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The integrity of cloud-based accounting systems could see the death of traditional audits in the SME space, with Xero proposing a “continuous certification” model within which accountants could certify the integrity of clients’ data.
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Xero calls for continuous certification to replace audits
17 August 2015
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Speaking to AccountantsDaily, Xero CEO Rod Drury said the connectivity of cloud-based software, and the ability to build relevant controls into such systems, can provide an environment in which accountants can be sufficiently confident in the integrity of financial data to certify that integrity to institutions such as banks.
“We love this idea of continuous certification where if an accountant understands how Xero works and how to use the controls and uses alerts and monitors that we can put into the system, they then will be happy to certify, within a certain set of standards, that this data is correct,” he said.
“A lot of what’s required on audit goes away with a high integrity system which is continuously looking at the data, so if we can provide the tools for an accountant to be monitoring at scale hundreds of customers, we think we can create this concept of continuous certification.”
Mr Drury said Xero will work with the relevant professional bodies to define this concept of certification and, in turn, expects the accounting bodies to work with Xero to ensure the right audit controls and checks are in the platform.
Aside from reducing the need for costly audits, which for accountants have long been considered low-margin work, continuous certification can also provide better access to capital and finance for small businesses, according to Mr Drury.
“As long as somebody is within their envelope and the accountant is keeping an eye on that, the bank will be happy. If we see things moving outside of the envelope, or even predict things will move outside the envelope, we can alert the accountant who can create a discussion with the bank,” he said.
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“I think the banks would significantly reduce risk. We could aggregate the market to create enough scale so the costs go out of the process of lending. This could be a massive stimulation for small businesses and the banks; it’s a whole new market they can lend to.
“We think accountants will become part of the lending environment and be the connection between banks and small businesses,” said Mr Drury.
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