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21 November 2017

Early November 2017, a fascinating two-day conference on the topic of ‘Accounting and IT’ was held in Curaçao. One hundred and eighty accountants from the Dutch Caribbean discussed the future of their profession in the IT era. Topics such as blockchain, data mining and combating electronic fraud were all addressed. Personally, I found the rapidly changing future of accounting the most interesting subject. This is something that all management board and supervisory board members of companies already get to deal with today. Simply put, for accountants and their clients the focus will shift in the coming years from preparing financial statements (currently still a legal task) to providing high-quality services from a business-financial perspective. After all, those financial statements will soon be drawn up via blockchain. Everybody will be able to do it, simply by using an app on his or her phone.

Accountants are also people, just like notaries. And people don’t like change. In the Netherlands many notaries completely missed the boat in the years after 2000, because they didn’t adapt quickly enough to the compulsory abandonment of the fixed and lucrative rates and to the new players on the market (the so-called ‘Hema notary’, transfer deeds as products placed between smoked sausages and underwear). Many once wealthy notaries went bankrupt. If the accountants don’t watch out, they await the same fate. As a member of the management board or supervisory board, how can you help your accountant to survive while at the same time reducing the audit costs? This is only possible by handling the relationship with your accountant more consciously.

“As a member of the management board or supervisory board, how can you help your accountant to survive while at the same time reducing the audit costs? This is only possible by handling the relationship with your accountant more consciously.”

First of all, there are the rates. In the near future, a difference will soon arise between high-value and low-value accounting work. You won’t want to pay high rates for what is basically low-value work. This means that the management board and if necessary the supervisory board must demand transparent quotes and, on balance, lower rates from the accountant. Just like all other professional service providers, accountants have to get used to the fact that they’ll have to deliver better work for less money in this current day and age.

Secondly, you’ll have to take place in the driver’s seat yourself when it comes to the structure and content of the management letter. Nowadays, all larger companies receive a management letter from their accountant after the so-called interim audit. In the management letter, the accountant brings various matters to the attention of the management board and supervisory board. In my experience the content and extensiveness of the management letter can vary greatly, depending on the outlook of the partner who is responsible for the interim audit. Whereas for one only a few points suffice, another draws up a list of twenty pages. The management letter should also provide the supervisory board with useful views of an expert outsider. A precondition is, however, that the management board, the supervisory board and the accountant have a serious discussion in advance about the management letter’s structure and content. Does the accountant have sufficient knowledge of the ins and outs of the company and the industry? Is he or she aware of the specific risks? What are the issues that, according to the supervisory board, require special external attention? Discuss those things in advance and don’t consider the management letter as something that just falls from the sky. You pay a lot of money for it and you can make demands about it.

Thirdly, as a management board or supervisory board member you must take the time to periodically (preferably once or twice a year) discuss with the accountant what is going well and what isn’t going well, both within the company and with regard to the quality of the services provided. Both for the management board and the supervisory board, insight into the company’s financial innards is one of their most important responsibilities. To achieve this, a lively and active relationship with your accountant is indispensable. Ideally, your accountant is one of your sounding boards for all financial matters within your company.

And that accountant? He is happy with your attention and interest. It will keep him sharp and therefore enable him to do a better job. And in the process he will also learn how to deliver a better product for less money.

This blogpost is also available in Papiamentu. Click here to download a pdf version.

Do you have a question about corporate governance yourself? Please e-mail it to governance@ekvandoorne.com and perhaps your question will be discussed in the next blogpost.