Inside the Accounting Profession: IFRS, Technology and Governance (Ep. 23)

How has the accounting profession changed over the past 25 years, and has practice kept pace?

In this opening episode of Inside the Accounting Profession series, Wayne Basford and Bruce Andrews discuss the forces reshaping the accounting profession, from technology and professional-firm bureaucracy to corporate governance and IFRS application.

🎧 In this episode, you’ll learn:

• Why large professional firms can struggle to adapt quickly
• How technology gives smaller firms greater agility
• What Australia’s adoption of IFRS achieved
• Why IFRS application can still differ across jurisdictions
• How revenue timing affects comparability and accountability

Financial Reporting Conversations is brought to you by Basford Consulting helping professionals go beyond compliance and get financial reporting right.

For technical insights, training, and resources that make the unknowns in financial reporting known, visit basfordconsulting.com

🔗 Connect with us:
LinkedIn: Wayne Basford & Judith Leung
YouTube: @BasfordConsulting
Website: basfordconsulting.com

Transcript

SPEAKER_01 0:00

Welcome to Financial Reporting Conversations brought to you by Bass for Consulting. We're here to make the unknowns of accounting and auditing and climate standards known so we can avoid the blindfreddy mistakes and do financial reporting better. Each episode we'll unpack what the standards really say and what they mean in practice. Whether you're a preparer, auditor, director, or litigator, our aim is to help you get it right. Good morning to Financial Reporting Conversations. Today marks the start of what I hope we are series of candid practical conversations about the issues that viewers will find interesting. Accounting standards, corporate governance, the role of auditors, and importantly, how all this is best communicated to the market and stakeholders. I'm Wayne Bassford and I'm joined today by Bruce Andrews. Bruce brings a rare combination of perspectives. Many of you will know him from his time as a journalist with BRW, where he covered the profession with insight and at times necessary scrutiny. Since then he's worked closely with firms including KPMG and Baker Mackenzie, advising on communication and strategic transformation. So he understands not just the technical side of the profession and how its story is told, interpreted, and sometimes misunderstood. Bruce and I go back a while. We first met in the early 2000s at a presentation in Sydney by Sir Adrian Cadbury, right to the time when corporate governance was undergoing significant change globally. Since then we've stayed in touch. So today is really about bringing those perspectives together technical, regulatory, communications, and strategic transformation of professional firms, and having an open discussion about where financial reporting and governance and professional firms are heading. Bruce, welcome and thank you for joining me.

SPEAKER_02 1:52

Being a fast follower is that is not easy, particularly if you're a large organization, to be that nimble. It's nice to have that mantra or that idea to be good at executing being a fast follower and and staying on, you know, keeping up. That's not easy for a large or you know, complex organization. So so yeah, there's a real opportunity, I think, for any of the mid-tier or or emerging players to to have a seat at the table ahead of uh anybody.

SPEAKER_01 2:24

You're right, it's it's the large organization. Now, conceptually, I've I was working for the fifth largest uh accounting audit firm in the world. And the large follower, it's there's so many disincentives, particularly somebody who lives in this world of ask forgiveness, not ask permission. So if I wanted to create anything, even if I wanted to create it, there has to be corporate visual identity. You have to use this font, you have to use that exact now. Somebody that's red, green, colorblind, somebody telling me I've used the wrong shade of red or green, isn't that? But I would create some presentation some and I would go that's not right, you can't do it. Have you checked with that? And then even if I went in my own office, no, I need to check with national. Can you check no? I need to check with the global uh head of design or marketing, and I'm sitting there thinking, this is just far, far too hard. And you know, one one of the almost embarrassing things in terms of technology, and I look at my you know, I I create my job is to create reports, and I, when I'm working for that major organization, my reports were not that polished. I didn't like the branding, I didn't like the formatting, I couldn't do it well, and then set up my own firm, my founding partner's partner, who's an IT guy, very switched on, he looked at it and said, Well, you just need a word template. What do you mean, the word template? And he just set up like that, taught me this is this level, level one, level two, level normal. Your colouring's gonna be this, and then I from day one can create far better documents as a at that time a two-man firm than I'd been uh preparing in a 70,000-man firm. I live and breathe by by technology, by SharePoint, and I want to use this, I need to use Chat GPT, somebody tells me Claude might be this, I want to use synthetia. I, in a small nimble firm, I can say, I want to try that. I know the larger firms know somebody is actually beta testing it. There's a committee, there's an international committee that is thinking about rolling this out.

SPEAKER_02 5:11

And the consultants are being brought in to advise on this to get there in the first place. Yeah.

SPEAKER_01 5:17

You look at AI. Um I am interested in AI, and I say wasting hours of my life playing with AI and talking to AI and shouting at AI. I've waste further hours listening to YouTube about what AI should I use. The standard when you watch AI, well, these are the AI tools I told you to use in 2025. And this YouTube video says forget using those AI models because this is what's good in the first half of 2026. So technology is you know, the adoption of AI, it's faster than the adoption of the of anything technology we've ever seen before. But I don't think the large firms can actually keep up to date with any of that.

SPEAKER_02 6:06

When you look back at uh that time you were in the fifth largest firm in the world, what do you think it was that you weren't, I guess, following the template there? And then you're in your own firm and you you were able to direct it and and tailor it to how you want it. What was it about it that that made it difficult being in a large firm?

SPEAKER_01 6:29

Empowerment. And you are talking somebody who's senior partners. It's not my job to worry about this. It's not my job to say I need it quickly. There is so much bureaucracy to go up the chain, you just give up. I bang my head against that wall too many times. I have learned, I am not gonna go down there, I'm not gonna moan, I'm not gonna say I need this quicker, I'm not gonna say we must be able to do better. You know, you go through the Stephen Covey, your sphere of influence, and when you're sitting there within an organization, if you listen to Stephen Covey, you realize that your sphere of influence, it cannot be across the whole firm. You've got a problem, it's is it that critical to you? No, I'll just use that template, I'll just fudge by, I will wait for somebody to roll something out, and I'm not invested in roll rolling out technology. You know, you look at if I I speak to audit partners almost daily, if I said to of quite large firms, okay, what are you doing on AI? Are you doing this? Are you doing that? Have you used ChatGPT? Are you using Claude? They won't know. Because there's somebody somewhere in that organization that will look into it, and they are just waiting to be told what to do, and it just makes them slow, you know. It it it is an interesting world of do can the world's changed, you know. We've we met 25 years ago or nearly 25 years ago. Yeah, if you consider when we met, I think when we met, no, I'd still got some sort of Nokia, and you know, I went through the journey of then being my Blackberry and loving my BlackBerry in 2005. I didn't have an I I think my first iPhone was an iPhone 3. Now look at the world we're in. You look at Teams, and when you first use Teams or Zoom, I people were not really using Teams until COVID, too, until really using it. I I weirdly and perversely was actually using Teams and SharePoint because I needed to from a necessity, because my marketing uh person, my marketing manager who came in from a new organization, introduced me to SharePoint. Not the firm, not my firm's IT, but we're now six years on from that, and my firm from day one, 2020, has just been using SharePoint, using Teams, work from anywhere. Whereas the bigger organizations, they're still behind.

SPEAKER_02 9:36

Can I take you back when to that time when we met? Do you remember him?

SPEAKER_01 9:40

I think it was an ICAW event or something. Sir Adrian Cadbury had turned up to Sydney and was banging his head that, and this was for all the work Sir Adrian had done on the Cadbury Code that everybody ignored in in the early 90s. And my accent, my accent is obviously somewhere from Birmingham, so Sir Adrian and Cadbury is a evidence from Birmingham. So he'd written the Cadbury Code and it hadn't got anywhere. And that meeting we had back in the early noughties, it was because of Sir Spain's Oxley. And I remember, I think you may be standing next to me talking to Sir Adrian, that he tried and do done, he'd come up with the answers in the early 90s, and the profession had said, no, we can't do this. The directors' associations, we can't do it. It's too much liability, it won't catch on. And then the Americans, because of Enron, etc., had introduced SOX, and suddenly everything that Sir Adrian had said was now relevant ten years after he'd actually published the the Cabri card.

SPEAKER_02 10:55

It was a really interesting time, wasn't it? I'd just become a journalist and was at BRW covering the accounting round, and I was really just feeling my way to understanding the the profession and the mindset and and just what was going on, and I didn't know it, but I had a jungle guide standing right next to me, and I could see you're quite excited by what Sir Adrian was saying, but also just him being there. I thought, oh, that's unusual. And you you explained to me, he is the godfather of corp modern corporate governance, and it was that was kind of the thread, if you like, of like teasing out what what was going on then. And it was like I said, it was a it was a really important time. Um we talked a lot about I think IFRS generally, but I think you walk me through what IAS that what that was then IAS 39 was. And and now 25 years later, you're you're basically telling everybody what IFRS means still. It's it's it's amazing that you that it's it's that you've you've got this this long record, I guess, track record of of trying to explain what what what's what what's been going on with with what was a seismic change at the time, yeah?

SPEAKER_01 12:21

I've lived through an amazing time and I keep on predicting how wrong it's got. So my background, my wonderful accent, I am an English chartered accountant, and I knew English accounting standards and SAP 24, and then we'd got finance. So Sir David Tweedy became head of the UK Accounting Standards Board when I was doing my exams, wrote some brilliant standards, and forget SAPs were into financial reporting standards. So I lived through that back in the 90s, turned up into Australia, still into US GAAP. I was moving into US GAAP, the complexities of US GAAP, turned up into Australia, didn't understand Australian accounting standards, didn't like Australian accounting standards, they didn't really make sense, they got a profit and loss that hadn't got anything other than revenue and profit. You know, 2001, 2002, certainly when we were talking, they the Australian accounting standards did not interest me, weren't very good. And I'm into US Gap. And then suddenly it was announced around that time. Australia is going to adopt IFRS, Europe is going to adopt IFRS. And guess what? Sir David Tweedy, the guy who changed all the accounting when I was doing my professional exams in the UK, was going to be head of the International Accounting Standards Board. And guess what? We'd got all the IASs, we'd got international accounting standards, and Sir David came along and said, no, we're not going to call those accounting standards anymore. We are going to call them IFRSs. So a whole new series of numbering, FRSs, but now IFRSs, and I'm thinking I've been down this route before. And fortunately for me, a lot of those earlier standards were re-badged, reworked, possibly simplified versions of US GAP. So I had a head start on what was a business combination, I had a head start on what was hedge accounting, what was a derivative. So that's about the time we went we we met. But when we met, I was looking forward to IFRS being introduced, and genuinely believed then, you know, I was a technical director almost teaching myself IFRS as I was teaching a firm IFRS. And IFRS was going to be introduced in 2005. And once it was introduced in 2005, me being a genius and a bright boy, IFRS was over. I needed to go back to be an audit partner, and I'd done the transition and no more. So that was my plan. When we met, it would be yes, I'm going to be doing IFRS for the next two years. Then I'll be an audit partner. And here we are 23 years later, and guess what? I'm still doing IFRS.

SPEAKER_02 15:54

So you didn't expect that at all. It was um and Australia was unusual, wasn't it? It in that adopted it for private companies as well at the time. It seemed like there was an attitude of like just just get on, shut up and get on with it. Um from some quite senior people in the in the among the regulators. How how how do you think looking back, how how did how did it go? How did how did people adapt? Uh was it a shock? I mean, or was it did was it uh was it smooth? What what what do you think happened?

SPEAKER_01 16:30

Okay, so in his context, Australia, the decision in Australia, certainly for I certainly for me, but I do believe for the Australian reporting was brilliant. So they actually were ahead of the game, they went with the EU. So they adopted IFRS, we're gonna do it. This is the Australian way, we are gonna adopt IFRS the same time as the EU. A lot of countries were behind us, so Canada dithered and Canada didn't adopt it until 2010, the Kiwis were two years late. So we were with the first wave, which tick. And we amazingly, in the main world, we adopted it for everybody. So for most of the world, if you imagine most audit clients are not listed, most preparers are not listed. The EU regulation was you adopt IFRS for your listed consolidated accounts. So 95% of British accountants, 95% of German accountants, they just kept on doing UK Gap, German Gap. We in Australia we went for it a big time. So we put ourselves far more IFRS than anywhere in the world. Now there is a separate podcast that you could interview me, or somebody else is going to interview me. I sit here and say 25 years on, or 20 years on, we have not adopted IFRS. So for the average accountant, and they keep on getting annoyed. Wayne, you keep on telling me this is difficult, you keep on telling me this is hard, I pass my CA last century, I and I just I keep on doing whatever I've done before. And there is a whole article I'm gonna read that revenue. When I was a US GAAP, when I'm a US GAAP expert, I would say rev US GAAP revenue recognition is the most complicated thing, it's the highest risk. What is the risk an auditor should do? Revenue. What's the second biggest risk of for an auditor? Revenue. We now have got, by the way, you know, IFRS 15, revenue converged. Topic 606 is exactly the same as IFRS 15 in 99.9% of it. And guess what? The Americans find it difficult, the Australians, nothing changed. It's easy. I raise an invoice, I recognize in revenue. I don't know what all the fuss was about. So we do it. Have we done it correctly? I don't know. There is a rebuttable when you have a share-based payment, there is a rebuttable presumption. So you're supposed to, I give you shares to acquire a mine, I give you shares to acquire a car. The standard says value the car. Value the mine. There is a rebuttable presumption that maybe you can't value the mine, you can't value the car. And if you can't value the good or the service that you've acquired in shares, you use the value of the shares. When I talk to my colleagues in London, when I talk to my colleagues in Canada, they've never seen it. You can't imagine you could rebut this. What do you mean you can't manage, you can't measure the good or the service? Welcome to Australia. We just always, we just measure the shares. So it is very the classic thing that when we've got this nightmare of IFS 18 coming along, the Australians prepare a direct cash flow. So the only place in the world where the world produces this is payments to customers, this sorry, this is payments to suppliers, this is receipts to customers, this is payments to employees, this is it's a it's a very good way of presenting a cash flow statement. Everybody else is movements in debtors, movements in creditors, it's the indirect. So the Australians have adopted IFRS. How well they've adopted IFRS is another whole top uh podcast topic.

SPEAKER_00 22:08

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SPEAKER_02 22:22

Wow. So how does something like that get resolved? If it's meant to be an international standard, I mean that is the point of uh having a standard that's recognised across the globe, is everyone is doing the same. And yet I guess you're you're saying, ah, there's traditions here, there's judgments involved. I mean, how do you reconcile?

SPEAKER_01 22:45

She'll be alright down here. So you will, and you do get, you know, there is the wonderful view of the world, and this this is not Australia, this is fair like the Asia Pacific. Whatever you do, don't ask a question. What we don't need to ask London a question, we don't want to ask international the question, we actually do very like know the answer to this, and don't ask the question. The world, I think the role of it, the role of when we'll get better is when the regulator gets better. If you look, and I've been beat being beat up by the SEC since 1999. I did a major US listing back when I was in Singapore, and I got all these amazingly technical questions from the staff. And some of those questions were yeah, yeah, easy, and some of the questions were very, very good and technical. In reality, the questions from our regulator, the questions from the inspectors, their knowledge of IFRS is not sufficient to ask the questions, and you know, that is the problem. Who in Australia are the IFRS experts? Have audit partners got enough knowledge of IFRS compared with their US counterpart if I sat down, a US partner and an Australian audit partner across any of the firms, and said, okay, here's a question and answer on revenue recognition, they're the same standard. Would I expect the US partner to win hands down in that quiz? If I were to put two sets of accounts together and say, here you are, Mr. US regulator, go for it, ask me hard questions on on RevRec. There you are, Mr. Australian regulator, ask me the questions, the US would win. And eventually, and it's it it is slowly, eventually, I think the regulator will get up to speed with RevRec. The regulator will get up to speed, better up to speed with with share-based payments, with financial instruments, and that will start to improve financial reporting. You know, in all fairness to the Australian regulator, they do ask some very good questions on impairment. They do ask some very good questions on IS-36. It may have taken them 10 years to start asking very good questions on IS-36, but they ask good questions. IS-36, it is IAS. It's actually an old standard. So there's questions about how good that standard is and is it being abused. But yeah, we will get there, but things don't now I live in Western Australia, so it takes even longer to get to me than it does in in the East Coast, so it will take a while. And I know you're asking me this question from Hong Kong. Again, and I've got lots of good friends and colleagues in the technical departments, in the firms in Hong Kong. I don't think anything that I'm criticizing Australia for, I could equally ask those uh accountants in in Hong Kong or or in Singapore or or in Malaysia. We've not we've adopted what we like to adopt, we've not been subject to rigor.

SPEAKER_02 26:51

So from your perspective, what in what impact does that have when it sounds like they're international standards, but not truly global or truly international? Does it have a material impact for investors or uh or or decision makers in an organization?

SPEAKER_01 27:09

Yes. You know, the beauty of and I am a massive supporter, fan, what's the best thing that's happened in my career is the adoption of IFRS. Why is it important? It gives comparability. I can compare a Hong Kong company with an Australian company with a company in London or a company in Toronto. We're not adopting it the same way. Does that allow comparability? It's completely failing in its uh key aspect. Revrec, everything says RevRec is the most important thing. If you apply IFRS 15 correctly, you can't manipulate revenue cutoff. You can't suddenly double your sales in period 12, which is the Australian way. If you look at people sales month on month on month on month, an Australian set of accounts, you can't believe how much they really manage to sell in June. That is and Hong Kong and Singapore. You can't actually do it. It's so unlikely you could do that under IFS 15. But that's the way we've always done it. We make an effort to push out sales, we make an effort to raise invoices. So all the analysts are being misled. Sorry, misled. And again, from a technical point, you know, I do the restatements and I involved in a lot of litigation. Horribly when you explain it, well, we do it because we do it every year, you've been getting it consistently wrong every year. So net net, you actually presented the right revenue this year because you moved you you suck forward July 26 into June 26, but you did the same in 25. So when you recorrect everything, you put the July sales back into July 25, and you take the July 26 sales out of June 26, and you end up with the right number. It only happens, it only gets really interesting when either the company's growing or the company's declining. So on a steady state, nobody cares really. Yeah. But up or down, you get material, you're materially misled.

SPEAKER_02 29:48

If I was a decision maker, I mean, uh are they aware in an organization in in this company, are you aware this is happening or are you using this uh incorrectly, this this this tool which is your accounts?

SPEAKER_01 30:06

I think the CEOs and the finite, you know, the sales directors, the sales managers if they said to them, well, okay, Mr. CEO, Bruce, the CEO, how did this new revenue standard impact you? What new revenue standard? This is the way we run our business, we are driven by budget, we always make targets, we always make our results, we are driven, the whole team is driven to do this. The board and the boards, the audit committees, if you know there is another interview you should do on me. Who do I hold responsible for financial reporting failure? And that's the chairman of the audit committee. So the person that's responsible for anything that goes wrong whenever you see a failure, that's the audit committee and the chairman of the audit committee. But that's a that's another interview for you to ponder. Um they're unaware of it. I I've got a good friend, or it's technically it turned out to be a good friend, but he was I know him through my my wife. He they go back a long, long time. And this guy is a technical, he was a technical salesperson, an IT guy who got into technical sales, and he happened to work for a US company. And we're and I don't think I'd ever shared with him what you what I did for a job. So we're up, we're drinking whatever bottle of wine and another bottle of wine, and he goes to me, out of interest, what do you do? I'm an accountant, you know, the barbecue killer, I I'm I'm an accountant. And he goes, I I hate accountants. And it was it was quite a vehicle, it was quite a vehement uh reaction, more so than I'm used to. And he said, I was negotiating a contract for three months, a massive sales contract, and I've got them over the line, I'd got the I'd made the sale, and we were gonna do it before the year end, and his bonuses are tied on that, he's you know, his job is to make sales, and because it was a US company, their procedures are you'd need to check it with the accountants. So he negotiated this contract, he'd fixed the contract that the customer was happy with, gave it to the accountants, and they said, You can't do it that way, you can't do that, you can't do that, and you can't do that. Now, that is the way revenue recognition works, that's the way US companies work. That before they do a massive new contract, a massive new sales contract, they go to the accountants who then very likely go to their auditors and double confirm is this the way we can recognise revenue, does it cause a problem? How do we recognise revenue? Anyone that's listening to this in Australia, that's not what happens in Australia. The sales guy, the sales director goes and negotiates it, the CEO he pats the guy on the back and says, We've won this contract, brilliant, well done, Bruce. We've got the best contract. We then recognize all the revenue, we tell the market we've won this great contract, and then you actually give it to the finance director or the financial controller. That's the way you know, where does this go? It's all about processes and respect. When I actually sit down with, or have done on loads of occasions, sit down with a US audit committee, they are so conscientious and so worried. And is this worked? Has this been checked? Does this comply with 606? I talk to a lot of audit committees, I talk to a lot of uh directors. I don't get the same sort of concern or or worry. But we will change.

SPEAKER_02 34:29

On the face of it, that sounds like Australia would have an an advantage that you can get the deal done first and then worry about talking to the your accountant second. Um, but how does that what happens in the real world?

SPEAKER_01 34:47

In Australia, you recognize good news earlier. It's only timing. You know, I've negotiated a contract with a customer, they're gonna give me $10 million. Accounting doesn't change, I'm gonna get $10 million. It's all about timing. When do I recognize the $10 million as revenue? In Australia, we will recognize a lot more of that $10 million in year one than an American would, and we'll recognize a lot less in year three. You know, accounting doesn't change the cash that we're bringing in. But if you're an analyst, if you're a sophisticated analyst, and I'm looking at revenue trends, I'm looking at gross margins, I'm trying to compare you against three other companies, I'm trying to compare you with a UK company or a US company. I can't get comparability. And a lot of these guys, you know, you see all these director remuneration, they get bonuses based on Ibida, they get bonuses based on share prices. So the share, and I'm British deep down, I've got two passports, but a lot of my sense of humour and irony is still very much British. I believe in stewardship. One of the purposes of a set of financial statements, which is a very British concept, is stewardship. I have entrusted you, the board, you the CEO, with my investment. Are you looking after it? And you're you're telling me untruths, you're telling me things that are better than they were because you're constantly sucking revenue forwards. And again, in a normal world, but when it goes wrong, then the restatements and then it wasn't going as well as you thought. You and I've paid you a bonus. I've given you share options, I've given you shares because you told me you were really managing this company well, and you were actually just playing some accounting tricks or driving through some of the accounting standards. Thanks for listening to Financial Reporting Conversations for guidance on applying accounting and auditing standards or to access our online training programs. Please visit basicconsulting.com.

SPEAKER_00 37:27

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