getting a little bit too to deviated away from its core principles?
NICOLAAS VAN WYK: I think there are a lot of demands placed on professional associations, both from its members and the public. So one has to relook at your own model and respond appropriately. What we’ve recently discovered with a own body is our main focus and should be on the finance department, if we can improve the finance function, then they can make a better contribution to the company, the company can make a better contribution to society, and so everybody benefits. So it is good to have a nice, clear focus area. We can’t solve all the world’s problems but let’s just solve the ones that are in front of us, through better designations, better integration with university, better cooperation with other professional associations so that we can have a uniform set of standards and drive business growth. I think what we realised with all this upheaval that we’re all experiencing is how important it is to focus on getting businesses profitable again, and accountants must play a role there. I think that to me is core, if there are more profits, and it’s funny that the word profit has come to have a negative connotation, but it is a bench line figure, it’s one figure that stands out. So if you can increase the profits of companies through legitimate means and good business practices, and you can accomplish let’s say a 10% increase for all companies across the board because accounting is a system and support them with data processing systems, that means a huge jump in the GDP and employment. So I think collectively that must be our focus area.
‘Many organisations have had literally to close their doors and move online’
CIARAN RYAN: Samantha, just picking up on that point that Nicolaas made is let’s try and solve the things that are in front of us and not the things that are not yet in front of us. Looking at what you are doing in advocacy, what needs fixing in the profession right now, and are we trying to solve things that haven’t really become a problem yet?
SAMANTHA LOUIS: Oh, I don’t think so, I think it’s important that you think to the future because the future is with you before you know it. I think one of the things we’ve learned this year is that our future is not linear. We’ve been doing, for example, round tables with our members around the world to try and understand as we progress through the Covid crisis, what has been important to them, what have they be doing in their organisations, what has impacted on their organisations. We hear again and again that cashflow has been critical and that is just fundamental in any business, that’s never changed. We’ve also heard that our members have been called upon to be doing huge levels of scenario planning to an extent that they’ve never done before, so really providing information to senior leadership, to the board, around where the organisation could go, depending on what happens. They’ve also been required to pull up their strategic thinking skills and help the organisations evolve their business models. Many organisations have had literally to close their doors and move online in terms of retailing what they might be selling, if it’s a service or a product. Many companies have to fundamentally change their business model and the accountants have been critical in helping them do that. So I don’t think it’s a question of fixing the profession, I think the profession evolves continuously to meet new challenges.
CIARAN RYAN: Tell us a bit about yourself, you’re South African, you’re based in London. I see you studied at the Gordon Institute of Business Science here in Johannesburg. How did that happen? SAMANTHA LOUIS: My first degree, unusually, is in drama from Wits University. You might ask how on earth does somebody with a drama degree end up running the Chartered Institute of Management Accountants in Africa, and that’s a really unusual career choice. But I worked in public relations and in 1998 I moved over to CIMA. I had been running the Public Relations Institute of South Africa’s education centre, managing it, and so moved on to a different professional body. Obviously, as you can imagine, having a drama background, I didn’t have a lot of experience in finance and accounting, and I really wanted to build up my knowledge in that area. GIBS had just opened its first class intake, I think it was 2000, so I was the second class intake in 2001, under Professor Nick Binedell, who’d moved over from Wits Business School. It was a bit of a leap of faith, I guess, but I enjoyed the way the course was structured, it gave me the flexibility I needed in my job, which involved a lot of travel. But it was really full on, I had two small children at home at the time, age three and five, so it was hectic, but it was a fantastic experience. I still get together with, with people I met on course, we still have drinks together and we all follow each other’s careers with great interest.
CIARAN RYAN: And Nick Binedell, is he still there? I have a feeling he might be retired by now?
SAMANTHA LOUIS: I think he’s retired; I don’t think he’s there anymore. I think they have just got a new dean.
CIARAN RYAN: Okay. And your kids, have they joined you in London or have they flown the coop?
SAMANTHA LOUIS: Both are just finishing qualifying here in South Africa and hopefully joining me in London soon.
CIARAN RYAN: Wow, okay, so have you relocated permanently or is this temporary?
SAMANTHA LOUIS: It’s a permanent relocation, yes. In 2016 CIMA and the American Institute of CPAs, AICPA, through a vote with their membership decided to join forces. So you had the American CPAs who are accountants in practice and CIMA, which is your professional accountants in business. So it was really complementary and we’d worked together on a number of joint ventures for a couple of years prior to that, and it really made strategic sense. So officially we became the Association of International Certified Professional Accountants on January 1 2017, and we’ve really gone from strength to strength, joining both the management accounting and the public accounting together in one organisation.
CIARAN RYAN: How is London treating you?
SAMANTHA LOUIS: I love London. As I said, my first degree was in drama, so one of the things I love about London is the theatre, it is just incredible, and the live music, the whole arts and culture scene is fantastic. I’m desperately hoping that when we get back to a more normal lifestyle that it will reopen.
CIARAN RYAN: Oh, of course, they’ve been closed now for the last few months, there’s no theatre.
SAMANTHA LOUIS: Everything is closed, there’s been no theatre since March.
CIARAN RYAN: And the lockdown is actually coming back again.
SAMANTHA LOUIS: It starts officially on November 5 and it’s set to be a four-week sort of circuit breaker, I think they’re calling it, because the numbers are increasing. So they’re hoping if they put everybody into lockdown for four weeks that that will just stop transmission and help their ability to manage hospital beds and that sort of thing.
‘Most research is done on men and they are taken to represent humanity overall’
CIARAN RYAN: Okay, good. This is the obligatory question for you, are there any books that you would like to share with us?
SAMANTHA LOUIS: I’ve got a couple and the one I most recently finished was a book called
The Future of the Professions: How Technology Will Transform the Work of Human Experts by Daniel Susskind and Richard Susskind, and that’s really interesting because it actually covers quite a lot that we’ve been discussing today. It looks at the impact of technology on expert workers such as the profession, so accounting, auditing, legal profession, marketing profession, how technology impacts that, and then the professional bodies that have oversight of the professions. It’s a fascinating read.
CIARAN RYAN: What’s the takeaway from that?
SAMANTHA LOUIS: It’s about if you think technology doesn’t impact how your profession works, you are in real, real trouble. You need to be thinking about that so carefully.
CIARAN RYAN: You’re a dinosaur.
SAMANTHA LOUIS: Yes, absolutely. The other book that I’m reading at the moment and I’m loving is a book by Caroline Criado-Perez, and it’s called Invisible Women: Exposing Data Bias in a World Designed for Men. So that’s fascinating because her premise is that most research is done on men and they are taken to represent humanity overall. But basically, if you do your research on men, you don’t necessarily get the full picture. So did you know, for example, that women are 47% more likely to die in a car crash because cars are usually tested on male crash dummies, and women’s bodies respond very differently because, for example, we I don’t have as much muscle in our necks and upper torsos as men do. So it’s just basic biological differences and, for example, bulletproof vests are designed for male bodies, not women, and obviously women’s bodies just are shaped differently, and if you don’t design them for women’s bodies, then women are more likely to have a bullet penetrate through gaps in the bulletproof vest. So it’s fascinating and I think the takeaway there is about trying to understand inherent bias in information that we think is neutral, and so that’s been really thought-provoking. On a fun note, I just bought a new Nigella Lawson cookery book called At My Table, so I have been having fun cooking two new recipes a week from it to have some creative family time together. So that’s just for fun.
CIARAN RYAN: Nicolaas, you wanted to say something?
NICOLAAS VAN WYK: No, thanks for sharing those books and especially the one about research and females. I’ve got three daughters and one finds the same thing, those unconscious biases are prevalent. I think it’s a normal situation in being human but one should be made aware of them and one wants the best outcome for everyone. So I totally support…I suppose from my perspective also on medicine, this general approach on developing medicines for everybody, as if an average person exists, but each one is so unique, you need to have individualised medicine, otherwise you cause more harm. So it’s quite liberating if you start looking into different aspects of research and then suddenly, a whole bunch of new opportunities open up. So thank you for sharing that, Samantha.
CIARAN RYAN: Good point. I think we are going to leave it there. What a fantastic discussion with you, Samantha. It was great to hear about your experiences in London, sorry that you’ve relocated permanently, although you are in Johannesburg at the moment, and it looks like you’ll be here for a few. Wishing you the very best in your endeavours and in advocacy, we really do need it for the accounting profession.
SAMANTHA LOUIS: Thank you, it’s been so lovely to join you today.
CIARAN RYAN: Great, that was Samantha Louis, who is joining us from Johannesburg, normally based in London, and she’s involved with public advocacy on behalf of the Association of International Certified Professional Accountants. Also, thank you very much Nicolaas van Wyk, who is the CEO of the South African Institute of Business Accountants.
NICOLAAS VAN WYK: Thank you very much, Ciaran, thank you, Samantha. It was wonderful.