In this episode, we go inside the world of CPA data analytics with Jack Castonguay, assistant professor and executive director of assurance and learning and accreditation at Hofstra University and vice president of strategic content development at KnowFully Learning Group. Castonguay shares current uses of data analytics in accounting, key skills CPA data analysts should possess, and ways to showcase these skills within your firm.
By: Bill Hayes, Pennsylvania CPA Journal Managing Editor
CPAs are inundated with data on a daily basis. The CPA that is skilled in taking in that data and making sense of it in an advanced manner is bound to have a leg up on the competition as the profession continues to grow and develop. Therefore, it's key for CPAs to step up their game in the area of data analytics. Today, we will be talking to Jack Castonguay, assistant professor and executive director of assurance and learning and accreditation at Hofstra University and vice president of strategic content development at Knowfully Learning Group, about uses of data analytics for CPAs.
For some context, can you give us an idea of what data analytics is as a concept?
[Castonguay] So the technical definition is it's a way to transform and analyze data to inform decision makers. That's a little bit wordy. So, the easier way to think about it is, it's using information to make decisions. When we're thinking of information, you have two types. We have what's called structured data. When you think about that, think of neat Excel columns, right? That is organized. You know exactly what columns represents. But then we also have what's becoming a bigger and bigger portion of it. It's called unstructured data. So, think conference call transcripts, press releases, audio files, images. And now we can take that structured data, combine it with that structured data, and make even better decisions than we could have even five or six years ago. One thing I would want to point out early on is bad data in is still bad data out, right? If you don't have good data to make your decisions with to begin with, no matter what you do to transform it, it's still going to be bad.
At this point, how ubiquitous would you say the use of data analytics is in the business world in general?
[Castonguay] I would say it's an integral part of the business world. You can't separate the two anymore than you can't separate international business from just general business.
If a company's not using data to drive their decisions, they're going to be behind. It's in everything we do. Whole companies are built on it. You think of companies like Facebook and Gmail, where you don't pay anything for the service, because what you're paying them is you're paying them in your data. So, if you're in the business environment and you're not using data to drive your decision-making process, you're already behind because it's in every single major business, it's in everything we do. Granted, you still need that experience and insight, but without the data, your context doesn't really tell you much until you know you're at least on the right path to begin with.
As far as CPA firms are concerned, how are they using data analytics?
[Castonguay] CPA firms have been moving quickly into this. I'm going to go through audit and then some other areas. But currently it's being used to identify unusual transactions in audits. One way I want to think about is journal entry testing. Any time there's a credit to revenue and the debit wasn't accounts receivable, flag that entry, and let's do some testing over it. Any time an entry was made between 11:00 p.m. and 6:00 a.m., flag that entry, let's do some testing over it. To where we don't really have to apply sampling techniques anymore. We can look at a whole population and draw inferences from there. Some of your larger firms are really pushing forward in internal controls testing. As I mentioned earlier, part of that unstructured data is things such as images.
If you have an internal control testing that says, every check over a certain amount has to be signed by the treasurer and then maybe one other person. If you have all those check images, you can actually use that analytics. You can write a bot to look at each one of those and only pull the ones where there was only one signature or the signatures matched, right? Meaning the same person assigned both sides of it. That's where it's happening in audit across all aspects. It's being used to find outliers and analyze risks. If I'm a company and I'm auditing somebody and I take their transcripts and I scan it, and maybe I find that the CFO said down 52% of his centages. Sales are down, revenues down, etc.
That's probably going to give me some insight into, okay, that's probably not a risk for us going forward. So it allows accountants, whether they're doing it on the advisory side or on the auditing side, to see these trends and know what's happening before the clients do so you can then inform them. A common example: I was trying to tie things that are non-accounting to accounting. I think it helps people understand it, think with COVID recently. People stopped going out to stores and businesses before lockdowns or stay-at-home orders went into place. The data told us already people are pulling back. So when those lockdowns went in place, it wasn't as much of, this is a hard cut. This was already happening. If we didn't have the analytics, we couldn't have put that together.
What are some of the key skills CPA should possess in the area of data analytics?
[Castonguay] The first one is a skill that CPA firms have one of their new hires or their experienced hires to have for years: critical thinking. But what does that mean? Being able to run the data is one thing and it's highly important, and I'm going to talk a little bit about that. But if you can't draw the critical emphasis, if you don't have the knowledge and the information set already to know what the data's telling you, then it really doesn't matter how good your skills are. So, they have to be able to critically think, observe these patterns, and then ask the next question. Early on, some of the skills you're going to need is just being able to understand processes. Because if you can understand processes, you can follow steps and you can take tutorials on how to actually write your data analytics to do the thing you want it to do.
One of the things I'm trying to think of is robotic process automation, to where you don't even have to know how to use that. That's where you can write robots to essentially do automated tasks for you. But if I understand the process that I want that robot to do beforehand, then writing the robot actually becomes really easy because it can follow my screen. It can follow my clicks. But I have to understand that process upfront. Along with those, you have to have a willingness to learn. As we've seen over the past 10 years, the technology has come so far so quickly and it's probably going to go so fast the next 10 years. So knowing one tool, whether it's Excel, Power BI, whether it's coding with Python or R, those are really helpful. But as the next best thing comes out, that ability to adapt that knowledge base you have, and then learn how to either use the next two or apply those skills in a different setting is one of the single biggest skill sets any accountant needs to come out and have.
What advantage do CPAs have over their competition for jobs promotions if they have this skill set?
[Castonguay] That's a great question. I would say in some firms, if you're in some of these larger firms, it's not so much an advantage as it is a requirement or at least you have to have the requirement to you wanting to expand upon it. But if, right now, and a lot of places, our industry doesn't always move at the quickest pace. If you're somebody who has these skills that are new and in demand, all things equal, you are going to get that job over the person who doesn't have the skills. If you have experience with data analytics or RPA, even if it's on the lower end, even if you've just done some introductory work or you've just passed a basic certificate program.
Those skills are going to make you much more in demand because what's probably happening at these firms is a lot of these more experienced people, whether it's the partner level or the director level, they aren't likely to have been exposed to it in the same way. If they can bring in some of these newer staff that have this experience, they can change the game at their firm. They can make some of these processes that, right now, probably a lot of these partners and directors are looking at and going, this is probably not the most efficient life, but I don't know how to do it better. If you're that new hire that can come in and say, I know how to do it better, then you have such an advantage over anyone else, because you can save the firm time, you can save the firm money, and you can clear up that time when everyone's scheduled to do the value-add, the client-facing work.
How can CPAs go about building their skill set in data analytics? Are there courses they should be taking? If so, where do you find them?
[Castonguay] Long-term, I'm of the belief that you'll likely see some combination of accounting, finance, and business analytics departments merge into one department. Because I think business analytics is going to become such a component of accounting and finance. With the business world, it's going to be hard to separate the two. But before we get there, if you're starting out, what I try to tell students or early staff is start with your comfort level. You don't need to go right into coding and Python right away. Start with what you know. A common one is Excel. Microsoft has essentially created a more powerful Excel called Power BI. It uses the same Excel-type interface. It has a lot of the same help desk and icons across the top. It gives you some familiarity if you're already familiar with Excel, but it can do so much more.
When we're trying to introduce people, we say start with something that's tangentially related to what you know, in Excel, Power BI, Tableau's pretty user-friendly as well. Start with those tools and see how well you do with that before moving up. From the core side, shameless plug, Knowfully is the parent company of Surgent. We have a 10-part data analytics course, and we're not the ones that offer these, right? Normally most places will offer you an introductory, an intermediate, an advanced level. I think that's one of the best places to start. Just go to one of these providers or, if you're still in school, try and get those certifications that a lot of computer labs at schools still offer today and just do the basic and see how you respond to that. Because when you're doing that, I think a lot of times you're going to find out that the tools can do so much more than we even thought they probably could do.
By just playing around pointing and clicking, dragging, and dropping things, you can see, okay, this can help me in these areas. Even if you really haven't done a lot of it. The only other one I want to plug in there is RPA. That's robotic process automation. Once you understand the processes, sit down and think about all the things you do that take time that you don't realize how much time it takes. An example I use is, okay, if you get the same roster of people at your firm every day, and you're trying to input their hours. Well, instead of just constantly going, okay, Jack worked eight hours, Bill worked 12, someone else worked five, and putting it manually into the system, you could write a bot that says every day, go to this folder, pull out this information and automatically put it into our system. Automatically into our employee tracking system. When you think about these processes, if you can play around and design stuff like that, when the students, when the new hires, when you go to your firm, when you go to your first company, you can then take that and apply it to your job and say, "Hey, I can help you do this thing that's going to save us time." I think that's a real easy way to just start building it up by just starting with the simplest thing. As you get comfortable, just natural talent and your natural … most of us are CPAs, we want to learn. We'll take you to that next step to where you can really start applying it to more complex, more business-use cases.
Once a CPA has garnered this expertise, how can they go about showcasing it? How do you make your firm aware that you have it and have them buy into it?
[Castonguay] I had a partner from a large public accounting firm one time tell me he wants his employees to constantly ask, how can you do it better? Right there, that's a way for people to have to showcase that skill. Because if they're constantly asking whatever project they're working on, whatever tasks they're working on, whether it's an evidence-gathering activity, risk analyzation, whether it's writing a memo, if they're asking how they can do it better, they can find the inefficiencies in their workflows.
If, let's say, they're able to find something and it may take them a week to write the analytics script or to code it or to come up with this bot. That week they spent, if they can then transfer it to other people in their firm, that can now save the firm a month, two months’, three months’ worth of employee time. If you want a way to get noticed, find a way to save your employer time and money. That's going to stand out right away when you do that. Before you get to that stage, I try to encourage my students and our new people coming through the Surgent program to make sure you mentioned that you have those skills. Because if your manager doesn't know, maybe you're on a new team.
If you don't have experience with these people, whether you're a new hire in a planning meeting, when they're discussing things, it's a good idea to just bring it up in the meeting to say, Hey, I have this analytics skill. I'm familiar with Power BI. I'm good with Altryx. I have experience using robotic process automation. Then early on, when you find areas where it could be helpful, just mention, "Hey, I know I told you I'm able to do this. This may be a good area whether now or in the future for us to be a little bit more efficient." By doing that, you'll come across as you thought about it, you have the skills, and also then showing, “Hey, I not only have these skills. I had that critical thinking skill. Because now I'm finding a situation where I think these skills will be best used.
What fate do you think CPAs who are not interested in gaining this skill are going to face? Is it possible to succeed in the future as a CPA if you're not fully data-literate?
[Castonguay] I think it's going to be quite difficult. I'm not going to say it's impossible. But I think the bar is going to be pretty high just because we've had a good discussion and it's so ingrained. It's so integrated into everything that's coming out in accounting and probably everything that's already being done, at least at most levels. Granted, there's always going to be a slot for people to interpret the data. Whether you don't know how to use any of the tools, if you can interpret it, there's a huge value-add there too.
If you know what to ask for, but you don't know how to actually use the platform, I think that's okay. But I think if you're somebody who is hesitant to bring data into your organization and bring data into your firm, I think you're going to get poached, to be completely honest. Because I think these other firms, as they adopt it more, it's going to free them up to have more time. The more data analytics use they use, they're going to be able to do more things and free up their employees to go to other jobs. If you're not using data analytics, unfortunately they're going to come for your clients.
Because now they can do the same amount of work in such a short amount of time. And not only do they have the skills and the expertise, but then they can go to these other clients and say, "Hey, we can do your job faster because we're using these skills that our employees have." I think if you're hesitant or not willing to adopt it, I don't think it's going to be an overnight transition. I think ultimately what's going to happen is you're going to get transitioned out just because everyone else is moving up. If you don't at least step to where everyone else is, you're going to be left behind because there's no getting out of the data cycle we're in now. Data's a part of our lives. Our phones are constantly collecting it. Every store we walk into is constantly grabbing data. If you don't have a way to address that data, I think you're going to end up behind the eight-ball unfortunately.