64% of finance talent seek firms with D&I policies, ACCA finds

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Gen Z talent are more likely to put D&I at the forefront of their job search, with 76% of this age group rating it as a key factor in their choice of organisation

Some 64% of UK finance professionals have rated diversity and inclusivity as a key factor when choosing an organisation to work for, according to ACCA’s latest annual Global Talent Trends Survey

While diversity and inclusion (D&I) strategies are nothing new, ACCA has found that they have risen in importance amongst financial talent when it comes to choosing a place to work. This has put the pressure on employers to deliver D&I policies in order to attract and retain the best talent. 

According to the survey, Gen Z talent are more likely to put D&I at the forefront of their job search, with 76% of this age group rating it as a key factor in their choice of organisation. 

ACCA’s research has been backed up by other studies, which also showed that Gen Z is “more principled” than their older counterparts, as working in a diverse and inclusive environment matters more to them than salary.  

However, with an ongoing cost-of-living crisis, some 50% of UK finance professionals are planning to ask for a pay rise within the next 12 months, while a further 49% believe that the best way to secure a pay rise is to leave their current organisation. 

In addition, with 54% of finance professionals expecting their next career move to be external to their current organisation, ACCA has urged employers to embrace this insight and take steps to retain talent.

Without the shoring up of other workplace factors like diversity and inclusion, hybrid working models and mental health support, ACCA believes there is a real risk that employers could face a move of half of their current workforce in the next 12 months.

Gemma Gathercole, strategic engagement lead for England at ACCA, said: “The latest Global Talent Trends report shed interesting light on the situation around the world and at home here in the UK. 

“While the UK is outperforming in some areas such as offering hybrid working and mental health support, it’s clear that D&I policy is a growing factor of importance for finance professionals.”

She added: “Equally important is skills and training. Finding ways to support employers in implementing effective D&I strategies, attracting and retaining diverse talent, and remaining competitive from a salary and job opportunities perspective is something ACCA will continue to support members with through education and policy outreach.”

Corina Duma writes in Accountancy Today

Big Four US Firms admit to audit regulation breaches

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The Public Company Accounting Oversight Board urged companies and investors to pay greater attention to the findings of its annual inspections of audit firms

The Big Four accounting firms have admitted hundreds of violations of regulations in the US that are designed to protect the independence of their audit work, the Financial Times has reported. 

The admissions by PwC, KPMG, Deloitte and EY come after the Public Company Accounting Oversight Board urged companies and investors to pay greater attention to the findings of its annual inspections of audit firms, which are expected to be released in the coming weeks. 

It is understood that US regulators require audit firm staff and their immediate family to make thorough financial disclosures. They also ban employment and financial relationships with audit clients that could impair the firm’s independence. 

According to PwC, it has identified 129 breaches of independence rules, affecting 74 clients. PCAOB inspectors also found a further one themselves, while inspecting audit work in 2022. 

These figures were included in an update to PwC’s audit quality report, which is published on its website. 

Meanwhile, Deloitte revealed in its audit quality report last month that it had told PCAOB inspectors of 129 breaches across 78 clients in 2022 — affecting approximately 3% of its US audits — and 107 across 53 clients in the 2023 inspection cycle.

The Financial Times reported that KPMG is the only Big Four firm not to have stated its figures, which will become public in the PCAOB’s forthcoming inspection reports for 2022. 

A PCAOB spokesperson said: “Auditor independence underpins the integrity of our capital markets and is essential to ensuring investors can trust the financial statements they rely on to make decisions.”

Article from Accountancy Today

AI is an emerging risk for auditors, new research shows

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Artificial intelligence has been identified as an emerging risk, with gaps in organisational preparedness and audit proficiency, according to new research from Protiviti.

In partnership with The Institute of Internal Auditors (The IIA), Protiviti conducted its 11th Annual Global Technology Audit Risks Survey to understand the impact of technology evolving at an unprecedented pace, and the risks associated with it.

A total of 559 executives and professionals, including chief audit executives and information technology audit directors, completed the online survey.

While only 28% of respondents perceive AI as a significant threat over the next 12 months, it is rated among the most significant risks over the next two to three years. This suggests that while AI may not be perceived as an immediate threat, it is rising rapidly on the risk horizon.

Although AI can provide organisations with advantages like automation and enhanced data analysis, its utilisation can also introduce a new level of complexity and risks that organisations need to address and manage proactively.

Organisations need the talent, now

As AI adoption continues to grow, it represents a latent risk that organisations must start preparing now. Few organisations believe their level of preparedness or proficiency of their technology audit group in handling AI and ML risks are at acceptable levels.

Another growing concern is the talent gap in IT. Companies need to hire talent with a deep understanding of cybersecurity and AI at a time when such talent is scarce.

“Companies with insufficient talent and intellectual capital in areas like cyber and AI will find themselves exposed when these risks become reality,” warns Angelo Poulikakos, Managing Director, Global Leader, Technology Audit and Advisory practice at Protiviti.

IT talent management poses a substantial technology risk concern, primarily because of the ongoing demand for qualified individuals with the required skillset. Amid a long-term talent shortage, those with technology-related skills and talent remain, by fa, the most difficult to locate, recruit and retain, especially for technology audit groups.

Job listings for AI and ML specialists increased by 300%, according to Protiviti’s report, in the past year while other postings for IT roles declining. With this rapid adoption of LLMs and other types of generative AI across most industries comes greater risks.

Cyber security tops the list of concerns

The survey results also reveal that cybersecurity is the top priority for organisations, with nearly 75% of all respondents considering it a high-risk area.

“When it comes to technology challenges, not only are companies facing a wide range of threats, but each of these threats is changing at an alarming rate,” says Poulikakos. He emphasises the importance of conducting frequent internal audits and integrating advanced analytical tools to stay on top of these changes.

Respondents believe next-gen cyber threats post the most significant risk over the next two to three years.

Call to action: Elevating technology audits

The survey report provides key calls to action aimed at assisting IT audit leaders and teams in taking their technology audits to the next level.

These include increasing audit frequency for high-impact areas, maintaining vigilance over well-managed risks, leveraging advanced analytics for deeper insights, and improving organizational preparedness regarding third-party risk management and IT talent management.

Conclusion: The Road Ahead

The 11th Annual Global Technology Audit Risks Survey serves as both a mirror and a roadmap, reflecting the current state of technology risks and guiding technology audit leaders through the challenges and opportunities that lie ahead. As technology continues to evolve, so too must the strategies and tools employed to manage and mitigate the associated risks.

Article from Accountancy Age

The auditors of the Post Office have questions to answer about why they did not flag accounting failures in the Horizon IT system

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Post Office auditors should be questioned, MPs told

MPs on the Business & Trade Committee questioned the bosses of Fujitsu and the Post Office, Lord Arbuthnot and lawyers at a hearing about the Post Office and Horizon compensation scheme.

Witnesses were questioned about why the Post Office failed to stop prosecutions and ignored warnings from Fujitsu about problems with the IT software rolled out across post office branches.

Lord Arbuthnot, who has been a long-time supporter of the sub-postmasters, was asked about the role of the auditors during the accounting scandal, and whether they should have taken more action.

‘Auditors either did or should have noticed that there was a potential liability building up within the post office that was likely to give rise to costs of £1bn,’ said Lord Arbuthnot.

‘If the auditors failed to realise that, was it because they were not looking at the right things or was it because they were ticking boxes? Or did they realise that and not bring it to the right people’s attention with sufficient oomph?’

Big Four firm EY was auditor of the Post Office until February 2019 when PwC took over the audit business. EY had started auditing Royal Mail in 1986, when it was responsible for the Post Office and remained as auditor once the business was hived off. When EY stepped down, it was earning around £1m a year in audit and non-audit fees for work on the parent and group company, and a group subsidiary.

In the annual report and accounts for 2017-18, audited by EY, Horizon was mentioned only once, stating that the Post Office was facing a group litigation ‘alleging defects in the Horizon system and Post Office’s internal processes’.

Six years later the government is introducing legislation to exonerate all the sub-postmasters mistakenly prosecuted over accounting fraud by the Post Office, first announced by the prime minister earlier this month. 

At the committee hearing, MPs questioned Paul Patterson (pictured right), CEO and head of Western and Northern Europe for Fujitsu Services over the IT company’s role in the Horizon scandal.

‘Our standards were not at the level we adhere to – I am personally appalled by the evidence that I have seen both on the TV drama and from the witness statements,’ Patterson told MPs.

When questioned about the timing of the Fujitsu disclosures to the Post Office about the scale of the IT problems, Patterson said that he did not have that information as he had only been CEO since July 2019. Prior to that he was VP and head of strategic sales since 2016, and group sales and marketing director since 2011, having joined the business in 2010.

He admitted that historically Fujitsu had been ‘supporting the Post Office in their prosecutions and data was given to the Post Office’.

When questioned about whether the Post Office knew about the scale of IT problems, Patterson said that ‘the Post Office also knew there were bugs and errors’.

MPs pressed Patterson on the scale of the problem and knowledge of the issue internally at Fujitsu, asking: Were there issues with Horizon system and were Fujitsu staff aware of it? He was reticent to answer the question, stressing that he was not CEO at the time, but admitted ‘my gut feeling is that yes, they knew’.

Another area of concern for the MPs was whether there was ‘covert activity – remotely accessing sub-postmasters’ accounts’, by Fujitsu.

Patterson acknowledged that ‘support and interventions from Fujitsu were known by the Post Office’.

When asked whether Fujitsu should pay towards the compensation for sub-postmasters, Patterson said there was a ‘moral obligation for the company to contribute’, adding that there were ‘many parties involved in this travesty’.

The head of the Post Office, Nick Dean (pictured left), is also relatively new in the job, having joined the organisation as CEO in 2019 in a move from Vodafone. In many of his answers he replied that information being requested had been given to the ongoing statutory inquiry, led by Sir Wyn Williams.   

‘I’ve only been at PO since 2019, we are cooperating with the enquiry,’ Dean said.

He said that the Post Office had supplied over 125,000 documents to the inquiry.

This did not deter the committee members, who questioned Dean about why when whistleblowers came forward and said there were problems with the Horizon system, they were ignored. ‘Why didn’t PO and Fujitsu listen to these sub-postmasters?’

Dean swerved the question, saying that he ‘empathised’ with the victims.

Reflecting the frustration of the MPs, they repeatedly asked why Fujitsu took no action about the IT problem.

‘When you knew there were glitches in the system why did you sit back and do nothing about it?’ MPs asked.

Patterson said: ‘I just don’t know and I know the enquiry is looking at this.’

He added: ‘There were bugs and errors in the system from the very early stage when it rolled out. There will always be bugs and errors when you roll out a large system. We passed the information on to the Post Office.’

One MP expressed his frustration, saying: ‘I haven’t had any answers to the questions I have asked and I am absolutely appalled at the answers I have been given.’

As far back as 2001, a whistleblower reported that remote access to Horizon accounts was possible. Dean was asked when Post Office staff knew that remote access to terminals was possible.

‘I cannot give you an answer to that question, but I will report back as this information was given to the inquiry.’

Dean was also asked about the culture at the Post Office when he joined.

‘The organisation was in shock and paralysis as a result of the Horizon judgment. That is why we settled with the GLO as quickly as possible. I do think it was dominating everything and that is why it was important to settle it.’

With a potential compensation bill of £1bn, Dean was asked whether provision had been made for the settlement.

Dean said: ‘I don’t accept the figure, but we have been concerned that people are not coming forward and that is a problem for us. We reduced our provisions as people were not coming forward to claim compensation. I think it is unlikely to be that size, but it could be.’

MPs also questioned Dean about the tax liability for the compensation payments as tax relief has been claimed, totalling an estimated £100m.

‘We have been having conversations with HMRC since last year about how we treat compensation payments,’ said Dean.

The 2023 Post Office annual report stated that a figure had not been agreed with HMRC as it was contingent on potential taxation liabilities.

‘While the directors recognise that an adverse outcome could be material, they are currently unable to determine whether the outcome of the discussions would have a material adverse impact on the consolidated position of the group and are unlikely to be able to do so until the discussions with HMRC are substantially concluded,’ the ARA stated. 

Since the group litigation was finalised, Fujitsu earned £95m in contract extensions to handle maintenance of the Horizon IT system, which the Post Office is currently looking to replace but has not made any decisions as yet, Dean told MPs.

Sara White writes in Accountancy Daily

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