We are exploring the rising use of Data Analytics (DA) into numerous practice areas of the CPA industry in this June edition of our What-Counts newsletter. The growing dominance of data analytics is prompting many top firms to require new employee prospects to have a certain amount of college training in data analytics before being hired. We checked in with Arthur R. Marshall, Audit Partner, Ernst & Young LLP, Boston, about the rise of data analytics, how it impacts the profession right now and where he sees it going in the next few years.
Editor: How is Data Analytics (DA) enhancing the job of the CPA overall and why is it becoming a vital area of expertise for new CPAs coming into the profession and entering a firm such as EY?
Arthur: Data analytics and technology integration overall are becoming core to what we do as CPAs as we’re transitioning from business supporters to true business advisors. Data analytics is about thinking differently in problem solving with a data-first mindset rather than traditional audit methods such as sampling. The expectations are becoming greater from clients and management regarding the use of data analytics, which is why it is becoming vital for incoming CPAs to be prepared with baseline knowledge and not get their first-line skill training on the job.
Editor: What new skills do CPAs need to be properly trained at interpreting and managing the results of data?
Arthur: New CPAs need to be prepared to deal with the unpredictable. Data sets are not the perfect reconciling balances, so managing data is the first step to effective data analytics. Transforming unstructured data sets into structured and “clean” data is critical to being able to effectively interpret the information. Working with basic technologies to capture and transform data sets before importing into analysis tools is a new area of problem solving that we’re not used to in the typical academic environment. Part of the other challenge for training, is that with interpretation, there is no “right” answer. The debits and the credits should balance, but the story that a data set tells one person can be very different. So, that storytelling skill is also a core component of training and academics. Translating data to meaningful results, recommendations or decision points is a critical, but underappreciated skill.
Editor: When working with clients, how does data analytics relate to helping clients realize return on investment, projecting financial growth going forward and help with overall decision-making for a company in terms of their projected revenue, capital investment capability, containing costs, etc.??
Arthur: DA is about smarter decision making. So much of business has been based on “gut feel” vs. informed decision making. An analogy I’ve seen used many times is the relationship of data analytics in business to the evolution of data analytics in baseball. Smarter decision making in baseball changed the way many teams approached signing players, how they’re building line-ups, and how they’re approaching match-ups because historical trends and future projections can be made through effective use of data. That is the same with DA in helping clients solve their problems. Effectively matching and interpreting internal and external information significantly helps decision making – and provides greater transparency into other options that might be less traditional.
Editor: What is your sense of how fast is DA being merged into the college curriculum? Would you say that most college departments of finance and the schools of business at top colleges and universities are starting to make this a requirement in the student’s core curriculum?
Arthur: It seems that DA is being added into the college curriculum, but unfortunately it doesn’t necessarily “fit” in the traditional path for CPA education and preparation for the CPA exam. Most schools are making this a requirement, but in various forms. Some are adding classes to undergraduate, others to graduate programs. The most successful students will come out of programs through that don’t just add classes as a supplement, but those that complement the current curriculum with integrated data analytics concepts. Data analytics is applicable across the entire spectrum of the accounting and business curriculum, so finding ways to make it part of the existing vs. an addition will drive the right mindset in students that DA is for everyday and everyone.
Editor: Is DA going to impact everyone in the industry, both public and private, regardless of their size or client base, in your view?
Arthur: DA is already impacting everyone, both public and private. In one way or another every firm, organization and person is being faced with DA challenges every day. Some view this as a technology spend, but this is really a people investment into thinking differently about traditional problem-solving methods. With so much data and information available, created internally and externally – we can make smarter and more informed decisions – but there is also so much information that can provide false results or lead us in the wrong direction. Everyone is being faced with these data challenges but those that look at this as a people matter to make an investment in how to think, rather than what technology to use, will be those that come out on top of the great data race.
Our thanks to Arthur R. Marshall, Audit Partner, Ernst & Young, LLP, Boston for providing this comprehensive overview to us on the expansion of data analytics in the CPA industry.