CEO Mark Koziel on the Future of Finance and Accounting & AICPA-CIMA’s Vision

Thanks Tom, thanks for having me. It's great to be back. And I said, as I was reintroduced to Council back in October, I said I was coming home. I missed being at the association, missed being with AICPA and CIMA leadership. So it's great to be back.

Yeah, so it's 55 days, the 55th day, but who's counting? Officially anyway. As you said, I might have been working a little bit for the association in October, November, and December before I started. And it was really everything was starting to heat up then. It's interesting now as we get through it, there's just so many things going on. First of all, the political landscape that we have here in the US currently, and really the political landscape globally as well. I got another kind of inside information today regarding CSRD and where that's going with ESG, but we could table that for a later discussion. But the bigger thing was really about listening, right? And getting back to our members. We created an email address, [email protected], asking our members to provide feedback to me, asking specifically: what can the association do for you? What can the association do for your career? And what can the association do for the profession? And it's gotten already a lot of great feedback from a variety of areas, globally, US focus, UK focus. So it's good to kind of reset, get that information, and make sure that what we're trying to accomplish we're able to move forward. And some of that, if I were to be specific on the CGMA side and management accounting, it was definitely a request for more community, which you and I have talked a lot about offline, and things that we're kind of focused on doing for our members, really giving our members a sense of belonging in a different way. I think that's really important, something that I did at ALAL that I was pretty proud of what we were able to create there. But also being able to do that from the CIMA side specifically, probably a lot around just internal systems, being able to deal with us a little bit easier than maybe it's been in the last year. So there are a number of things there, and the CPA community we've talked a lot about things happening there. But I'll go in whatever direction you want to go from there.

You know, I was here for the vote back in the day when we had it. And as you know, for years we as a profession have always been challenged by how do we add value to our members in business and industry, which is now, in just looking at AICPA membership, more than half of the overall membership of the AICPA are CPAs who are sitting in business and industry. And they felt that the CPA was incredibly important to them to continue to maintain as they go throughout their career. As you had mentioned, before joining the association, I spent 12 years in public accounting, and then I spent three years in political and public affairs media doing absolutely nothing related to accounting. I ran the Time Warner division and also started to do client coordination, so I was the client manager of one of our largest public affairs clients, which was just absolutely crazy work in comparison to other things I had been involved in. So being on the BNI side, being on the public accounting side, and then joining the association back in 2006 and moving my family from Buffalo to Durham, North Carolina, having the perspective of both PA and MA back then, and then understanding the importance of all that. So when the discussion around some semblance of aligning AICPA with CIMA, it did make sense to me then, but it actually hit me even more so leaving the association in 2020 to join ALAL. And then you fast forward to October 15th, when the announcement was made that I was leaving ALAL to come back to AICPA and CIMA as CEO. That was on October 15th, a Wednesday. On Thursday, I was getting on a plane to Singapore for our Global Conference for ALAL Global. And I expected to go there and have a lot of our global members really not care much or not appreciate the position itself and who AICPA and CIMA was. And I was quite surprised actually by their response to it. How many of the ALAL member firms from Hong Kong, Singapore, South Africa, they were all incredibly impressed. First and foremost, the size, they just knew AICPA as being the biggest in the world by itself, just the CPA in the US economy. But then they were always quite excited because they said, well, we're still going to be a member of yours because we actually have the CGMA and we're a member of CIMA. And so that to me was the ultimate awakening to say we absolutely did the right thing. It makes a ton of sense. And while you've used the pyramid quite a bit, and you and I have talked a lot about this, we've said at both ends of the pyramid have been kind of outsourcing on one side and the technology on the other. Well, because firms have really invested in the technology, they become the outsourcer for the same pyramid model inside of business and industry. And so many of them now, it could be that a company makes a choice not to be in a market themselves to set up a finance department and rely on a firm that's there, or there's some level of supplement between them. And so the lines of public accounting and management accounting are incredibly blurred today.

And you know what's interesting, and this is really what helped me learn about that in ALAL, was the fact that we'd have a firm call up and say we need transfer pricing help in these 30 countries. And so then we had firms in those countries, maybe they knew, maybe they didn't, we just helped coordinate and bring the process together to put them together. One of our greatest successes was a billion dollar spin-off that I talk about a lot, a spin-off from a larger company that at first they needed to be up in I think it was like 20 or 22 countries within about a three-week span, SAP implementation and accounting support in those 22 countries. By the time we, and I don't even want to say we finished the project because we're still involved, but at this point they're in 56 countries. And of the 56 countries, 12 of those countries it was our member firm being their finance function because they said, you know what, we don't want to dedicate our own resources there, we'll just use one of your firms to do it. And so that's where it's just all jumbled, right? So their head of global accounting putting this all together, she's relying on it and she's making the business decision of where they want boots on the ground and where they'll supplement elsewhere. And so that's how global companies are doing it. But then take it down to the smallest of companies. When I was in practice in Buffalo, New York, where Main Street runs right through Buffalo, the not-for-profits that we had as clients and the small businesses, especially in the not-for-profit world, so many of them are like, you know what, we need to hire a CFO, but we only have a bookkeeping budget to do that. So they try and go out there and hire someone with that capability without having the support to be able to do it. And today they're finally saying, okay, you know what, that's enough, we will hire the firm to do it. The firm can now automate it. Back in the day when I was doing it, I'm doing journal entries in the conference room. Today all of that's automated, and the firm's able to go in and have more strategic discussions, which is what the client wants anyway. It's incredible.

Yeah, so I think it starts with that concept of trust, as you had just said. So in the CPA world in the US specifically, we were charged with trust. We wanted to be, and we are, the most trusted professional based on the fact that the one exclusivity we have is audit. And audit is what we are truly licensed to do. Everything else that we do in the marketplace is a matter of permission based on that level of trust that we've created. And I think with the CGMA we could do the same thing. The fact that we have standards around being a CGMA, same as we have standards being a CPA, being able to provide some level of trust in the environment around it. So when you talk about ESG, sustainability, and the like, yes, we have the ability now to provide some level of assurance over ESG and sustainability, and we could wrap it right into how we do financial statement audits and the trust behind the CPA to be able to do that. To be very US specific for a second, one of the things that we were charged to do back a number of years ago, I don't even remember when it started, I just remember doing it, are the single audits. The federal government provides funding to these not-for-profits and governmental entities around the country, and they wanted some level of assurance that they're following the program the way the money was intended to be spent. So we were hired to not only do the financial statement audit but to also provide assurance over those programs and provide that back to the federal government. In fact, over all these years, it was the OMB or the GAO would come in and they would basically audit our audits about every six years. And just in the past year, our Governmental Quality Center has been working with the federal government about that type of review, and the federal government then finally said, you know what, you guys have a peer review, we've been through it, we believe we can rely on that, we don't have to come in every six years to do that. And I think that's such a testament to who we are. So when I think of, and people, you know, I got to put it in context to what I understand, so when people start talking about assurance over ESG or sustainability, I said, well, we can already do that over here in this single audit space, so why not do it in that? And then I think from a management accounting side, because of the reporting that we do in financial information, we do have to report on ESG, and how is that reporting going to be done? And that's where the finance teams are contributing greatly and being able to do that. So we have to understand it as a profession, we should own it. I'll say outright, much like financial information, I think that's where it's all kind of coming together. And you might have some firms out there or some small businesses that are saying, ah, that's big company stuff, that's not for me. Okay, wait a minute, you're in somebody's supply chain. I don't know if we still have this out there or not, I'm going to get very local, GE in my example. But you know, I grew up, I worked for a supermarket chain, Wegmans, well known up in the Northeast. And Wegmans decided at some point, a privately held company, not even mandated to do anything, they decided that they wanted to produce a sustainability report. And in that report, they wanted to state that they were able to reduce their water waste as an organization by 20%. And so one of the clients, an ice cream manufacturer in small business America, would have been a great client of my firm, we lost that one, we didn't get that when we bid on the audit, we got the cookie company instead. But I know the small firm that did that. That ice cream manufacturer manufactures the white label for Wegmans, and we're told by the way, ice cream manufacturer, we are saying we reduce our water waste by 20%, you need to prove to us that you've reduced your water waste because you produce our ice cream in our name. And so immediately that small business was thrust into sustainability without knowing anything about it. So if anybody out there is in the supply chain, or you have clients who are in the supply chain of these larger businesses, if you haven't heard about it yet, you will eventually. I say coming to a theater near you. That's how that works. And interesting enough, what we are seeing in our Future Finance group is the emergence of the ESG controller or sustainability controller. So they're taking what used to be Sarbanes-Oxley controllers, and because they're experts in all the financial information and controls, dedicating them to ESG and those larger corporates. So it kind of again, the benefit of having both public accounting and management accounting, loud and clear for sure.

Yeah, and we've been following that actually quite closely. There's a bunch of activity that's happening from that UK productivity report to say that they're, what is it, their fourth in overall productivity and seem to be declining. Part of that, anytime you look at productivity, you're like, okay, what are the things that get in the way of being productive? And a lot of companies are going to go back on any type of regulation that has to slow you down. And I think the UK is suffering from this greatly, especially coming outside of Brexit and trying to compete in a different way in the EU and the like. I mean, from Brexit, Ireland just exploded as far as companies that started to drive over that way to be able to kind of backdoor their way back into the UK. But the UK now is struggling with all this additional regulation and split up. We've seen this in the audit community, and now they're saying how do we focus on being better business people as a country because we need to compete against that. And I think all of us kind of are in the same boat around that. So we are following that closely. I think that also is having some impact on ESG related items as you had mentioned, because what is it in the UK? I think it's CSDD, CSRD, and no, it's actually a different acronym now, IFRS or something like that in the UK. And then you have CSRD in Europe. And then everyone in the US said, well, we're not going to have to follow anything because we have a new administration. Maybe there's a couple of states that are doing what they're doing. But again, if it's a global company, they are trying to follow CSRD in Europe, and now they're starting to take a look at the cost benefit of the CSRD. So there's going to be probably some version of CSRD, but probably not at the level of where it's at today. And so I do think that the more we can involve technology and being able to track some of these sustainability initiatives, and if we could be nimble as a profession to be able to help companies be nimble around some of these regulations, then that can help with the productivity and not just focused on the fact that we're overregulated, we need to pull back on the regulations all the time. There are some things that we could do from a technology standpoint to make it easier. And then we're starting to see AI regulation proliferating all over the place, including states and Europe and UK and EU. It's almost like, you know, there are two versions of things as far as regulation. So something happens negatively in the marketplace, and then governments will knee-jerk react and just overregulate when things like that happen, or they try and regulate that which they don't understand. And I even think some of the cyber related GDPR that came out of Europe, and then California followed pretty close suit to that. And where does that stand today? Being able to allow companies to be able to sell and to talk to their customers in a different way. So I do think that all of this needs to be watched, and we need to try and keep an open capital market as best we can without overregulating it. And I get it, AI is scary, it scares me some days, but it doesn't mean that we have to overregulate it to try and prevent things from happening when the capability is there. But we have our EU, UK, and US team watching that stuff and weighing in on a lot of those regulations and standards as well. So you have a voice if you're in the AICPA and CIMA.

Great, well yeah, so I was, I wasn't here at the very start of CPA.com but not far thereafter. And one of the things that I always appreciated, and I created that relationship, and it was important to me to interact with CPA.com in a very different way because they were helping our member firms to get to a different point and working with technology companies differently. It really helped me shape my leadership when I was at ALAL for five years of how important partnerships were with technologies to make it easier to find what's out there. You were around when the Executive Roundtable was started. The Executive Roundtable, CPA.com created a meeting with the C-suite of the technology companies that impacted the profession. I think that first year we had like 40 companies that were there. It's first come, first served, they're all fighting to get in that room, they really want to have the conversation. So when I think about what was it, maybe 15, 16 years ago that that was started, and the conversation back then was around integration and the fact that a lot of these companies weren't talking to each other. We were trying to push everybody to the cloud, right? In our membership, saying you need to be in the cloud, you need to be in the cloud. And by the way, technology companies, you need an open API to allow for the firms and businesses to pick and choose how they're going to put their tech stack together and make sure that it's going to work. Because every time you send a new update to the cloud, if you don't have that open API, all of a sudden that connection gets broken. And in the desktop environment, we could pick and choose when we were going to do the update. With desktop, I knew some firms still today who are on desktop or still running some level of QuickBooks desktop version 2000 currently or something like that. So cloud just makes it easier, easier to keep updated. And we were active in that conversation and moved the profession forward and made it easier. I think a lot of our members wouldn't really necessarily understand that. We need to take that mentality and we need to move that globally. And we are looking at some executive roundtables that we could have in other markets where it impacts business and industry in a major way. And I think we can focus on that and stay involved in the conversation. Like you had mentioned, AI, we need to stay on top of that, who are the big AI providers, but also on ESG and ESG related reporting activity and the technology companies that are out there. We can partner with them. And then finally, the accelerator program that was started there, it's an AICPA sponsored event as well, trying to encourage innovation and these new technology companies that are coming to the profession. Being involved in that and helping them kind of get introduced into the profession, and maybe getting our member firms and businesses access to technology a little bit earlier than the rest of the marketplace.

I think I do. I think it's the same, right? Mark Koziel is the, yeah, Mark Koziel on Twitter. I will confess I don't follow that as much, so if they're trying to reach me on there...

Yeah, it was just that [email protected].

Absolutely, absolutely. And like I said, on the CIMA side, it was really about how they are able to interact with us, communities, more sense of community. And then on the CPA side, don't forget about the small firm. I think some of the regulation and things and just financial reporting for small businesses.

Thanks Tom, and thanks to all who are members for being members. We appreciate you. Thanks for.