Thomas Carey is co-Principal Catalyst for the Workplace Innovation Network for Canada, Executive-in-Residence with the Monash University Faculty of Arts and a former Associate Vice-President at the University of Waterloo.
Anahita Baregheh is an Associate Professor at Nipissing University’s School of Business and WINCan’s Research Director.
Jennifer Justice is an Accountant with Kendall Sinclair Cowper & Daigle LLP in North Bay (Ontario) and a graduate from Nipissing University’s School of Business
In previous posts, we outlined our prototype workplace innovation Ladder of Professional Development Opportunities and provided illustrations from the work domain of Accountancy for the first two opportunities (Job Crafting and Innovation Adaptation), along with a demonstration of how innovative developments in Accountancy practice have opened up new opportunities for employee-led Workplace Innovation by accountants.
In this post we follow up with examples from the specific Accountancy subfield of Auditing, to illustrate the dual goals of employee-led Workplace Innovation (improving organizational effectiveness and quality of work life), adaptation of innovative accounting practices from sources outside the firm, and the development of new innovator roles for accountants in Audit.
Auditing as an Example of Incorporating Quality of Work Life into Workplace Innovation
While traditionally the emphasis for innovation in accounting may have been driven by the goal of improving organizational effectiveness, the goal of improving quality of work is increasingly recognized as important. We focus here on Auditing work to illustrate this trend.
“Auditors are implementing technology to save time and better catch errors or automate some of the more tedious tasks associated with the audit process”, in order to create room for “the decision and judgment making steps”. This description – from a study of technology innovations for audit within the offices of the “Big Four” multinational accounting firms in a midwestern U.S. city [Rychlik 2018] – illustrates the classic dual goals of workplace innovation: improving organizational effectiveness and the quality of work life.
All of the Big Four firms – Deloitte, EY (Ernst & Young), PWC (PricewaterhouseCoopers) and KPMG – have a separate practice area within the firm devoted solely to “creating new, innovative ideas and ways for completing the audit” and several have designated regional Innovation Centres to encourage and disseminate innovations. Additionally, at least one firm (Deloitte) holds an audit innovation competition annually for all employees with incentives for the winning team [Shannon 2020]. The winners of the innovation challenge in 2016 were members of a team that found a new way to use robotic process automation in auditing, a topic that we return to later in this post. None of them had been with the firm for more than a year and a half [Tysiac 2017].
The growing importance of employee-led workplace innovation is also influencing recruiting and hiring policies in these large multinational accounting firms:
“Recruiting the right people to use the tools and come up with new ideas may be the most critical part of the innovation process. We are finding that early-career professionals, in particular, get excited about the opportunity to use technology to make process improvements and provide useful insights to businesses”
The technological shift can make early-career tasks more fulfilling for young people in the accounting profession. In the past, a person in his or her first few years at Deloitte may have been charged with verifying accounts receivable by confirming them with company clients. Now, with the confirming process automated, that same early-career professional spends some time instead on more interesting tasks, such as understanding data populations, identifying and investigating anomalies, and finding creative ways to gain assurance as to the propriety of the financial statements.” [Tysiak 2017, quoting Deloitte’s Chief Innovation Officer]
Auditing Illustrates the Importance of “Open Innovation” in Adaptive Innovation
While the experience of the Big Four multinational accountancy firms may be in line with the goals of employee-led workplace innovation, that doesn’t automatically carry over into other accounting firms. In smaller firms, Innovation Adaptation may rely more on stimulating innovation from outside the organization, which has traditionally been labelled as “Open Innovation”.
The “Open Innovation” paradigm highlights the value of "a distributed innovation process based on purposively managed knowledge flows across organizational boundaries". [Chesbrough & Bogers 2014]. In the public and social/community sectors, sharing innovation across organizational boundaries is commonplace; in contrast, for private sector entities the research on open innovation demonstrated that in some sharing innovative practices across organizations could create sufficient additional value to be of benefit across all participants in the open innovation process.
The influence of Open Innovation on Innovation Adaptation in internal auditing was examined in a recent study of more than one thousand internal audit practitioners [Lhuillery et al 2021]. The study explored the extent to which internal audit teams were innovative, and related this to “their internal search capabilities, and the different internal and external knowledge sources that they can absorb”.
The study findings suggest that peer input and feedback from within these accounting firms are largely “limited to providing feedback on established practices to increase audit quality”. In addition, peer influence may “not allow internal audit departments to go beyond compliance with standardized auditing practices in order to foster innovation”. Peers within the firm tend “rather [to be] gatekeepers for regulators’ knowledge, fostering novel practices for compliance purposes” rather than for innovation”.
Innovative auditors, on the other hand, do not emphasize compliance when they innovate. They “deliberately deviate from compliance to innovate using professional associations’ and IT consultants’ knowledge”. For them, the impact of external knowledge sources “demonstrates the prominent influence of professional associations on internal audit innovation…external regulators should pay attention to internal audit departments’ willingness to innovate in order to foster internal audit practices”.
[On a personal note, as researchers this study highlighted the potential links between research on Open Innovation and our own interest in fostering Adaptive Innovation. We expect more on this will follow in future posts 😊.]
Team Job Crafting meets Innovation Adaptation:
Innovator roles for Robotic Process Automation in accountancy
We conclude with examples of an interesting variant on Innovation Adaptation/Open Innovation in Accountancy: the adaptation of a software platform rather than a software application. Many accounting practices are using software platforms for Robotic Process Automation (RPA), which make it easy to build, deploy, and manage software robots that emulate routine human actions when interacting with digital systems and software. For the firm, there are efficiency gains in reducing costs and elapsed time to process accounting transactions. For the employees, transactional-routine work is minimized, and the opportunities for creative-analytical work are increased. [Fernandez & Aman 2018].
This RPA context creates some interesting differences in the workplace innovation activities. Due to the nature of the RPA software platform, the What Is and What If design questions for Innovation Adaptation are limited to identifying accounting processes which are viewed as largely routine transactions and where the potential gains in efficiency and job quality provide sufficient Return on Investment to justify the effort required to train the software platform to recognize and process the transactions.
A 2021 study of experiences with RPA in eight accountancy firms categorized these activities as falling within an Identifier role: “identifying RPA opportunities that will allow their organizations to operate more efficiently and effectively” and ”quantifying both the process exception rate and the number of labor hours saved” [Kokina et al 2021]. The resulting “to-be” process flowchart is a visualization of the What If scenario in an Innovation Adaptation process.
““I think it’s important also that the profession understands that this is going to continue evolving, and it’s going to be moving more in a direction where accountants are going to be really process experts, rather than just doers of the processes.”
”
The What Works design question is addressed in part by the next steps of the RPA process, when the software platform is trained on sample accountancy case data. The accountants’ innovation activities at this point focus on an Explainer role: “explaining to software designers and bot developers in great detail the steps and internal controls involved in a process chosen for RPA.”.
As with any What Works innovation activity, the hypotheses from the Identifier activities require revision: the accountants’ role is “to make sure that as we…pilot these deployments, that we know what we’re doing, and we have the right documentation in place, we have the right process in place, we have the right controls in place.”.
Two further activities for accountants were evident in the RPA workplace innovation context:
a Sustainer role in which a change in regulations or processes requires a retraining of the RPA platform (with related What Works activities). This activity emphasizes that Innovation Adaptation need not be just a one-time task of identifying how to adapt this innovation to work here – it can also be a continuing process of asking how to craft our own innovations here using this innovation platform.
an Analyzer role in which the expected benefits re more creative and analytical work can be realized: “The Analyzer role is not part of the end-to-end RPA process but rather it has been enabled by RPA. Freed from performing mundane and routine tasks and devoting hours to preparing data for analysis, the accountant can now dedicate time to providing their organization with important insights.” This is the second half of the What Wows hypothesis: that the accountants will be enabled to engage in work roles which increase their job satisfaction and quality of work.
A final note about the RPA process: the more technical role of Trainer/Coder working to customize the RPA software platform for this particular task is currently carried out by an Information Technology staff member. However, there is speculation that over time accountancy students in higher education may receive sufficient technical training to take on this role themselves (where that makes economic sense).
References for Auditing as an Example of Incorporating Quality of Work Life into Workplace Innovation
Rychlik, M. (2018). Innovation in the Audit Profession and How it is Changing the World of Accounting. Oklahoma State University Honors College thesis.
Shannon, E. (2020). “Crowdsourcing Innovation from Within: How Deloitte’s 2020 Audit & Assurance Innovation Challenge is Helping Drive New Talent Models and Inclusivity”. CPA Practice Advisor weblog, Sept 30, 2020. [Erin Shannon is Deloitte’s Strategic Initiatives Leader]
Tysiac, Ken. "How to enable audit innovation: ideas, strategic alliances, and user-friendly tools help Deloitte make technological improvements." Journal of Accountancy, vol. 223, no. 4, Apr. 2017, pp. 33+.
References for Auditing Illustrates the Importance of “Open Innovation” in Adaptive Innovation
Chesbrough, H., & Bogers, M. (2014). Explicating open innovation: Clarifying an emerging paradigm for understanding innovation. In H. Chesbrough, W. Vanhaverbeke, & J. West (Eds.), New Frontiers in Open Innovation: 3-28. Oxford: Oxford University Press. Page 17.
Lhuillery, S., Tellechea, M., & Thiery, S. (2021). “Open innovation in managerial innovation: the case of internal audit”. Presentation at the Copenhagen Business School DRUID Conference 21, Oct 2021.
References for Innovator Roles for Robotic Process Automation in Accountancy
Fernandez, D., & Aman, A. (2018). Impacts of robotic process automation on global accounting services. Asian Journal of Accounting and Governance, 9(1), 127-140.
Kokina, J. and Davenport, T.H. (2017). The Emergence of Artificial Intelligence: How Automation is Changing Auditing. J. Emerg. Technol. Account. 2017, 14, 115–122.
Kokina, J., Gilleran, R., Blanchette, S., & Stoddard, D. (2021). Accountant as digital innovator: Roles and competencies in the age of automation. Accounting Horizons, 35(1), 153-184
This project was supported in part by a grant from eCampus Ontario’s Virtual Learning System program.