Paul Vetrone:
But ultimately, for our clients and for any client of an audit firm, having a data-differing approach is going to lead to efficiencies, and we're going to definitely see an increase in quality.
Narrator:
Welcome to Accounting for the Future, a BDO Canada podcast for financial leaders to navigate change and achieve business growth. We'll uncover the challenges financial leaders may not have dealt with yesterday, but will definitely have to manage for the future.
Anne-Marie Henson:
Hello, and welcome to Accounting for the Future. I'm your host, Anne-Marie Henson. I'm really excited to be speaking with you today about technology and how it can provide improved data-driven solutions for audits. I have with me, two incredible experts to help answer our questions about what these changes mean for the future of the audit profession. First off, we've got Paul Vetrone, who's the innovation and change director for BDO Canada. He's responsible for driving innovation and digital transformation within the accounting practice, working closely with dedicated specialists and technologists to identify and implement innovation opportunities across the firm. He also leads the firm's initiatives to develop data and analytics tools, leveraging various AI and machine learning models to better serve BDO's clients.
Youssef Hounat is VP of product at DataSnipper. His impressive portfolio of experience spans almost a decade working at industry-leading organizations such as EY. He's a qualified chartered accountant, and with a background of studying accounting and finance while also building digital products, Youssef has combined his two passions to bring the world of auditing and innovation together. Paul and Youssef, I'm really happy to have you both here.
Paul Vetrone:
Thanks for having us, Anne-Marie.
Anne-Marie Henson:
First off, for maybe people who haven't had the opportunity to work with DataSnipper, Youssef, first question for you. Maybe you can tell us a little bit just about the company, what it does, how long you've been there for.
Youssef Hounat:
Yeah, for sure, so I've been at DataSnipper for three years and a little bit of change, and what DataSnipper is, is essentially an intelligent audit platform, which allows our users to basically create their own test of details and to populate information from certain documentary evidence that they may have. We use a lot of document intelligence and artificial intelligence to streamline that process, and we use it as an Excel plugin, which means that it seamlessly integrates into your workflow. So you can just think about maybe doing a test of details on admin expenses, and instead of having to flip back and forth to a bunch of PDF invoices you have, you can import them directly into your work paper, and then you can just use a simple snipping interface or some more advanced automation features to help you complete your work. And not only does it help you with the preparation site, it also streamlines your work when you come to review the procedure, as well.
Anne-Marie Henson:
Fantastic, I've been at BDO for about 20 years, so definitely did not use DataSnipper when we started. I don't think we used much technology at all when I started, but I've seen it at least in the eyes of a reviewer more recently, and it really does streamline the process and make it a lot easier for you to understand the testing and the conclusion, so I'm looking forward to seeing what we've been doing so far and what we could achieve in the future with tools like DataSnipper.
Youssef Hounat:
Thanks, that's great to hear.
Anne-Marie Henson:
So maybe a first sort of question to you, then, Youssef, about what your clients, I assume, for the most part, a lot of your customers or your clients today are audit firms, so tell us a bit about what they're looking for when it comes to the technology surrounding audit tools, and what you think that says about the state of the assurance industry today.
Youssef Hounat:
Yeah, for sure. So I think it's good to mention that, yes, we started a lot with audit firms, and that was our core base of our clients, but we're also starting to see a lot more of the CFOs, financial control teams, any tax preparation specialists, as well as, also, internal auditors using the product, as well. And so, we've got quite a natural sort of adjacent group of verticals who are also getting to use the product, as well. What we really see on a sort of zoomed out level, or on the whole, is that people are looking for ways to make their work more efficient, and also, to make the work that's being done more meaningful.
As you mentioned, when you and I started in the profession, and yeah, I'm sorry, I'm lumping you in with my generation, but we were doing a lot of things like maybe printing out papers, having a red pen and a green pen, and going through it. And of course, that's all great in terms of helping you to really learn deeply what's happening within the business, but after you do it one time, that second time, that third time, what is the incremental value that you're getting?
So on the whole, you see a massive war for talent in the industry. People want to make sure that their teams are actually working on value-added activities, and that's really why they come to DataSnipper, to take away the manual and repetitive work so that their teams can focus on what matters, talking to your clients, really getting an understanding of the business, spotting any potential issues, and then, actually having the time to escalate and resolve those issues with your client. That's not all a given, sometimes the way that deadlines and projects are structured, it can be really tough, so that's why we're here to really help those users out.
Anne-Marie Henson:
That's fantastic, and I think you touched on something really important here. There's been concern around technology replacing humans and becoming obsolete in the future, but it really doesn't seem to be...that's not where we're headed, at least not in the near term, we're looking for technologies that help us make the maybe more repetitive or redundant work easier, more efficient, so we can focus on the more value add, more significant items in an audit, and work with our clients to understand where they're headed. So it's great to see that that's what a lot of your clients are looking for. Very interesting that you're working with companies outside of firms, that you've started working with the finance function in various industries, so that's really cool.
Youssef Hounat:
No, I think it is a really interesting question, and it's one that we're all asking ourselves, how do we stay relevant? How do we make sure that the profession evolves with this technology? And in the end, people want to make sure that they don't get replaced. I think for me, what I see, that firstly, accounting versus bookkeeping, bookkeeping, there are really set rules, and you can debit this and credit that, and it's really sort of straightforward. That's the stuff that can really be automated.
But accounting is really when someone comes to me and says, hey, look, I got this refund on a lease that I'm paying, where am I paying that? How am I dealing with it? So I have a roller coaster Bermudan Swaption, and it's actually in the money this month, but maybe out of the money next month. And so, these are the more complex things, which ultimately, you're dealing with a lot of shades of gray, and it's really hard to have an algorithm to replace that. And then, the other thing which I really find is that there's never going to be an algorithm that goes to your shareholders or goes to an AGM and says, hey, here's why we gave a clean audit. And that's the part which I think that humans can really add a lot of value.
Anne-Marie Henson:
Yeah, absolutely. No, it's a good point. And maybe a question for you, Paul, given your experience in all the work that you've been doing with BDO and Canada, especially, so what does a data-driven audit look like? And I know Youssef touched on it a little bit, but talk to us a bit about how that can benefit our clients.
Paul Vetrone:
Yeah, absolutely, so I mean, most people are really familiar with the traditional ways of auditing, so obviously, the examining of invoices, testing a sample of the population. But when we're dealing with some of those processes and procedures, I mean, even though there's some statistical methods behind it, it's almost like throwing darts at a dartboard sometimes. I mean, you might be able to get something, you might be able to find an error when you're testing samples. Sometimes staff, if they find an error or something, they might jump to the next item just in case. So you kind of run into some of those issues where you're not necessarily going to get the best quality.
When we're talking about a data-driven audit approach, we're really looking at the entire population, the entire data set, and being able to see trends and anomalies within that data to really kind of identify, what are those true outliers within that information? It's a drastic change in how we kind of do things, but it's ultimately going to lead into something that's going to be a higher quality audit for our clients. And we need to be able to leverage technology within the profession to be able to enable that, and so, using tools like DataSnipper, and looking at the emerging trends within artificial intelligence and gen AI, I think are really going to get us to that point. But ultimately, for our clients and for any client of an audit firm, having a data-driven approach is going to lead to efficiencies, and we're going to definitely see an increase in quality.
Anne-Marie Henson:
That's really great to hear, and coming from someone who worked in the technical side of accounting and assurance for a number of years, hearing a better quality audit is music to my ears, and hope that it also just leads to better client service. It goes hand in hand, the higher quality audit is just better for the stakeholders, it's better for the clients, it's better for us training future CPAs, so it's good to hear. And like I said, I've been around the firm for a number of years, so I've definitely seen so much evolution and improvement in the tools that we use and how efficient and effective they are. There's a lot of firms today that are developing their own internal platforms, one of them for us being BDO Harmony, which I know that you've had a lot of involvement in. So can you tell us a little bit about BDO Harmony and what it does, and give us examples about how that's helped to lead us to higher quality audits?
Paul Vetrone:
Yeah, absolutely, so Harmony is a BDO tool that we've been using across the network for a couple of years now, in really kind of building on my previous comments there, about allowing us to really analyze the entire population of data, to drive different audit procedures. You made a really good point, Anne-Marie, about utilizing technology and just kind of going with previous methods. Back then, we were probably able to do that with paper audit, but nowadays, I think even with our smaller clients, we're finding they're just generating so much data and so much information, it's just nearly impossible for us to keep up with that. And going down that bit of the thread in terms of a quality audit, you're not going to get as high a quality audit if you're not leveraging these kinds of tools, so using something like BDO Harmony allows us to be able to standardize the data, allows us to cleanse that data before we utilize a bunch of different analytic procedures, utilize visualization tools such as Power BI, and even leveraging tools like DataSnipper to help us to analyze that information.
That, in turn, allows us to be able to automate a number of different procedures that we do within the audit, and really drives more of a statistical approach in terms of looking at trends within the information, being able to look at anomalies within the populations of the data that our clients provide, and really kind of builds upon that quality audit that I was mentioning. So it's a really great tool, a lot of our clients that have started to use it have really talked about how great of an experience it's been using Harmony for their audit. And we've even had engagement teams come to us and say, some of the work that they've done actually caught some things within the information that they wouldn't have necessarily gotten using traditional methods. So we're already seeing a lot of really great benefits and returns just within the first couple of years of using it.
Anne-Marie Henson:
Yeah, that's really great, and I can only imagine that the more we use it, the better it will be, because then, it can start telling you, depending on the client size or certain ratios, or even the industry that they're in, that these could be items to flag or things to look out for, or anomalies. So it can only get better from here, which is really exciting to hear.
Youssef, I'd like to talk to you a bit more. So we've had a couple of episodes so far this year, not surprisingly, on AI, and how it's changing the finance function and the profession as a whole. So I'd like to hear from you about the evolution of AI and its involvement within certain industries, so picking one out in particular, let's say, fintech, how have you seen the evolution of AI impact some of these industries?
Youssef Hounat:
Yeah, absolutely. So I'll definitely talk a little bit about how it's evolved within DataSnipper, and then, I'd love to share a bit about what I've seen in the market, as well. For us, when we started in 2017, we used a lot of AI in our product, specifically, optical character recognition, where we train an algorithm to understand every type of, let's say, the letter E, and then, it can just recognize that from a screenshot or from a PDF that doesn't have a text layer. And that's something which, again, for me personally, would've been super useful when I started an audit, because the amount of times I had to spend retyping things from screenshots. But that's something which is now being used loads by over 500,000 happy snipping users across the world.
In the beginning, though, we really kept it quiet. We really didn't want to talk about it a lot, we didn't advertise that we used AI, we were very much keeping that under the radar, because the accounting and finance profession also has extra hurdles to clear. So we have ISA 210, which sets the standard for documentation, and says that someone must be able to come in, review your work, and get to the exact same outcome. And so, a lot of people had fear behind using these types of artificial intelligence tools, where maybe it could be creating audit judgments for you, or it would be a black box model, and how do you explain that to your regulator?
What we've seen over the past couple years is that there's a huge transition within the industry to starting to embrace these techniques, and then, delivering them in a way that actually helps match that new technology with the constraints of this particular industry. So as an example, you see companies like MindBridge, who are using advanced analytical techniques to go through and kind of do something maybe similar to what BDO Harmony is doing. You may see products like DataSnipper in the future adding more generative AI features. And indeed, we actually just launched an advanced extraction suite, which really leverages a lot of deep learning models to give you much better extraction of information from certain types of documents.
So I would say that it's something that really maybe is a bit behind the rest of the world in terms of how we're using it, but definitely something that we started now becoming a bit more proud about and shouting about because it's now more popular. I would say if you look at the wider market as a whole, especially if you look at things like the fintech industry, most neo banks that you might use, whether that's like a Monzo or a Revolut or an N26, they'll all have AML monitoring, KYC being done. Actually, randomly, I dropped my phone and had to buy a new phone, and forgot all of my passcodes, had a ton of issues trying to get back into these accounts, but one of the ways I was able to do it was say, hey, here's my phone number, so you know it's me, and then take a picture of my face and take a picture of my ID, and then you could match my face to my id.
So those are the types of use cases that we're seeing really permeate the industry, and it'll be exciting to see what people are doing going forward. Since the launch of ChatGPT in September 2022, there's been so many exciting new products, whether it be bookkeeping assistance that can completely do a reconciliation with absolutely no input from a human, all the way through to transaction risk scoring. So these are all the sorts of great examples that we're seeing across the market, and I'm sure Paul knows more about this than I'll ever learn.
Anne-Marie Henson:
Well, it's great to have your background, having done a few years in audit in public practice, and then, being able to apply that to the use of these technologies. So for sure, Paul, I'm sure you have stuff to add about this, so I want to throw it to you. Can you tell us a bit about AI and how it's being used today in the audit process, maybe specifically to BDO, or maybe other firms? And if it's not being used today, how do you see it being integrated in the future?
Paul Vetrone:
Yeah, absolutely, and Youssef, I wouldn't feel too bad about it, just because this is such an emerging area and there's advancements happening, it seems, almost every day now. It's almost a full-time job just to keep up on the different changes. I think, Anne-Marie, in terms of what we're seeing in the audit industry right now, I think AI is really kind of on the fringes. I think a lot of firms are really trying to figure out how to best utilize it at this point, and I think there's a couple of reasons for that. One is, when you look at ChatGPT and you look at some of these other really cool models in the market, they're able to train on millions of different records of books and pictures and videos, and all sorts of other great things.
There's no repository that exists of financial or accounting debt, at least not from one that companies want to make publicly available, so the way models are currently built right now, it's really kind of hard to do that. We're seeing advancements in some of these smaller models that Microsoft, for example, are developing, that requires, without getting too technical, just essentially, less data, and we're really curious to see how that might benefit us, as well. The other piece, I think the reason why there's also some hesitation, as well, too, and I think, Youssef, you really hit on this, as well, too, is that we need to be able to explain to regulators exactly what we're doing, and a lot of models don't have that level of transparency.
But we are starting to see a shift, there's a lot of people that want to know when an AI model or a chatbot, if you ask it a question and it generates a response to you, they really want to see, okay, how did you come up with that response? What are your sources? What are you referencing? And I think we're starting to see some more of those models come out where it's, I would call, say, explainable AI, which seems to be a term that's being used more frequently now, to be able to explain when you're asking a question, say, about an accounting standard or audit treatment for a particular transaction, that it can reference, okay, here's the part of the handbook to indicate why we suggested this response or this answer, as a really good example.
So I think as we see a couple more developments in there, models that can be trained on less data, and also, models that can actually show that level of transparency in terms of how they come up with those responses, then I'm going to probably expect to see more use of AI within the industry. The third challenge I would say that we have, as well, too, is the regulatory issues. Anecdotally, I can tell you, up until a couple of years ago, the Canadian bodies here, up until a couple of years ago, had guidance about use of technology, and they still refer to fax machines in some of their materials.
And our regulators have said, we understand this is an emerging area and the technology is moving faster than laws and regulations can keep up. And they recognize that that's a challenge, and it's something that they need to address. So they're going to be hesitant, nobody wants to be the first mover, make a mistake, and then sort of get a slap on the wrist for using technology in the wrong way or something that would be offside. So the other piece that I think is critical to this is that we need to see firms, technology companies like DataSnipper, working in tandem with the regulators to be able to show some comfort around that, because we're only going to be able to do this if we work together, and if we can do that, then I could see some really, really great things happen.
Youssef Hounat:
Yeah, I just was going to say, I think that's such a great point, Paul, in terms of also demanding more from your vendors, as well. So at DataSnipper, we always like to say it's a tool that's built by auditors, for auditors, and so, we really come with an understanding of what you need and what questions you're going to get from your regulator. And sometimes that makes you make choices, which, at the outset, appear a bit counterintuitive, but in reality, do actually add a lot of value. So just to give an example, we are now currently in active development, and we've just passed the closed alpha stage of a new GPT-powered product, which allows you to basically take out information from any type of document with any type of question.
And we've actually built that product in such a way that we add more friction to the process so that we can firstly explain where we take answers from. We make it super traceable for you, so you can actually see with a snip, where in the document that information came from. And then, beyond that, we've also added a flow where the auditor, the practitioner, has to approve or reject each of those individual answers. Now of course, that's adding so much extra steps to your process, but what we've found is that actually, the adoption is higher than if we didn't have that, because we can then go to any technical accounting department or national office and say, hey, look, we've done this to make sure that people definitely check it. So it's sometimes counterintuitive, but I also think that it's a great point on demanding more from your vendors and making sure that they're working with the regulators, with you, to create a solution that's actually truly usable and helpful in your context.
Anne-Marie Henson:
Youssef, it's funny, because when we were just chatting offline before, we were talking about the power of making decisions in groups, and I think that's changing more and more with these types of technologies, whereas previously, you had the regulator that would set a new standard, and that would trickle down to companies and auditors who would figure out, okay, how do we account for this on the company side, and then, how do we audit this on the audit side? And then, that would permeate out to the vast majority of, then, practitioners who are sort of in the day-to-day. Whereas today, just given the rapid changes of technologies, it's impossible to keep that model and continue to be effective and relevant. We don't want to end up in a situation where the sort of audit practice as a whole just becomes irrelevant to stakeholders, so it's great to hear that these types of things are happening.
Youssef Hounat:
Definitely.
Paul Vetrone:
Absolutely, and Anne-Marie, just to build on that a little bit, as well, too, our clients are expecting and demanding more of that. An annual audit, for some of our clients now, it just isn't timely enough, they're expecting more regular feedback and even close to real-time audits, and so, we really need to see regulations keep up with that. Obviously, we have great vendors, we can do great things, but if those regulations don't keep up, like you said, there is that chance that the audit does become irrelevant.
Youssef Hounat:
Yeah, and I think it's also something that's changing with time. As you see new generations enter the workforce, most of the people that are going to start at BDO, let's say, next year, are going to be totally digitally native, they'll have been using iPads and computers maybe almost their whole lives. So it's also about understanding that that's really an asset to your firm, that that's something where you can, if given the right opportunity, allow people to drive their own kind of citizen innovation, and that's something which we've also seen, across our client base, has had amazing results.
As an example, within DataSnipper, we created the possibility for you to use templates, whether it's for a form extraction or for a document matching procedure that you might do. And tons of the time, where these templates are being developed, and then shared across their firms, are coming from the brand new first years, the second years that have done a job once, and then thought, hey, how am I going to do this better next time so I don't have to stay until 10 PM every day? So it's those sorts of things which also give me a ton of hope for the industry, and as well as making our regulation advance, I think the people that we have working in the industry are ultimately what's going to drive the success or failure.
Anne-Marie Henson:
Yeah, that's fantastic. Well, it dovetails well into our final question for you both about, Paul, the future of BDO and these types of data tools, and same, Youssef, the future of DataSnipper. Before that, I'm going to give my own plug, in terms of how I hope these types of tools will help me in the future. And I think I speak for anyone who's still in public practice today, if you could devise a tool that could help me with time sheets, I would personally invest in that company. So that's my hope for the future, but maybe, Youssef, I'll start with you.
Youssef Hounat:
It's on the roadmap, Q4, expect it. No, actually, when I worked as an auditor, we did have a tool like that, and it was like a little widget that was in the corner, and you would just press all these little clocks and we'd record your time. And then, we changed the time sheet software and it broke, so easier said than done. Yeah, so where I see DataSnipper going, it's a really good question, and there's definitely some element of it which is uncertain, things that will change over time. As Paul mentioned, the technology advances rapidly.
What I can say is that we always push for our principles to be met, so when we're building things with AI, we want them to be traceable, actionable, supportive, and specific. And so, what I can expect to see is much more integration with tools such as APT or with BDO Harmony to make sure that it's more of a seamless experience as people are working, and then, much more of a focus on bringing this new type of generative artificial intelligence techniques to the industry in a way that's safe and usable, and that we can basically help you complete your work smoother, easier, and to a higher quality.
Anne-Marie Henson:
Fantastic, that sounds really exciting, actually. Maybe Paul, over to you?
Paul Vetrone:
Yeah, I think I see three sort of pressures that would face not just BDO, but any sort of auditing firm. I think one is, Youssef mentioned sort of the challenge for talent, a lot of the intense competition, so being able to show staff that we are using the latest and greatest tools to help do their work, and also, create a great working environment, showing them that we enable them using technology. We're going to see pressures from regulators in terms of increasing audit quality, and from our clients, we're going to see a lot of pressure to be able to be efficient with our audits. There are always going to be fee pressures, as well, too. And so, all of those different things, I don't think you're able to keep up or address any of those if you're not going to embrace digital or innovation within your practice.
So I think artificial intelligence is certainly something that's going to play a role in that, it's going to be one of many tools, I think, that we're going to have to use. AI is certainly not going to eliminate the use of an accountant. You still need those critical thinking skills that professional accountants have, these technologies are simply going to be more tools within the toolbox for them to use. But I see definitely, more rapid advancements, especially with respect to artificial intelligence, and my hope is, the regulators working with us hand in hand to enable firms to be able to embrace newer technologies or emerging technologies to be able to execute the work.
I think as long as we can show that it's still driving audit quality, the regulators should be able to work with firms to be able to push these new technologies. So that's my hope, that's where I kind of see things going. Certainly, any CPAs or professional accountants that are listening to this, AI is not going to take over your job unless you're maybe a bookkeeper, it's probably going to automate a lot of your work. And if anything, it's just going to simply enable you to do the things that you were trained to do as a professional accountant, is use those critical thinking skills to provide value and advice to your clients.
Anne-Marie Henson:
Thank you. Well, it's great to hear, and it's exciting to see the future of where we're headed at a pretty fast pace, so thank you both. By the way, you both have fantastic podcast voices, so if ever you're looking for a change in career, you'd both be really successful. It was also just a really super interesting conversation, so Paul and Youssef, I just want to thank you so much for your valuable time and input today. I hope our audience appreciated this discussion, I'd also like to thank you, our listeners, for tuning in today into all of our episodes. I'm Anne-Marie Henson, and this has been BDO's Accounting for the Future. Please let us know if you found the topic interesting and useful, and remember to subscribe if you liked it. We'll see you next time.
Narrator:
Thank you for listening to BDO Canada's Accounting for the Future. Past episodes and related insights are available at www.bdo.ca/accountingforthefuture, or you can go to Apple Podcasts, Spotify, or Google Podcasts to subscribe. For more information on BDO Canada, visit bdo.ca.