The Value of Data Analytics in Accounting with Kathryn Horton (Part 2)
In this two-part episode, Phil continues his conversation with Kathryn Horton about data analytics. Kathryn shares her thoughts on online accounting programs and the new programs that teach data analytics. She also gives advice for students interested in learning this process. She ends the discussion by talking about why people need to find a specialty or niche to stand out from the other accountants and one thing she would change in the profession.
Narrator [00:00:00] This is the second part of the conversation between Phil and Katherine Horton on the value of data analytics in accounting. If you haven't listened to the first part of this episode, check your podcast feed.
Narrator [00:00:12] 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 [00:00:36] You went to Florida Atlantic or to Florida International?
Kathryn [00:00:39] I did my bachelor's at Florida International and then did my bachelor's at Florida Atlantic.
Phil [00:00:44] So those are fairly large universities. And do they teach data analytics in the courses?
Kathryn [00:00:53] Yes, those have been new programs that have come out really with a lot of colleges, with the technology that they have been putting in courses for data analytics. I've seen even some for the cryptocurrency, some of the new evolving areas there as well.
Kathryn [00:01:13] But a lot of them are kind of programs starting out because, you know, data analytics really--you know, I started using it about eight years ago, but it really didn't take off, I feel, within our profession until about four or five years ago.
Kathryn [00:01:28] And that's really when we started seeing schools take notice and then start implementing some different programs and courses there. So for most schools, I would have to say I would think they're relatively new programs in that sense, just because with the whole technology, with data analytics is just evolved so much. But yeah, about 10 years ago, I mean, it was used pretty infrequently, I would think.
Phil [00:01:55] What do you think of people who are taking online accounting programs? All right. And as we know, there's so many online universities that every week I see a couple more show up and I wonder. All right. Online, most of them are like PowerPoint. They don't really have someone teaching them. Would you hire people from online universities in your firm?
Kathryn [00:02:20] Yeah, it would absolutely depend on each individual, each individual skill sets. And, you know, really, their interesting is if that's something that they would want to learn with data analytics.
Phil [00:02:33] But what I'm saying in general, these online universities, have you ever had a person from an online university, who graduated the program actually join your firm?
Kathryn [00:02:46] Our not my firm in particular, but a lot of the other firms I've worked for, I have seen, I swear on my graduates have been brought in.
Phil [00:02:56] How are they coming--how are they--they come out and basically they don't have much contact with their professors, these online. And I'm not sure it's a great idea unless--I have a friend of mine who teaches at like nine online universities and he actually went to Florida Atlantic for his PhD. He's an excellent teacher. He works with me. We do classes together. His name is Ron Premuroso. And Ron teaches a course online at a school in New Jersey called Cauldwell. And but he's teaching at Cauldwell. And that's the only one he does. He actually teaches them Zoom-call live, real-time, and that's how he runs it. So it's so yeah. You don't have you can't touch or feel him, but you can see him and talk to you and he has your questions. And I think that's the only one he talks about that really is into this sort of like virtual courses.
Phil [00:03:55] And I because I said to him, you know, these online, how these people learn this stuff if you basically just you know, they they have the book. They teach themselves. There's some PowerPoint in each of them, maybe once every three or four weeks. That's not the way I remember education to be. And I have nothing, nothing really against any new approaches to education. But I honestly wonder, how do these people learn accounting? Because I see people know this was a graduate in accounting from a traditional brick and mortar and I really don't know a lot of stuff. All right. And now these people, they got online and I think well, I know people go to non-online. They don't know anything. What happens to the online programs? Now, I don't want you to think I'm against those. It must be--because a lot of the main universities have online. I've heard Northern Arizona University runs an online master's program. Does Florida Atlantic, do they have an online program?
Kathryn [00:05:04] I believe so. Yes, I believe so. I haven't been over there in a little bit. But but yeah, I do believe they and I think Florida International as well.
Phil [00:05:14] Yeah, no, they're good schools. I could see that their program with the covid online has become a big thing because it's virtual--it can be virtual--and they don't have to worry about going to classes and worried about getting the virus from someone else in the class. But I think it's a good thing. But the thing is, I talk to people in the CPA Review and I say to them, "do you know what data analytics is". They don't even know what that is. Alright. About artificial intelligence? No, no.
Phil [00:05:50] So they did not have courses when they were in. And these are traditional programs. So what are we going to do? We're going to train these PhDs? And where are they going to learn it from? Because a lot of them haven't worked in actual jobs. You have any suggestions?
Kathryn [00:06:12] So, you know, it is kind of a tough one, you know, as you said, not having worked with data analytics in a working environment, it can be really hard as far as how as gauging how it can actually be applied. Because that's really the one thing when you actually go into the workforce is they want to see the results. And that was something that actually--data analytics was something I saw. I liked it a lot. I actually went on YouTube and watched a lot of videos and self-taught myself as far as what data analytics is, how it can be applied. And I asked my employer because there was a software that they had used for data analytics, he said, I like it. Is there a way I can do a training or something? Because they do offer these trainings and my employer was great. That firm was really encouraging as far as kind of being able to explore that. So they sent me off to a training. There was a couple days, but that's how I really learned data analytics.
Kathryn [00:07:14] So it is tough. And then coming back, it was kind of a barrier in a way, because I was working with different partners who had never seen this technology, never seen what it could do, and there was institutional bias. That was a barrier I had to break to show them the value. Once they produce some tangible results and show them the efficiencies. And oh, by the way, this only took me 20 minutes to do what it normally would take the staff four hours to do. That's when the light bulbs really started going off.
Kathryn [00:07:49] But it is just a very tough one, I would say, for students who want to see more of it, learn a little bit. It does seem somewhat trivial, but YouTube was a huge, great resource. I thought it was a great resource. And I there's a lot of thought leaders out there who actually show how they apply data analytics and how they use it in their day-to-day functions, which for me was amazing because then I had the wheels start turning on how I could apply it, and I was starting to think outside of the box there, and really being able to cultivate it.
Kathryn [00:08:23] But it is it is tough because most of the professors do go the PhD route, but it is trying to find those practical applications outside of the theory. You know, I would say if students are interested, YouTube's a really great resource there to go through and start looking. And even from there, you can see the different softwares and how they're used because there are some that incorporate artificial intelligence.
Kathryn [00:08:50] So with those, you input your data and then the artificial intelligence works in the background. Now, how it works is it has all these algorithms. So they have programmers that create these algorithms, you know, just to kind of show how what how it works. What it is, is these programmers create these algorithms, which are tests that run in the background on your data. Now, based on the number of hits to these algorithms, on your data, the algorithms are: Is it a weekend transaction? Is it after hours that this happened? Is it coming from a high risk account? Is it unusual, based on this account, to have debits or credits that feed into these other accounts? So that's all what's program there? And then artificial intelligence will run all these different tests on your data, but then it does incorporate machine learning. So what happens is, the more you the artificial intelligence processes, your data, it gets smarter over time.
Kathryn [00:09:54] So it says after a while, okay, transactions from this vendor normally go into this account. This time it didn't. We're going to flag it because that's odd. That's the machine learning coming in. Over time, it learns different behaviors and it picks up different things.
Kathryn [00:10:12] Now, at the end, all these tests are run in the background. The artificial intelligence does it. So it really you upload your data and then that's what's going on. So you hit play. All of that's going on in the background and then based on the number of hits against your control points. So if you have a high number of weekend transactions, the high number of after hours, it comes out in the overall risk score report. So then you get a whole report that'll show you the different areas that are higher risk. So then you can dive into those areas, see what gave rise to those risks and then determine the appropriate next steps. So that's how the artificial intelligence works with the data analytics.
Kathryn [00:10:59] Now, your other base data analytic programs can do those exact same functions. They can do all of those different tests. The only thing is it doesn't incorporate the machine learning aspect. It's relying more on your own experience or knowledge in what you deem risks. But then, too, you can really cultivate and create a lot of tests on your own, which I really like. But those that infuse artificial intelligence are easier to learn because you upload the data and it really is kind of a self-starter. There were other programs. It does have a higher learning curve, but you have much more creative freedom as far as creating your test, finding those risk areas in different anomalies.
Kathryn [00:11:48] I mean, I have to say there's definitely 40, 50 plus different vendors out there and different softwares with the data analytics, with the AI. So definitely YouTube, I thought was great, too, in that aspect. And being able to look at all the different softwares, different programs, see how they work, see how they operated, so that we could really settle on the one that I thought worked best for my processes and the work I was really doing.
Phil [00:12:17] Are people are afraid that there's all this artificial intelligence--data analytics--is this going to put people out of work.
Kathryn [00:12:25] Actually, no, I don't believe so. I think what it will do is it'll change as far as skill sets. And I do think it'll really change as far as some of the lower-level testing, so to speak--you know, the more detailed transactional testing. Because what happens is with the data analytics AI, you can automate a lot of different things.
Kathryn [00:12:48] And I think that's really what could change as far as with the workforce, is that rather than having a staff or an intern spent hours and hours combing through different invoices or different support, now that can be uploaded and auto-performed and then it spits out the different outputs.
Kathryn [00:13:10] So as far as the staff, seniors and interns, it'll change in that now you'll be looking at more-or-less the end results and then applying that critical thinking of, OK, is this a high level risk here? What are the next steps? What additional steps should we do? So it is going to change that a little bit. I think we're going to see a lot less of the heavy lifting in regards to processes. But I do think it'll incorporate for staff and interns, you know, a few different skill sets as far as the critical thinking. And I know having the technology. So even having a data analytics course or two, just even knowing the theory behind it, could really assist on that front as well.
Phil [00:13:57] You know, the CPA exam, they've actually changed it to the point that they want you to have critical thinking. And that's what they trying to get out of people so people know what they're doing instead of just memorizing things. So that is a big goal of the AICPA. And the last thing I wanted to--gee, a lot of plaques on you. Gee, you were one of those 40 under 40 honorees, right?
Kathryn [00:14:25] I was, yes. With CPA practice advisor for 2019, 2020.
Phil [00:14:31] 2019, 2020?
Kathryn [00:14:34] Yes, both years.
Phil [00:14:35] So what are you, 16, 17 years old?
Kathryn [00:14:39] Yeah, yeah, it's right around there.
Phil [00:14:41] Very good. And by the way, for those who don't know that, it's a very select group, the 40 under 40, you know, and you must have done something. How do you get into that? Does someone nominate you to get in?
Kathryn [00:14:56] Yes. So you do get nominated in there and then it goes through a whole kind of selection process. But part of the nomination, you have to submit your full background and everything that you're involved with, both within the profession and then also to in the community as well. Because I think also agree with them wholeheartedly that they want the well-rounded professionals as far as having the community involvement, increasing the visibility of the CPA profession within the community as a whole.
Phil [00:15:32] And that's awarded by CPA today, that magazine. Is that correct? CPA practice advisor, sorry, CPA today. Have you written articles? I mean, I see plaques with that too.
Kathryn [00:15:45] Yeah, that's for the Florida CPA Today. So it's through the Florida Institute of CPAs. But yeah, I was the their 2020 woman to watch award winner for the emerging leader. I'm also on their board of directors and I'm also chair of the Young CPA Committee.
Phil [00:16:04] Do you sleep at all.
Kathryn [00:16:06] Oh I try. Yeah. So. It's definitely keeps me busy, keeps me active. But I like it, it's an interest area for me...
Phil [00:16:16] And a few questions and then we can let you go for today. And I want to know and I discussed with other people. Do you believe that people should have some type of specialty or niche?
Kathryn [00:16:30] Oh, absolutely, absolutely. I think that's critical as far as your career in finding that specialty early on. So that's really keeping the eyes and ears open and really trying to find areas that interest you, but also too areas that you have the skill sets for in those key interests. And so for me, when I started an audit, I saw all the data analytics and I knew right away that was what I wanted to do because I love statistics. That was actually what I wanted to do before becoming an accountant. But I just was terrible at calculus. You had to do all these calculus courses, so I knew that wasn't really the best route. So I went into accounting.
Kathryn [00:17:15] But when I saw the data analytics, that was the perfect blend for me and nobody else had an interest in it, which I was very surprised at. So it was something I was interested in. I learned, I honed, I developed, made it my own. And then because it was so kind of early on and really people just didn't pick up on it, I thought it was going to be the evolution of the profession. And so for that, I was able to really develop that niche. I was doing presentations and then was able to scale it statewide, nationally. So I am now kind of the expert in that field, but definitely finding that niche area and finding specialty niche areas, because I would say there's hundreds of thousands of accountants out there.
Kathryn [00:18:02] What's going to make you different? And it's kind of goes on a more granular level than audit or tax or nonprofit work. It's really finding those specialty areas within that, that you become the expert matter in that and you're the go to. And the more specialized it can be, the better it is, because that means there's a lot less people out there who are in that same area. So certain emerging areas I think are free as far as niche areas, definitely with technology, artificial intelligence, blockchain, cryptocurrency, they all have certifications as well. You can become a certified blockchain expert or a certified cryptocurrency expert and being a young professional and having that, because I don't see many right now with that. So if it is an interest area, that's something I know people can really cultivate right now and make it their own. But it is kind of thinking outside the box, but really finding what you're interested in. So that way you can really craft it into your own specialty.
Phil [00:19:12] You're very excited about this profession. I can see there's such enthusiasm. I think that's great. We need people like you to get out there and convince them to go into the accounting field. Because there is a shortage of accountants. So therefore, are you available for the next three hundred sixty five?
Kathryn [00:19:34] Yes. Always available for you, Phil, definitely.
Phil [00:19:38] And I want to ask you, what is one thing you would change about the profession?
Kathryn [00:19:43] So what thing with accountants? We are creatures of habit. So I do find it challenging sometimes kind of bringing that creativity and that out of the box thinking, and especially for starting with data analytics. I vividly remember one of the first conversations I have I, I run this really cool test, the results I absolutely loved and I thought it was really value added. I showed it to the client. They were just floored by it. They really like this analysis I did.
Kathryn [00:20:15] And so then I presented it to one of the supervisors I was working with, and I said, hey, I did this analysis with the data analytics, with software here. And the very first thing was, "Why did you do that? We always do this process every year. Why would you go ahead and just go ahead and do this? You should have asked me first, then and this".
Kathryn [00:20:36] And I said, but wait, let me just show you this. And so I walked him through and I said at the very end and by the way, this only took me 20 minutes to do. And so and I saw it immediately. The light bulb went off and then I saw the whole change. Where he said, you know what, this is good. I like this. And then that supervisor actually became one of my biggest champions as far as using data analytics and going through. But I've had many roadblocks like that.
Kathryn [00:21:05] And so that is, I guess one of the challenges with our profession is really kind of breaking out of the standard mold that we're used to and really start embracing some of these different areas in different ways to be creative. Still get good results, but add more to it and leverage that technology. So we are creatures of habit, like I said, so it is hard to break that, but that's what I find to be the biggest challenge is to try and fuse some of these new technologies, new thoughts, creative processes into really the standard procedures as they've been always performed.
Phil [00:21:43] You know, I think it would have been a great college professor. Well, did you ever think of that going into a teaching like that or?
Kathryn [00:21:51] Oh, I have at times thought about it.
Phil [00:21:55] I don't want you going to blame me. So, no, I'm listening to you and you speak so well and you know what you're talking about. If you enjoy what you're doing, obviously, which is the day that no, don't go into teaching. But I'm just looking and saying, all right, there's just a handful of real good professors out there. And I think you would be part of that handful.
Phil [00:22:18] And I've been in the education field so long, I worked in public accounting and I enjoy teaching. That's why I went into it, because I wanted to be actually I wanted to be a comedian, standup comic, but I couldn't tell jokes. So the only way I could do was teach accounting and make it funny. So that's worked out for me. But hey, you're happy with what you do. I think that's great. You are very inspirational and it'll be interesting. Where you speaking next?
Kathryn [00:22:51] Yeah, so the Institute of Management Accountants? They're doing they're a national conference. They do it annually in June. So I'll be presenting at that. So that'll be the next one up on the...
Phil [00:23:01] And where is that going to be? That's going to be fully online. It was supposed to be over in Arizona, but just because of Covid and everything, they made a decision just to do it virtually this year. So it will be fully online. Bt I'm looking forward to it. I think it'll be a great experience.
Phil [00:23:18] But it's only for members, really, right?
Kathryn [00:23:20] I think actually it's open and so others can join the conference as well.
Phil [00:23:26] OK, very good. Well, Catherine, I guess I cancel that on you and I apologize for that. But I you're very, very--I can tell you are extremely intelligent also. All right. I guess you don't really you seem modest, but I can tell you, in order to do what you're doing, you have to have a real brain on your head. And I think that's great.
Phil [00:23:54] Do you think anybody can learn data analytics? Or do you have to have a good math background?
Kathryn [00:23:59] Yeah, so, you know, it so little, you know, it's something that I was very happy, I actually did about a year of experience there and had a little bit of background before diving into data analytics, because then I was able to kind of really create tests to meet specific objectives within public accounting because I learned the basics there and then I learned the data analytics. So as far as the applications, I was really able to kind of piece that together. I say really had an interest area always in statistics. So I took a lot of courses in high school. So anybody who does have an interest area in that data analytics is a great avenue for it, especially if they are in accounting, whether they're in public or private or governmental, as long as they have an interest area with the data, with statistics. And I even use it too on a forensic level, where I'm trying to find...
Phil [00:24:58] Are you a certified forensic accountant, also?
Kathryn [00:25:01] I'm a CFE, certified fraud examiner.
Phil [00:25:03] Oh, certified fraud. But you're not into forensic accounting?
Kathryn [00:25:07] I do. I guess you could say I do some of that because I have been called on different engagements. Like one in particular. They had fraud in their company was a national dealership. They had different divisions all over the US and they had fraud in one of their divisions. Will they wanted to see how prevalent it was and if other divisions had that same issue. But I got called in because they had 50 plus divisions. But reporting they could provide was only in notepad, by month, by division for the first six months of the year, and then the second six months, they could only provide reporting on a monthly basis in PDF, by division. So the CPA had hundreds of reports in notepad and PDF, and had to try to find where potential fraud could be. So that's where I was brought in with data analytics. I was able to convert it all into a usable format and actually do the data mining, the tests there. And we did have good results where we did find some other unusual items. We were able to bring it up to management, but had it not been for the data, analytics, would have never been the case.
Phil [00:26:20] Well, if you want to find out more information about Kathryn Horton, you are on LinkedIn. All right. Any other way they could find out more about you if they wanted to?
Kathryn [00:26:31] Yeah, absolutely. So I'm on LinkedIn. I'm on Twitter. I have my own website, KHortonCPA.com. And then also too, always feel free to email me as well. That's Kathryn@KHortonCPA.com.
Phil [00:26:51] And Katherine is planning on going to medical school, to use up her other available time, is that correct?
Kathryn [00:26:58] Yes, that's on the docket. [Laughs].
Phil [00:27:03] [Laughs] Once again, thank you. Stay safe, be healthy and really enjoyed speaking with you.
Kathryn [00:27:11] Likewise as well.
Phil [00:27:11] I can tell you're a terrific person.
Kathryn [00:27:13] Thank you. I appreciate that. Thank you for the opportunity to take part today.
Phil [00:27:17] Oh, well thank you. I appreciate you coming on and sharing all... Well, sharing the knowledge you have on areas that most people don't even know about. So thank you once again. Anyway, this is good old Phil Yaeger. And thank you again for listening, watching CPA Review and More. We have a new show every Tuesday, and it's probably not as exciting as Kathryn--no [just kidding]. We have we've talked about blockchain. We've done--we've had people on--you know, I've doing this actually for about a year and a half now. It's amazing. Time flies when you're having fun. And I've been lucky. We get some real good people.
Phil [00:27:59] If there's some topic you have of interest, contact me. My number is (301) 874-4900, ext 5. And you can reach me and I will answer the phone seven days a week because I have nothing to do with my life. Okay, so anyway, call me. I'd love to hear from you and please watch again next week or listen next week on our podcast and we'll have another interesting topic, I promise you. So everyone stay safe. Be healthy. And by the way, try to be polite to each other, because I have done a lot of people recently who are not polite. They are angry about this Covid thing, but be kind to people. It's important. So anyway, take care everyone. Thank you again for listening and watching. This is Phil Yaeger and have a good day.
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