Date posted: 31/05/2019 8 min read

Accounting’s future climate

Root cause analysis, climate-related risk reporting and an economic tilt to Asia are changing accounting.

In Brief

  • The June/July 2019 issue of Acuity magazine is in mailboxes from 3 June.
  • It includes an exclusive interview with Kurt Zumwalt, the treasurer of global giant Amazon, who is taking a leading role in its internal fintech initiatives.
  • Other major features look at putting climate-related risks to earnings in financial statements, using root cause analysis to improve audit quality, and how Australia and New Zealand should approach the Asian century.

How are accountants adapting for the future? It’s a theme we explore in the June/July 2019 issue of Acuity.

The issue’s cover story is an exclusive interview with Kurt Zumwalt, the treasurer of Amazon, who has played a key role in one of the most rapid expansion stories in corporate history.

With a market capitalisation of close to US$800 billion, and annual revenue above US$230 billion, the online behemoth is turning into a quasi-financial institution in its own right.

But in addition to being Amazon treasurer, Zumwalt also takes a leading role in its internal fintech initiatives, following his patenting of the wildly successful Amazon Currency Converter App.

Acuity also interviews Kirsty Godfrey-Billy CA, CFO at Xero, who is steering the finance at New Zealand’s most prominent technology company.

“I love tech because it’s shaping the future and improving the way we work,” she says.

Climate-related risk reporting

A big change ahead for accounting is the strengthened focus on climate risks. Standard setters in Australia have got behind the G20’s push to include climate-related risks to earnings in financial statements. In New Zealand, the introduction of the country’s Zero Carbon Bill is expected to put more attention on companies disclosing their climate-related risks.

“Investors are telling us that climate risk is very important to their decision-making,” says Kris Peach FCA, the head of the Australian Accounting Standards Board.

Kris Peach FCA Kris Peach FCA

Warren Allen, CEO of New Zealand’s External Reporting Board, adds that: “For companies with material exposure to climate risk, such as the big carbon emitters, we’ve possibly not seen enough disclosure to date.”

It’s a big concern, so in this edition of Acuity we speak to finance professionals in organisations that have already signed on to the reporting framework devised by the G20’s Task Force on Climate-related Financial Disclosures. What is their advice for getting climate-risk reporting right?

“Investors are telling us that climate risk is very important to their decision-making.”
Kris Peach FCA, Australian Accounting Standards Board

Getting to grips with root cause analysis

Audit, too, is evolving. Root cause analysis, initially used by accident investigators in the mid-20th century, has found a place in external auditing as the audit profession globally looks for ways to improve the quality of audits.

The process starts with defining the problem, gathering the relevant information and identifying the issues that helped create the problem. Once the underlying causes of any audit quality issues have been identified, the team sets about devising permanent solutions.

The Australian Auditing and Accounting Public Policy Committee (APPC) released two new guidance documents in February 2019 to help individual auditors and audit firms strengthen their root cause analysis frameworks.

In the June issue, Acuity speaks to a number of the experts behind the new guidance, who share their experiences of implementing root cause analysis at their firms.

Australia and NZ in the Asian century

The global economy’s tilt to Asia requires an adjustment of a different kind. Geopolitical consultant Dr Parag Khanna says if Australia and New Zealand want to engage and benefit from this new world order, we need to change our Western mindsets.

We don’t have to be ‘team US’ or ‘team China’, he says; it’s not a new Cold War. Instead, Australia and New Zealand can hold quite different relationships with these different players at the same time. We must also realise there is a lot more to Asia than China.

It’s about having a multi-polar view of the world, and transforming the sometimes black-and-white Western outlook into something more nuanced and, indeed, Asian, he argues.

“Just because Russians and Australians hail (mostly) from European races does not mean they cannot be Asian. Even through an ethnic lens, Russians and Aussies should be seen – and see themselves – as white Asians,” Khanna writes in his book The Future is Asian. But is that realistic?

We ask chartered accountants based in Asia what they think businesses Down Under could do better. The consensus is we should spend more time getting to know our neighbours. Organisations should also make better use of individuals, including former international students, who are successfully navigating the Asian and Australasian spheres.

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