ICAI releases Digital Competency Maturity Model for Professional Accounting Firms
DIGITAL COMPETENCY MATURITY MODEL (DCMM)
For Professional Accounting Firms
Digital Accounting and Assurance Board
The Institute of Chartered Accountants of India
“Digital Competency Maturity Model (DCMM) for Professional Accounting Firms – Version 1.0” has to be used ONLY for self evaluation by accounting firms of their digital competency maturity level and taking steps to move up the maturity model.
The results of the self evaluation conducted should NOT be published/ displayed in any form/ manner, which may be deemed to be violation of Code of Ethics of the Institute of Chartered Accountants of India”.
THE ACCOUNTANCY PROFESSION globally is largely Small and Medium Practitioner (SMP) based, serving the whole Small and Medium Enterprises (SME) universe which constitutes a significant part of any economy and in many cases also as niche firms serving large entities. The same rend is true in the Indian context also. Challenges of financial resources apart these firms are to be supported proactively with insights on the emerging trends in the emerging digital society and the consequent impact on the accounting function. It is also important to take note of the huge effort of Government on digitisation and the already visible changes in tax law compliance including the new transformational legislation on Goods and Services Tax where every aspect of compliance and regulation is digital and in other areas of financial services transactions, etc.
At The Institute of Chartered Accountants of India (ICAI), the Council constituted the Digital Accounting and Assurance Board (DAAB) as an enabling Board to proactively assess the impact of digitisation on accounting and audit.
DAAB was constituted to begin withdrawing experience of co-opted members and special invitees having exposure in the area of digitisation, from peer regulatory organizations, academician and accounting firms.
The instant toolkit “Digital Competency Maturity Model (DCMM) for Professional Accounting Firms – Version 1” is an endeavor to provide a recommended set of requirements which the firms can evaluate on a self assessment basis and build a strategy for up skilling, to leverage the opportunities which will unfold in the digital era.
We compliment the members and staff of DAAB for taking up this initiative for the benefit of the profession. We are sure that the Instant “Digital Competency Maturity Model (DCMM) for Professional Accounting Firms – Version 1.0” will be used by our members/firms to assess the current digital competence of their firms and building their firms competencies for their own growth and the profession at large.
The “Digital Competency Maturity Model (DCMM) for Professional Accounting Firms – Version 1.0” has been developed for self evaluation by accounting firms and is intended only to be a self assessment tool for rating their current digital capabilities. This self evaluation process would be wholesome when the model questions are filled up after debate/ discussion among all the partners of the firm to know the “as is where is position”of digital competency with the firm.
The objective is that the accounting firms, irrespective of the size, assess the current level of Digital Competency and identify steps to move up the model and calibrate their functioning to the emerging context. We recommended that each firm should develop a strategy as part of its Annual Operating Plan to move up the DCMM.
We are encouraged to hear that this could probably be the first of its kind initiative in the accounting world and we thank CA. Nilesh S Vikamsey, President, CA. Naveen N D Gupta, Vice-President and our Council Colleagues for their thought leadership, continuous support and encouragement to the initiatives of the Board.
Our sincere thanks and heartfelt gratitude to CA. Rajaji Chandrasekhar, Chennai for converting the Board vision into an Executable model with long hours of extensive research, to prepare the Digital Competency Maturity Model. Our thanks are also due to CA Hemant Joshi, Pune and CA. Vijayender Rana, New Delhi for their inputs in making the model more robust at the first version itself.
We recommend the members/ firms to apply this Maturity Model and provide us their feedback/ responses (at insightDCMMV2.email@example.com). This would assist us in developing a more robust and comprehensive Version 2 of the Maturity Model in the near future. This version of DCMM is simple and has set moderate competencies, with intent to encourage firms to embrace the reality of digital era. The next version is likely to have more qualitative and quantitative criteria and may define more levels of maturity with a single weighted raking across all the three sections of competency identified.
DIGITAL ACCOUNTING AND ASSURANCE BOARD OF ICAI
TO UNRAVEL the impact of Digitization on Accounting and Assurance, the Council of ICAI has constituted the Digital Accounting and Assurance Board, as a non-standing Board of the ICAI, for fostering a cohesive global strategy on aspects related to digital accounting and assurance, through sharing of knowledge and practices among st the members. DAAB is endeavored to identify, deliberate and highlight on issues in accounting (including valuation) and assurance (including internal audit) issues in the digital world. Digital Accounting and Assurance Board is focusing on issues in accounting and assurance arising from the high pace of digitization, including use of artificial intelligence in audit, big data analytics in audit, relevance of sampling, valuation of data as an asset, impairment, testing of digital assets, insurance of data-valuation and premium fixation, etc.
The Board is taking up initiatives to develop knowledge base through position papers and articles on issues related to impact of technology on accounting and assurance. DAAB Knowledge Page https://www.icai.org/new_post.html?post_id=13422&c_id=432 may be referred for position papers issued and for links to relevant article on digital accounting and assurance. Technology Summits are being conducted with the theme of Empowering Chartered Accountants in digital era. DAAB has also released knowledge management videos available on ICAI Mobile App https://www.icai.org/mobile/. DAAB has also conducted online survey on impact of emerging technologies on the accountancy profession and around one thousand responses have been received.
TERMS OF REFERENCE
(Board for deliberating and initiating solutions for Accounting (including valuation) and Assurance (including internal audit) issues in the Digital World)
Arising out of digital era and its consequences –
(a) to identify, deliberate and highlight issues in Accounting (including valuation) and Assurance (including internal audit) in the Digital World, and security aspect of data and technology;
(b) to act as a facilitator by engaging through relevant committees of ICAI; and wherever necessary with standard setters, Government, Regulators, industry and other accounting bodies in the world; and suggest to the relevant Committee(s) in Institute, the required changes in Accounting Standards, Assurance Standards and Valuation Standards;
(c) to develop knowledge base through position papers, create on line platform, including an annual conference/ round table preferably, on areas identified with a view to raise awareness in all stakeholders, the issues and opportunities arising from these trends; and
(d) to enable setting up a Global Digital Accounting and Assurance Board, as India initiative so that ICAI gets recognition as the global thought leader in Accounting and Assurance in digital world.
THE DIGITAL SOCIETY is bringing in a new framework of unwritten rules of the game wherein not only the way the businesses are being carried out is getting radically transformed, but its silhouette is equally evident in the related value chain and more importantly the financial reporting chain as also the assurance chain. Things like vulnerability assessment and risk mitigation thereto arising out of the analysis of financial information is radically changing since concept of data is now being replaced with
big data, and the landscape of accounting and assurance function will accordingly get transformed to cover a large segment of population rather than getting confined to a sample base assessment.
One may think what does this dawn of information technology and a digitized society has to do with the profession of Chartered Accountancy. An orthodox view would be that it does not concern us, but a pragmatic and rational school of thought is that a digital society brings with it its own set of challenges and one needs to embrace the reverberations not as complexities. It is now largely seen that using the frontiers of technology is likely to positively impact and transform the landscape of the professional working of an accounting firm. If we start looking the role of accounting function with an enhanced esotericness through use of technology, it would open up new windows of professional work for accountancy firms.
Digital Competency in a generic sense of the term has two parts- Digital– referring to “involving or using computer technology” and Competence– “indicates sufficiency of knowledge and skills that enable someone to act successfully and efficiently”. Digital Competency, thus, is a measure of skill and competence on use of computer and related technology. Accounting and Audit Firms have had a fair bit of impact in terms of how they run their firm operations and also adapt and evolve to the ever changing technology architectures at the client side.
ICAI, through DAAB, has initiated a process of laying out a self- evaluation matrices for accounting firms to gauge their relative maturity level as regards digital competency, relating to audit and accounting related functions being rendered by firms and individuals.
The objective of this Evaluation Matrix is for Audit and Accounting firms to be able to self- evaluate their current level of maturity on digital competency, identify areas where competencies are good/ lacking, and then develop a road map for upgrading to a higher level of maturity.