12 minute read
Andrew Greaves has been involved in public-sector external auditing for most of his career, starting in Canberra with the Australian National Audit office in 1984. His work led to his latest appointment as the Auditor-General of Victoria in 2016, a role he will remit to 2023.
No stranger to reporting to the Australian Parliament, Andrew was the Auditor-General of Queensland from 2011 to 2016, and beforehand worked at the Victorian Auditor-Generals Office from 2003 to 2011 as Assistant Auditor-General, Performance Audit; and Assistant Auditor-General, Financial Audit.
He is also a Fellow of both CPA Australia, and of the Institute of Chartered Accountants Australia and New Zealand.
In a recent interview, Andrew discusses public practitioners in the age of Artificial Intelligence (AI), businesses fighting COVID-19 and the value he gained from his ANU degree.
Data analytics and AI are expected to have a growing impact on public practices. Could you identify some of the key strategies public practitioners should adopt in the future?
Auditors have used data analytics, or data analysis, for many years as part of their suite of audit evidence, including in planning and conduct, and in reviewing financial reports for reasonableness. We refer to these as analytic procedures, and it was common to talk about computer-assisted audit techniques with the large-scale uptake of computerised accounting and reporting systems late last century.
The recent rapid growth of data analytics usage has been enabled by an explosion of data and the arrival of more powerful analytical and visualisation software, with user-friendly interfaces that put this power into the hands of auditors and accountants. This software is operational without the need for specialist programmers or other technical IT support, presenting both new opportunities and challenges.
We can harvest significant efficiencies through the automated extraction and parsing of client data, financial and non-financial, in close to real time. We are pursuing this at the Victorian Auditor-General's Office with 35 of our largest clients across most sectors – Transport, Health, Justice, Education, Local Government and Central Government. As audit practices look for cost efficiencies, it makes sense to work with all large clients towards this goal.
However, we also need to keep an eye on how new accounting and financial reporting software is increasingly looking to ‘build in’ its own data-analysis capability and AI tools to enable finance departments to facilitate their work. Our approaches need to respond and continually adapt as this landscape changes if we are to stay relevant.
A significant challenge to note relates to capability. It’s great to have the capacity to rapidly deploy data analytics to a client but we need staff with the skills to interpret this data in a meaningful way. Our own experience is that data analysts are only part of the story. They are great at getting the best out of the software and producing some great dashboards and reports, but not always at getting to the key audit questions, and generating the insights we and our clients need. We also employ data scientists, with backgrounds in science, mathematics and statistics, who make sure we produce rigorous analysis that meet audit evidentiary standards.
The ‘tone at the top’ is one of the most important elements of [organisational misconduct] in a control environment.
What is your assessment of the nature of organisational misconduct and its key drivers in Australia?
From a public sector perspective, I am more likely to encounter maladministration than the common understanding of the term ‘misconduct’– that is, fraud and corruption.
Nevertheless, it is much more prevalent than I would like it to be, and in most jurisdictions, we now have ‘crime and corruption’ commissions that focus specifically on this issue.
Organisational misconduct can be considered from two perspectives: First, a deliberate and often ‘board-sanctioned’ (explicit or implicit) approach designed to deceive or obtain a benefit or advantage that often involves illegal acts or questionable morals. Second, allowing or fostering an environment within which officers and employees feel ‘authorised’ to engage in misconduct. I often differentiate between these as ‘intent’ for the former and ‘incompetence’ for the latter.
Both perspectives have their roots in self-interest – that is, what do I or we, as a board or governing body, stand to gain (or lose), which trumps fiduciary duties to act in the best interest of taxpayers, shareholders and the firm.
I have observed cases where a weak internal control environment not only allowed misconduct to occur but also actively encouraged it. The ‘tone at the top’ is one of the most important elements of the control environment and when this is broken, it sends all the wrong signals to the organisation.
[This pandemic] has given us a renewed laser focus on how we will secure and sustain cost savings after we come out of the crisis period.
From your experience, how could businesses secure themselves against the financial effects of coronavirus?
It’s tough for anyone to plan for and think about how to respond to a once-in-one-hundred-year force majeure event, that now involves actual regulatory risk, and potentially even the spectre of sovereign risk for some countries.
This reality is reflected in the Australian and state governments’ unprecedented fiscal responses, which include substantial direct subsidies to the private sector.
For a service entity like my Office, our remote working capability was already very mature because that is a normal mode of operation for my audit staff. It took very little for us to extend this to our corporate and other support staff. Therefore, we have been able to continue to operate with all staff working from home, with no real disruption to our business model. Unfortunately, some of our public sector clients were less well placed for this eventuality, and we are working with them to obtain remote access to their systems.
While we already had a focus on the efficiency of our operations, this event has given us a renewed laser focus on how we will secure and sustain cost savings after we come out of the crisis period. We, and I suspect many other enterprises, are now looking at the potential for home-based work becoming the new normal, with all the concomitant savings in outgoings like rent and utilities that this affords.
Strategically, we need to always make sure our service offering remains relevant to our user’s needs and that we grow our influence.
What are the key challenges in your portfolio?
Having more than 550 fee-paying clients and 175 staff always presents operational challenges that manifest themselves in things like employee health and wellbeing, and client satisfaction. However, we are generally well-placed in both these respects, with voluntary staff turnover at the lower end of the industry metrics, and consistently high levels of parliamentary and entity satisfaction with our outputs.
Strategically, we need to always make sure our service offering remains relevant to our user’s needs and that we grow our influence. We continually strive to better leverage our unfettered access to the public sector’s financial and administrative datasets, to produce sector-wide analyses and fresh insights into what’s working well by combining data from different sources.
The thing I valued most about my degree from ANU was its focus on theory – organising principles and conceptual underpinnings.
How did your degree from ANU and subsequent training in Accounting with CPA Australia and Chartered Accountants Australia and New Zealand (CAANZ) prepare you for your career?
On reflection, the thing I valued most about my Economics degree from ANU, which has held me in good stead throughout my career, was its focus on theory – organising principles and conceptual underpinnings. I hope these concepts are still in place.
When I started as a graduate auditor, I found that some of my peers had a better grip on the practice of accounting, but lacked insight into the underlying conceptual frameworks, and would struggle when faced with novel transactions or events that they had not been trained in dealing with.
Our first-year text was Barton’s Anatomy of Accounting, which eschewed a rules-based approach. I can still recall Allan Barton holding forth during my studies centred around readings in financial accounting theory, and the debates on measurement using current cost and continuously cotemporary accounting bases.
Perhaps this is why I still have trouble, as Barton did, with trying to value the public good that is the land that sits under local roads, and recognising this on public sector balance sheets.
The post-graduate professional study programs offered by CPA and CAANZ were a natural progression from my undergraduate studies and worked well for me because they complemented my day-to-day practical experience from working as an auditor.
The ANU College of Business and Economics offers an extensive range of specialised programs in Accounting. Click here for more details.