March 2020

Why the ICAEW Technology Accreditation Scheme matters to you

May 26, 2022March 31, 2020 by Roy Sarkar

ICAEW Technology Accreditation for MindBridge

It should come as no surprise that the accounting software market is exploding. With increasing demands on chartered accountants to be smarter, faster, and more data-driven than their peers, we’re seeing massive growth in available tools, and the leading-edge technologies behind them.

This new landscape means that we’re in an age of faster time-to-market, constant product evolution, and, with the adoption of AI, taking on new ways of doing things. That’s why it’s critical for vendors to ensure a high degree of testing and quality assurance behind their products and for accountancy firms to understand the technology being offered to them.

The ICAEW Technology Accreditation Scheme helps accounting firms take the guesswork out of choosing the best software solution and MindBridge Ai Auditor is the first and currently only data audit & analysis software solution provider to have gone through this rigorous evaluation methodology.

The ICAEW methodology

The Institute of Chartered Accountants in England and Wales (ICAEW) is a professional membership organization providing insight and leadership to the global accountancy and finance professions. With over 181,500 chartered accountants and students worldwide, ICAEW provides qualifications and professional development, insights and technical expertise, and protects the quality and integrity of these professions.

The ICAEW Technology Accreditation Scheme is a rigorous evaluation methodology that goes into a software company’s management structure and financials, software development details, customer satisfaction processes, and more. This typically entails all departments coming together to answer questions in support of the company’s ability to successfully deliver features, value, and support to users.

Why it matters

This accreditation gives current and future Ai Auditor customers every confidence about choosing and using our solution. This is important for the following reasons:

The ICAEW Technology Accreditation Scheme is an independent evaluation of software packages, giving you the confidence that Ai Auditor brings value to your practice
Completion of the accreditation involves the completion of detailed questions about our product, functionality, support processes, and corporate management, including an on-site visit by the ICAEW
All submissions are evaluated and verified by an independent top UK accountancy firm, RSM UK, who has the final say as to whether a product has passed the accreditation process
The Scheme’s independence is very important as it means software companies cannot simply pay to join the Scheme but must meet the required criteria laid out in the questionnaire

As Ai Auditor is the first and currently only data audit & analysis software solution provider to have gone through this evaluation methodology, we are uniquely positioned to deliver real value and support to audit practices.

Craig McLellan, manager of the ICAEW Technology Accreditation Scheme, has the final word: “We are delighted that MindBridge has been accredited by the ICAEW. With the ICAEW Technology Accreditation Scheme being the benchmark for software used by accountants in both the business and practice markets, we welcome industry and software companies in embracing a modern approach to finance and accountancy.”

Learn more about MindBridge Ai Auditor here.

How auditors use AI-driven financial ratios to understand risk

December 18, 2020March 23, 2020 by Kevin Smiley

In times of great uncertainty, we all look for a crystal ball.

Also known as an orbuculum or crystal sphere, legend has it that a crystal ball is a fortune-telling object. But the use of crystal balls to predict the future is pseudoscience and there’s no evidence that they can validly predict the future.

Time and again, businesses and their advisors have proven that monitoring key performance indicators and ratios can be helpful to understand current business health and, some might say, predict future events. With the advent of artificial intelligence and machine learning, we now have the ability to augment this work with large amounts of data and perform complex calculations using an unprecedented number of variables to increase its accuracy.

MindBridge Ai Auditor gives this power to auditors, helping to evaluate financial health, discover trends in risk, and enabling better decision making.

Here’s a quick rundown on some ratios within Ai Auditor and how they can help.

Current ratio

The current ratio is a liquidity ratio used to evaluate a company’s ability to meet its short-term debt obligations by measuring the adequacy of the company’s current resources to cover its debt. To calculate, you divide current assets by current liabilities.

Companies in crisis will likely see their current ratio decrease as they draw down lines of credit to stockpile cash and use cash to maintain operations while revenue and accounts receivable decline. An example is Boeing drawing down its full $13.8B line of credit to stockpile cash to maintain operations and deal with the damage the airline industry is experiencing.

A healthy company has a current ratio of more than 2, whereas a company who is in trouble has a current ratio of less than 1.

Operating cash flow to sales ratio

Even with a healthy current ratio, cash and cash flow must be monitored because of uncertainty on accounts receivable and cash is key to the success and survival of any business. The operating cash flow to sales ratio indicates a company’s ability to generate cash from its sales.

Ideally, as sales increase, operating cash flow should increase by the same. However, in a time of crisis, accounts receivable may take unusually longer to collect as the market manages cash more carefully and takes longer to pay. An example of this ratio decreasing is the difficulty that oil producers across the world are facing as demand for oil plummets, supply increases, and oil companies have a more difficult time generating cash from their sales.

Though it is normal to see change in a period of change, the higher the ratio the better, and it should find a level of consistency over time.

Debt to equity ratio

The debt to equity ratio is an indicator of a company’s financial health. This ratio is indicative of the company’s ability to meet financing obligations as well as its financing structure.

It will be normal in a crisis to see this ratio increase as companies borrow heavily against their lines of credit and other debt. Investors will also be hesitant to provide more equity in a crisis especially as the markets are in decline. Further, raising money via equity offerings at a time of depressed markets is expensive to businesses. This causes companies to rely on debt and since increasing debt brings an increasing ratio, lenders will eventually consider it unhealthy.

This is part of the reason that the Small Business Administration announced additional small business support of up to $2M loans to small businesses who qualify during the coronavirus (COVID-19) epidemic.

A ratio of about 1 is optimal where a ratio higher than 2 is considered to be unhealthy.

Cash flow to debt ratio

Cash flow is king to any business as no business can operate without an ability to pay their bills. The cash flow to debt ratio is often considered the best predictor of financial business failure. This ratio is calculated by dividing cash flow from operations by total debt. A higher ratio indicates a company is more able to cover its debt.

Often free cash flow is used rather than operating cash flow because this takes into account capital expenditures. With COVID-19 essentially grounding international air travel, airlines are seeing a huge decrease in cash flow to debt ratio, so much so that the airlines are seeking a $50B aid package from the US government.

A ratio higher than 1 is healthy but any value below 1 is indicative of an impending bankruptcy within a few years unless the company takes steps to improve its situation.

Another metric often used to predict potential bankruptcy is the Z-score, which is a combination of several financial ratios used to produce a single composite score.

What do these ratios have in common?

Other than the fact that they are in no way associated with crystal balls, they are very important to a business of any size in a time like this and they can be augmented and presented using MindBridge Ai Auditor.

As businesses create plans and seek advice from their advisors, Ai Auditor can present intuitive dashboards of ratios such as these (and more) by using a 100% complete set of general ledger data. In addition, by leveraging machine learning and AI, Ai Auditor can provide analytics of these ratios to evaluate deviations from expected ranges across 12 months of data. Additional analysis is also possible on more detailed ledger data such as accounts payable and accounts receivable ledgers.

So what’s with the crystal balls?

Whereas we have all been led to believe that the future-telling effect of crystal balls is pseudoscience—which very well may be true—there do exist approaches and high-tech tools that enable the use of massive data sets to help gain incremental clarity about the future.

Ai Auditor isn’t pseudoscience, it’s right here, right now.

COVID-19 update: Effective audits & remote work

May 26, 2022March 19, 2020 by Stefano Colaiacovo, CPA, CA

COVID-19 — the coronavirus — has businesses around the world facing an unprecedented situation. First and foremost, we sincerely hope that you and your loved ones are safe and secure. Our current, shared situation certainly gives us pause and we recognize the importance of pulling through this together.

This new working environment most likely means that going into the office may not be viable for your audit teams, which means you may need to support remote talent.

We’re here to help you bring those audit engagements home.

We’re here for you

MindBridge continues to operate as usual and our teams are here to help you navigate any changes to your working model. As Ai Auditor is cloud-based and designed to help people in multiple locations work together, you’re already on your way to working remotely and having continuity in your processes.

We will update you with news and best practices to help you work productively. Keep this blog starred and check back for updates.

If you need to get in touch with support, contact your Customer Success Manager.

How to work remotely with Ai Auditor

Ai Auditor is built to support geographically diverse teams, meaning your audit team should be able to work together as they would normally. But as more team members start working from home, you may need to support additional geographically diverse users.

Considerations for expanding your infrastructure

Ensure that remote employees have the right equipment to log in to Ai Auditor, usually a modern laptop with an internet connection is enough.
Check with IT or your team on VPN requirements. While Ai Auditor does not require a VPN to log in, other files, applications, and communications tools to support your engagements might.

Best practices for engagements

No matter where your team is located, all the capabilities that you’re used to in Ai Auditor are available.

With the move to decentralized working arrangements, Ai Auditor provides the ability to manage your workflow transparently and for tasks to be allocated to team members. You can also use the tool to track responses and the real-time status of your testing plan at any point in time.

Has your client decided to postpone fieldwork or extend reporting timelines? Now could be the opportunity to think about the relationship between your methodologies and the appropriate approaches in Ai Auditor, including analysis and reporting. Your Customer Success Manager can help out here, and call upon one of our resident CPAs or CAs to find the best fit between methodology and technology.

Talk to your clients

Open and honest communication is critical during challenging times and your clients might be looking for support or wondering how the audit process may be impacted. This is an opportunity to connect with them on how they’re managing in these circumstances, reassuring them that you have state-of-the-art, cloud-based tools that maintain quality, support, and security in your service delivery.

Tips for maintaining productivity at home

Our very own Director, Transformation & Strategic Major Accounts (and fitness enthusiast), Gillian Fischer, created this guide for managing tasks, communication, and staying healthy while at home. We encourage you to take advantage of Gillian’s advice and let us know how you’re doing!

Read Gillian’s productivity tips >

Rather than focus on uncertainty, now is the time to embrace change and innovate. By working through the unique challenges presented before us, we’ll find ourselves responsive, ready, and well-positioned for the time when this storm has passed (and it will).

While the nature of markets, organizations, and your clients themselves could be very different from what they look like today, as history has shown, a sustained focus and a real commitment to the future, prevails. It is this focus and commitment that will help organizations deliver differentiated value and relevance.

We’re here to help you deliver that value to your team and your clients.