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Overcome a Common Personal Independence Gap that Blinds Organizations to Potential Conflicts

Alex Olson
7/11/17 6:15 AM

The tracking of personal financial interests for independence purposes has been done by the larger accounting networks for years. However, a common gap among independence regimes is to tie what people are working on with the restriction status for that individual. Multiple factors are at play in most large accounting networks, including: Personal_Independence_Gap.jpg

  • The personal independence tracking system has securities (what someone owns), and many of the personal independence tracking systems do not have corporate family tree information (entities relate to entities). 
  • Staff assignments and time reporting are performed by member-firm level systems that have minimal global integration. 
  • Legacy systems make integration difficult. 
  • Unaligned and misaligned data permeates across systems, which clouds the ability to connect the dots between a user's holding and a user's staff assignment and time entry. 

The aforementioned challenges create a situation where many firms simply approach this situation with policy statements without proactive or detective controls. When controls are put in place, they are usually after the fact and use duct tape and bailing wire. In an environment where regulators are expecting more, this situation is simply untenable.

Fortunately, factors within some of the largest firms are changing how to look at this independence gap, including:

  • Consolidation of member firms and increased coordination at a global level
  • Investments in common accounting and HR systems help set standards across member firms
  • Data management projects to align and remediate data

Through the use of the Kingland platform, we are incorporating new capabilities in our Personal Independence solution. These capabilities, when combined with the investments in adjacent areas by the accounting networks, enable firms to move from ad-hoc solutions that are unsatisfactory to regulators, internal administrators, and practitioners, to an integrated solution. Our solution includes two types of controls.

Enable Preventative Controls
Similar to having the ability to pre-clear a financial holding prior to acquiring it, the preventative control is to have a pre-clearance for work assignment. In order to do so, we are working to securely provide, through an integration layer, certain information to staffing applications that allows a manager to see that the practitioner cannot be assigned to an engagement due to independence issues.

Create Integrated Detective Controls

While a staff member may not be formally assigned, one unfortunate practice is to have an individual work on an engagement without going through a standard assignment process. A second situation involves the facts and circumstances related to the individual, their holdings, and/or the restriction status changes after the assignment was made.

In these situations, the preventative control is bypassed or rendered inadequate, creating the need for a detective control. Therefore, we are working with our customers to integrate basic corporate hierarchy information for the purpose of linking the time entry engagement data and the financial holding. As issues are identified, these exceptions are routed through the same mechanisms as a financial interest - conflict of interest messages, notifications, on-screen updates, and the ability to clear the conflict.  All escalations and disciplinary actions automatically occur. Practitioners have a single pane of glass for their personal independence state, and administrators have a holistic view of personal independence across offices, member firms, and the global network.

Through these changes, public accounting firms can overcome this personal independence control gap, getting ahead of issues and having predictable results. When combining these changes with our expertise and software, organizations greatly improve how they manage these complexities in a straightforward fashion. 

Contact us to discover more. 

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