INNOVATION AND OUR NEXT GENERATION
Fermín del Valle, President
International Federation of Accountants
Royal NIVRA´s Annual Congress
Amsterdam, Netherlands – November 22, 2006
It is a pleasure to be here with you today to address Royal NIVRA’s Annual
Congress.
I would like to thank your Chairman, Willem van Wijngaarden, and your Chief
Executive, Gert Smit, for inviting me to speak to you today. Gert Smit has been
an active supporter of IFAC, serving as a Technical Advisor on the IFAC Board –
including at our meeting in Istanbul last week – and I would like to recognize his
dedication and commitment to the accountancy profession both here in the
Netherlands and globally.
I would also like to recognize and thank all the Dutch members who currently
serve on IFAC boards and committees as well as all those who have worked for
IFAC in the past. The Netherlands is a country recognized for its culture and
tradition of cooperation and support for development. Your constant collaboration
with IFAC is an example of that tradition.
The accountancy profession is living in challenging times that obligate us to put
all of our energy and resources in motion. We are doing this and doing it well.
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The accountancy profession is standing strong and looking ahead.
IFAC has a good strategic plan, a plan that is both relevant and achievable.
Within this plan, we have identified five strategic themes:

First, being recognized as the international standard setter in the areas of
auditing and assurance, education, ethics and governmental financial
reporting;

Sustaining the profession;

Serving as the international voice of the accountancy profession;

Achieving greater value for the public through enhancing collaborative
efforts; and

Continuing to enhance IFAC’s governance.
The first three themes reflect the key strategies of the organization. The last two
are the approaches IFAC will implement to ensure the fulfillment of these key
strategies.
Looking to the future, we can identify two areas that we should work on with
similar decisiveness and commitment. In some ways they summarize and, at the
same time, reflect the three primary strategic themes. On the one hand, we
should continue to work steadfastly on strengthening public confidence in the
profession and in IFAC.
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On the other hand, we should encourage innovation and flexibility so that our
profession can readily respond to the future demands that society will place on it.
We believe that public confidence in the profession and in IFAC’s work can be
and will be strengthened, if we remain committed to our key current initiatives:

Standard setting;

The Member Body Compliance Program;

The development of the profession; and

Being the global voice of the profession.
The other area of attention is related to the need for innovation and flexibility.
There are four topics that IFAC deals with under the strategic theme of
sustainability of the profession that in my opinion are related to a vision of the
future. These are:

The need to better understand and shape society’s expectations of the
profession;

The relevance of education;

The attractiveness of the profession; and

The emphasis on values.
There is a strong interrelation among all of these issues.
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The profession can and must move ahead in new areas in order to build a better
future. It should keep looking to the markets it serves, both within organizations
and from public practice. We should identify and design more efficient ways to
deliver our services and we must generate new services that better respond to
the changing demands of the market. We need to be prepared to provide
relevant services within the new technology environment, for example taking a
leadership role in the preparation and assurance of non-financial information. We
should continue to be players, not spectators, in the development of this
profession. We should continue to take the initiative.
This is clearly related to innovation.
It is worth asking ourselves: how innovative is our profession?
Ours has been a profession devoted to continuous improvement, in a permanent
search for greater quality, clearly open to the use of new technological tools, in a
constant search of excellence. But it may be that many of the enhancements we
have made may fall more accurately within the term “improvement.” It has been
said that innovation is distinct from improvement in that innovation causes
society to reorganize. If we define innovation as a process of making
improvements by introducing something new, then we should possibly admit that
our profession is not characterized by its innovation.
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In auditing, for example, the last important innovation, in my opinion, was the
introduction of computer assisted auditing techniques, especially for files
interrogation, but this occurred more than ten years ago. It’s true that more
recently there have been other developments of software tools combining audit
methodology and financial statement compilation that have brought efficiencies
to audit practices of all sizes, and that with the introduction of the IAASB’s audit
risk standards, auditors have brought a much greater focus to understanding the
client’s business to better identify the audit risks and the areas where the
auditor’s effort should be focused.
It is also true that, as a consequence of the introduction of the requirements to
report on internal control required by the Sarbanes-Oxley Act, auditors of US
registrants and their foreign subsidiaries have been heavily involved in new work
to determine how best to meet the audit challenges imposed by this legislation.
But, the question is whether these are truly innovations, attempting to solve old
problems in new ways or if it is rather a new use of old techniques and tools to
solve new problems.
It is worthwhile asking ourselves: What are the reasons for this shortage of
innovation?
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Two reasons occur to me.
The first is that even though, on the one hand, innovation typically adds value,
innovation may also have other effects as new developments clear away or
change old organizational or operational forms and practices. From this
perspective, innovation can be seen as a source of new challenges and
problems. It can be something that removes us from the comfort of what we
know, and therefore, it can be consciously or unconsciously resisted.
The second reason, which is of course related to the first, is the education of
accountants. We can ask ourselves if we are educating ourselves for innovation,
or if on the contrary, our education favors a conservative attitude, less inclined to
innovation. This may be an interesting area to explore in the revisions of the
intellectual and personal skills which are recommended in our education
standards.
All of this naturally leads to the issue of education.
Our profession can only meet the global challenges of the 21st century if we are
prepared to deal with an increasing quantity of financial reporting, governance
and related audit requirements, greater complexity in business transactions,
ongoing emergence of new technology and new demands of the market.
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Education provides the means to meet these challenges. If we do not see
education as a priority, then we will be making a serious mistake.
A commitment to education is fundamental. We must seek to ensure that, as the
profession develops, it is supported by high quality educational requirements.
From what we have just seen, attention should also be given to certain aspects
of learning, such as those related to the capacity to innovate.
The other question that is recognized today as a problem for the profession
around the world, especially in auditing, is the need to attract and retain talent.
Let me suggest a small modification here in the form in which this problem tends
to be presented. I think that we should talk just about attracting. In reality, it is
about attracting people permanently. What works to attract individuals should be
the same as that will work to retain them.
There should not be difference between what is presented or offered to someone
when he or she is considering a career or job offer and what that person
effectively finds in his or her work to be.
The problem is without a doubt a complex one, because the factors influencing it
are various and interrelated.
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On the one hand, there is a cultural issue that makes the new generation
different from its predecessors. The tendency to change jobs, including careers,
the importance of a balance between work and other activities, the tendency to
question employers – the same way they question their parents – the total
comfort with and reliance on new technology, among others, are characteristics
that differentiate the young generation.
They are willing and not afraid to challenge the status quo. They tend to look for
an environment where creativity and independent thinking are seen positively
and as incentives.
Here we find a relationship with the previous point about innovation.
There is also a need to adjust the strategies and policies of human resources to
this new reality. It is possible that the human resources model that we have been
using, especially in the accounting and auditing firms, is not the most appropriate
any longer, and we have not yet designed an adequate substitute. Rather, only
touch-ups and adjustments have been made to the existing model. It is possible
that innovation is needed in this area as well.
I will mention some aspects that occur to me as possible areas for revision.
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In the first place, I consider it is necessary to recreate the appropriate conditions
and the most adequate structure to develop a true liberal and independent
profession. This implies, among other things, that the firms should be careful so
as not to lose the characteristics of a true professional partnership and resemble
a corporation too closely.
In the second place, it is possible that there have been several important
changes with respect to the mix of competencies and experiences required on
the work teams, influenced, among other things, by technological changes.
In the third place, it is necessary to consider another series of factors that can
have a negative influence, such as excess or detailed rules that limit the use of
professional judgment; excess of regulatory requirements that can absorb a good
part of energy in formalities and turn aside what is seen by young people as
essential; inadequate legislation of professional liabilities; excess work loads and
the conclusion by the new generation that those who are already where they may
aspire to be do not represent a model of an attractive life.
In sum, we are facing a field that presents more than interesting challenges.
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I would like to conclude with a brief reflection, especially directed towards the
new generation of professionals, about the relationship between vocation, values
and happiness.
We rarely introduce the word “happiness” in this type of speech.
But, at the end of the day, if there is something we are looking for, it is precisely
that. And if it is not that, then we should seriously question ourselves about what
it is we are looking for. And if it is what we are looking for, then it is clear that this
should be a good reason for attractiveness.
Happiness is fundamentally the consequence of a “mission accomplished.”
If we do what we enjoy, then we increase the chances of being in a job that is
consistent with our talents. In other words, we greatly increase our chances of
doing what we do well and experiencing the satisfaction of having achieved a job
well done.
There is a strong tie between these three things: to live the vocation, to work
well, and to be happy.
The components of the vocation are talent, passion, and values.
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We cultivate our vocation when we use our talents to progress the activities we
are passionate about in a manner consistent with our fundamental values.
And if we have the talent and the passion for the accountancy profession and we
are willing to live the values that it demands, then we surely can not only
overcome the temporary difficulties that it presents to us with, but also be active
agents to modify and improve those conditions.
On the other hand, those that can offer a place to work where the vocation can
be cultivated in this way will be very close to achieving that permanent attraction
that we were speaking about.
As I said at the beginning we are living in challenging times that demand us to
work intensively for the development of our profession. This is what IFAC has
done, is doing and will continue to do. This is what we should all do. This is what
the accountancy profession in the Netherlands is doing. That is why it is
remarkable that you selected “Innovation and our next generation” as the theme
for your Congress. I believe that addressing and analyzing this subject is
fundamental to the future of our profession.
Thank you very much for your attention.
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