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University of Arkansas, Fayetteville ScholarWorks@UARK Accounting Undergraduate Honors Theses Accounting 12-2018 Addressing Skills in an Analytics World: Proposals for the Accounting Department at the University of Arkansas Michael Griffin Follow this and additional works at: https://scholarworks.uark.edu/acctuht Part of the Accounting Commons, and the Business Analytics Commons Recommended Citation Griffin, Michael, "Addressing Skills in an Analytics World: Proposals for the Accounting Department at the University of Arkansas" (2018). Accounting Undergraduate Honors Theses. 36. https://scholarworks.uark.edu/acctuht/36 This Thesis is brought to you for free and open access by the Accounting at ScholarWorks@UARK. It has been accepted for inclusion in Accounting Undergraduate Honors Theses by an authorized administrator of ScholarWorks@UARK. For more information, please contact scholar@uark.edu, ccmiddle@uark.edu. Addressing Skills in an Analytics World Proposals for the Accounting Department at the University of Arkansas by Michael Griffin Advisor: Katie Terrell An Honors Thesis in partial fulfillment of the requirements for the degree Bachelor of Science in Business Administration in Finance and Accounting. Sam M. Walton College of Business University of Arkansas Fayetteville, Arkansas December 15, 2018 1 Introduction Since the publication of a special report by the American Accounting Association’s (AAA) Committee on the Future Structure, Content, and Scope of Accounting education in 1986, professionals and educators alike have been calling for a change to the accounting curriculum to better prepare the accounting graduate for the professional world. There is a stark division on which skill areas should be improved. That special report predicted “an accounting profession that will provide information for economic and social decisions, using sophisticated measurement and communication technologies applied to a substantially enlarged scope of phenomena” (AAA, 1986). AAA (1986) commented on how the accounting profession was expanding and touched on several topics including accounting information systems and what we would now call soft skills, though more in the problem solving and critical thinking areas. More recently, Low, Botes, Rue, and Allen (2016) interviewed professionals on which skills accounting graduates lacked and found that most professionals assumed that accounting graduates had about the same technical knowledge, and what technical knowledge they didn’t have could be addressed in on-the-job training. Instead, when interviewing for new staff accountants, professionals looked more at the soft skills that the potential hires possessed than the technical skills they had listed on their resumé. On the other side of the argument, Pan and Seow (2016) focused on the technological skills that accounting graduates are lacking, particularly the most recent technologies such as IT control and data analytics, and proposed a few new courses to address these technological skills. There seems to be two major areas that educators or professionals are calling to be improved, soft skills and technological skills. As pointed out by Albrecht and Sack (2000), professionals and educators tend to differ on which areas are more important. In their study, the service that educators thought would be demanded the most was audit services, whereas professionals identified that service as financial analysis. It is necessary to identify the areas that students local to the University of Arkansas must be proficient in and how to improve the education process to prioritize those areas. To determine how to improve the current state of the accounting curriculum, one must first turn to research that has already been conducted and how it identifies the areas that accounting education must improve on. This paper will divide the areas into two broad categories: technical skills and “soft” skills. Soft skills are defined as those skills that are “required by accounting graduates for employability and career success” (Low et al., 2016). These skills often encompass “communication, team playing, leadership, problem solving, analytical, and interpersonal skills” (Sugahara, Suzuki, and Boland, 2010, p. 2). These skills have the same general characteristics but also have some aspects that are specific to the industry the accountant is working in. Technical skills can be broadly defined as the knowledge and skills to complete the tasks needed in one’s position. In terms of the accounting curriculum, this covers basically all of the courses taught from Principles of Accounting 1 to Corporate Tax. There has been a plethora of research concerning what technical and soft skills should be covered in accounting education. This paper aims to synthesize that research with the thoughts from local professionals and educators in the Northwest Arkansas area into a list of proposals that best suit the University of Arkansas. In doing so, other universities may take a similar approach in investigating which adjustments best serve their students and recruiters. 2 Literature Review Technical and Technological Skills Cory and Pruske (2012) conducted a study of public accountants and non-public accountants and the skills they deemed important. The top eight equally ranked skills/topics were “spreadsheet software, word processing software, creativity in problem solving, Windows, awareness of ethical issues, internet research, presentation software, and database software” (p. 216). These skills contain a mix of both technical and soft skills, however almost all of the technical skills presented to the accountants that were surveyed pertained to some form of technology. Thus, technical skills are as previously defined as the knowledge and skills to complete the tasks needed in one’s position, there is the distinct aspect of technology in technical skills, mostly thanks to the constantly evolving business environment that accountants are working in today. Skills in audit, tax, management accounting, and business intelligence roles The skills that professional accountants are using have been used as a metric for determining the effectiveness of an accounting curriculum. There are, however, different areas of accounting, usually categorized into four areas: tax, audit, management accounting, and financial accounting. Using data from the O*Net Program, the different tasks and skills that each of these areas use as well as business intelligence analysts have been identified. The O*Net program is a database sponsored by the US Department of Labor that contains occupational information on the knowledge, skills, abilities, work activities, and interests in every occupation. In auditing, the top five most important work activities identified in the O*Net data were: evaluating information to determine compliance with standards, getting information, updating and using relevant knowledge, communicating with supervisors, peers, or subordinates, and making decisions and solving problems. Tax preparers had similar work activities: getting information, interacting with computers, updating and using relevant knowledge, processing information, and performing for/working with the public. Financial accountants had all of the same activities with the exception of processing information and documenting/recording information. The most prominent position for management accountants would be controller. In the O*Net data for that position, the most notable activity not found in the other roles was analyzing data or information. While these are listed as work activities for each of these roles, it is important to note that a majority of them can be completed with the help of technology and analytics. For example, data analytics is becoming increasingly essential to the audit process for both external auditors and internal auditors. According to Tschakert, Kokina, Kozlowski, and Vasarhelyi (2016), “auditors are using data analytics to enable practices such as continuous monitoring, continuous auditing, and analysis of full data sets in situations where only samples were audited” (p. 2). Data analytics is not confined to an advanced firm proprietary software however. For some auditors, Microsoft Excel is one of the most powerful tools to assist in sampling, verifying calculations, identifying errors, analyzing controls, and fraud detection (Ragland & Ramachandran, 2014). Pan and Seow (2016) identified IT as another important area for accountants today and separated it into four different areas: • • • • internal control IT control and auditing data modeling, tagging, and management data analytics 3 They point out with the increasing “IT investment among accounting functions, it is therefore not difficult to understand why there is growing demand for advanced IT knowledge and skills for accounting professionals.” Accountants aren’t required to become Information Systems experts, but they do need to be familiar with the systems of the companies they are auditing or working for. However, there is a place for accountants in a more technologically heavy area: system implementation. In a case study conducted by Griffin and Dempsey (2009), accountants were said to be “fantastic middlemen explaining to both the vendor and users in layman’s terms the solution to the problem” (p. 44). In this area, accountants are functioning more as a business intelligence analyst and a liaison between the technologically minded developers and the business members. This is where the role of the accountant is headed. With the rapid increase of data, accountants must “develop strong analytical and critical thinking skills that include using technological tools to be able to sort, manipulate, and/or perform analytical functions in data extracts in these systems” (Ragland and Ramachandran, 2014, p. 115). How professionals gain technical skills With these developments, some accountants currently practicing lack the technological knowledge to fulfill the business intelligence roles. How do professionals gain these skills? If the professional has a CPA license, they are required to obtain a certain number of Continuing Professional Education (CPE) hours each year. In Arkansas, the requirement is 40 hours, 50% must pertain to the technical aspects of accounting such as Attest, Accounting Ethics, or Tax and if the professional performs attest services, then 20% of CPE hours must involve accounting/auditing (Western CPE, n.d.). In 2018 the Arkansas Society of CPAs (ASCPA) offered eight hours of CPE credit for an Analytics and Big Data for Accountants presentation. There was also a Cybersecurity Risk Management presentation offered in 2018 (ASCPA, 2018). One source of knowledge that current professionals can learn more about the trending technological and technical skills is the State Society of CPAs. If the professional works for a public accounting firm, it is likely that the firm is able to provide training for these specific skills, especially the larger public accounting firms. In fact, Pricewaterhouse Coopers (PwC) recently developed an app called the Digital Fitness app. The app assesses the user’s competencies and gives a “digital fitness” score. Employees then “choose personal, measurable weekly learning plans that suit their schedules and target the gaps in their Digital Fitness score.” (PwC, 2017) The learning plan includes short videos or articles on different tech related topics. Employers then are able to evaluate the current standing of their workforce and can then “create collaborative engagement models and move at the speed of a startup.” (PwC, 2017) This app is available for many different employers, so it doesn’t just affect public accountants but also accountants in industry. If the professional needing more technical training to keep up with the rate of technological change doesn’t need CPE credits or has access to more in depth training, there is another potential option. According to Kleinman, Siegel, and Eckstein (2002), “work teams are efficient instruments for individualized learning.” Teams are made up of professionals from different backgrounds and different competencies, that’s what makes the team such an effective unit. It turns out these teams are just as useful to the team members as well as the business that it is doing work for. Work teams accomplish this by design, they “provide a forum for organizational members to recognize and take advantage of a variety of learning opportunities” (Kleinman et al., 2002, p. 430). 4 The effect of new technologies on accounting roles PwC (2015) describes the impact and disruptive power of data analytics in business in its article, “Data Driven: what students need to succeed in a rapidly changing business world.” They identified one of the challenges in the current business environment as “the proliferation of data” (PwC, 2015). The volume of data that each company has is an enormous resource, though the systems in those companies vary in structure. As PwC commented, “some of this data is structured (amassed in one form within a database) but stuck in disconnected systems – much of which simply gets archived without deriving any real value.” While a good portion of data management systems are lacking in companies, there is a distinct shift towards making all of that data useable, and by doing so, making decisions with a better understanding of the context of the decision. Accountants in the past have normally only used this data when needed on an audit engagement or a tax return. Those in different accounting roles have the opportunity to improve that process, however, and change their function. As previously mentioned, accountants are excellent at taking technical jargon and interpreting it to something that clients or other users of the information can understand. PwC identified this as a potential role for accountants as well: “Accounting professionals can also use data visualization tools to help others better understand what the data is telling them, such as depicting the ebb and flow of online conversations around a particular topic, or using an interactive chart to allow a user to change inputs and see a new view automatically.” In the field of auditing, PwC identified three benefits for embracing the analytical role of accountants: better experience for clients, better experience for auditors, and more valuable insights. The main benefit for clients is the ease of pulling different records for their auditor. With the use of data analytics, clients for audit firms can set up their data to make it easier to gather the relevant information and supporting documentation needed by the external auditor. The benefit for the auditors themselves is relatively the same, by being able to pull data and validate easier with data analytics, auditors “can focus more on the logic and rationale behind data queries and less on getting the data in the first place” (PwC, 2015). As to more valuable insights, PwC stated that “not only does the audit yield important findings from a financial perspective, but also information that can help companies refine processes, improve efficiency, and anticipate future problems.” For management accountants, the amount of new technologies does not stop at software and ERP systems. The IMA (2018) article identified the technologies that are disrupting management accounting as “Big Data, predictive analytics, artificial intelligence (AI), blockchain, cognitive computing, machine learning, and robotics process automation” (Lawson, p. 4). According to Ratnatunga (2015), management accountants must be aware of the technologies that “will have a major impact [on] cost management and decision making.” Ratnatunga then discusses the potential effects of different cutting edge technologies from 3D Printing to meat grown in a lab. In Europe, Eurofound (2018) identified five technologies that will drastically change the way the manufacturing industry operates. They identified advanced industrial robotics (AIR), additive manufacturing (AM), industrial internet of things (IIoT), electric vehicles (EV), and industrial biotechnology (IB) as five disruptive technologies to the manufacturing process and key parts of Industry 4.0. In the report they described each technology in detail. Advanced robotics are “digitally enabled robots working within industrial environments that are equipped with advanced functionality” by the use of sensors. Additive manufacturing is the process of building products up instead of cutting them out of raw materials; the best example of this is 3D-printing. Industrial internet of things is the infrastructure that advanced robotics and other smart objects use to function. Electric vehicles are 5 vehicles that are propelled using electricity instead of fossil fuels. Industrial biotechnology is used “to design processes in industry using yeasts, bacteria, fungi, and enzymes…to produce biomaterials and biofuels.” More extensive definitions can be found in Table 1 (Eurofound, 2018). Eurofound estimated the potential market size for each technolog y in Table 2. These technologies represent a large movement towards Industry 4.0 and with them a whole new way of accounting for the costs of these technologies will arise. Accountants will play a key role in the implementation and accounting for these new technologies as seen in the Griffin and Dempsey (2009) case study. Management accountants of course will not have to be experts in these technologies, but will need to know how they affect costs and how they change the way inventory should be recorded. Auditors will need to know how these technologies will affect the processes of the manufacturing companies and how controls will change because of them. Ratnatunga (2015) comments that while these technologies seem radical and that management accountants might not want to think so far in the future, it is important “to be aware of the dramatic changes to business models that these technologies will bring” (Ratnatunga, p. 6). Soft Skills As defined previously by Sugahara et al. (2010), soft skills include “communication, team playing, leadership, problem solving, analytical, and interpersonal skills.” De Villiers (2012) defined them as “the interpersonal, human, people, or behavioral skills needed to apply technical skills and knowledge in the workplace.” He then separated them into five main categories: communication skills, problem solving and thinking skills, leadership and teamwork skills, ethical and moral values, and self-management. Communication skills encompass activities such as presentations, negotiations, conflict resolution, and writing. They also involve active listening, understanding different perceptions and giving and receiving feedback. Problem solving and thinking skills include creativity, framing issues, asking questions, and awareness of ambiguities and complexities. A number of different attributes are involved in leadership and teamwork skills, most notable were drive, project management, leadership social skills including empathy, and team formation and norm setting. Under ethical and moral values, a few traits were listed such as cultural awareness, cross-cultural appreciation, integrity and honesty, and work ethic. Self-management included self-awareness and knowledge, time management, realistic selfassessment, accountability, and continuous learning and upgrading of skills (De Villiers, 2012). These skills and attributes enable an accountant to effectively interact with clients and colleagues. Soft skills in audit, tax, management accounting, and business intelligence roles Palmer, Ziegenfuss, and Pinsker (2004) conducted a study of some of the competency research and publications concerning the knowledge, skills, and abilities (KSAs) of different accounting roles. The publications ranged from 1989 to 2003 and covered a variety of different accounting fields. Though the topics in each publication covered varying technical subjects as time progressed, some soft skills were a constant. In 1989 the “Big Eight White Paper” listed communication skills and interpersonal skills as needed in accounting. One or both of these terms were included in each of the following publications’ summary by Palmer et al. (2004). Soft skills therefore are not new to the accounting field. Though the societal stereotype of accountants is quiet and antisocial, the reality is quite the opposite. Accountants are constantly interacting with people no matter what area of accounting they work in. 6 In the O*Net data pertaining to auditors, tax preparers, controllers, and business intelligence analysts, there is a section titled Work Context. In this section O*Net sent out surveys with questions such as “how often do you use email in this job?” and “how often do you have face-to-face discussions with individuals or teams in this job?” Many of these questions pertain to the soft skills that professionals are currently using in their respective jobs. When asked how often they use email on the job, 100% of auditors responded with “every day.” 81% of auditors said they had face-to-face discussions every day as well. For business intelligence analysts it was very similar, 100% responded that they used email every day, 75% responded that they had face-to-face discussions, and 92% said that it was extremely important or very important to work with others in a group or team. Tax preparers used email a little less than auditors and business intelligence analysts with 45% using it every day and 55% using it at least once a week but not every day. A majority of tax preparers, 65%, responded that they were required to make decisions that affect other people, financial resources, and/or the image and reputation of the organization, indicating that they also use the leadership soft skills as identified by de Villiers (2012). Controllers are more senior in position compared to the respective positions in auditing, tax, and business intelligence roles, so they naturally have more leadership and management roles and thus use more soft skills pertaining to management. Some of the tasks listed in the O*Net data with the highest importance score include supervising employees, coordinating and directing financial planning, and developing internal control policies. The most important skill identified for controllers was critical thinking. Technology’s influence on soft skills By now, email has become an integral part of business communication. With the pervasiveness of email in the business environment, it is imperative that accountants write a professional email. If they fail, it is likely that messages will be misunderstood or the reputation of the sender will be diminished. As mentioned in the O*Net data, the vast majority of accountants in any accounting field use email every day. Thus, it would be safe to assume that there is a fairly normal distribution of accountants that can write professional emails. In a recent article published in the CPA Journal, Belik and Violette (2018) analyzed the perceptions of students on professionalism, specifically between domestic and international students. One portion of that study was on the use of communication devices and social media in the workplace. They found that students considered it “sometimes acceptable” for professionals to use cell phones for personal calls and text messages during the workday. This rating hinged on the context of the situation, because when asked if it was acceptable to do so during a work meeting, a majority of the students considered taking personal calls and text messages not acceptable under any circumstance. (Belik & Violette, 2018) This study is interesting because the results to the questions concerning social media and cell phone usage were fairly consistent between the two groups surveyed. New associates are not the only ones who could benefit from social media use. Warlick (2018) argued five reasons why firms should have a social media presence. She stated that first social media allows firms to build relationships, especially with potential clients or colleagues, and argued that doing so will “dramatically increase the chances of eventual business opportunities with these people and the firms they represent” (Warlick, 2018). The second reason Warlick gives is that social media allows firms to establish thought leadership. She argues that by posting on social media about complex issues and new developments, followers “begin to recognize you for the expert you are.” By becoming more active on social media, Warlick claims 7 that firms will reinforce niche specialties, attract new talent, and maintain high visibility. Her reasoning for high visibility seems to be valid in potentially drawing in new clients, if clients find they need a specialist to address some accounting need, they might first ask about the one they see most often on social media. The problem with this logic is that most of the large companies have established relationships with the accounting firms that they work with, so this might only work with smaller companies or if large companies decide to look for a change. Considering her claim that increased social media use attracts new talent, a 2013 article published in the CPA Journal found that the students surveyed spent on average “less than 30 minutes per week using online social networking for recruiting purposes during their last job search” (Herbold & Douma, 2013). While this information seems to go against Warlick’s reasoning, it is important to note that the Herbold and Douma article is outdated in terms of technology and it only focuses on students in the recruiting process. It is possible that a strong social media presence might attract talent already working, there simply is not much research on that subject. Seemingly in response of the lack of quantifiable data concerning social media, Warlick makes a point that the reasons that she presents “strengthens and supports your brand” (Warlick, 2018). Social media itself presents an interesting scenario in which students going through the recruitment process potentially know a good deal more about how to behave professionally in this new environment and thus the soft skills unique to those platforms. Goal Skill Set of Accounting Students Accounting students are expected to be prepared to transition to professional work fairly smoothly. However, some of these skills are difficult to teach in the university setting. Keeping this in mind, some research suggests that the focus must be on “the ability to develop, change, and renew skills and knowledge throughout life” (Kavanagh & Drennan, 2008). While this is true for some skills, especially those that are based in experience, there is a specific set of skills that accounting graduates will need to have when beginning work. There are different groups that dictate this skill set: employers, the CPA Exam, the Association to Advance Collegiate Schools of Business (AACSB), and the educators themselves. All of these organizations have different expectations as to what accounting students need to learn in tertiary education. Determinants of the goal skill set Employers Employers have become increasingly concerned with more of the soft skills that students possess instead of the technical skills, because the employers assume that the candidates they choose to interview understand the fundamentals of accounting and they expect to train new associates in the technical areas. One of the participants in Low et al. (2016) stated, “when somebody starts we don’t expect them to have all the technical skills because it is part of our responsibility that we teach them or give them the skills they need to do the technical work.” Low et al. (2016) indicated that employers expect to address the technical skills of graduates through on-the-job training. After gathering several job postings for entry level accounting positions in the local area, the requirements listed have a distinct soft skills focus. The requirements of strong accounting knowledge and technological literacy are still present in all of the job postings, but they only take up a couple of lines. The rest of the requirements and qualifications for associates focus more on critical thinking, problem solving, ability to research into topics, and above all interacting with clients and colleagues. A Deloitte posting for a staff auditor broke down the requirements into two parts, auditing skills and professional mindset, 8 what they call “skill and will.” In contrast, PwC seemed to be focused on the technological skills of accounting students as well. PwC (2015) laid out three ways they believe universities can address the changing technological environment: adding technical skills in the undergraduate program, adding technical skills in the graduate program, and focusing on leadership. The first area suggests implementing technical skills in undergraduate programs by “infus[ing] analytical exercises into existing curriculum to help students develop data analytics proficiency on top of their core accounting skills.” They suggested to shift the statistics courses from theory to more programming and analysis heavy. Specifically they propose three courses: a basic computing course which focuses on programming, spreadsheets, and databases and two statistics courses, the first of which focuses on programming in R, data cleaning, and data visualization. The second statistics course focuses more on “documenting analysis in R” and dealing with data problems and predictive statistics. On top of these courses they suggested that more case studies be implemented in classes to increase hands-on use of analytics tools, specifically using realworld concepts so that students will have a better understanding of how to conduct this analysis when working. Association to Advance Collegiate Schools of Business (AACSB) The AACSB is a large influencer of what accounting curricula cover and by extension what skills accounting graduates should possess. In the preamble to the 2018 standards, the AACSB stated that “business schools and accounting academic units must respond to the business world’s changing needs by providing relevant knowledge, research, and skills to the communities they serve.” They define their purpose as the encouragement of business schools and accounting departments to improve the business and accounting practice through “scholarly education, engagement, innovation, and impactful intellectual contributions.” The AACSB claims to achieve this purpose by “defining a set of criteria and standards, coordinating peer review and consultation, and recognizing high-quality business schools and accounting academic units that align with the standards and participate in the process.” The main way that the AACSB determines what skills the accounting graduate should have is through the standards they place on participating accounting departments. There are several standards on the structure and organization of business schools and accounting departments in order to be eligible to be accredited by the AACSB, however the focus here will mostly be on the curriculum standards. Standard A4 states “Curriculum is appropriate to professional expectations and requirements for each accounting degree program. The accounting academic unit uses well-documented, systematic processes for determining and revising degree program learning goals; designing, delivering, and improving degree program curricula to achieve learning goals; and demonstrating that degree program learning goals have been met” (AACSB, 2018). Within this standard, the AACSB defines some content areas that accounting departments should cover in different degree programs. Some of the topics required include: • • • • • The ability to identify issues and develop questions, apply appropriate analyses, interpret results, and communicate conclusions. The roles accountants play in society to provide and ensure the integrity of financial, managerial, and other information. The ethical and regulatory environment for accountants. The critical thinking and analytical skills that support professional skepticism, risk assessment, and assurance of accounting information. Internal controls and security. 9