The Value of Data Analytics in Accounting with Kathryn Horton (Part 1)

CPA Podcasts

In this two part episode, Phil speaks with Kathryn Horton about data analytics. Kathryn discusses what is data analytics and why it’s important to know for the profession. She shares her thoughts on how the schools are teaching this as part of the accounting curriculum. Kathryn also shares her career trajectory from the struggle to finding a job after she took the CPA exam to starting her own private firm.


Narrator [00:00:02] Hello and thank you for tuning in to another episode of CPA review and more. We are pleased to bring you the number one podcast for CPAs and CPA candidates. If you'd like to learn more about how Yaeger CPA Review can help you, find us on our website at Yaeger CPA Review dot com. Now, here's your host, Phil Yaeger.

Phil [00:00:28] Everyone, this is still Yaeger and welcome to CPA Review and More. Today we're not going to be talking about CPA Review. All right. We're going to be talking about "more". And I have a guest today, Kathryn Horton. Correct? Did I get that right?

Kathryn [00:00:44] Yes, you did.

Phil [00:00:44] Kathryn is a--she is a CPA. And Katherine, do you have your own practice? You work for someone? What is your background?

Kathryn [00:00:53] So my background, I actually spent two years in private, so I worked at a factory in production control. I liked accounting. The reason I was working at production control, I graduated in two thousand nine job market was not the best. So I went throughout I could to get some experience. So I worked there for two years. Then I started as an intern at a regional accounting firm, so I have a background in aduit. I was there for about six and a half years. [Unintelligible] down in Sunrise. And then I moved over to Marcum LLP. I worked there for about a year here in Fort Lauderdale and then actually coming home to a two year anniversary of starting my own firm. Catherine Horten, CPA, formerly based in Fort Lauderdale, recently moved over into Coral Springs, Florida.

Phil [00:01:42] Where is Coral Springs in relation to Fort Lauderdale?

Kathryn [00:01:46] It is just north west. So it is over kind of by the Everglades. But I really kind of due west of Boca Raton, which is right in between Fort Lauderdale and West Palm Beach.

Phil [00:01:59] And are you born and raised in Florida?

Kathryn [00:02:03] Yep, born and raised in Miami. South Miami, actually.

Phil [00:02:07] OK, and and now down there as we speak, spring break is on, right? Yes. And the things we've heard about the governor just allowing, and correct me if I'm wrong, everything is open, right. All right. The Covid virus. It's all open. Am I correct?

Kathryn [00:02:25] Yes, it's mostly over east. They don't tend to come out too far west over by the Everglades. They like to stay in by the beach.

Phil [00:02:34] Is there a border guard where they can't get in. Is that what it is to keep those people out?

Kathryn [00:02:38] Yeah. Yeah. So, yeah, but but I used to live over by the beach, and it was. It was over--every...

Phil [00:02:44] You live over by the beach or you live on the beach? How far are you from the beach?

Kathryn [00:02:49] Well, from the beach right now. I'm a good 15, 20 miles probably. But I used to live out there. I want to see about five years ago, I lived out there for years, but we always knew March, April, it was going to be very busy over there. And if you wanted to plan some trips or get out for a little bit, that was the time to do it.

Phil [00:03:11] I never was at spring break. I'm trying to remember one hundred and two years old, so we didn't really know. I'm just kidding. We try to think what we did during Easter break. That's what it was. We basically stayed out of school. That was it. We didn't go to our parents and say, hey, can we go down to Panama City? All right. Panama City existed, but we just stayed home. That was it. We stayed home. Oh, I remember what we did. We used to go to Radio City Music Hall for the Easter show. They had the big Easter show then. Which really has nothing to do with accounting. But I figured I would mention that. And so, anyway, you have your own firm. How many people work for you?

Kathryn [00:03:54] It's just me right now. So it's something I thought in time I would be able to have some interns. But just with the whole Covid, I thought it was best just to keep everything in-house for right now. But but yeah, it's just me but it's been working out really, really well so far. And I definitely enjoy having my own firm, running my own practice, being the main controller of my destiny, so to speak.

Phil [00:04:19] And has the market now or accounting firms. You said you started 2009, you mentioned, which was during that the Great Recession. But how is it now? Is it more Florida was always a a resort area and people came down there. So there wasn't a need for large corporations so much. Has Florida changed to some extent? And is it you find it easy, difficult to get clients? How is Florida now? I haven't been to Florida for a while, but I understand Miami is booming. I guess a lot of companies are coming in there.

Kathryn [00:04:58] Oh, yeah. We're having a big influx down here. Even the housing market, the corporate is there. It's just flooded especially to with the tax rates. Florida tends to be a little more advantageous for certain corporations. And then as far as the work goes, with the work I do is actually contracted work based on my experience as an audit manager, a senior manager, working through. So a lot of firms like to engage me to come in as needed on various audits to assist them in that process. And so I have seen a little bit of a change, though, with that, I have to say, because there has been a lot more I've seen actually kind of a trend where there is a bit of a migration as far as staff, senior supervisors, out of public accounting into private. So the need is a lot greater, I'm seeing. But some of that in talking with some other young professionals, I could see that directly be a correlation from Covid. You know, in public accounting, we work really long hours, but a lot of the incidental benefits, like the the happy hours, the team building events, even in regards to compensation, some of that has been mitigated because of covid as far as bonuses and increases. So I have seen somewhat of a little bit of a trend where as far as the public accounting, some are migrating out, I think sooner rather than later as some would. But I think Covid has had an effect on that. So that is something I do see maybe as a horizon issue in another couple of years where there will be that void there of greater need, so to speak, on those experience levels within the public accounting firms.

Phil [00:06:57] When you got to college, you didn't have the experience required to get the CPA, did you?

Kathryn [00:07:03] No. So I graduated in 2009, and the market was not good. That was when we were in a recession. And I pretty much had worked my way through college. So I mostly did night classes. So I didn't have really the chance to go to daytime recruiting events and be able to do that. So I had to start really from scratch when I graduated and just the opportunities weren't there. So what I ended up doing was I took the CPA exam. It was actually a really good choice to do that because it was right out of school. I had my one hundred twenty credits to sit for the exam and I had already done my my two upper level years. So everything was still fresh on my mind and I was still kind of in that study mode from school. So to hop right into studying for the exam was actually an easy transition then and really helped in the process. So while I was still looking for work, I took the exam and I got all four parts passed. And so then I had that kind of in my back pocket. Still wasn't able to get work in public accounting.

Kathryn [00:08:11] So I went into a manufacturing company and I did that while I worked on my Masters to get that additional thirty credit hours. And then after a couple of years I got an internship. I thought the time was right to go back out there and take another stab at it. And I did. And I did get an internship with the firm. That's what I did the one year work experience requirement. So it was a longer process, so to speak. It was a little tough. You pass the exam, then you have to wait a couple of two, three years after to finally get licensed. But I thought it was a little different from from most and taking the exam right away. But it really was a huge help because then when others were already working, trying to find the time to get the exam done, it was something that I already had kind of in the pocket. So it was a huge help in that sense. So I always find blessings or try to find blessings in everything. And the fact that I couldn't find work right away, I think really was a blessing in disguise.

Phil [00:09:15] Do you think it was too rigid that you passed the exam? And basically most states, Florida sounds very similar experience requirement, one year in the accounting firm--public accounting firm--or in some states you have to work under a CPA for a year. Was that also one of the experience requirements of Florida?

Kathryn [00:09:36] I believe so. Yes, you have to be under--you have to have a licensed CPA really sign-off as far as your experience requirement, and having been a part of that, actually the challenge I found was actually in regards to the exam scores. Because I took the exam in Georgia actually. And so I was going to transfer everything down into Florida and then do the experience requirements have everything done there. Florida, actually, if you pass the exam and after three years you haven't met the other requirements, your exam actually expires.

Kathryn [00:10:15] So you can pass all four parts, but if you don't meet the other requirements within three years, those scores go away. So as soon as I saw that, and I saw I was kind of getting towards--or could be getting towards--the cusp right there, I decided it was best not to transfer the scores, keep them in Georgia where they don't have that expiration there. And then that's how I got licensed in Georgia and filed for reciprocity after the fact. But it was a very small clause in there. And I'm really glad I saw it, because Florida is one of just a handful of states that that have that.

Phil [00:10:52] In Florida, will they take accountants who are licensed in other states? Because a lot of people have a license. Other states could get reciprocity in Florida because they were trying to keep the retired people who were coming from like New York, whatever, and they came to Florida to retire, but they figured, hey, I'll do some tax returns, whatever. And I heard they [Florida] made it very hard to get reciprocity. Is that still the case?

Kathryn [00:11:23] You know, it can be difficult, especially on the retired status. But I know that is something in the Florida legislation, actually, that they're trying to push through in this session. There's a couple CPAs there who are in the Florida Senate and the US representatives who are advocating in regards to the retired status and having that. So that way people coming from [unintelligible] will be able to practice. So that's something that they're pushing through as far as this legislative session. And we'll see if that actually passes.

Phil [00:11:59] Is that I mean, the fact is they made it very difficult for these older accountants who were tiring of Florida, but yet they still want to work. It's sort of discouraging people from still remaining a CPA. And I don't see the point. I mean, a person can still do work. All right, then don't make it so difficult. But just like I feel the one year experience requirement under a CPA or working for a CPA firm, that really keeps a lot of people out of the profession.

Phil [00:12:35] And when I took the exam, the experience required a lot of states is one year working as an accountant. You didn't have to sign off as a CPA or even work in a public firm because a lot of people don't want to go into a public accounting firm because, as you said, they work you. There's no quality of life. But what have they done? They've gone to one year in accounting firm CPA or one year working under a CPA.

Phil [00:13:06] And I personally--and I think that goes with what I was talking about before--about this person at the AICPA who really thinks it's a CPA is a license to practice in public accounting. Now, when I took the exam in Maryland. All right. The CPA was a certification. All right. And once you got the CPA got to it. And then if you wanted to practice as a CPA, you had to get the experience requirement and then you would get a license to practice. But it's--I don't--I mean, my opinion is--and it basically doesn't really count for much--is that let's make it a little easier. Let's not be so strict. Let's get people in the profession and don't force them to go into public accounting because they are big, big, a large group of people who're becoming certified at one point, where people work for the federal government. We used to get a lot of students from the federal government. Now, I don't see them anymore because, first of all, they don't have CPAs that work under. And they have not been in public accounting. They don't want to. So they're going to CMAs. Now are you a CMA?

Kathryn [00:14:23] Yes, I'm a certified management accountant.

Phil [00:14:27] And it wasn't as rigorous to get that as a CPA, correct?

Kathryn [00:14:33] Correct. Yeah, that was a two parter, a two part exam. So they were four hours each and then each consisted of certain subcomponents there. But it was definitely an easier process, I thought, overall.

Phil [00:14:49] But you don't see a lot of people going for jobs. They don't say CMA instead of CPA. CPA is the big thing, right?

Kathryn [00:14:59] Correct. Yes.

Phil [00:14:59] Now why did you go for a CMA?

Kathryn [00:15:01] Well, that was something it was really an interesting area for me. I always like cost accounting. I was kind of the the oddball in my class there that I loved cost. And then I worked in production control at a manufacturing company. And so I got to see a lot of what I learned actually in practice there. So it was something I've always really liked. So I went ahead. I took the exam, got it done with. I thought it was just a good credential overall to have to compliment by my CPA.

Phil [00:15:30] Are you were active in the IMA?

Kathryn [00:15:35] Yes, I am. Yeah. I'm a current member there, and I'm actually speaking at their at their national conference in June coming up this year.

Phil [00:15:43] And do people ask you, should I go for a CPA or CMA? Do you get that asked of you?

Kathryn [00:15:50] Not too often just because I do have quite a few letters after the name, but it has been asked as far as why this is having the two together. And I thought it was and I still think it's a very good blend, especially when you are dealing with manufacturing companies, companies and production. You want to be able to speak their language. And having that C.M.A really allowed me to do that. So I have always felt that it's been a good complement and it does kind of provide that broader kind of experience within accounting that allows me to service clients better.

Phil [00:16:29] Do you get asked more, like if you're working in that area--manufacturing client of some type--do they ask you: do you have a CMA? Have you ever been asked that?

Kathryn [00:16:41] Um, no I have not. But it's always been on my my email signatures, and it's something the firms always have included. As far as my background, you know, with the companies, so...

Phil [00:16:53] Do you get questions such as, "are you a CPA"?

Kathryn [00:16:57] Yes, there are certain companies like there's one I was actually dealing with. They only wanted CPAs on their engagement. So sometimes we do have interns or staff who work on those engagements who maybe don't have that quite yet. But there are there's one client I was just dealing with that required it for everybody on the engagement team for us to be engaged. So that is that tends to be kind of the the key focal point for most clients.

Phil [00:17:26] We discussed earlier that when it comes to auditing--and you said you like doing audits. Right?

Kathryn [00:17:32] Yeah. Audits my background.

Phil [00:17:34] You love it? How much--do you get up in the morning and say to yourself, "God I hope I'm doing an audit today"?

Kathryn [00:17:39] Well that's part of my every day.

Phil [00:17:41] So, you know, it's something I do enjoy doing. Others may not. I know that for certain companies audits are the last thing they want to deal with. You know. But I always try to make it a smooth process overall. And I always say we work together through the...

Phil [00:17:59] Which one would you prefer? Would you prefer to do an audit or go to the beach today?

Kathryn [00:18:04] [Laughs] I think that's... It's a beautiful day out there, but with the spring breakers, I don't necessarily...

Phil [00:18:11] They're carrying all that Covid stuff. They don't know it.

Kathryn [00:18:14] Ah yes. That too.

Phil [00:18:17] But anyway, I started talking about the good old CPA exam changing July first. And obviously, technology is becoming more important in the profession. And they figured, hey, it's time to start testing on those areas. And you told me you are into data analytics, which I'm going to ask you what that means. And I also mentioned they're going to start asking questions in auditing--the auditing part of the exam, on data analytics. Now, I bet if I asked students coming out of school who probably didn't have a course in data analytics and just said, "well, you've taken all the other courses, tell me, do you know what data analytics is". I don't know if they'd be able to answer that. So I'm going to ask you, Kathryn. Okay. Alright. Kathryn, tell us what data analytics is. All right. Why it's important today to know into the profession. And what is your take on if the schools are teaching it as part of the accounting curriculum?

Kathryn [00:19:25] Yes. So do the analytics, in and of itself, is the science of analyzing raw information sources to draw insights. So it's taking your very large data files and consolidating all that information to provide meaningful insights. Now, the definition of meaningful insights can vary greatly depending on who's using it. So that, in a nutshell, is what data analytics is. It's being able to take your big data files and take that fifty thousand foot view in order to find and to see the relevant, useful information, but then also to data analytics has the power to really slice and dice down your data to immediately pinpoint the unusual items, things that may be odd, things that may require additional information. So you are much more likely to find that needle in the haystack, so to speak, in a massive data file using technology and specific data analytics.

Kathryn [00:20:30] Now, it's highly important for our profession, because big data is where it's at. Our clients love big data, everybody's using big data. Now big data is these extremely large data sets. So that's your five hundred thousand line Excel file or your million page PDF document. And I encounter files like that all the time. And you get that information and then you have you have to find the unusual items. What's odd? How it's relevant to your purpose, your engagement at hand. And doing that through a manual process, it's just not feasible. And that's why the technology with data analytics is so important. And I use it on big data files really on a daily basis, because I'm able to really consolidate that information and hone in on really the key areas where the risk may be or where the unusual items are.

Kathryn [00:21:33] So it is highly, highly important and it's only becoming more and more important, especially because of Covid. We were all forced into remote working environments. So with our data, the same transition has happened. Before there was a lot of diversity as far as data, where a lot had manual paper files. Some were fully electronic as far as their data. But with Covid, that's forced a lot more into that electronic data realm. So it's really not uncommon to deal with those million page PDFs or that 500 line Excel file.

Kathryn [00:22:12] And you are required under professional standards to to really vouch for that data as a whole and make sure it does comply with professional standards. So data analytics is a great technology. There's a lot of different programs out there, softwares to use. Some incorporate artificial intelligence. I mean, a lot of it has really advanced in time. But it is a little difficult, I have to say, because in school, a lot of times you're taught the theory about things and the overall theory of data analytics. And at least that's what I've seen with a lot coming out from school. But there is somewhat of a disconnect as far as the practical applications. So you learn all these theories and then you start working for a company, or working for a firm, and they asked you to do work with the data analytics. And what kind of insights can you provide? There is that disconnect.

Kathryn [00:23:11] So that's something that I actually try to kind of break that barrier. So I do a lot of presentations at colleges, different courses to the students where I pull up my software, I'll pull up data files, I'll show them how I use it so that we can kind of bridge the gaps, so to speak, as to what they're learning and how it can actually be applied.

Phil [00:23:35] When you're doing that, are the teachers, do you feel they know it? Or are they also learning?

Kathryn [00:23:43] Well, it's kind of they're learning it as well. So I do a lot of presentations on data analytics for the Florida Institute of CPAs. I also do it on a national level as well for different organizations and really my requests to come in for some of the colleges where professors who are at those presentations, so they saw the data analytics, they saw how it works, how it could be applied, and they knew it was value added and something their students definitely needed to see.

Kathryn [00:24:12] But those professors in particular are ones who really want to try to give the skill sets they are to make sure when you start in your career that you actually can really hit the ground running. So one professor in particular and I come in for the data analytics, she has a QuickBooks Pro advisor, come in for another session and work with QuickBooks for the students. So that way they know that program and how it works. So when they started a company, they have a baseline as to some different accounting systems, but to try to bridge that gap between the theory and then the practical applications.

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